Document:

Exhibit
10.3

 

AUGUST 2008
AMENDMENT AGREEMENT

 

THIS AUGUST 2008 AMENDMENT AGREEMENT (the “Amendment”), including all changes made pursuant hereto, is
dated August 20, 2008, and effective the 19th day of July 2008 (the “Amendment Effective Date”), by and between CERAGENIX
PHARMACEUTICALS, INC., a Delaware corporation (the “Borrower”), and each investor listed on the signature pages hereto
as a “Holder”.

 

RECITALS

 

WHEREAS, pursuant to that certain subscription agreement dated November 28,
2005, by and between the Borrower and the Holders (the “Subscription Agreement”), the Holders were
issued Secured Convertible Notes (the “Notes”);
and

 

WHEREAS, the Notes were amended by the November 2007 Amendment
Agreement dated November 28, 2007 (the “November 2007
Amendment Agreement”); and

 

WHEREAS, the Maturity Date of the Notes as amended by the November 2007
Amendment Agreement was extended by the November 2007 Amendment Agreement
to June 30, 2008; and

 

WHEREAS, effective June 30, 2008, the Borrower and Holders entered
into a Consent and Waiver agreement extending the Maturity Date of the Notes to
July 18, 2008, and waiving the Holders’ right to payment of interest at a
default rate with respect to the Notes, which such default rate of interest
would be triggered by the occurrence of the Maturity Date; and

 

WHEREAS, the Borrower and Holders desire to amend the Notes to further
extend the Maturity Date and amend certain other terms of the Notes; and

 

WHEREAS, the Borrower and Holders desire to amend the existing Warrants
issued by Borrower to Holders (the “Existing Warrants”)
on the form of Class A Common Stock Purchase Warrant substantially similar
to the form attached hereto as Exhibit A (the “Form Warrant”)
to adjust the conversion price and extend the expiration date of the Existing
Warrants; and

 

WHEREAS, the Borrower and Holders desire that Borrower shall, in
connection with the adjustments to the Notes and the Existing Warrants, issue
additional Warrants to the Holders on the terms of the Form Warrant as
amended hereby and pursuant to any other amendments to the Existing Warrants,
subject to certain adjustments (the “Additional Warrants”).

 

AMENDMENT

 

NOW, THEREFORE, IN CONSIDERATION of the covenants contained in this
Amendment, and for good and valuable consideration the receipt and adequacy of
which is hereby acknowledged, the Holders and the Borrower agree that the Notes
be amended as follows:

 

1.                                       Extension of Maturity Date.  The Maturity Date of the Notes is
hereby extended from July 18, 2008, to December 31, 2011.  The
Maturity Date as it appears throughout each Note is replaced with the date “December 31,
2011”.

 

2.                                       Interest Rate Adjustment.  The Interest Rate of the Notes is
hereby adjusted to equal twelve percent (12%) per year on the outstanding
principal balance, compounded quarterly and effective July 1, 2008.  Section 1.1 of the Notes is hereby
amended and restated in its entirety as follows:

 

1

 

1.1        Interest Rate. Subject to Section 5.6 hereof,
interest payable on this Note shall accrue at a rate per annum (the “Interest
Rate”) equal to twelve percent (12%) per year on the outstanding principal
balance, compounded quarterly beginning July 1, 2008. Interest on the
Principal Amount shall first be payable on June 30, 2009, and on the same
day of the month each three months thereafter and on the Maturity Date, whether
by acceleration or otherwise.  The
Borrower will notify the Holder within five (5) trading days before any
interest payment due date if the Borrower will make all of such interest
payment in cash.  If the Borrower does
not elect to make the entire interest payment due in cash, of if any such
interest payment is not timely made, then, for that portion not paid in cash or
not timely made, the Holder shall have the option of (i) adding the
interest payment due to the principal balance of this Note or (ii) accepting
the interest payment in shares of common stock of the Borrower at a value equal
to 85% of the average of the five lowest volume weighted average prices, using
Bloomberg L.P. as the data source, over any thirty (30) day period for the 365
days preceding the interest due date. 
Any such shares of common stock of the Borrower issued in lieu of cash
for payment of interest shall be subject to piggyback registration rights under
Section 11.1 of the Subscription Agreement as amended.  The holding period of any such shares of
Common Stock calculated for purposes of Rule 144 under the Securities Act
of 1933 shall have begun on the original issue date of the Notes.  This Note may be pre-paid at any time without
penalty in accordance with the terms of Section 2.5 hereof.

 

3.                                       Amortization Schedule and Payment of Interest
Due.

 

(a)                                  Any terms of the Notes and the Subscription
Agreement to the contrary notwithstanding, the Borrower shall comply with the
repayment schedule on Exhibit B attached hereto (the “Amortization Schedule”) with respect to
the Notes held by the Holder identified thereon and all sums payable in
connection with the Notes.  Beginning June 30,
2009, Borrower shall make the payments listed on the Amortization Schedule no
later than the corresponding dates listed on the Amortization Schedule.  If the Borrower fails to timely make any of
the cumulative payment amounts listed on the Amortization Schedule with respect
to any 12-month period ending June 30 of the corresponding year, the
Conversion Price of the Notes held by such Holder shall be reduced, but not
increased, effective July 1 following such year to be equal to the lesser
of the Conversion Price then in effect or the average of the ten lowest volume
weighted average prices of the Borrower’s common stock over the sixty (60)
previous trading days immediately preceding such July 1 date, subject to
adjustment as described in the Notes and Subscription Agreement.

 

(b)                                 The Borrower shall pay to each of the Holders
within five (5) business days of the last date of execution of this
Agreement the interest currently due and payable by the Borrower to each of the
Holders, the total such amount with respect to all the Holders being
$77,554.73.

 

4.                                       Security Interest.  The
Borrower and Holders hereby recognize and reaffirm the rights and obligations
of the parties with respect to the Notes pursuant to Section 3 of the
Subscription Agreement, the Security Agreement between Borrower and Holders
dated November 28, 2005 (the “Security
Agreement”), and the Amended and Restated Collateral Agent Agreement
between Holders and the Collateral Agent specified therein and acknowledged by
Borrower dated December 5, 2006 (the “Collateral
Agent Agreement”).

 

5.                                       Conversion Price Reduction.

 

(a)                                  The Conversion Price of the Notes is hereby
reduced to $0.80.  The first sentence of Section 2.1(b) of
the Notes is hereby amended and restated in its entirety as follows: 

 

2

 

“Subject
to adjustments as provided in this Section 2.1(b) and Section 2.1(c) hereof,
the Conversion Price per share shall be $0.80.”

 

(b)           The acceptance by a Holder of shares of common stock of Borrower as
payment for interest under Section 1.1 of the Notes, as amended by this
Amendment, shall be included in the definition of “Excepted Issuances” under Section 12(a)
of the Subscription Agreement.  The first
sentence of Section 12(a) of the Subscription Agreement is hereby
amended by the addition of the words “, and (vii) the acceptance by a
Subscriber of shares of Common Stock of the Company as payment for interest
under Section 1.1 of the Notes” immediately before the words “(collectively
the foregoing are “Excepted Issuances”).”

 

6.                                       No Prepayment Premium.  The
words “one hundred and twenty percent (120%)” in Section 2.5 of the Notes
are hereby deleted and replaced with the words “one hundred percent (100%)”.

 

7.                                       Availability of Rule 144.  In
the event at any time after the date of this Amendment, Holders are not
permitted to immediately resell (i) any of the Common Stock issuable upon
conversion of Note principal or interest or (ii) any Common Stock issuable
upon exercise of the Existing Warrants that was purchased for cash at least six
months before the proposed date of sale or pursuant to cashless exercise,
without any restrictive legend or if such sales are permitted but subject to
volume limitations or further restrictions on resale as a result of the unavailability
to Holder of Rule 144(b)(1)(i) under the Securities Act of 1933 or
any successor rule (a “144 Default”),
for any reason except for Holder’s status as an affiliate or “control person”
of the Borrower or change in current applicable securities laws, then the
Borrower shall pay such Holder as liquidated damages and not as a penalty an
amount equal to two percent (2%) for each thirty (30) days (or such lesser
pro-rata amount for any period less than thirty (30) days) thereafter of the
purchase price of such Common Stock owned by the Holder during the pendency of
the 144 Default.

 

8.                                       Mandatory Redemption of Notes.  The
Company hereby agrees to use certain expected revenues for the cash redemption
of the Notes and Debentures (as defined in Section 16 below) as follows;
provided, that such revenues shall be further subject to apportionment among
each of the Holders and Purchasers (as defined in Section 16 below)
according to the percentages set forth on Schedule 8 attached hereto:

 

(a)                                  100% of any net revenues received by or
payable to the Company, including, but not limited to, all milestone payments,
all partnership payments, all royalty payments and any other payments, and
excluding any direct costs, direct fees, or direct royalties (such payments,
the “Net Revenue”) derived,
directly or indirectly, from the Distribution and Supply Agreement between Dr. Reddy’s
Laboratories, Inc. (“Dr. Reddy’s”),
and the Company and Ceragenix Corporation, dated November 16, 2007 (the “DRL Agreement”), except for any milestone
payments, net sales royalties and product cost reimbursements paid or owed to
the Company prior to April 1, 2009. 
By way of example, Net Revenue shall not include such direct costs,
direct fees or direct royalties such as, but not limited to, the 5% royalty for
EpiCeram pursuant to the Exclusive License Agreement by and among the Company
and The Regents of the University of California, dated June 28, 2000;

 

(b)                                 100% of the Net Revenue derived, directly or
indirectly, from any other EpiCeram commercialization arrangements;

 

(c)                                  50% of the Net Revenue derived, directly or
indirectly, from the sale of NeoCeram;

 

3

 

(d)                                 33% of any Net Revenue derived, directly or
indirectly, from the sales of Ceragenins partnerships; and

 

(e)                                  33% of any Net Revenue not reference above
and received by the Company in excess of, in the aggregate until the Notes are
no longer outstanding, $250,000, excluding any capital raised by the Company
through investment from the Holders or any other equity investment in or
issuance of debt by the Company.

 

Upon
receipt of any of the Net Revenues described above, the Company shall
immediately place such funds in a segregated account for the benefit of the
Holders and notify the Holders in writing of the receipt of such funds.  Upon notice to the Company that a Holder
wishes to have its Debenture redeemed, the Company shall immediately wire such
Holder its pro-rata share of such funds (based on the original principal amount
purchased by such Holder) and record the reduction in principal in the Note
register.  In the event that a Holder
declines to receive a redemption payment or does not respond to the Company
within twenty (20) Trading Days, the Company shall notify all other Holders of
such excess amount and any Holders that wish to have their Notes further
redeemed by such additional amount shall receive their pro-rata share of such
remaining funds.

 

9.                                       Adjustment of Per Share Purchase Price under
Existing Warrants.  The
per share exercise price  of the Warrant
Shares (as defined in the Existing Warrants) is hereby reduced to $0.80.  The number of Warrant Shares issuable
pursuant to the Existing Warrants shall be increased such that the aggregate
Exercise Price payable prior to the aforedescribed reduction shall equal the
aggregate Exercise Price payable after the aforedescribed reduction of the
Existing Warrant Exercise Price and similarly in the future in connection with
the amount of Warrant Shares purchasable upon exercise of the Existing Warrants
and Additional Warrants for any other reduction of the Exercise Price of the
Existing Warrants or Additional Warrants which is a result of the application
of Section 3.4 of the Existing Warrants or Section 3.4 of the
Additional Warrants.

 

10.                                 Extension of Expiration Date of Warrants.  The
Expiration Date of any Existing Warrants shall be extended as of the Amendment
Effective Date to December 31, 2011.

 

11.                                 Additional Warrants.

 

(a)                                  On the Amendment Effective Date, the Borrower
will issue and deliver Additional Warrants to the Holders as outlined on Exhibit C
attached hereto equal to 25% of the amount of Warrant Shares issuable to each
Holder immediately following the date of this Agreement.  The Additional Warrants shall be issued
subject to the terms of the Form Warrant and the Subscription Agreement;
provided, however, that, any terms of the Form Warrant and the
Subscription Agreement to the contrary notwithstanding, the per share purchase
price of the shares of Common Stock issuable pursuant to the Additional
Warrants shall be $0.80, subject to adjustment as described therein.

 

(b)                                 The Additional Warrants shall be exercisable
on a cashless basis through the Expiration Date of the Additional Warrants and
subject to piggyback registration rights; provided, that, if an existing
Registration Statement does not provide for the registration of a sufficient
number of Registrable Securities, and any terms of the Additional Warrants to
the contrary notwithstanding, Borrower shall not be required hereunder or pursuant
to the terms of the Additional Warrants to obtain an effective registration
statement or a post-effective amendment to any existing Registration Statement
with respect to the Additional Warrants or shares of common stock issuable upon
exercise thereof.

 

4

 

(c)           The Expiration Date of the Additional Warrants shall be August 20,
2013.

 

12.           Additional Covenants. The following covenants shall be added to Section 9
of the Subscription Agreement.

 

(a)           As of the date of this Agreement and until the earlier of (i) June 30,
2010 and (ii) the date that 50% of the initial aggregate principal amount
of the Notes is no longer outstanding and has been redeemed by the Company
pursuant to the terms of such Notes and this Agreement (such earlier date, the “Accrual Termination Date”), the Company
shall (i) not pay cash retainers or make any other cash payments to the
Board of Directors except meeting fees for up to four (4) meetings of the
Board of Directors per year and meeting fees for any meetings of the Audit
Committee of the Board of Directors (the “Board
Payments”) and the Company shall revise the payment schedule and
methods of payment for all Board Payments and (ii) use commercially
reasonable efforts to minimize the cost of holding meetings of the Board of
Director, including providing for telephonic meetings of the Board of Directors
rather than in-person quarterly meetings of the Board of Directors. All Board
Payments shall accrue until the Accrual Termination Date.

 

(b)           No later than September 30, 2008, the Company shall terminate its
consulting agreement with Armada Medical Marketing.

 

(c)           Immediately upon execution of this Agreement, the Company hereby agrees
that it shall not renew its consulting agreement with CEOcast.

 

(d)           The Company shall use best efforts to renegotiate its obligation to
Osmotics Corporation for the purchase of Triceram from a 12-month note to a
24-month note no later than the 30th day following the date of this Agreement,
and such renegotiation shall not result in the Company paying to Osmotics
Corporation more than $20,000 per month.

 

(e)           The Company shall use best efforts to renegotiate the payment terms for
EpiCeram under the DRL Agreement pursuant to which Dr. Reddy’s shall
prepay 50% of each EpiCeram purchase order placed by Dr. Reddy’s.

 

(f)            The Company shall use best efforts to
monetize or securitize the EpiCeram and NeoCeram royalties on or prior to the
one year anniversary of the date of this Agreement.

 

13.           Representations and Warranties of the Company.  The
Company hereby makes the representations and warranties set forth below to the
Purchasers that as of the date of its execution of this Agreement:

 

(a)                                  Authorization; Enforcement.  The
Company has the requisite corporate  power and authority to enter into
and to consummate the transactions contemplated by this Agreement and otherwise
to carry out its obligations hereunder and thereunder.  The execution and delivery of this Agreement
by the Company and the consummation by it of the transactions contemplated
hereby have been duly authorized by all necessary action on the part of such
Company and no further action is required by such Company, its board of
directors or its stockholders in connection therewith.  This Agreement has been duly executed by the
Company and, when delivered in accordance with the terms hereof, will
constitute the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms except (i) as limited by general
equitable principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or

 

5

 

other
equitable remedies and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.

 

(b)                                 No Conflicts.  The
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby do not and
will not: (i) conflict with or violate any provision of the Company’s
certificate or articles of incorporation, bylaws or other organizational or
charter documents, 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,
result in the creation of any lien upon any of the properties or assets of the
Company, or give to others any rights of termination, amendment, acceleration
or cancellation (with or without notice, lapse of time or both) of, any
material agreement, credit facility, debt or other material instrument
(evidencing Company debt or otherwise) or other material understanding to which
the Company is a party or by which any property or asset of the Company is
bound or affected, or (iii) conflict with or result in a violation of any
law, rule, regulation, order, judgment, injunction, decree or other restriction
of any court or governmental authority to which the Company is subject
(including federal and state securities laws and regulations), or by which any
property or asset of the Company is bound or affected.

 

(c)                                  Issuance of Warrants. 
The  Warrants are duly authorized and
duly and validly issued, fully paid and nonassessable, free and clear of all
Liens imposed by the Company other than restrictions on transfer provided for
in the Transaction Documents.  The
Warrant Shares, when issued in accordance with the terms of the Warrants, will
be validly issued, fully paid and nonassessable, free and clear of all Liens
imposed by the Company.  The Company has
reserved from its duly authorized capital stock a number of shares of Common
Stock for issuance of the Warrant Shares and additional shares issuable
pursuant to the Warrants under this Agreement.

 

(d)                                 The Company hereby represents and warrants
that, as of the Amendment Effective Date, the Company has not materially
breached or defaulted in the performance of any of its material obligations
under the DRL Agreement.  In the event
that, after the Amendment Effective Date, the Company materially breaches or
defaults in the performance of any of its material obligations under the DRL
Agreement, the Company shall give notice within ten (10) days of such
material breach or default to the Holders and to the Collateral Agent (as such
term is defined in the Collateral Agent Agreement) at the address and using the
procedure provided for in the Subscription Agreement and Collateral Agent Agreement.  The Company agrees to cooperate with the
Holders to assist, allow and enable the Holders to cure at the Company’s
expense any of the Company’s material defaults under the DRL Agreement.

 

14.                                 Representation and Warranty of the Holders.  The
Holders severally and not jointly hereby make the representation and warranty
set forth below to the Company that as of the date of its execution of this
Agreement, such Holder represents and warrants that (a) the execution and
delivery of this Agreement by it and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary action on its
behalf and (b) this Agreement has been duly executed and delivered by such
Borrower and constitutes the valid and binding obligation of such Holder,
enforceable against it in accordance with its terms except (i) as limited
by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or
other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.

 

6

 

15.                                 Notices.

 

(a)                                  The last sentence of Section 5.2 of the
Notes is hereby deleted in its entirety and replaced with the following:

 

“The addresses for such
communications shall be: (i) if to the Borrower to: Ceragenix
Pharmaceuticals, Inc. 1444 Wazee Street, Suite 210, Denver, CO 80202,
Attn: Steven S. Porter, CEO, facsimile: (303) 534-1860, with a copy by
facsimile to George A. Hagerty, Esq., Hogan & Hartson LLP, 1200
Seventeenth Street, Suite 1500, Denver, CO 80202, facsimile (303)
899-7333, and (ii) if to the Holder, to the name, address and telecopy
number set forth on the front page of this Note, with a copy by telecopier
to Grushko & Mittman, P.C., 551 Fifth Avenue, Suite 1601, New
York, New York 10176, telecopier number: (212) 697-3575.”

 

(b)                                 Sections 13 of the Class A Common Stock
Purchase Warrant dated November 28, 2005, as amended, and the Subscription
Agreement dated November 28, 2005, as amended; Section 12.3 of the
Security Agreement dated November 28, 2005, as amended; and Section 11(e) of
the Collateral Agent Agreement dated November 28, 2005, as amended, are
each hereby amended to delete the following notice address:

 

John W. Kellogg, Esq.,

McKenna Long &
Aldridge LLP

1875 Lawrence Street

Denver, CO 80202

telecopier (303) 634-4400

 

and to replace it with the
following:

 

George A. Hagerty, Esq.

Hogan & Hartson LLP

1200 Seventeenth Street

Suite 1500

Denver, CO 80202

Facsimile: (303) 877-7333

 

Any and all notices or other
communications or deliveries required or permitted to be provided hereunder
shall be made in accordance with the provisions of the Subscription Agreement.

 

16.                                 Amendment to 2006 Debentures.  Borrower entered into that certain
Securities Purchase Agreement dated December 5, 2006, by and among
Borrower and the purchasers listed thereunder (the “Securities Purchase Agreement”).  Pursuant to the terms of the Securities
Purchase Agreement, Borrower issued to the purchasers thereunder (the “Purchasers”) certain convertible
debentures (the “Debentures”).  The Borrower agrees to amend the Securities
Purchase Agreement.  The redemption date
of the Debentures shall be amended so that the timing and mechanism of interest
and principal payments shall be substantially similar to those of the
Notes.  The Borrower represents that, as
of the Amendment Effective Date, no Monthly Redemptions (as that term is
defined in the Debentures) have been made. 
The effectiveness of this Amendment is conditioned upon the Borrower
entering into an amendment agreement to amend the Debentures and the Securities
Purchase Agreement no later than the date of execution of this Amendment by all
the parties hereto.

 

17.                                 Obligations of the Borrower.  The Borrower agrees that all
obligations and commitments of the Company, which currently expire upon June 30,
2008, or July 18, 2008, shall be extended to

 

7

 

December 31,
2011.  All occurrences in Section 9 of the Subscription Agreement, as
amended, of the following phrase:

 

“..until the sooner of (i) June 30
2008, or (ii) until the Shares and Warrant Shares have been resold or
transferred by all Subscribers pursuant to the Registration Statement or
pursuant to Rule 144.”

 

shall be replaced with the
following:

 

“..until the sooner of (i) December 31
2011, or (ii) until the Shares and Warrant Shares have been resold or
transferred by all Subscribers pursuant to the Registration Statement or
pursuant to Rule 144.”

 

18.           No Reset.   Except as described
herein, Borrower represents that this Amendment shall not result in the reset
or ratchet of the price at which any Common Stock of Borrower was issued or is
issuable of any of Borrower’s outstanding Common Stock or Common Stock which
may be issued in the future including the amount of Common Stock which may be
issuable by Borrower except as described on Schedule 18 hereto.

 

19.           Filing of Form 8-K.  Within 2 Trading Days of the date
hereof, the Borrower shall issue a Current Report on Form 8-K disclosing
the material terms of the transaction contemplated hereby, which shall include
this Amendment as an attachment thereto.

 

20.           Execution.  This Amendment may be executed 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.  This
Amendment may also be executed by either party hereto by facsimile signature,
which shall be deemed to be an original signature of such party hereon.

 

21.           Survival. All warranties and representations (as of the date such warranties
and representations were made) made herein or in any certificate or other
instrument delivered by it or on its behalf under this Agreement shall be
considered to have been relied upon by the parties hereto and shall survive the
issuance of the Warrants. This Agreement shall inure to the benefit of and be
binding upon the successors and permitted assigns of each of the parties; provided,
however, that no party may assign this Agreement or the obligations and
rights of such party hereunder without the prior written consent of the other
parties hereto.

 

22.           Entire Agreement.  This Amendment constitutes the entire
agreement among the parties, and supersedes all prior and contemporaneous
agreements and understandings of the parties in connection herewith.  No
changes, modifications, terminations or waivers of any of the provisions hereof
shall be binding unless in writing and signed by all of the parties thereto.

 

23.           Governing Law, Venue and Jurisdiction.  All questions concerning the
construction, validity, enforcement and interpretation of this Amendment shall
be determined pursuant to the governing law provision of the Notes.

 

24.           Incorporation.  Once executed, this Amendment shall
be attached to the Notes and shall be deemed incorporated therein and a part
thereof.

 

25.           Defined Terms.  All capitalized terms used herein,
unless otherwise defined herein, shall have the meanings ascribed to them in
the Notes.

 

26.           General Terms.  This Amendment has been executed and
entered into by Borrower and the Holders pursuant to the terms of the Notes.

 

8

 

27.           Construction.  The headings herein are for convenience only,
do not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.  The
language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent, and no rules of strict
construction will be applied against any party.

 

28.           Modification.  Except as expressly modified pursuant
to this Amendment, the terms of each Note remains unchanged and in full force
and effect.  This Amendment shall not
constitute a novation or satisfaction and accord of any other agreement to which
Borrower and any Holder are subject.

 

29.           Fees.  The Company agrees that it shall pay the reasonable legal fees
incurred by the Holders incurred in connection with this Amendment and any
transactions directly related thereto.

 

9

 

IN WITNESS WHEREOF, this Amendment is dated August 20, 2008, and
executed as of the last date set forth below.

 

	
  BORROWER:

  	
  CERAGENIX PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
  Date:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  HOLDERS:

  	
  LONGVIEW FUND

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
  Date:

  	
   

  
	
   

  	
   

  
	
   

  	
  LONGVIEW EQUITY FUND

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
  Date:

  	
   

  
	
   

  	
   

  
	
   

  	
  ALPHA CAPITAL AKTIENGESELLSCHAFT

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
  Date:

  	
   

  

 

10

 

EXHIBIT A

 

FORM WARRANT

 

THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON
EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF
THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO CERAGENIX PHARMACEUTICALS, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED.

 

	
   

  	
   

  	
  Right
  to Purchase
                  
  shares of Common Stock of Ceragenix Pharmaceuticals, Inc. (subject to
  adjustment as provided herein)

  

 

CLASS A COMMON STOCK
PURCHASE WARRANT

 

	
  No. 2005-A-001

  	
   

  	
  Issue Date:
  August         , 2008

  

 

CERAGENIX PHARMACEUTICALS, INC., a corporation
organized under the laws of the State of Delaware (the “Company”), hereby
certifies that, for value received,
                                    ,
                                             ,
Fax:
                              
or its permitted assigns (the “Holder”), is entitled, subject to the terms set
forth below, to purchase from the Company at any time after the Issue Date
until 5:00 p.m., E.S.T on the fifth (5th) anniversary of the
Issue Date (the “Expiration Date”), up to
                
fully paid and nonassessable shares of Common Stock at a per share purchase
price of $        .  The aforedescribed purchase price per share,
as adjusted from time to time as herein provided, is referred to herein as the “Purchase
Price.”  The number and character of such
shares of Common Stock and the Purchase Price are subject to adjustment as
provided herein.  The Company may reduce
the Purchase Price without the consent of the Holder.  Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in that certain Subscription
Agreement (the “Subscription Agreement”),
dated November         , 2005,
entered into by the Company and Holders of the Class A Warrants.

 

As used herein the following
terms, unless the context otherwise requires, have the following respective
meanings:

 

(a)           The term “Company” shall include Ceragenix Pharmaceuticals, Inc.
and any corporation which shall succeed or assume the obligations of Ceragenix
Pharmaceuticals, Inc. hereunder.

 

(b)           The term “Common Stock” includes (a) the Company’s
Common Stock, $0.0001 par value per share, as authorized on the date of the
Subscription Agreement, and (b) any other securities into which or for
which any of the securities described in (a) may be converted or exchanged
pursuant to a plan of recapitalization, reorganization, merger, sale of assets
or otherwise.

 

(c)           The term “Other Securities” refers to any stock (other
than Common Stock) and other securities of the Company or any other person
(corporate or otherwise) which the holder of the Warrant at any time shall be
entitled to receive, or shall have received, on the exercise of the Warrant, in
lieu of or in addition to Common Stock, or which at any time shall be issuable
or shall have been issued in exchange for or in replacement of Common Stock or
Other Securities pursuant to Section 5 or otherwise.

 

A-1

 

(d)           The term “Warrant
Shares” shall mean the Common Stock issuable upon exercise of this Warrant.

 

1.             Exercise of Warrant.

 

1.1.          Number of
Shares Issuable upon Exercise.  From and after the Issue Date through and
including the Expiration Date, the Holder hereof shall be entitled to receive,
upon exercise of this Warrant in whole in accordance with the terms of
subsection 1.2 or upon exercise of this Warrant in part in accordance with
subsection 1.3, shares of Common Stock of the Company, subject to
adjustment pursuant to Section 4.

 

1.2.          Full Exercise.  This Warrant may be exercised in full by the
Holder hereof by delivery of an original or facsimile copy of the form of
subscription attached as Exhibit A hereto (the “Subscription Form”) duly
executed by such Holder and surrender of the original Warrant within four (4) days
of exercise, to the Company at its principal office or at the office of its
Warrant Agent (as provided hereinafter), accompanied by payment, in cash, wire
transfer or by certified or official bank check payable to the order of the
Company, in the amount obtained by multiplying the number of shares of Common
Stock for which this Warrant is then exercisable by the Purchase Price then in
effect.

 

1.3.          Partial
Exercise.  This
Warrant may be exercised in part (but not for a fractional share) by surrender
of this Warrant in the manner and at the place provided in subsection 1.2
except that the amount payable by the Holder on such partial exercise shall be
the amount obtained by multiplying (a) the number of whole shares of
Common Stock designated by the Holder in the Subscription Form by (b) the
Purchase Price then in effect.  On any
such partial exercise, the Company, at its expense, will forthwith issue and
deliver to or upon the order of the Holder hereof a new Warrant of like tenor,
in the name of the Holder hereof or as such Holder (upon payment by such Holder
of any applicable transfer taxes) may request, the whole number of shares of
Common Stock for which such Warrant may still be exercised.

 

1.4.          Fair Market
Value. Fair Market Value of a share of Common Stock as of a particular date
(the “Determination Date”) shall mean:

 

(a)           If the Company’s Common Stock is
traded on an exchange or is quoted on the National Association of Securities
Dealers, Inc. Automated Quotation (“NASDAQ”), National Market System, the
NASDAQ SmallCap Market or the American Stock Exchange, LLC, then the closing or
last sale price, respectively, reported for the last business day immediately
preceding the Determination Date;

 

(b)           If the Company’s Common Stock is not
traded on an exchange or on the NASDAQ National Market System, the NASDAQ
SmallCap Market or the American Stock Exchange, Inc., but is traded in the
over-the-counter market, then the average of the closing bid and ask prices
reported for the last business day immediately preceding the Determination
Date;

 

(c)           Except as provided in clause (d) below,
if the Company’s Common Stock is not publicly traded, then as the Holder and
the Company agree, or in the absence of such an agreement, by arbitration in
accordance with the rules then standing of the American Arbitration
Association, before a single arbitrator to be chosen from a panel of persons
qualified by education and training to pass on the matter to be decided; or

 

(d)           If the Determination Date is the date
of a liquidation, dissolution or winding up, or any event deemed to be a
liquidation, dissolution or winding up pursuant to the 

 

A-2

 

Company’s charter, then all amounts to be payable per share to holders
of the Common Stock pursuant to the charter in the event of such liquidation,
dissolution or winding up, plus all other amounts to be payable per share in
respect of the Common Stock in liquidation under the charter, assuming for the
purposes of this clause (d) that all of the shares of Common Stock then
issuable upon exercise of all of the Warrants are outstanding at the
Determination Date.

 

1.5.          Company Acknowledgment. The Company will, at the
time of the exercise of the Warrant, upon the request of the Holder hereof
acknowledge in writing its continuing obligation to afford to such Holder any
rights to which such Holder shall continue to be entitled after such exercise
in accordance with the provisions of this Warrant. If the Holder shall fail to
make any such request, such failure shall not affect the continuing obligation of
the Company to afford to such Holder any such rights.

 

1.6.          Trustee for Warrant Holders. In the event that a
bank or trust company shall have been appointed as trustee for the Holder of
the Warrants pursuant to Subsection 3.2, such bank or trust company shall
have all the powers and duties of a warrant agent (as hereinafter described)
and shall accept, in its own name for the account of the Company or such
successor person as may be entitled thereto, all amounts otherwise payable to
the Company or such successor, as the case may be, on exercise of this Warrant
pursuant to this Section 1.

 

1.7           Delivery of Stock Certificates,
etc. on Exercise. The Company agrees that the shares of Common Stock
purchased upon exercise of this Warrant shall be deemed to be issued to the
Holder hereof as the record owner of such shares as of the close of business on
the date on which this Warrant shall have been surrendered and payment made for
such shares as aforesaid. As soon as practicable after the exercise of this
Warrant in full or in part, and in any event within three (3) business
days thereafter, the Company at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of and delivered to
the Holder hereof, or as such Holder (upon payment by such Holder of any
applicable transfer taxes) may direct in compliance with applicable securities
laws, a certificate or certificates for the number of duly and validly issued,
fully paid and nonassessable shares of Common Stock (or Other Securities) to
which such Holder shall be entitled on such exercise, plus, in lieu of any
fractional share to which such Holder would otherwise be entitled, cash equal
to such fraction multiplied by the then Fair Market Value of one full share of
Common Stock, together with any other stock or other securities and property
(including cash, where applicable) to which such Holder is entitled upon such
exercise pursuant to Section 1 or otherwise.

 

2.             Cashless
Exercise.

 

(a)           Except as described below, if a Registration Statement (as
defined in the Subscription Agreement) (“Registration Statement”) is effective
and the Holder may sell its shares of Common Stock upon exercise hereof
pursuant to the Registration Statement, this Warrant may be exercisable in
whole or in part for cash only as set forth in Section 1 above.  If no such Registration Statement is
available during the time that such Registration Statement is required to be
effective pursuant to the terms of the Subscription Agreement, then payment
upon exercise may be made at the option of the Holder either in (i) cash,
wire transfer or by certified or official bank check payable to the order of
the Company equal to the applicable aggregate Purchase Price, (ii) by
cashless exercise in accordance with Section (b) below or (iii) by
a combination of any of the foregoing methods, for the number of Common Stock
specified in such form (as such exercise number shall be adjusted to reflect
any adjustment in the total number of shares of Common Stock issuable to the
holder per the terms of this Warrant) and the holder shall thereupon be
entitled to receive the number of duly authorized, validly issued, fully-paid
and non-assessable shares of Common Stock (or Other Securities) determined as
provided herein.

 

A-3

 

(b)           If the Fair Market Value of one share of Common Stock is
greater than the Purchase Price (at the date of calculation as set forth
below), in lieu of exercising this Warrant for cash, the holder may elect to receive
shares equal to the value (as determined below) of this Warrant (or the portion
thereof being cancelled) by surrender of this Warrant at the principal office
of the Company together with the properly endorsed Subscription Form in
which event the Company shall issue to the holder a number of shares of Common
Stock computed using the following formula:

 

X=Y
(A-B)

          A

 

Where    X=           the number of shares of
Common Stock to be issued to the holder

 

Y=           the number of
shares of Common Stock purchasable under the Warrant or, if only a portion of
the Warrant is being exercised, the portion of the Warrant being exercised (at
the date of such calculation)

 

A=          the Fair Market
Value of one share of the Company’s Common Stock (at the date of such
calculation)

 

B=           Purchase Price
(as adjusted to the date of such calculation)

 

(c)           The Holder may
employ the cashless exercise feature described in Section (b) above
only during the pendency of a Non-Registration Event as described in Section 11
of the Subscription Agreement.  For
purposes of Rule 144 promulgated under the 1933 Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have commenced, on
the Issue Date.

 

3.             Adjustment for
Reorganization, Consolidation, Merger, etc.

 

3.1.          Reorganization, Consolidation, Merger, etc.  In case at any time or from time to time, the
Company shall (a) effect a reorganization, (b) consolidate with or
merge into any other person or (c) transfer all or substantially all of
its properties or assets to any other person under any plan or arrangement
contemplating the dissolution of the Company, then, in each such case, as a
condition to the consummation of such a transaction, proper and adequate
provision shall be made by the Company whereby the Holder of this Warrant, on
the exercise hereof as provided in Section 1, at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and
property (including cash) to which such Holder would have been entitled upon
such consummation or in connection with such dissolution, as the case may be,
if such Holder had so exercised this Warrant, immediately prior thereto, all
subject to further adjustment thereafter as provided in Section 4.

 

3.2.          Dissolution. 
In the event of any dissolution of the Company following the transfer of
all or substantially all of its properties or assets, the Company, prior to
such dissolution, shall at its expense deliver or cause to be delivered the
stock and other securities and property (including cash, where applicable)
receivable by the Holder of the Warrants after the effective date of such
dissolution pursuant to this Section 3 to a bank or trust company (a “Trustee”)
having its principal office in New York, NY, as trustee for the Holder of
the Warrants.

 

A-4

 

3.3.          Continuation of Terms.  Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to in
this Section 3, this Warrant shall continue in full force and effect and
the terms hereof shall be applicable to the Other Securities and property
receivable on the exercise of this Warrant after the consummation of such
reorganization, consolidation or merger or the effective date of dissolution
following any such transfer, as the case may be, and shall be binding upon the
issuer of any Other Securities, including, in the case of any such transfer, the
person acquiring all or substantially all of the properties or assets of the
Company, whether or not such person shall have expressly assumed the terms of
this Warrant as provided in Section 4. 
In the event this Warrant does not continue in full force and effect
after the consummation of the transaction described in this Section 3,
then only in such event will the Company’s securities and property (including
cash, where applicable) receivable by the Holder of the Warrants be delivered
to the Trustee as contemplated by Section 3.2.

 

3.4           Share Issuance.  Until the Expiration Date, if the Company
shall issue any Common Stock except for the Excepted Issuances (as defined in Section 12(a) of
the Subscription Agreement), prior to the complete exercise of this Warrant for
a consideration less than the Purchase Price that would be in effect at the
time of such issue, then, and thereafter successively upon each such issue, the
Purchase Price shall be reduced to such other lower issue price.  For purposes of this adjustment, the issuance
of any security or debt instrument of the Company carrying the right to convert
such security or debt instrument into Common Stock or of any warrant, right or
option to purchase Common Stock shall result in an adjustment to the Purchase
Price upon the issuance of the above-described security, debt instrument,
warrant, right, or option and again at any time upon any subsequent issuances
of shares of Common Stock upon exercise of such conversion or purchase rights
if such issuance is at a price lower than the Purchase Price in effect upon
such issuance.  The reduction of the
Purchase Price described in this Section 3.4 is in addition to the other
rights of the Holder described in the Subscription Agreement.

 

4.             Extraordinary
Events Regarding Common Stock.  In the event that the Company shall (a) issue
additional shares of the Common Stock as a dividend or other distribution on
outstanding Common Stock, (b) subdivide its outstanding shares of Common
Stock, or (c) combine its outstanding shares of the Common Stock into a
smaller number of shares of the Common Stock, then, in each such event, the
Purchase Price shall, simultaneously with the happening of such event, be
adjusted by multiplying the then Purchase Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such event and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after such event, and the product so
obtained shall thereafter be the Purchase Price then in effect. The Purchase
Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this Section 4.
The number of shares of Common Stock that the Holder of this Warrant shall
thereafter, on the exercise hereof as provided in Section 1, be entitled
to receive shall be adjusted to a number determined by multiplying the number
of shares of Common Stock that would otherwise (but for the provisions of this Section 4)
be issuable on such exercise by a fraction of which (a) the numerator is
the Purchase Price that would otherwise (but for the provisions of this Section 4)
be in effect, and (b) the denominator is the Purchase Price in effect on
the date of such exercise.

 

5.             Certificate as
to Adjustments.  In each
case of any adjustment or readjustment in the shares of Common Stock (or Other
Securities) issuable on the exercise of the Warrants, the Company at its
expense will promptly cause its Chief Financial Officer or other appropriate
designee to compute such adjustment or readjustment in accordance with the
terms of the Warrant and prepare a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based, including a statement of (a) the consideration
received or receivable by the Company for any additional shares of Common Stock
(or Other Securities) issued or sold or deemed to 

 

A-5

 

have
been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding, and (c) the Purchase
Price and the number of shares of Common Stock to be received upon exercise of
this Warrant, in effect immediately prior to such adjustment or readjustment
and as adjusted or readjusted as provided in this Warrant. The Company will
forthwith mail a copy of each such certificate to the Holder of the Warrant and
any Warrant Agent of the Company (appointed pursuant to Section 11
hereof).

 

6.             Reservation of
Stock, etc. Issuable on Exercise of Warrant; Financial Statements.   The Company will at all times reserve and
keep available, solely for issuance and delivery on the exercise of the
Warrants, all shares of Common Stock (or Other Securities) from time to time
issuable on the exercise of the Warrant. 
This Warrant entitles the Holder hereof to receive copies of all
financial and other information distributed or required to be distributed to
the holders of the Company’s Common Stock.

 

7.             Assignment;
Exchange of Warrant.  Subject to
compliance with applicable securities laws, this Warrant, and the rights
evidenced hereby, may be transferred by any registered holder hereof (a “Transferor”).
On the surrender for exchange of this Warrant, with the Transferor’s
endorsement in the form of Exhibit B attached hereto (the “Transferor
Endorsement Form”) and together with an opinion of counsel reasonably
satisfactory to the Company that the transfer of this Warrant will be in
compliance with applicable securities laws, the Company at its expense, twice,
only, but with payment by the Transferor of any applicable transfer taxes, will
issue and deliver to or on the order of the Transferor thereof a new Warrant or
Warrants of like tenor, in the name of the Transferor and/or the transferee(s) specified
in such Transferor Endorsement Form (each a “Transferee”), calling in the
aggregate on the face or faces thereof for the number of shares of Common Stock
called for on the face or faces of the Warrant so surrendered by the
Transferor.  No such transfers shall
result in a public distribution of the Warrant.

 

8.             Replacement of
Warrant.  On receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or mutilation
of this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of this Warrant, the Company at its
expense, twice only, will execute and deliver, in lieu thereof, a new Warrant
of like tenor.

 

9.             Registration
Rights.  The Holder of this Warrant has
been granted certain registration rights by the Company.  These registration rights are set forth in
the Subscription Agreement.  The terms of
the Subscription Agreement are incorporated herein by this reference.

 

10.           Maximum
Exercise.  The Holder
shall not be entitled to exercise this Warrant on an exercise date, in
connection with that number of shares of Common Stock which would be in excess
of the sum of (i) the number of shares of Common Stock beneficially owned
by the Holder and its affiliates on an exercise date, and (ii) the number
of shares of Common Stock issuable upon the exercise of this Warrant with
respect to which the determination of this limitation is being made on an
exercise date, which would result in beneficial ownership by the Holder and its
affiliates of more than 4.99% of the outstanding shares of Common Stock on such
date.  For the purposes of the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934,
as amended, and Regulation 13d-3 thereunder. 
Subject to the foregoing, the Holder shall not be limited to aggregate
exercises which would result in the issuance of more than 4.99%.  The restriction described in this paragraph may
be waived, in whole or in part by the Holder, upon sixty-one (61) days prior
notice from the Holder to the Company. 
The Holder may decide whether to convert a Note or exercise this Warrant
to achieve an actual 4.99% ownership position.

 

A-6

 

11.           Warrant Agent.  The Company may, by written notice to the
Holder of the Warrant, appoint an agent (a “Warrant Agent”) for the purpose of
issuing Common Stock (or Other Securities) on the exercise of this Warrant
pursuant to Section 1, exchanging this Warrant pursuant to Section 7,
and replacing this Warrant pursuant to Section 8, or any of the foregoing,
and thereafter any such issuance, exchange or replacement, as the case may be,
shall be made at such office by such Warrant Agent.

 

12.           Transfer on the
Company’s Books.  Until this
Warrant is transferred on the books of the Company, the Company may treat the
registered holder hereof as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary.

 

13.           Notices.   All notices, demands,
requests, consents, approvals, and other communications required or permitted
hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally
served, (ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable air
courier service with charges prepaid, or (iv) transmitted by hand
delivery, telegram, or facsimile, addressed as set forth below or to such other
address as such party shall have specified most recently by written
notice.  Any notice or other
communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business
day following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur or (c) three business days after deposited in the mail
if delivered pursuant to subsection (ii) above.  The addresses for such communications shall
be: (i) if to the Company to: Ceragenix Pharmaceuticals, Inc., 1444
Wazee Street, Suite 210, Denver, CO 80202, Attn: Steven S. Porter, CEO,
telecopier: (303) 534-1860, with a copy by telecopier only to: Cliff Neuman, Esq.,
Clifford L. Neuman, P.C., Temple-Bowron House, 1507 Pine Street, Boulder, CO
80302, telecopier: (303) 449-1045, and (ii) if to the Holder, to the
addresses and telecopier number set forth in the first paragraph of this
Warrant, with an additional copy by telecopier only to: Grushko &
Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176,
telecopier number: (212) 697-3575.

 

14.           Miscellaneous.  This
Warrant and any term hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party against which enforcement
of such change, waiver, discharge or termination is sought. This Warrant shall
be construed and enforced in accordance with and governed by the laws of New
York.  Any dispute relating to this
Warrant shall be adjudicated in New York County in the State of New York.  The headings in this Warrant are for purposes
of reference only, and shall not limit or otherwise affect any of the terms
hereof.  The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision.

 

A-7

 

IN WITNESS WHEREOF, the
Company has executed this Warrant as of the date first written above.

 

	
   

  	
  CERAGENIX
  PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

Witness:

 

	
   

  	
   

  

 

A-8

 

Exhibit A

FORM OF
SUBSCRIPTION

(to be signed only on exercise of Warrant)

 

TO:  CERAGENIX PHARMACEUTICALS, INC.

 

The undersigned, pursuant to the provisions set forth in the attached
Warrant (No.        ), hereby
irrevocably elects to purchase (check applicable box):

 

o                         shares
of the Common Stock covered by such Warrant; or

 

o            the maximum number of shares of
Common Stock covered by such Warrant pursuant to the cashless exercise
procedure set forth in Section 2.

 

The undersigned herewith makes payment of the full purchase price for
such shares at the price per share provided for in such Warrant, which is
$                      .  Such payment takes the form of (check applicable
box or boxes):

 

o            $                    
in lawful money of the United States; and/or

 

o            the cancellation of the Warrant to
the extent necessary, in accordance with the formula set forth in Section 2,
to exercise this Warrant with respect to the maximum number of shares of Common
Stock purchasable pursuant to the cashless exercise procedure set forth in Section 2.

 

The undersigned requests that the certificates for such shares be
issued in the name of, and delivered to
                                                                                                          
whose address is

                                                                                                                                                                                                                                                                                                                                                                                                                                                

Number of Shares of Common Stock Beneficially Owned on the date of
exercise: Less than five percent (5%) of the outstanding Common Stock of
Ceragenix Pharmaceuticals, Inc.

 

The undersigned represents and warrants that the representations and
warranties in Section 4 of the Subscription Agreement (as defined in this
Warrant) are true and accurate with respect to the undersigned on the date hereof.

 

The undersigned represents and warrants that all offers and sales by
the undersigned of the securities issuable upon exercise of the within Warrant
shall be made pursuant to registration of the Common Stock under the Securities
Act of 1933, as amended (the “Securities Act”), or pursuant to an exemption
from registration under the Securities Act.

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Signature
  must conform to name of holder as

  
	
   

  	
   

  	
  specified
  on the face of the Warrant)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Address)

  

 

A-9

 

Exhibit B

 

FORM OF
TRANSFEROR ENDORSEMENT

(To be signed only on transfer of Warrant)

 

For
value received, the undersigned hereby sells, assigns, and transfers unto the
person(s) named below under the heading “Transferees” the right represented
by the within Warrant to purchase the percentage and number of shares of Common
Stock of CERAGENIX PHARMACEUTICALS, INC. to which the within Warrant relates
specified under the headings “Percentage Transferred” and “Number Transferred,”
respectively, opposite the name(s) of such person(s) and appoints
each such person Attorney to transfer its respective right on the books of
CERAGENIX PHARMACEUTICALS, INC. with full power of substitution in the
premises.

 

	
  Transferees

  	
   

  	
  Percentage Transferred

  	
   

  	
  Number Transferred

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Dated:
                              ,                                  

  	
   

  	
   

  
	
   

  	
   

  	
  (Signature
  must conform to name of holder as specified

  
	
   

  	
   

  	
  on
  the face of the warrant)  

  
	
   

  	
   

  	
   

  
	
  Signed
  in the presence of:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Name)

  	
   

  	
   

  
	
   

  	
   

  	
  (address)

  
	
   

  	
   

  	
   

  
	
  ACCEPTED
  AND AGREED:

  	
   

  	
   

  
	
  [TRANSFEREE]

  	
   

  	
   

  
	
   

  	
   

  	
  (address)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Name)

  	
   

  	
   

  

 

A-10

 

EXHIBIT B

 

AMORTIZATION
SCHEDULE

 

Longview  Fund

 

	
   

  	
   

  	
  Beginning

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Ending

  	
   

  
	
  Date

  	
   

  	
  Balance

  	
   

  	
  Rate

  	
   

  	
  Interest

  	
   

  	
  Payment

  	
   

  	
  Balance

  	
   

  
	
  9/30/2008

  	
   

  	
  2,057,189.00

  	
   

  	
  12

  	
  %

  	
  61,715.67

  	
   

  	
  —

  	
   

  	
  2,118,904.67

  	
   

  
	
  12/31/2008

  	
   

  	
  2,118,904.67

  	
   

  	
  12

  	
  %

  	
  63,567.14

  	
   

  	
  —

  	
   

  	
  2,182,471.81

  	
   

  
	
  3/31/2009

  	
   

  	
  2,182,471.81

  	
   

  	
  12

  	
  %

  	
  65,474.15

  	
   

  	
  —

  	
   

  	
  2,247,945.96

  	
   

  
	
  6/30/2009

  	
   

  	
  2,247,945.96

  	
   

  	
  12

  	
  %

  	
  67,438.38

  	
   

  	
  (23,914.72

  	
  )

  	
  2,291,469.63

  	
   

  
	
  9/30/2009

  	
   

  	
  2,291,469.63

  	
   

  	
  12

  	
  %

  	
  68,744.09

  	
   

  	
  (101,637.54

  	
  )

  	
  2,258,576.18

  	
   

  
	
  12/31/2009

  	
   

  	
  2,258,576.18

  	
   

  	
  12

  	
  %

  	
  67,757.29

  	
   

  	
  (53,808.11

  	
  )

  	
  2,272,525.35

  	
   

  
	
  3/31/2010

  	
   

  	
  2,272,525.35

  	
   

  	
  12

  	
  %

  	
  68,175.76

  	
   

  	
  (90,875.92

  	
  )

  	
  2,249,825.20

  	
   

  
	
  6/30/2010

  	
   

  	
  2,249,825.20

  	
   

  	
  12

  	
  %

  	
  67,494.76

  	
   

  	
  (121,965.05

  	
  )

  	
  2,195,354.90

  	
   

  
	
  9/30/2010

  	
   

  	
  2,195,354.90

  	
   

  	
  12

  	
  %

  	
  65,860.65

  	
   

  	
  (144,684.03

  	
  )

  	
  2,116,531.52

  	
   

  
	
  12/31/2010

  	
   

  	
  2,116,531.52

  	
   

  	
  12

  	
  %

  	
  63,495.95

  	
   

  	
  (172,664.24

  	
  )

  	
  2,007,363.23

  	
   

  
	
  3/31/2011

  	
   

  	
  2,007,363.23

  	
   

  	
  12

  	
  %

  	
  60,220.90

  	
   

  	
  (582,323.32

  	
  )

  	
  1,485,260.81

  	
   

  
	
  6/30/2011

  	
   

  	
  1,485,260.81

  	
   

  	
  12

  	
  %

  	
  44,557.82

  	
   

  	
  (340,784.69

  	
  )

  	
  1,189,033.94

  	
   

  
	
  9/30/2011

  	
   

  	
  1,189,033.94

  	
   

  	
  12

  	
  %

  	
  35,671.02

  	
   

  	
  (310,891.30

  	
  )

  	
  913,813.66

  	
   

  
	
  12/31/2011

  	
   

  	
  913,813.66

  	
   

  	
  12

  	
  %

  	
  27,414.41

  	
   

  	
  (941,228.07

  	
  )

  	
  —

  	
   

  

 

Longview  Equity
Fund

 

	
   

  	
   

  	
  Beginning

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Ending

  	
   

  
	
  Date

  	
   

  	
  Balance

  	
   

  	
  Rate

  	
   

  	
  Interest

  	
   

  	
  Payment

  	
   

  	
  Balance

  	
   

  
	
  9/30/2008

  	
   

  	
  550,000.00

  	
   

  	
  12

  	
  %

  	
  16,500.00

  	
   

  	
  —

  	
   

  	
  566,500.00

  	
   

  
	
  12/31/2008

  	
   

  	
  566,500.00

  	
   

  	
  12

  	
  %

  	
  16,995.00

  	
   

  	
  —

  	
   

  	
  583,495.00

  	
   

  
	
  3/31/2009

  	
   

  	
  583,495.00

  	
   

  	
  12

  	
  %

  	
  17,504.85

  	
   

  	
  —

  	
   

  	
  600,999.85

  	
   

  
	
  6/30/2009

  	
   

  	
  600,999.85

  	
   

  	
  12

  	
  %

  	
  18,030.00

  	
   

  	
  (6,393.72

  	
  )

  	
  612,636.12

  	
   

  
	
  9/30/2009

  	
   

  	
  612,636.12

  	
   

  	
  12

  	
  %

  	
  18,379.08

  	
   

  	
  (27,173.32

  	
  )

  	
  603,841.89

  	
   

  
	
  12/31/2009

  	
   

  	
  603,841.89

  	
   

  	
  12

  	
  %

  	
  18,115.26

  	
   

  	
  (14,385.87

  	
  )

  	
  607,571.28

  	
   

  
	
  3/31/2010

  	
   

  	
  607,571.28

  	
   

  	
  12

  	
  %

  	
  18,227.14

  	
   

  	
  (24,296.14

  	
  )

  	
  601,502.27

  	
   

  
	
  6/30/2010

  	
   

  	
  601,502.27

  	
   

  	
  12

  	
  %

  	
  18,045.07

  	
   

  	
  (32,607.98

  	
  )

  	
  586,939.36

  	
   

  
	
  9/30/2010

  	
   

  	
  586,939.36

  	
   

  	
  12

  	
  %

  	
  17,608.18

  	
   

  	
  (38,682.01

  	
  )

  	
  565,865.53

  	
   

  
	
  12/31/2010

  	
   

  	
  565,865.53

  	
   

  	
  12

  	
  %

  	
  16,975.97

  	
   

  	
  (46,162.67

  	
  )

  	
  536,678.82

  	
   

  
	
  3/31/2011

  	
   

  	
  536,678.82

  	
   

  	
  12

  	
  %

  	
  16,100.36

  	
   

  	
  (155,687.12

  	
  )

  	
  397,092.07

  	
   

  
	
  6/30/2011

  	
   

  	
  397,092.07

  	
   

  	
  12

  	
  %

  	
  11,912.76

  	
   

  	
  (91,110.53

  	
  )

  	
  317,894.31

  	
   

  
	
  9/30/2011

  	
   

  	
  317,894.31

  	
   

  	
  12

  	
  %

  	
  9,536.83

  	
   

  	
  (83,118.38

  	
  )

  	
  244,312.76

  	
   

  
	
  12/31/2011

  	
   

  	
  244,312.76

  	
   

  	
  12

  	
  %

  	
  7,329.38

  	
   

  	
  (251,642.14

  	
  )

  	
  —

  	
   

  

 

B-1

 

Alpha

 

	
   

  	
   

  	
  Beginning

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Ending

  	
   

  
	
  Date

  	
   

  	
  Balance

  	
   

  	
  Rate

  	
   

  	
  Interest

  	
   

  	
  Payment

  	
   

  	
  Balance

  	
   

  
	
  9/30/2008

  	
   

  	
  495,000.00

  	
   

  	
  12

  	
  %

  	
  14,850.00

  	
   

  	
  —

  	
   

  	
  509,850.00

  	
   

  
	
  12/31/2008

  	
   

  	
  509,850.00

  	
   

  	
  12

  	
  %

  	
  15,295.50

  	
   

  	
  —

  	
   

  	
  525,145.50

  	
   

  
	
  3/31/2009

  	
   

  	
  525,145.50

  	
   

  	
  12

  	
  %

  	
  15,754.37

  	
   

  	
  —

  	
   

  	
  540,899.87

  	
   

  
	
  6/30/2009

  	
   

  	
  540,899.87

  	
   

  	
  12

  	
  %

  	
  16,227.00

  	
   

  	
  (5,754.35

  	
  )

  	
  551,372.51

  	
   

  
	
  9/30/2009

  	
   

  	
  551,372.51

  	
   

  	
  12

  	
  %

  	
  16,541.18

  	
   

  	
  (24,455.98

  	
  )

  	
  543,457.70

  	
   

  
	
  12/31/2009

  	
   

  	
  543,457.70

  	
   

  	
  12

  	
  %

  	
  16,303.73

  	
   

  	
  (12,947.29

  	
  )

  	
  546,814.15

  	
   

  
	
  3/31/2010

  	
   

  	
  546,814.15

  	
   

  	
  12

  	
  %

  	
  16,404.42

  	
   

  	
  (21,866.53

  	
  )

  	
  541,352.05

  	
   

  
	
  6/30/2010

  	
   

  	
  541,352.05

  	
   

  	
  12

  	
  %

  	
  16,240.56

  	
   

  	
  (29,347.18

  	
  )

  	
  528,245.43

  	
   

  
	
  9/30/2010

  	
   

  	
  528,245.43

  	
   

  	
  12

  	
  %

  	
  15,847.36

  	
   

  	
  (34,813.81

  	
  )

  	
  509,278.97

  	
   

  
	
  12/31/2010

  	
   

  	
  509,278.97

  	
   

  	
  12

  	
  %

  	
  15,278.37

  	
   

  	
  (41,546.40

  	
  )

  	
  483,010.94

  	
   

  
	
  3/31/2011

  	
   

  	
  483,010.94

  	
   

  	
  12

  	
  %

  	
  14,490.33

  	
   

  	
  (140,118.40

  	
  )

  	
  357,382.87

  	
   

  
	
  6/30/2011

  	
   

  	
  357,382.87

  	
   

  	
  12

  	
  %

  	
  10,721.49

  	
   

  	
  (81,999.48

  	
  )

  	
  286,104.87

  	
   

  
	
  9/30/2011

  	
   

  	
  286,104.87

  	
   

  	
  12

  	
  %

  	
  8,583.15

  	
   

  	
  (74,806.54

  	
  )

  	
  219,881.48

  	
   

  
	
  12/31/2011

  	
   

  	
  219,881.48

  	
   

  	
  12

  	
  %

  	
  6,596.44

  	
   

  	
  (226,477.92

  	
  )

  	
  —

  	
   

  

 

B-2

 

EXHIBIT C

 

ADDITIONAL
WARRANTS

 

	
  Additional Warrants Conv Notes

  	
   

  	
  Warrants as of

  6/30/2008

  	
   

  	
  25%

  additional

  warrants

  	
   

  	
  Ratchet warrants

  	
   

  	
  Total Warrants

  After Amendment

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Longview Fund

  	
   

  	
  487,805

  	
   

  	
  342,988

  	
   

  	
  884,147

  	
   

  	
  1,714,939

  	
   

  
	
  Longview Equity Fund

  	
   

  	
  121,951

  	
   

  	
  85,747

  	
   

  	
  221,036

  	
   

  	
  428,734

  	
   

  
	
  Alpha Capital

  	
   

  	
  121,951

  	
   

  	
  85,747

  	
   

  	
  221,036

  	
   

  	
  428,734

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  771,336

  	
   

  	
  514,481

  	
   

  	
  1,326,219

  	
   

  	
  2,572,407

  	
   

  

 

C-1

 

SCHEDULE 8

 

NET REVENUES APPORTIONMENT

 

	
   

  	
   

  	
  Debt

  	
   

  	
  Cash Receipt

  	
   

  
	
   

  	
   

  	
  6/30/2008

  	
   

  	
  Application

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Longview Fund

  	
   

  	
  2,057,189

  	
   

  	
  23.91

  	
  %

  
	
  Longview Equity Fund

  	
   

  	
  550,000

  	
   

  	
  6.39

  	
  %

  
	
  Alpha Capital

  	
   

  	
  495,000

  	
   

  	
  5.75

  	
  %

  
	
  Midsummer

  	
   

  	
  3,300,000

  	
   

  	
  38.36

  	
  %

  
	
  Bushido Capital Master Fund

  	
   

  	
  550,916

  	
   

  	
  6.40

  	
  %

  
	
  Pierce Diversified Fund

  	
   

  	
  550,000

  	
   

  	
  6.39

  	
  %

  
	
  ACM SPV

  	
   

  	
  179,865

  	
   

  	
  2.09

  	
  %

  
	
  BCFM Trustees

  	
   

  	
  895,656

  	
   

  	
  10.41

  	
  %

  
	
  Ralph Rabman

  	
   

  	
  9,923

  	
   

  	
  0.12

  	
  %

  
	
  CFRR Holdings

  	
   

  	
  13,640

  	
   

  	
  0.16

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  8,602,189

  	
   

  	
  100.00

  	
  %

  

 

1

 

SCHEDULE 18

 

COMMON STOCK SUBJECT TO RESET OR
RATCHET

 

The
conversion or exercise price with respect to Company debentures or warrants or
the amount of Common Stock issued or issuable upon conversion of Company
debentures or warrants to the following holders thereof:

 

·                  Midsummer Investments, Ltd.

·                  Bushido Capital Master Fund

·                  Pierce Diversified Strategy Master Fund

·                  ACM SPV LLC

·                  BCMF Trustees, LLC

·                  Ralph Rabman

·                  CFRR Holdings, LLC

 

1Exhibit 10.4

 

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY SUCH SECURITIES.

 

COMMON
STOCK PURCHASE WARRANT

 

CERAGENIX
PHARMACEUTICALS, INC.

 

	
  Warrant Shares:

  	
   

  	
  Initial Exercise Date:

  	
   

  

 

THIS COMMON STOCK PURCHASE
WARRANT (the “Warrant”) certifies that, for value received,             
(the “Holder”), is entitled, upon the terms and subject to the
limitations on exercise and the conditions hereinafter set forth, at any time
on or after the date hereof (the “Initial Exercise Date”) and on or
prior to the close of business on the five year anniversary of the Initial
Exercise Date (the “Termination Date”) but not thereafter, to subscribe
for and purchase from Ceragenix Pharmaceuticals, Inc., a Delaware
corporation (the “Company”), up to                         
shares (the “Warrant Shares”) of common stock, par value $.0001 per
share, of the Company (the “Common Stock”).  The purchase price of
one share of Common Stock under this Warrant shall be equal to the Exercise
Price, as defined in Section 2(b).

 

Section 1.                                            Definitions.  Capitalized terms used and not otherwise defined herein shall
have the meanings set forth in that certain Securities Purchase Agreement (the “Purchase
Agreement”), dated December 5, 2006, as amended, among the Company and
the purchasers signatory thereto.

 

Section 2.                                            Exercise.

 

a)                                        Exercise of Warrant.  Exercise of the purchase rights
represented by this Warrant may be made, in whole or in part, at any time or
times on or after the Initial Exercise Date and on or before the Termination
Date by delivery to the Company of a duly executed facsimile copy of the Notice
of Exercise Form annexed hereto (or such other office or agency of the
Company as it may designate by notice in writing to the registered Holder at
the address of such Holder appearing on the books of the Company); and, within
3 Trading Days of the date said Notice of Exercise is delivered to the Company,
the Company shall have received payment of the aggregate Exercise Price of the
shares thereby purchased by wire transfer or cashier’s check drawn on a United
States bank.  Notwithstanding anything herein to the contrary, the Holder
shall not be required to physically surrender this Warrant to the Company until
the Holder has purchased all of the Warrant Shares available hereunder and the
Warrant has been exercised in full, in which case, the Holder shall surrender
this Warrant to the Company for cancellation within 3 Trading Days of the date
the final Notice of Exercise is delivered to the Company.  Partial
exercises of this Warrant resulting in purchases of a portion of the total
number of Warrant Shares available hereunder shall have the effect of lowering
the outstanding number of Warrant Shares purchasable hereunder in an amount
equal to the applicable number of Warrant Shares purchased.  The Holder
and the Company shall maintain records showing the number of Warrant Shares
purchased and the date of 

 

 

such
purchases.  The Company shall deliver any objection to any Notice of
Exercise Form within two (2) Business Days of receipt of such
notice.  The Holder and any assignee, by acceptance of this Warrant,
acknowledge and agree that, by reason of the provisions of this paragraph,
following the purchase of a portion of the Warrant Shares hereunder, the number
of Warrant Shares available for purchase hereunder at any given time may be
less than the amount stated on the face hereof.

 

b)                                     Exercise Price.  The exercise price per share of the
Common Stock under this Warrant shall be $0.80,
subject to adjustment hereunder (the “Exercise Price”).

 

c)                                      Cashless Exercise.  If at any time after one year from
the date of issuance of this Warrant there is no effective Registration
Statement registering, or no current prospectus available for, the resale of
the Warrant Shares by the Holder, then this Warrant may also be exercised at
such time by means of a “cashless exercise” in which the Holder shall be
entitled to receive a certificate for the number of Warrant Shares equal to the
quotient obtained by dividing [(A-B) (X)] by (A), where:

 

(A) =  the VWAP on the Trading Day immediately preceding the
date of such election;

 

(B) =  the Exercise Price of this Warrant, as adjusted; and

 

(X) =  the number of Warrant Shares issuable upon exercise of
this Warrant in accordance with the terms of this Warrant by means of a cash
exercise rather than a cashless exercise, or if only a portion of the Warrant
is being exercised, the portion of the Warrant being exercised (at the date of
such calculation).

 

Notwithstanding anything herein to the contrary, on the Termination
Date, this Warrant shall be automatically exercised via cashless exercise
pursuant to this Section 2(c).

 

d)                                     Holder’s Restrictions.  The Company shall not effect any
exercise of this Warrant, and a Holder shall not have the right to exercise any
portion of this Warrant, pursuant to Section 2(c) or otherwise, to
the extent that after giving effect to such issuance after exercise as set
forth on the applicable Notice of Exercise, such Holder (together with such
Holder’s Affiliates, and any other person or entity acting as a group together
with such Holder or any of such Holder’s Affiliates), as set forth on the
applicable Notice of Exercise, would beneficially own in excess of the
Beneficial Ownership Limitation (as defined below).  For purposes of the
foregoing sentence, the number of shares of Common Stock beneficially owned by
such Holder and its Affiliates shall include the number of shares of Common
Stock issuable upon exercise of this Warrant with respect to which such
determination is being made, but shall exclude the number of shares of Common
Stock which would be issuable upon (A) exercise of the remaining,
nonexercised portion of this Warrant beneficially owned by such Holder or any
of its Affiliates and (B) exercise or conversion of the unexercised or
nonconverted portion of any other securities of the Company (including, without
limitation, any other Debentures or Warrants) subject to a limitation on
conversion or exercise analogous to the limitation contained herein
beneficially owned by such Holder or any of its affiliates.  Except as set
forth in the preceding sentence, for purposes of this Section 2(d)(i),
beneficial ownership shall be calculated in accordance with Section 13(d) of
the Exchange Act and the rules and regulations promulgated thereunder, it
being acknowledged by a Holder that the Company is not representing to such
Holder that such calculation is in compliance with Section 13(d) of
the Exchange Act and such Holder is solely responsible for any schedules
required to be filed in accordance therewith.   To the extent that
the limitation contained in this Section 2(d) applies, the
determination of whether this Warrant is exercisable (in relation to other
securities owned by such Holder together with any Affiliates) and of which a
portion of this Warrant is exercisable shall be in the sole discretion of a
Holder, and the submission of a Notice of Exercise shall be deemed to be each
Holder’s determination of whether this Warrant is exercisable (in relation to
other securities owned by such Holder together with any Affiliates) and of
which portion of this Warrant is exercisable, in each case subject to such
aggregate percentage limitation, and the Company shall have no obligation to
verify or confirm the accuracy of such 

 

 

determination.  
In addition, a determination as to any group status as contemplated above shall
be determined in accordance with Section 13(d) of the Exchange Act
and the rules and regulations promulgated thereunder.  For purposes
of this Section 2(d), in determining the number of outstanding shares of
Common Stock, a Holder may rely on the number of outstanding shares of Common
Stock as reflected in (x) the Company’s most recent Form 10-QSB or Form 10-KSB,
as the case may be, (y) a more recent public announcement by the Company
or (z) any other notice by the Company or the Company’s Transfer Agent
setting forth the number of shares of Common Stock outstanding.  Upon the
written or oral request of a Holder, the Company shall within two Trading Days
confirm orally and in writing to such Holder the number of shares of Common
Stock then outstanding.  In any case, the number of outstanding shares of
Common Stock shall be determined after giving effect to the conversion or
exercise of securities of the Company, including this Warrant, by such Holder
or its Affiliates since the date as of which such number of outstanding shares
of Common Stock was reported.  The “Beneficial Ownership Limitation”
shall be 4.99% of the number of shares of the Common Stock outstanding
immediately after giving effect to the issuance of shares of Common Stock
issuable upon exercise of this Warrant.  The Beneficial Ownership
Limitation provisions of this Section 2(d)(i) may be waived by such
Holder, at the election of such Holder, upon not less than 61 days’ prior
notice to the Company to change the Beneficial Ownership Limitation to 9.99% of
the number of shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock upon exercise of this Warrant,
and the provisions of this Section 2(d) shall continue to
apply.  Upon such a change by a Holder of the Beneficial Ownership
Limitation from such 4.99% limitation to such 9.99% limitation, the Beneficial
Ownership Limitation may not be further waived by such Holder.  The
provisions of this paragraph shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this Section 2(d)(i) to
correct this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation herein contained
or to make changes or supplements necessary or desirable to properly give
effect to such limitation. The limitations contained in this paragraph shall
apply to a successor holder of this Warrant.

 

e)                                      Mechanics of Exercise.

 

i.         
Authorization of Warrant
Shares.  The Company
covenants that all Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of the purchase
rights represented by this Warrant, be duly authorized, validly issued, fully
paid and nonassessable and free from all taxes, liens and charges created by
the Company in respect of the issue thereof (other than taxes in respect of any
transfer occurring contemporaneously with such issue).

 

ii.        
Delivery of Certificates Upon
Exercise.  Certificates
for shares purchased hereunder shall be transmitted by the transfer agent of
the Company to the Holder by crediting the account of the Holder’s prime broker
with the Depository Trust Company through its Deposit Withdrawal Agent
Commission (“DWAC”) system if the Company is a participant in such
system, and otherwise by physical delivery to the address specified by the
Holder in the Notice of Exercise within 3 Trading Days from the delivery to the
Company of the Notice of Exercise Form, surrender of this Warrant (if required)
and payment of the aggregate Exercise Price as set forth above (“Warrant
Share Delivery Date”).  This Warrant shall be deemed to have been
exercised on the date the Exercise Price is received by the Company.  The
Warrant Shares shall be deemed to have been issued, and Holder or any other person
so designated to be named therein shall be deemed to have become a holder of
record of such shares for all purposes, as of the date the Warrant has been
exercised by payment to the Company of the Exercise Price (or by cashless
exercise, if permitted) and all taxes required to be paid by the Holder, if
any, pursuant to Section 2(e)(vii) prior to the issuance of such
shares, have been paid.

 

 

iii.       
Delivery of New Warrants Upon
Exercise.  If this
Warrant shall have been exercised in part, the Company shall, at the request of
a Holder and upon surrender of this Warrant certificate, at the time of
delivery of the certificate or certificates representing Warrant Shares,
deliver to Holder a new Warrant evidencing the rights of Holder to purchase the
unpurchased Warrant Shares called for by this Warrant, which new Warrant shall
in all other respects be identical with this Warrant.

 

iv.       
Rescission Rights.  If the Company fails to cause its
transfer agent to transmit to the Holder a certificate or certificates
representing the Warrant Shares pursuant to this Section 2(e)(iv) by
the Warrant Share Delivery Date, then the Holder will have the right to rescind
such exercise.

 

v.        
Compensation for Buy-In on
Failure to Timely Deliver Certificates Upon Exercise.  In addition to any other rights
available to the Holder, if the Company fails to cause its transfer agent to
transmit to the Holder a certificate or certificates representing the Warrant
Shares pursuant to an exercise on or before the Warrant Share Delivery Date,
and if after such date the Holder is required by its broker to purchase (in an
open market transaction or otherwise) or the Holder’s brokerage firm otherwise
purchases, shares of Common Stock to deliver in satisfaction of a sale by the
Holder of the Warrant Shares which the Holder anticipated receiving upon such
exercise (a “Buy-In”), then the Company shall (1) pay in cash to
the Holder the amount by which (x) the Holder’s total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (y) the amount obtained by multiplying (A) the
number of Warrant Shares that the Company was required to deliver to the Holder
in connection with the exercise at issue times (B) the price at which the
sell order giving rise to such purchase obligation was executed, and (2) at
the option of the Holder, either reinstate the portion of the Warrant and
equivalent number of Warrant Shares for which such exercise was not honored or
deliver to the Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its exercise and delivery
obligations hereunder.  For example, if the Holder purchases Common Stock
having a total purchase price of $11,000 to cover a Buy-In with respect to an
attempted exercise of shares of Common Stock with an aggregate sale price
giving rise to such purchase obligation of $10,000, under clause (1) of
the immediately preceding sentence the Company shall be required to pay the
Holder $1,000. The Holder shall provide the Company written notice indicating
the amounts payable to the Holder in respect of the Buy-In and, upon request of
the Company, evidence of the amount of such loss.  Nothing herein shall
limit a Holder’s right to pursue any other remedies available to it hereunder,
at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Company’s failure to
timely deliver certificates representing shares of Common Stock upon exercise
of the Warrant as required pursuant to the terms hereof.

 

vi.       
No Fractional Shares or Scrip.  No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant.  As to any fraction of a share which Holder would otherwise be
entitled to purchase upon such exercise, the Company shall at its election,
either pay a cash adjustment in respect of such final fraction in an amount
equal to such fraction multiplied by the Exercise Price or round up to the next
whole share.

 

vii.      
Charges, Taxes and Expenses.  Issuance of certificates for Warrant
Shares shall be made without charge to the Holder for any issue or transfer tax

 

 

or
other incidental expense in respect of the issuance of such certificate, all of
which taxes and expenses shall be paid by the Company, and such certificates
shall be issued in the name of the Holder or in such name or names as may be
directed by the Holder; provided, however, that in the event
certificates for Warrant Shares are to be issued in a name other than the name
of the Holder, this Warrant when surrendered for exercise shall be accompanied
by the Assignment Form attached hereto duly executed by the Holder; and
the Company may require, as a condition thereto, the payment of a sum
sufficient to reimburse it for any transfer tax incidental thereto.

 

viii.     
Closing of Books.  The Company will not close its
stockholder books or records in any manner which prevents the timely exercise
of this Warrant, pursuant to the terms hereof.

 

Section 3.                                            Certain  Adjustments.

 

a)                                      Stock Dividends and Splits. If the Company, at any time while this
Warrant is outstanding: (A) except for dividends to the Series A
Stockholders in accordance with the terms of the Company’s Certificate of Designations,
Preferences and Rights of Series A Convertible Preferred Stock, as
amended, in effect as of the date hereof, pays a stock dividend or otherwise
make a distribution or distributions on shares of its Common Stock or any other
equity or equity equivalent securities payable in shares of Common Stock
(which, for avoidance of doubt, shall not include any shares of Common Stock
issued by the Company upon exercise of this Warrant), (B) subdivides
outstanding shares of Common Stock into a larger number of shares, (C) combines
(including by way of reverse stock split) outstanding shares of Common Stock
into a smaller number of shares, or (D) issues by reclassification of
shares of the Common Stock any shares of capital stock of the Company, then in
each case the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately after such event and the number of shares issuable upon exercise of
this Warrant shall be proportionately adjusted.  Any adjustment made
pursuant to this Section 3(a) shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.

 

b)                                     Subsequent Equity Sales. If the Company or any Subsidiary thereof,
as applicable, at any time while this Warrant is outstanding, shall sell or
grant any option to purchase, or sell or grant any right to reprice its
securities, or otherwise dispose of or issue (or announce any offer, sale,
grant or any option to purchase or other disposition) any Common Stock or
Common Stock Equivalents entitling any Person to acquire shares of Common
Stock, at an effective price per share less than the then Exercise Price (such
lower price, the “Base Share Price” and such issuances collectively, a “Dilutive
Issuance”) (if the holder of the Common Stock or Common Stock Equivalents
so issued shall at any time, whether by operation of purchase price
adjustments, reset provisions, floating conversion, exercise or exchange prices
or otherwise, or due to warrants, options or rights per share which are issued
in connection with such issuance, be entitled to receive shares of Common Stock
at an effective price per share which is less than the Exercise Price, such
issuance shall be deemed to have occurred for less than the Exercise Price on
such date of the Dilutive Issuance), then the Exercise Price shall be reduced
and only reduced to equal the Base Share Price and the number of Warrant Shares
issuable hereunder shall be increased such that the aggregate Exercise Price
payable hereunder, after taking into account the decrease in the Exercise
Price, shall be equal to the aggregate Exercise Price prior to such
adjustment.  Such adjustment shall be made whenever such Common Stock or
Common Stock Equivalents are issued.  Notwithstanding the foregoing, no
adjustments shall be made, paid or issued under this Section 3(b) in
respect of an Exempt Issuance. For clarity, any adjustment to the conversion
price or exercise price of the Notes and/or Series A Warrants shall not
constitute an Exempt Issuance, 

 

 

and,
any such adjustment to an effective price per share that is lower than the then
Exercise Price shall constitute a Dilutive Issuance subject to this Section 3(b). 
The Company shall notify the Holder in writing, no later than the two (2) Trading
Days following the issuance of any Common Stock or Common Stock Equivalents
subject to this Section 3(b), indicating therein the applicable issuance
price, or applicable reset price, exchange price, conversion price and other
pricing terms (such notice the “Dilutive Issuance Notice”).  For
purposes of clarification, whether or not the Company provides a Dilutive
Issuance Notice pursuant to this Section 3(b), upon the occurrence of any
Dilutive Issuance, after the date of such Dilutive Issuance the Holder is
entitled to receive a number of Warrant Shares based upon the Base Share Price
regardless of whether the Holder accurately refers to the Base Share Price in
the Notice of Exercise.

 

c)                                      Subsequent Rights Offerings.  If the Company, at any time while the
Warrant is outstanding, shall issue rights, options or warrants to all holders
of Common Stock (and not to Holders) entitling them to subscribe for or
purchase shares of Common Stock at a price per share less than the VWAP at the
record date mentioned below, then the Exercise Price shall be multiplied by a
fraction, of which the denominator shall be the number of shares of the Common
Stock outstanding on the date of issuance of such rights or warrants plus the
number of additional shares of Common Stock offered for subscription or
purchase, and of which the numerator shall be the number of shares of the
Common Stock outstanding on the date of issuance of such rights or warrants
plus the number of shares which the aggregate offering price of the total
number of shares so offered (assuming receipt by the Company in full of all
consideration payable upon exercise of such rights, options or warrants) would
purchase at such VWAP.  Such adjustment shall be made whenever such rights
or warrants are issued, and shall become effective immediately after the record
date for the determination of stockholders entitled to receive such rights,
options or warrants.

 

d)                                     Pro Rata Distributions.  If the Company, at any time prior to
the Termination Date, shall distribute to all holders of Common Stock (and not
to Holders of the Warrants) evidences of its indebtedness or assets (including
cash and cash dividends) or rights or warrants to subscribe for or purchase any
security other than the Common Stock (which shall be subject to Section 3(b)),
then in each such case the Exercise Price shall be adjusted by multiplying the
Exercise Price in effect immediately prior to the record date fixed for determination
of stockholders entitled to receive such distribution by a fraction of which
the denominator shall be the VWAP determined as of the record date mentioned
above, and of which the numerator shall be such VWAP on such record date less
the then per share fair market value at such record date of the portion of such
assets or evidence of indebtedness so distributed applicable to one outstanding
share of the Common Stock as determined by the Board of Directors in good
faith.  In either case the adjustments shall be described in a statement
provided to the Holder of the portion of assets or evidences of indebtedness so
distributed or such subscription rights applicable to one share of Common
Stock.  Such adjustment shall be made whenever any such distribution is
made and shall become effective immediately after the record date mentioned
above.

 

e)                                      Fundamental Transaction. If, at any time while this Warrant is
outstanding, (A) the Company effects any merger or consolidation of the
Company with or into another Person, (B) the Company effects any sale of
all or substantially all of its assets in one or a series of related
transactions, (C) except for any tender offer or exchange offer by
Osmotics Corporation (“Osmotics”) whereby shares of Common Stock and/or
shares of the Company’s Series A Convertible Preferred Stock are
distributed to the stockholders of Osmotics, any tender offer or exchange offer
(whether by the Company or another Person) is completed pursuant to which
holders of Common Stock are permitted to tender or exchange their shares for
other securities, cash or property, or (D) the Company effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property (in any such case, a “Fundamental Transaction”),
then, upon any subsequent exercise of this Warrant, the Holder shall have the
right to receive, for each Warrant Share that would have been issuable upon
such exercise immediately prior to the occurrence of such Fundamental
Transaction, at the option of the Holder, (a) upon exercise of this 

 

 

Warrant,
the number of shares of Common Stock of the successor or acquiring corporation
or of the Company, if it is the surviving corporation, and any additional
consideration (the “Alternate Consideration”) receivable upon or as a
result of such reorganization, reclassification, merger, consolidation or
disposition of assets by a Holder of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such event or (b) if
the Company is acquired in an all cash transaction, cash equal to the value of
this Warrant as determined in accordance with the Black-Scholes option pricing
formula.  For purposes of any such exercise, the determination of the
Exercise Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in
respect of one share of Common Stock in such Fundamental Transaction, and the
Company shall apportion the Exercise Price among the Alternate Consideration in
a reasonable manner reflecting the relative value of any different components
of the Alternate Consideration.  If holders of Common Stock are given any
choice as to the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any exercise of this Warrant following such
Fundamental Transaction.  To the extent necessary to effectuate the
foregoing provisions, any successor to the Company or surviving entity in such
Fundamental Transaction shall issue to the Holder a new warrant consistent with
the foregoing provisions and evidencing the Holder’s right to exercise such
warrant into Alternate Consideration. The terms of any agreement pursuant to
which a Fundamental Transaction is effected shall include terms requiring any
such successor or surviving entity to comply with the provisions of this Section 3(e) and
insuring that this Warrant (or any such replacement security) will be similarly
adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.

 

f)                                        Calculations. All calculations under this Section 3
shall be made to the nearest cent or the nearest 1/100th of a share, as the
case may be. For purposes of this Section 3, the number of shares of
Common Stock deemed to be issued and outstanding as of a given date shall be
the sum of the number of shares of Common Stock (excluding treasury shares, if
any) issued and outstanding.

 

g)                                     Voluntary Adjustment By Company. The Company may at any time during the term
of this Warrant reduce the then current Exercise Price to any amount and for
any period of time deemed appropriate by the Board of Directors of the Company.

 

h)                                     Notice to Holder.

 

i.         
Adjustment to Exercise Price. Whenever the Exercise Price is adjusted
pursuant to any provision of this Section 3, the Company shall promptly
mail to the Holder a notice setting forth the Exercise Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment. If the Company issues a variable rate security, despite the
prohibition thereon in the Purchase Agreement, the Company shall be deemed to
have issued Common Stock or Common Stock Equivalents at the lowest possible
conversion or exercise price at which such securities may be converted or
exercised in the case of a Variable Rate Transaction (as defined in the
Purchase Agreement).

 

ii.        
Notice to Allow Exercise by
Holder. If (A) the
Company shall declare a dividend (or any other distribution in whatever form)
on the Common Stock; (B) the Company shall declare a special nonrecurring
cash dividend on or a redemption of the Common Stock; (C) the Company shall
authorize the granting to all holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock of any class or of any
rights; (D) the approval of any stockholders of the Company shall be
required in connection with any reclassification of the Common Stock, any
consolidation or merger to which the Company is a party, any sale or transfer
of all or substantially all of the assets of the Company, of any compulsory
share exchange whereby the 

 

 

Common
Stock is converted into other securities, cash or property; (E) the
Company shall authorize the voluntary or involuntary dissolution, liquidation
or winding up of the affairs of the Company; then, in each case, the Company
shall cause to be mailed to the Holder at its last address as it shall appear
upon the Warrant Register of the Company, at least 20 calendar days prior to
the applicable record or effective date hereinafter specified, a notice stating
(x) the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be
taken, the date as of which the holders of the Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected that holders of the
Common Stock of record shall be entitled to exchange their shares of the Common
Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share exchange;
provided that the failure to mail such notice or any defect therein or in the
mailing thereof shall not affect the validity of the corporate action required
to be specified in such notice.  The Holder is entitled to exercise this
Warrant during the 20-day period commencing on the date of such notice to the
effective date of the event triggering such notice.

 

Section 4.                                            Transfer of Warrant.

 

a)                                      Transferability.  Subject to compliance with any
applicable securities laws and the conditions set forth in Section 4(d) hereof
and to the provisions of Section 4.1 of the Purchase Agreement, this Warrant
and all rights hereunder (including, without limitation, any registration
rights) are transferable, in whole or in part, upon surrender of this Warrant
at the principal office of the Company or its designated agent, together with a
written assignment of this Warrant substantially in the form attached hereto
duly executed by the Holder or its agent or attorney and funds sufficient to
pay any transfer taxes payable upon the making of such transfer.  Upon
such surrender and, if required, such payment, the Company shall execute and
deliver a new Warrant or Warrants in the name of the assignee or assignees and
in the denomination or denominations specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing the
portion of this Warrant not so assigned, and this Warrant shall promptly be
cancelled.  A Warrant, if properly assigned, may be exercised by a new
holder for the purchase of Warrant Shares without having a new Warrant issued.

 

b)                                     New Warrants. This Warrant may be divided or combined
with other Warrants upon presentation hereof at the aforesaid office of the
Company, together with a written notice specifying the names and denominations
in which new Warrants are to be issued, signed by the Holder or its agent or
attorney.  Subject to compliance with Section 4(a), as to any
transfer which may be involved in such division or combination, the Company
shall execute and deliver a new Warrant or Warrants in exchange for the Warrant
or Warrants to be divided or combined in accordance with such notice.

 

c)                                      Warrant Register. The Company shall register this Warrant,
upon records to be maintained by the Company for that purpose (the “Warrant
Register”), in the name of the record Holder hereof from time to
time.  The Company may deem and treat the registered Holder of this
Warrant as the absolute owner hereof for the purpose of any exercise hereof or
any distribution to the Holder, and for all other purposes, absent actual
notice to the contrary.

 

d)                                     Transfer Restrictions. If, at the time of the surrender of this
Warrant in connection with any transfer of this Warrant, the transfer of this
Warrant shall not be registered pursuant to an effective registration statement
under the Securities Act and under applicable state securities or blue sky
laws, the Company may require, as a condition of allowing such transfer, that (i) the
Holder or transferee of this Warrant, as the case may be, furnish to the
Company a 

 

 

written
opinion of counsel (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions) to the effect
that such transfer may be made without registration under the Securities Act
and under applicable state securities or blue sky laws, and (ii) the
Holder or transferee execute and deliver to the Company an investment letter in
form and substance acceptable to the Company, and (iii) the transferee be
an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3),
(a)(7), or (a)(8) promulgated under the Securities Act or a “qualified
institutional buyer” as defined in Rule 144A(a) promulgated under the
Securities Act.

 

Section 5.                                            Miscellaneous.

 

a)                                      No Rights as Shareholder Until Exercise.  This Warrant does not entitle the
Holder to any voting rights or other rights as a shareholder of the Company
prior to the exercise hereof as set forth in Section 2(e)(ii).

 

b)                                     Loss, Theft, Destruction or Mutilation of
Warrant. The Company
covenants that upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate relating to the Warrant Shares, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it (which, in
the case of the Warrant, shall not include the posting of any bond), and upon
surrender and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of like
tenor and dated as of such cancellation, in lieu of such Warrant or stock
certificate.

 

c)                                      Saturdays, Sundays, Holidays, etc.  If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall not be a Business Day, then such action may be taken or such right may be
exercised on the next succeeding Business Day.

 

d)                                     Authorized Shares.

 

The Company covenants that during the period the Warrant is
outstanding, it will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of the Warrant Shares
upon the exercise of any purchase rights under this Warrant.  The Company
further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock certificates
to execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant.  The Company will take
all such reasonable action as may be necessary to assure that such Warrant
Shares may be issued as provided herein without violation of any applicable law
or regulation, or of any requirements of the Trading Market upon which the
Common Stock may be listed.

 

Except and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation, amending its
certificate of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of Holder as set forth in this
Warrant against impairment.  Without limiting the generality of the
foregoing, the Company will (a) not increase the par value of any Warrant
Shares above the amount payable therefor upon such exercise immediately prior
to such increase in par value, (b) take all such action as may be
necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable Warrant Shares upon the exercise of this
Warrant, and (c) use commercially reasonable efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having 

 

 

jurisdiction
thereof as may be necessary to enable the Company to perform its obligations
under this Warrant.

 

Before taking any action which would result in an adjustment in the
number of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or exemptions
thereof, or consents thereto, as may be necessary from any public regulatory body
or bodies having jurisdiction thereof.

 

e)                                      Jurisdiction. All questions concerning the construction,
validity, enforcement and interpretation of this Warrant shall be determined in
accordance with the provisions of the Purchase Agreement.

 

f)                                        Restrictions.  The Holder acknowledges that the
Warrant Shares acquired upon the exercise of this Warrant, if not registered,
will have restrictions upon resale imposed by state and federal securities
laws.

 

g)                                     Nonwaiver and Expenses.  No course of dealing or any delay or
failure to exercise any right hereunder on the part of Holder shall operate as
a waiver of such right or otherwise prejudice Holder’s rights, powers or
remedies, notwithstanding the fact that all rights hereunder terminate on the
Termination Date.  If the Company willfully and knowingly fails to comply
with any provision of this Warrant, which results in any material damages to
the Holder, the Company shall pay to Holder such amounts as shall be sufficient
to cover any costs and expenses including, but not limited to, reasonable
attorneys’ fees, including those of appellate proceedings, incurred by Holder
in collecting any amounts due pursuant hereto or in otherwise enforcing any of
its rights, powers or remedies hereunder.

 

h)                                     Notices.  Any notice, request or other document required or permitted to
be given or delivered to the Holder by the Company shall be delivered in
accordance with the notice provisions of the Purchase Agreement.

 

i)                                         Limitation of Liability.  No provision hereof, in the absence
of any affirmative action by Holder to exercise this Warrant to purchase
Warrant Shares, and no enumeration herein of the rights or privileges of
Holder, shall give rise to any liability of Holder for the purchase price of
any Common Stock or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.

 

j)                                         Remedies.  Holder, in addition to being entitled to exercise all rights
granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Warrant.  The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Warrant and hereby agrees to
waive and not to assert the defense in any action for specific performance that
a remedy at law would be adequate.

 

k)                                      Successors and Assigns.  Subject to applicable securities
laws, this Warrant and the rights and obligations evidenced hereby shall inure
to the benefit of and be binding upon the successors of the Company and the
successors and permitted assigns of Holder.  The provisions of this
Warrant are intended to be for the benefit of all Holders from time to time of
this Warrant and shall be enforceable by any such Holder or holder of Warrant
Shares.

 

l)                                         Amendment.  This Warrant may be modified or amended or the provisions
hereof waived with the written consent of the Company and the Holder.

 

m)                                   Severability.  Wherever possible, each provision of
this Warrant shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision 

 

 

of
this Warrant shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provisions or the remaining
provisions of this Warrant.

 

n)                                     Headings.  The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this
Warrant.

 

********************

 

IN WITNESS WHEREOF, the
Company has caused this Warrant to be executed by its officer thereunto duly
authorized as of the date first above indicated.

 

 

	
   

  	
  CERAGENIX PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Jeff Sperber

  
	
   

  	
   

  	
  Title:

  	
  CFO

  

 

 

NOTICE OF
EXERCISE

 

TO:                            CERAGENIX PHARMACEUTICALS, INC.

 

(1)   The undersigned hereby elects to purchase                       
Warrant Shares of the Company pursuant to the terms of the attached Warrant
(only if exercised in full), and tenders herewith payment of the exercise price
in full, together with all applicable transfer taxes, if any.

 

(2)   Payment shall take the form of (check applicable box):

 

o in lawful money of the United States; or

 

o [if permitted] the cancellation of such
number of Warrant Shares as is necessary, in accordance with the formula set
forth in subsection 2(c), to exercise this Warrant with respect to the maximum
number of Warrant Shares purchasable pursuant to the cashless exercise
procedure set forth in subsection 2(c).

 

(3)   Please issue a certificate or certificates representing said Warrant
Shares in the name of the undersigned or in such other name as is specified
below:

 

The Warrant Shares shall be delivered to the following DWAC Account
Number or by physical delivery of a certificate to:

 

(4)   Accredited Investor. 
The undersigned is an “accredited investor” as defined in Regulation D
promulgated under the Securities Act of 1933, as amended.

 

[SIGNATURE OF HOLDER]

 

	
  Name of Investing

  Entity:

  	
   

  
	
  Signature of Authorized Signatory of Investing

  Entity:

  	
   

  
	
  Name of Authorized

  Signatory:

  	
   

  
	
  Title of Authorized

  Signatory:

  	
   

  
	
  Date:

  	
   

  
						

 

 

ASSIGNMENT
FORM

 

(To assign the foregoing
warrant, execute

this form and supply required information. 

Do not use this form to exercise the warrant.)

 

FOR VALUE RECEIVED, [      ]
all of or [                            ]
shares of the foregoing Warrant and all rights evidenced thereby are hereby
assigned to

 

                                                                                                                                                
whose address is

 

                                                                                                                                                .

 

	
   

  	
  Dated:

  	
   

  	
  ,

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Holder’s
  

  Signature:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Holder’s

  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  
	
   

  
	
  Signature

  Guaranteed:

  	
   

  	
   

  
									

 

NOTE:  The signature to this Assignment Form must correspond
with the name as it appears on the face of the Warrant, without alteration or
enlargement or any change whatsoever, and must be guaranteed by a bank or trust
company.  Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to
assign the foregoing Warrant.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00147-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00147-of-00352.parquet"}]]