Document:

Exhibit 10.1

[**] indicates that information had been redacted and filed separately pursuant to a confidential treatment

request filed with the Securities and Exchange Commission

Exhibit 10.1

COMMERCIAL DEPLOYMENT AGREEMENT

This COMMERCIAL DEPLOYMENT AGREEMENT (the “Agreement”) is entered into as of the 31 day of March, 2008 (the “Effective Date”), by and between DUKE ENERGY CAROLINAS, LLC (“Duke”), a North Carolina limited liability company having a principal place of business at 526 South Church Street, Charlotte, North Carolina, 28201 and AMBIENT CORPORATION (“Ambient”), a Delaware corporation having a principal place of business at 79 Chapel Street, Newton, MA 02458.

WI T N E S S E T H

WHEREAS, Duke provides a wide range of energy related products including electricity generation and distribution to end-users through electric power lines, and Duke generates, transmits, distributes and sells electricity to approximately 3.8 million customers; and

WHEREAS, Duke is interested in establishing Smart Grid deployments within Duke’s service territory with Ambient’s Smart Grid solution; and

WHEREAS, Ambient is a utility communications solutions provider that develops and markets Smart Grid communications technologies and services which are designed to facilitate a comprehensive (end-to-end solution) for high speed transmission and reception of Internet Protocol data traffic for utility applications (“Ambient’s Smart Grid Solution”); and

WHEREAS, Duke Energy Corporation and Ambient entered into a Mutual Confidentiality and Non-Disclosure Agreement dated as of May 4, 2005 (the “NDA”); and

WHEREAS, Duke and Ambient desire to enter into a binding agreement with respect to supporting both a 1,500 device [**] deployment, and a 50,000 home [**] deployment; and

NOW, THEREFORE, in consideration of the terms and conditions hereafter set forth, the Parties hereto agree as follows:

ARTICLE I

DEFINITIONS

As used herein, the following terms shall, unless the context otherwise required, have the following meanings ascribed to them:

1.1 “Ambient’s Intellectual Property” means all United States and foreign patents (including without limitation all renewals and extensions thereof), registrations and applications for registration of patents (including without limitation continuations, continuations-in-part, reissues and extensions thereof), applications for patent (including without limitation divisions thereof), trade secrets and other intellectual property rights, whether now existing or hereafter created, developed, arising or otherwise coming into being, that relate to or cover any part of Ambient Technology, including without limitation any intellectual property rights that could be violated, infringed or misappropriated by any copying, manufacture, use, performance, distribution or other exploitation of the Ambient Technology or part thereof.

1.2

“Ambient Technology “ or “Ambient Technologies” shall mean any and all software, hardware, technology, equipment, know-how, algorithms, procedures, techniques, solutions, whether contained in a technology or technique owned by or exclusively licensed to Ambient or to an Ambient subsidiary or affiliate.

1.3 “Confidential Information” shall have the same meaning as in the NDA.

1.4 “Duke’s Intellectual Property” means all United States and foreign patents (including without limitation all renewals and extensions thereof), registrations and applications for registration of patents (including without limitation continuations, continuations-in-part, reissues and extensions thereof), applications for patent (including without limitation divisions thereof), trade secrets and other intellectual property rights, whether now existing or hereafter created, developed, arising or otherwise coming into being, that relate to or cover any part of Duke’s Technology, including without limitation any intellectual property rights that could be violated, infringed or misappropriated by any copying, manufacture, use, performance, distribution or other exploitation of Duke’s Technology or part thereof.

1.5

“Duke Technology “ or “Duke Technologies” shall mean any and all software, hardware, technology, equipment, know-how, algorithms, procedures, techniques, solutions, and work-arounds, whether contained in a technology or technique owned by or exclusively licensed (other than by Ambient) to Duke or to a Duke subsidiary or affiliate and contributed by Duke or any such subsidiary or affiliate. For avoidance of doubt, Duke Technology shall include all specifications, requirements and Confidential Information provided by Duke, or a Duke subsidiary or affiliate, to Ambient in connection with this Agreement or the Deployment.

1.6 “NDA” shall mean that certain Mutual Confidentiality and Non-Disclosure Agreement dated May 4, 2005, by and between Ambient and Duke Energy Corporation.

1.7 “Newly Developed Technology” shall mean any and all software, hardware, technology, equipment, know-how, inventions, discoveries, applications, algorithms, procedures, techniques, solutions, blue-prints, surveys, data, test results or outcomes and work-arounds, developed or created in the course of and pursuant to the [**] and/or [**] Deployments. Newly Developed Technology shall not include any improvement, derivation, extension, modification or enhancement of any copyright, patent, patent pending or patent application of Ambient, or any software, hardware, component, equipment or other intellectual property of Ambient, including the Ambient Technologies and the Ambient Intellectual Property, all of which shall remain the exclusive property of Ambient. Likewise, Newly Developed Technology shall not include any improvement, derivation, extension, modification or enhancement of any copyright, patent, patent pending or patent application of Duke, or any software, hardware, component, equipment or other intellectual property of Duke, including the Duke Technologies and the Duke Intellectual Property, all of which shall remain the exclusive property of Duke.

1.8

“NMS License Agreement” shall mean that certain Network Management System Software License Agreement dated September 12, 2006 by and between Ambient and Duke.

1.9

“Party “ or “Parties” shall mean Ambient and Duke.

1.10

“[**] Deployment” shall mean the assembly and delivery of enclosures to Duke which incorporate components specified and provided by Duke for the purposes of Advanced Meter Reading (AMR) in the [**] area.

1.11

“[**] Deployment” shall mean the delivery and integration of the required Ambient technology pursuant to Article III hereof, that will enable a two-way real-time communications platform for use by Duke that will service an initial 50,000 homes in the [**] area.

1.12

“Terms and Conditions” shall mean the terms and conditions set forth on Appendix B annexed hereto which are part of this Agreement as if set forth herein.

ARTICLE II

[**]

2.1

[**] Services: Ambient will assemble and deliver components specified and provided by Duke into enclosures for deployment on the utility distribution infrastructure. Duke will be responsible for selecting such components and delivering them to Ambient. Duke shall be responsible for the risk of loss of such components until Ambient receives and accepts them at such assembly location. Ambient warrants that the components [**], installed in each enclosure will power up, as indicated by the respective lights on each component being illuminated, but makes no other warranty in connection with the [**] Deployment.

2.2

Pricing and Delivery: Pricing for the [**] Deployment is set forth in the attached Appendix A-1 and a delivery schedule set forth in the attached Appendix A-2. The delivery schedule for Ambient’s performance for the [**] Deployment will be automatically extended by that number of days (if any) which Duke is late in delivering the required components to Ambient.

2.3

Payment: Duke will pay Ambient for the services provided for the [**] Deployment as set forth in Section 4.4.

ARTICLE III

[**]

3.1

[**] Services: (a) Ambient will provide Duke the equipment and technical support necessary to implement Ambient’s Smart Grid communications platform for 50,000 homes in the [**] area. Duke is responsible for delivering to Ambient the [**] in the quantities and on the delivery schedule specified on Appendix A-5. Duke shall be responsible for the risk of loss of such components until Ambient receives and accepts them at the assembly location.

(b) Each Party will exert commercially reasonable efforts including without limitation dedication of appropriate staff, facilities, equipment as well as access to facilities, sites, data processing and learning centers to carry out the [**] Deployment in accordance with the provisions of this Agreement. Without limiting the foregoing, Duke agrees to provide line access, line crew installation, testing facilities and backhaul connection.

3.2

Pricing and Delivery: Ambient shall provide the equipment set forth on the attached Appendix A-3 at the unit cost set forth thereon. Delivery of such equipment shall be in accordance with the timetable set forth on the attached Appendix A-4; provided that the delivery schedule for Ambient’s performance for the [**] Deployment will be automatically extended by that number of days (if any) which Duke is late in delivering the required components to Ambient. If Duke has met its obligations set forth in Appendix A-5, and in the event an Ambient delivery is not made within thirty (30) days of the date set forth in the timetable (as extended as set forth in the previous sentence, the invoiced amounts owing to Ambient on account of such delivery shall be reduced by liquidated damages of [**]% of the invoice amount if delivery is late by [**] and an additional [**]% of the invoice amount if delivery is late by [**], which the Parties agree is a fair and reasonable determination of the amount of actual damages which Duke would incur due to such a delay and that such liquidated damages do not constitute a penalty.

3 .3

Payment: Duke will pay Ambient for the services provided for the [**] Deployment as set forth in Section 4.4

ARTICLE IV

COMMERCIAL TERMS AND CONDITIONS

4.1

License: The terms and conditions of the NMS License Agreement shall govern Duke’s right to use Ambient’s Network Management Software (“NMS”) in connection with the [**] Deployment.

4.2

Technical Support. Except as provided in the next sentence, Ambient shall provide engineering and technical support as needed to design, support and assist in the completion of the [**] Deployment at its expense. Ambient shall also supply an engineer at the [**] Deployment site during the implementation of the [**] Deployment, but not to exceed a period of six months, and Duke agrees to pay Ambient on the Effective Date a lump sum of $_FEE TO BE DETERMINED BY AMENDMENT, IF NECESSARY______ for such engineer.

4.3

Purchase Orders: Duke shall submit purchase orders to Ambient on the Effective Date for each of the [**] Deployment and the [**] Deployment, which purchase orders will contain the Terms and Conditions. No other terms and conditions on any pre-printed forms or otherwise shall be binding on the Parties.

4.4

Payments:

(a)

For the [**] Deployment, Duke will pay Ambient the unit prices specified on Appendix A-1 within thirty (30) days of delivery of such units against an invoice therefor.

(b)

For the [**] Deployment, Duke will pay to Ambient the unit prices specified on Appendix A-3 against an invoice therefor within 5 days of receipt.

4.5

Expenses: Unless otherwise specified herein, each Party agrees to fully fund and pay for the costs and expenses of the performance of its responsibilities specified herein, including without limitation: (i) any and all salaries, employee benefits and other overhead costs for its own employees and facilities involved in the performance of this Agreement; (ii) any and all lodging, meal or travel expenses of its own employees; (iii) any and all costs and expenses for consultants whose use is not mutually agreed to in writing by both Parties; and (iv) any and all taxes, charges or fees arising out of its sole obligations or acts hereunder.

4.6

Personnel. Each Party will dedicate sufficient personnel at all skill and management levels, including without limitation, project managers, engineers, research personnel and line personnel with appropriate technical skills to the [**] Deployment and the [**] Deployment effort to ensure that the [**] Deployment and the [**] Deployment (collectively, where applicable, the “Deployments”) are developed in accordance with the terms of this Agreement. All engineers and other staff which may be assigned by Ambient or Duke to the Deployments shall at all times be employees or consultants of Ambient or Duke, respectively. Each Party may, at its option and expense, employ the services of contractors or consultants to assist with either one or both of the Deployments. Such Party will be held fully responsible for the work and activities of each of its subcontractors, including but not limited to each subcontractor’s compliance with this Agreement and the NDA.

4.7

Regulatory Compliance. For the Deployments, Duke and Ambient will each be responsible for the undertaking of all measures to assure their own compliance with applicable laws and regulations. Notwithstanding anything to the contrary contained herein, Duke shall be responsible for all costs relating to other approvals or permits necessary for the implementation of the Deployments and for obtaining all such approvals and permits. Should Duke for any reason fail to obtain the requisite regulatory consents or approvals to fulfill its obligations hereunder, Duke may terminate this Agreement for its convenience pursuant to Section 7.2.3.

4.8

[**] Deployment Results. Subject to the provisions of Article V hereof, each Party shall be entitled to full access to, and shall share with each other, all data, protocols, results and outcomes from the [**] Deployment activities (the “Results”) undertaken pursuant to this Agreement. All such Results shall be deemed Confidential Information pursuant to this Agreement; provided, however that nothing herein shall prohibit Ambient from utilizing the Results in the deployment on behalf of other customers.

[**]

ARTICLE V

PROPRIETARY RIGHTS

5.1

Ambient Technology. Duke acknowledges that the Ambient Technology is the sole property of Ambient, and Duke shall not obtain any interest of any kind in the Ambient Technology (or any patents or patents pending) by or through this Agreement except as otherwise provided herein. Any modifications, enhancements or improvements to the Ambient Technology or patents or patents pending (whether or not resulting from the implementation of this Agreement) which are discovered, invented or first reduced to practice by Duke and/or Ambient, or any of their respective sub-licensees, shall be the sole and exclusive property of Ambient. Duke acknowledges that this declaration is vital to Ambient and without it Ambient would not enter into this Agreement.

5.2

Duke Technology. Ambient acknowledges that the Duke Technology is the sole property of Duke, and Ambient shall not obtain any interest of any kind in the Duke Technology (or any patents or patents pending) by or through this Agreement except as otherwise provided herein. Any modifications, enhancements or improvements to the Duke Technology or patents or patents pending (whether or not resulting from the implementation of this Agreement), which are discovered, invented or first reduced to practice by Duke and/or Ambient, or any of their sub-licensees, shall be the sole and exclusive property of Duke. Ambient acknowledges that this declaration is vital to Duke and without it Duke would not enter into this Agreement.

5.3

Newly Developed Technology. (a) With respect to any technology that the Parties identify in writing for a joint development project by them, the Parties shall jointly own all title, rights and interests in and to any such Newly Developed Technology invented, discovered or otherwise created jointly by the employees of Ambient and Duke assigned to the Deployments pursuant to this Agreement, and either Party may use such Newly Developed Technology for any purpose whatsoever. Such Newly Developed Technology shall specifically include any and all patents, trademarks, copyrights, trade secrets and other proprietary rights of any kind whatsoever in the Newly Developed Technology and any and all works in any medium whatsoever that refer to, relate to, incorporate, include, analyze or utilize such Newly Developed Technology, including, but not limited to, improvements and modifications thereto and derivations there from. The Parties shall cooperate with each other to prepare all necessary patent and other filings and take all other actions reasonably necessary to reflect this joint ownership and equally share the costs thereof.

(b)

With respect to any other Newly Developed Technology not identified by the Parties as a joint development project under Section 5.3(a), Ambient shall own all title, rights and interests in and to any such Newly Developed Technology; provided that such Newly Developed Technology was invented, discovered or otherwise created solely by the employees of Ambient assigned to the Deployments pursuant to this Agreement and Ambient may use such Newly Developed Technology for any purpose whatsoever. Such Newly Developed Technology shall specifically include any and all patents, trademarks, copyrights, trade secrets and other proprietary rights of any kind whatsoever in the Newly Developed Technology and any and all works in any medium whatsoever that refer to, relate to, incorporate, include, analyze or utilize such Newly Developed Technology, including, but not limited to, improvements and modifications thereto and derivations there from. The Parties shall cooperate with each other to prepare all necessary patent and other filings and take all other actions reasonably necessary to reflect Ambient’s ownership.

(c)

With respect to any other Newly Developed Technology not identified by the Parties as a joint development project under Section 5.3(a), Duke shall own all title, rights and interests in and to any such Newly Developed Technology; provided that such Newly Developed Technology was solely invented, discovered or otherwise created by the employees of Duke assigned to the Deployments pursuant to this Agreement and Duke may use such Newly Developed Technology for any purpose whatsoever. Such Newly Developed Technology shall specifically include any and all patents, trademarks, copyrights, trade secrets and other proprietary rights of any kind whatsoever in the Newly Developed Technology and any and all works in any medium whatsoever that refer to, relate to, incorporate, include, analyze or utilize such Newly Developed Technology, including, but not limited to, improvements and modifications thereto and derivations there from. The Parties shall cooperate with each other to prepare all necessary patent and other filings and take all other actions reasonably necessary to reflect Duke’s ownership.

5.4

Trade Secrets. Each of Ambient and Duke acknowledges that the Ambient Technology and the Duke Technology contain trade secrets which are the sole property of Ambient and Duke, respectively, and that the Newly Developed Technology, if any, will contain trade secrets which may be the property of Ambient and/or Duke, as the case may be, all of which are not in the public domain, and the unauthorized use or disclosure of which may cause irreparable harm to the respective owner of the technology.

5.5

Confidentially. Duke agrees to be bound by the terms of the NDA applicable to Duke Energy Corporation. Each of Ambient and Duke acknowledges that the NDA shall be in effect during the Deployments and thereafter, and that all Confidential Information disclosed by one Party hereto to the other Party hereto during the course of the Deployments and thereafter shall be subject thereto and that the definition of “PROJECT” therein shall include the Deployments as contemplated by this Agreement; provided, however, that a Party receiving Confidential Information from the other Party may reveal such information solely to its employees, contractors or consultants who require such disclosure in order for such receiving Party to be able to perform its obligations or exercise its rights under this Agreement; provided, however, that such contractors or consultants, as the case may be, who received such confidential information, agree in writing to refrain from making any unauthorized use or disclosure thereof. Duke may retain the Confidential Information disclosed by Ambient, subject to the confidentiality obligations of the NDA, following termination or completion of this Agreement.

5.6

Patent Rights. Subject to section 5.3, the Parties agree that all right, title and interest in any modifications, revisions, additions, customizations and enhancements to a Party’s (“Owner”) patents, trademarks, trade secrets and other intellectual property made during the course of the Deployments shall be owned exclusively by the Owner without reservation, and that all such worldwide ownership rights, title and interest in and to, all aspects thereof shall solely vest with and be owned by the Owner. Specifically, Duke shall not acquire any right, title or interest in or to the Ambient Technologies by virtue of this Agreement or any of the activities contemplated hereby, nor shall Ambient acquire any right, title or interest in or to the Duke Technologies by virtue of this Agreement or any of the activities contemplated hereby.

ARTICLE VI

WARRANTIES & LIABILITY

6.1

Warranties. EXCEPT AS OTHERWISE PROVIDED HEREIN OR IN THE TERMS AND CONDITIONS OR IN THE NMS LICENSE AGREEMENT, AMBIENT EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

6.2

Limitation on Liability. IN NO EVENT SHALL ANY PARTY BE LIABLE TO THE OTHER PARTY IN RESPECT OF OR ARISING OUT OF THE PERFORMANCE AND/OR BREACH OF ITS OBLIGATIONS HEREUNDER FOR ANY INDIRECT, INCIDENTAL OR SPECIAL OR CONSEQUENTIAL DAMAGES, INCLUDING LOSS OF PROFITS, REVENUE, DATA OR USE, INCURRED BY THE OTHER PARTY WHETHER IN AN ACTION IN CONTRACT OR TORT, EVEN IF THAT PARTY OR ANY OTHER PERSON HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH HEREIN OTHER THAN SECTION 7.2.3, IN NO EVENT SHALL EITHER PARTY’S LIABILITY TO THE OTHER PARTY HEREUNDER FOR ANY REASON (INCLUDING EACH PARTY’S OBLIGATIONS UNDER APPENDIX B, SECTION 10) EXCEED THE AMOUNTS PAID TO AMBIENT PURSUANT TO THIS AGREEMENT.

6.3

Solicitation of Other Party’s Employees. Each Party agrees that during this Agreement and for a period of twelve (12) months after its termination, in whole or in part, it will not directly solicit (other than by general solicitation such as advertising in any media), the services of (i) an employee of the other Party or (ii) a former employee of the other Party whose employment with the other Party ended less than six (6) months prior to the date of such hiring (unless such employment ending was at the discretion of such employee’s employer or such employee accepted a company severance or benefit package offered by the employee’s employer), provided, however, that this provision shall not apply if the employer or former employer of such individual consents in writing to such solicitation.

ARTICLE VII

DEFAULT & TERMINATION

7.1

Effectiveness - Term of Agreement. This Agreement shall become effective upon the Effective Date and, unless terminated as herein provided, shall continue in full force and effect until the first to occur of the following: (a) the completion of the [**] Deployment (b) twelve (12) months from the Effective Date; and (c) earlier termination in accordance with the provisions hereof.

7.2

Right to Terminate.

7.2.1 Either Party may terminate this Agreement upon the other Party’s breach of a representation, warranty, term, covenant or undertaking in this Agreement if, within thirty (30) days following the delivery of a written notice to the defaulting Party setting forth in reasonable detail the basis of such default and the remedial action required to be taken to rectify such default, the defaulting Party has not rectified such default to the reasonable satisfaction of the non-defaulting Party.

7.2.2

A Party hereto may, at its option, terminate this Agreement should the other Party:

a)

Admit in writing its inability to pay its debts generally as they become due.

b)

Make a general assignment for the benefit of creditors.

c)

Institute proceedings to be adjudicated a voluntary bankrupt, or consent to the filing of a petition of bankruptcy against it.

d)

Be adjudicated by a court of competent jurisdiction as being bankrupt or insolvent.

e)

Seek reorganization under any bankruptcy act, or consent to the filing of a petition seeking such reorganization; or

f)

Have a decree entered against it by a court of competent jurisdiction appointing a receiver, liquidator, trustee, or assignee in bankruptcy or in insolvency covering all or substantially all of such Party’s property or providing for the liquidation of such Party’s property or business affairs.

7.2.3

Duke may terminate this Agreement for its convenience, upon written notice to Ambient, provided, however, that in the event of such a termination, Duke shall be required to remit to Ambient all amounts owing thereto on account of equipment purchased by Ambient for the Deployments, services rendered by Ambient, and any and all other amounts that may be owing to Ambient as of the date of termination; provided, however, that Duke shall be entitled to a credit for the net amount realized by Ambient from the resale or other disposition of such equipment within one hundred eighty (180) days from notice of termination. Ambient shall use commercially reasonable efforts to maximize such credits.

7.3

Survival. Articles V, VI and VIII of this Agreement shall survive the termination and/or expiration of this Agreement for any reason whatsoever. Upon termination or expiration of this Agreement, Duke will pay Ambient all amounts due and owing under this Agreement, which remain unpaid.

ARTICLE VIII

MISCELLANEOUS

8.1

Relationship. The relationship between Duke and Ambient is that of independent contractors and parties to certain licenses in accordance with this Agreement. Neither Party is in any way the agent or attorney in fact of the other, nor shall any Party or any of its respective agents or employees have any power or authority to assume any obligation of any kind, implied or expressed, on behalf of any other or to bind others to any contract, commitment or agreement whatsoever, or to make any representation on the others’ behalf. This Agreement shall not be construed as constituting either Party as the partner or joint venture partner of the others, nor to create any form of legal association which would impose liability upon one Party for the acts or failures to act of the others.

8.2

Force Majeure. No Party shall be liable for reasonable delays in the performance of its obligations under this Agreement which result from causes beyond its reasonable control, including without limitation acts of God, terrorism, strikes, war, riot, civil disorder, embargo, acts of civil and military authorities, fire, earthquake, flood or inability to obtain labor or materials.

8.3

Notices. Any notice, demand or communication which under the terms of this Agreement must or may be given or made by Duke or Ambient shall be in writing and shall be given or made by facsimile with confirmation of receipt, via electronic email, certified or registered mail, return receipt requested, or any delivery services, requiring signature of receipt, addressed to the respective parties as noted above. Such notice, demand or other communication shall be deemed to have been given on the date confirmed as the actual date of delivery by the delivery service if sent by such service, and in the case of certified or registered mail seven business days following the date on which it was deposited postage prepaid in the United States mail (or the date shown on the actual mail receipt if it is earlier).

The above addresses may be changed at any time by giving prior written notice as provided above.

8.4

Severability: Each provision of this Agreement or part thereof shall be severable. If, for any reason, any such provision or part thereof is finally determined, by a court or agency having valid jurisdiction, to be invalid and contrary to, or in conflict with, any existing or future law or regulation, such determination shall not impair the operation of or affect the remaining provisions of this Agreement, and such remaining provisions will continue to be given full force and effect and shall continue to bind the Parties.

8.5

Enforcement. The respective rights and remedies of each Party are cumulative, and no exercise or enforcement by either Party of any right or remedy hereunder shall preclude the exercise or enforcement by such Party of any other right or remedy hereunder, or which such Party is entitled by law to enforce. Each Party may waive any obligation of or restriction upon the other Party under this Agreement only in writing. No failure, refusal, neglect, delay, waiver, forbearance or omission of either Party to exercise any right under this Agreement or to insist upon full compliance by the other with its obligations hereunder shall constitute a waiver or any provision of this Agreement.

8.6

Entire Agreement. This Agreement, the NDA, and the NMS License Agreement, including all recitals in the preamble hereto and Appendices attached hereto, set forth the entire agreement and understanding between the Parties, contain all the understandings, inducements, promises and representations between the Parties relating to the matters referred to herein, and merge and supersede all prior agreements, commitments, arrangements, representations, writings and discussions between them related to the subject matter hereof, whether written or oral. Neither this Agreement nor any Appendix hereto may be modified or amended except by a written supplement, duly executed by each of the Parties. The Appendices attached hereto are incorporated by reference herein in their entirety. In the event of any inconsistency between the terms of this Agreement and the terms and provisions of any Appendix, this Agreement shall control.

[Signature page follows]

IN WITNESS WHEREOF,  each of the Parties has caused this Commercial Deployment Agreement to be duly executed on its behalf as of the Effective Date.

			
	         

	DUKE ENERGY CAROLINAS, LLC

	 
	 
	  

	 
	 
	 

	 
	By:  

	/s/ Ronald Reising

	 
	Name:

Title:

	Ronald Reising

Vice President

	 
	 
	 

	 
	 
	 

	         

	AMBIENT CORPORATION

	 
	 
	  

	 
	 
	 

	 
	By:  

	/s/ John J. Joyce

	 
	Name:

Title:

	John J. Joyce

Chief Executive Officer

Appendix A-1: Equipment Summary: [**] Proprietary and Confidential

Attached

Appendix A-2: Equipment Delivery Schedule: [**] Proprietary and Confidential

Attached

Appendix A-3: Equipment Summary: [**] Proprietary and Confidential

Attached

Appendix A-4: Equipment Delivery Schedule: [**] Proprietary and Confidential

Attached

Appendix A-5: Duke Equipment Delivery Schedule

Attached

Appendix A-1: Equipment Summary: [**]

Proprietary and Confidential

						
	Item

	Model #

	Description

	Qty.

	Unit Cost

	Ext. Cost

	1

	90-0021-002

	Pole-mount Units

	[**]

	$[**]

	$[**]

	2

	90-0021-001

	Pad-mount Node Units

	[**]

	$[**]

	$[**]

	3

	57-0072-003

	Pad-mount Kit

	[**]

	$[**]

	$[**]

	4

	ASSEMBLY

	Assembly labor charge /unit

	[**]

	$[**]

	$[**]

	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	TOTAL

	$540,779.60

Assumptions:

1. 

Minimum of [**] weeks lead time from date of Purchase Order received for first units to be delivered

2. 

Specific quantities of pole-mount [**] or pad-mount [**] units to be provided to Ambient no later than two weeks from date of Purchase Order received 

3. 

This proposal assumes Ambient is not performing any provisioning or configuration of [**] and modems

Appendix A-2: Equipment Delivery Schedule: [**]

Proprietary and Confidential

												
	 
	 
	 
	WEEK

	 

	Item

	Model #

	Description

	5

	6

	7

	8

	9

	10

	11

	12

	Total Shipped

	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 

	1

	[**]

	[**]

	[**]

	[**]

	[**]

	[**]

	[**]

	[**]

	 
	 
	[**]

	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 

	2

	90-0021-002

	Pole-mount Units - Delivered to Duke

	 
	 
	[**]

	[**]

	[**]

	[**]

	[**]

	[**]

	[**]

	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 

	3

	90-0021-001

	Pad-mount Node Units - Delivered to Duke

	 
	 
	[**]

	[**]

	[**]

	[**]

	[**]

	[**]

	[**]

	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 

	Assumptions:

	 
	 
	 
	 
	 
	 
	 
	 
	 
	 

	 
	1. Minimum of [**] weeks lead time from date of Purchase Order received for first units to be delivered

	 

	 
	2. Specific quantities of pole-mount [**] or pad-mount [**] units to be provided to Ambient no later than two weeks from date of Purchase Order received

	 
	3. This proposal assumes Ambient is not performing any provisioning or configuration of [**] and modems

Appendix A-3: Equipment Summary: [**]

Proprietary and Confidential

							
	Item #

	Model #

	Description

	Qty.

	Unit Cost

	Ext. Cost

	 
	 
	 
	 
	 
	 

	1

	X-2000-Y1A

	Pole-mount Node [**]

	[**]

	[**]

	$[**]

	 
	 
	 
	 
	 
	 

	2

	X-2000-Y1C

	Pole-mount Node [**]

	[**]

	[**]

	$[**]

	 
	 
	 
	 
	 
	 

	3

	X-2000-G11

	Pad-mount Node  [**]

	[**]

	[**]

	$[**]

	 
	 
	 
	 
	 
	 

	4

	X-2000-G1E

	Pad-mount Node  [**]

	[**]

	[**]

	$[**]

	 
	 
	 
	 
	 
	 

	5

	NMS Server1

	Server (includes hardware, NMS server license[**]

	[**]

	[**]

	$[**]

	 
	 
	 
	 
	 
	 

	6

	NMS Client

	Client Licenses (simultaneous users)

	[**]

	[**]

	$[**]

	 
	 
	 
	 
	 
	 

	7

	NMS Node License2

	Licenses for Nodes

	[**]

	[**]

	$[**]

	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	$10,655,944.89

	 
	 
	 
	 
	 
	 

	Notes:

	 
	 
	 
	 
	 

	1 If Duke exercises its option to provide the NMS Server hardware, the quoted price for each server will be reduced by $[**] (i.e., the $[**] price will be reduced to $[**])

	2 Per the terms of the "NMS License Agreement", "a maintenance Fee of [**]% of the total list price of all licensed components" (the NMS servers and the Node Licenses) will be charged [**] days from date of this agreement.  

	 
	 
	 
	 
	 
	 

	Assumptions:

	 
	 
	 
	 

	1. Minimum of [**] weeks lead time from date of Purchase Order received for first units to be delivered

	2. Appropriate quantities of [**] and [**] products must be made available to Ambient at least [**] weeks prior to delivery of units [**]

Appendix A-4: Equipment Delivery Schedule: [**] 

Proprietary and Confidential

										
	Time Period (weeks from date of PO)

	Total Required

	1 to 4

	4 to 8

	9 to 12

	13 to 16

	17 to 20

	21 to 24

	25 to 28

	Total Shipped

	 

	 

	 

	 

	 

	 

	 

	 

	 

	 

	X-2000-Y1A

	[**]

	[**]

	[**]

	[**]

	[**]

	[**]

	[**]

	[**]

	[**]

	 

	 
	 
	 
	 
	 
	 
	 
	 
	 

	X-2000-Y1C

	[**]

	 
	 
	 
	[**]

	[**]

	[**]

	[**]

	[**]

	 

	 
	 
	 
	 
	 
	 
	 
	 
	 

	X-2000-G11

	[**]

	 
	 
	 
	[**]

	 
	[**]

	 
	[**]

	 

	 
	 
	 
	 
	 
	 
	 
	 
	 

	X-2000-G1E

	[**]

	 
	 
	 
	 
	 
	 
	[**]

	[**]

	 

	 
	 
	 
	 
	 
	 
	 
	 
	 

	Total in time period

	 
	[**]

	[**]

	[**]

	[**]

	[**]

	[**]

	[**]

	[**]

	 

	 
	 
	 
	 
	 
	 
	 
	 
	 

	Cumulative Total

	[**]

	[**]

	[**]

	[**]

	[**]

	[**]

	[**]

	[**]

	 

	 

	 

	 
	 
	 
	 
	 
	 
	 
	 

Appendix A-5a: Duke Equipment Delivery Schedule:  [**]

Proprietary and Confidential

			
	 

	MAR

	APR

	 

	 
	 

	[**]

	1500

	 

	[**] 

	960

	540

	 

	 
	 

Appendix A-5b: Duke Equipment Delivery Schedule:  [**]

Proprietary and Confidential

								
	 

	MAR

	APR

	MAY 

	JUNE

	JULY

	AUG 

	SEP

	 

	 
	 

	 

	 

	 

	 

	 

	[**] 

	[**]

	[**]

	[**]

	[**]

	[**]

	[**]

	[**]

	 

	 
	 

	 

	 

	 

	 

	 

	[**]

	 
	[**]

	[**]

	[**]

	 

	 

	 

	 

	 
	 

	 

	 

	 

	 

	 

Appendix B

Terms and Conditions

In the event of any inconsistency between the provisions of this Appendix B and the Agreement to which it is attached, the terms of the Agreement shall control. The Agreement, together with all Appendices hereto, is referred to herein as the “Agreement.”

A. Terms and Conditions Applicable to the Purchase of Equipment

Warranty. With respect to the [**] Deployment only, Ambient represents and warrants that: (a) Ambient shall deliver good, exclusive and marketable title to the equipment described in the Agreement (the “Equipment”) free and clear of all liens, security interests, claims, and encumbrances; (b) for a period of twelve months after acceptance, which must occur no later than thirty (30) days after delivery, the Equipment shall be free from defects in materials and workmanship and shall comply with all final written descriptions, specifications, drawings and representations Ambient has provided to Duke, including those specified in the Agreement; (c) except as authorized by Duke, in writing, all Equipment and materials furnished, delivered or installed by Ambient shall contain zero percent asbestos, (d) no federal, state, local or foreign statute, law, rule, regulation or order will be violated in manufacturing, selling or delivering of the Equipment. Ambient shall promptly repair or replace, at Ambient’s election, all Equipment that does not comply with this warranty.

1.

Risk of Loss; Acceptance. Ambient shall bear all risk of loss with respect to the Equipment until Duke actually receives and accepts the Equipment. Duke shall have the right to inspect the Equipment before accepting it. Duke shall have a reasonable period of time after it discovers a defect or nonconformity, not to exceed thirty (30) days, to reject the Equipment or to revoke its acceptance of the Equipment. If Duke rejects the Equipment or revokes its acceptance of the Equipment, and Ambient does not deliver conforming Equipment on or before the delivery date specified in the Agreement, Duke shall have the right, at Duke’s election, to terminate all or a portion of this Agreement and obtain a prompt refund from Ambient of all payments Duke has made with respect to that portion of this Agreement Duke has terminated (but not for Equipment that has been received and accepted).

2.

Inspection. Upon reasonable notice and during normal business hours and at Duke’s expense, Duke shall have the right to place one inspector who must be a Duke employee in Ambient’s facilities to inspect the Equipment and the manufacturing and assembly process for the Equipment and to inspect and copy all quality assurance and other records relating to the Equipment.

B. Terms and Conditions Applicable to the Purchase of Services

4.

Warranty. With respect to the [**] Deployment only, Ambient represents and warrants to Duke that: (a) Ambient shall perform the services described in the Agreement (the “Services”) in a professional and workman like manner, and in full compliance with all final written descriptions, specifications, drawings and representations Ambient provides to Duke pursuant to the Agreement; (b) Ambient shall employ only competent and experienced personnel to perform the Services; (c) Ambient shall perform and complete the Services within the schedule established in the Agreement; and (d) no federal, state, local or foreign statute, law, rule, regulation or order will be violated in the performance of the Services.

5.

Safety and Security. All Services performed by Ambient or any other person or entity on Duke’s premises, and the design of all equipment and systems brought onto Duke’s premises, shall comply fully with the occupational safety and health standards in 29 C.F.R. sections 1910 and 1926 and Duke’s safety and security policies and regulations which have been provided in writing to Ambient, all as amended from time to time. At least two weeks before any Services are performed on Duke’s premises, Ambient shall deliver to Duke: (a) a copy of Ambient’s hazard communication program; (b) a list of all hazardous chemicals and other substances Ambient proposes to bring onto Duke’s premises, if any, and the quantities of each; and (c) material safety data sheets for each chemical and substance on the list.

C. Terms and Conditions Applicable to All Purchases

6.

Insurance. Ambient shall obtain, and shall provide to Duke certificates evidencing, the following insurance coverages: (a) worker’s compensation insurance with statutory limits and employer’s liability insurance with limits of at least $ 1,000,000; (b) commercial general liability insurance having a limit of at least $2,000,000 per occurrence for bodily injury and property damage, including but not limited to products and completed operations liability, owner’s and contractor’s protective, blanket contractual liability, personal injury liability, broad form property damage and explosion, and collapse and underground hazard coverage; (c) comprehensive automobile liability insurance having a limit of at least $1,000,000 per occurrence for bodily injury and property damage, including but not limited to coverage for owned, hired and non-owned automobiles and contractual liability. This insurance shall have an AM Best rating of A-Vu or higher, shall be primary for all purposes and shall contain standard cross liability provisions. All insurance policies shall have an AM Best rating of A-Vu or higher, shall be endorsed to add Duke as an additional insured, except for workers compensation and employer’s liability policies.

7.

No Additional Charges; Audit. The prices specified in the Agreement are the total prices of the Equipment and Services to Duke, and Duke shall not be responsible for any other charges, fees, taxes or expenses. Ambient shall maintain complete and accurate books, records and accounts of all materials, services and costs relating to this Agreement, in accordance with generally accepted accounting principles for at least four years after Ambient receives the final payment under this Agreement. Duke, or Duke’s representative, shall have the right to audit and copy those records at Duke’s expense.

8.

Discounts. All of Ambient’s invoices shall refer to the appropriate Duke Purchase Order and contain its number. Any prompt payment discount Ambient offers Duke shall be determined using the date Duke receives a correct invoice. Duke’s standard payment terms are forty-five days from receipt of the invoice.

9.

Intentionally omitted

10.

Indemnification. Ambient shall defend, indemnify and hold harmless Duke and its subsidiaries, affiliates, directors, officers and employees from and against all claims, demands, losses, damages, liabilities, obligations, and attorneys’ and other professionals’ fees and expenses arising out of or relating to: (a) any claim that the Equipment or Services or the Ambient Technology or Duke’s use of the Equipment or Services or the Ambient Technology infringes any patent, copyright, trademark, trade name, service mark or other property right; (b) any third party claim resulting from any breach of warranty by Ambient; (c) any third party claim resulting from any claim that the Equipment is defective; and (d) any negligent act or omission of Ambient or its employees, contractors and agents in the performance of the Services, including any claim arising out of Ambient’s failure to comply with applicable laws, rules, regulations or orders. In the case of a claim that the Equipment is infringing, Ambient shall have the right, at its sole expense, to (i) procure for Duke the right to continue using the Equipment (ii) modify the Equipment so that it is non-infringing but has the same functionality (iii) procure replacement Equipment that has substantially the same functionality, or if none of the above options is reasonably available (iv) terminate this Agreement and all licenses granted hereunder. Duke shall defend, indemnify and hold harmless Ambient and its subsidiaries, affiliates, directors, officers and employees from and against all claims, demands, losses, damages, liabilities, obligations, and attorneys’ and other professionals’ fees and expenses arising out of or relating to: (a) any third party claim resulting from any defect in Duke’s electric power grid or other property of Duke utilized in the Agreement, (b) any claim that the Duke Technology infringes any patent, copyright, trademark, trade name, service mark or other property right; and (c) any negligent act or omission of Duke or its employees, contractors and agents in connection with the performance of the Agreement. Each Party shall give the other Party reasonable notice of any claim it contends falls within this indemnification.

11.

Compliance with Laws. Unless exempted by the applicable rules, regulations or orders, Ambient and Duke shall comply fully at all times relevant to this Agreement with all applicable laws, rules, regulations and court orders, including, but not limited to: (a) Executive Order 1 1246 issued by the President of the United States on September 24, 1965; (b) the Vietnam Era Veterans Readjustment Assistance Act of 1974 and applicable sections of 41 CFR and 48 CFR 52.222.35 relating to the employment of veterans; (c) Sections 503 of the Rehabilitation Act of 1 973 and 48 CFR 52.222-36; (d) regulations of the United States Occupational Safety and Health Act; (e) 15 U.S.C. 637(d)(3) and 48 CFR 52.219 (Aid to Small Business); (f) 48 CFR 52.202-1 (Definitions); (g) 48 CFR 52.203-3 (Gratuities); (h) 48 CFR 52.203-5 (Covenant Against Contingent Fees); (i) 48 CFR 52.203-6 (Restrictions on Subcontractor Sales to the Government); (j) 48 CFR 52.203-7 (Anti-Kickback Procedures); (k) 48 CFR 52.203-8 (Cancellation, Rescission, and Recovery of Funds for Illegal or Improper Activity); (1) 48 CFR 52.209-6 (Protecting the Government’s Interest When Subcontracting with Contractors Debarred, Suspended, or Proposed for Debarment); (m) 48 CFR 52.212-5 (Contract Terms and Conditions Required to Implement Statutes or Executive Orders-Commercial Items); (n) 48 CFR 52.2 15-19 (Notification of Ownership Changes); (o) 48 CFR 52.222-21 (Prohibition of Segregated Facilities); (p) 48 CFR 52.222-26 (Equal Opportunity); (q) 48 CFR 52.223-13 (Certification of Toxic Chemical Release Reporting); (r) 48 CFR 52.223- 14 (Toxic Chemical Release Reporting); (s) 48 CFR 52.229-1 (State and Local Taxes); (t) 48 CFR 52.232-23 (Assignment of Claims); (u) all applicable rules, regulations and orders issued by the United States Secretary of Labor under any of the foregoing; and (v) all amendments of the foregoing that may be made from time to time. “CFR” is the Code of Federal Regulations.

12.

No Assignment. Neither Ambient nor Duke shall assign, delegate or subcontract all or any portion of this Agreement without the prior written consent of the other Party. Any attempted assignment, delegation or subcontracting without the other Party’s prior written consent shall be ineffective and void. Subject to the provisions of this Section, this Agreement shall be binding upon and shall inure to the benefit of the Parties hereto and their respective successors and assigns. Notwithstanding the foregoing, Ambient shall assign this Agreement to a third party, acceptable to Duke, and enter into and execute an assignment and assumption agreement to complete its obligations pursuant to this Agreement and make deliveries per Appendix A-3 , if Ambient (a) ceases business operations, (b) dissolves, (c) fails to pay its debts generally as they become due, (d) makes an assignment for the benefit of creditors, (e) seeks relief under any bankruptcy, insolvency or similar law, or (f) is involved in any involuntary proceeding under any bankruptcy, insolvency or similar law.

13. Arbitration. Any claim or controversy arising out of or relating to this Agreement or the breach of this Agreement shall be resolved by binding arbitration in Charlotte, North Carolina by a single arbitrator under the rules of the American Arbitration Association then in effect, and judgment may be entered on the award by any court of competent jurisdiction. Each party shall be entitled to a reasonable amount of prehearing discovery as allowed by the Arbitrator; provided that the discovery period shall not exceed sixty days. This Agreement and any controversy relating to this Agreement shall be governed by the laws of the State of North Carolina, excluding its conflict of law principles. The United Nations Convention on the International Sale of Equipment is expressly excluded and shall not apply. Notwithstanding the forgoing, either Party shall be entitled to seek equitable relief, including injunctions, in a court of competent jurisdiction and without proof of actual damages or the posting of a bond or other security.

14. Remedies. The remedies in this Agreement are cumulative and in addition to all rights and remedies at law and in equity. No delay in exercising or failure to exercise a right of remedy shall impair that or any other right or remedy or be construed as a waiver of any default.

15. Survival. The provisions of sections 1, 4, 7, 10, 13, 14 and 15 of this Appendix B and all other provisions of this Appendix B providing for indemnification or limitation of or protection against liability shall survive the termination, cancellation, or expiration of this Agreement.

16. Personnel.

A.

Ambient and Duke shall comply in all respects with all applicable immigration laws that may impact Ambient’s or Duke’s obligations under this Agreement, including the Immigration Reform and Control Act of 1986 and Form 1-9 requirements. Without limiting the generality of the foregoing, Ambient shall perform all required employment eligibility and verification checks and maintain all required employment records with respect to Ambient’s employees.

B.

For Services performed at a Duke facility or requiring access to Duke’s computer network, Ambient shall be responsible for conducting adequate pre­deployment screening of its employees, agents or independent contractors (and its subcontractors’ employees, agents or independent contractors) prior to assigning such personnel to Duke. Ambient represents and warrants that it will complete pre­deployment screening with respect to such personnel and that it will not assign such personnel to perform Services at a Duke facility or provide access to the Duke computer network unless the pre-deployment screening does not reveal any information that Ambient, acting reasonably, considers would adversely affect such personnel’s suitability for performance of the Services. Such pre-deployment screening shall include, at a minimum, an alcohol and five-panel drug test and a background check including: a Terrorist Watch Database Search; a Social Security trace; and a state and federal criminal history check for the previous five (5) years. Except where prohibited by law, Ambient will have the ongoing duty to inform Duke immediately upon learning that one of Ambient’s or its subcontractors’ employees, agents or independent contractors is not suitable for performance of the Services. Except where prohibited by law, should Ambient learn, after assigning an individual to provide Services at a Duke facility or requiring access to the Duke computer network, information that Ambient, acting reasonably, considers would adversely affect such personnel’s suitability for performance of the Services, Ambient will promptly advise Duke and remove the individual immediately from performing Services at a Duke facility or on the Duke computer network.

C.

Ambient and its subcontractors will not assign any person to provide Services known by Ambient to have been convicted of a felony involving dishonesty or a breach of trust or who is listed in the Terrorist Watch Database. Except where prohibited by law, Ambient will have the ongoing duty to inform Duke immediately upon learning that one of Ambient’s or its subcontractors’ employees, agents or independent contractors has been convicted of a felony or is listed in the Terrorist Watch Database. Except where prohibited by law, should Ambient learn after assigning an individual to provide Services that the individual has been convicted of a felony or is listed in the Terrorist Watch Database, Ambient will promptly advise Duke and remove the individual immediately from performing Services at a Duke facility or on the Duke computer network.

D.

Duke, in its sole discretion, shall have the option of barring from Duke’s property any Ambient (or subcontractor) personnel who Duke determines is not suitable.exhibit-10_1.htm

     

     

    Exhibit 10-1 

     

     

     

    

    SECURITY
AGREEMENT

     

    SECURITY
AGREEMENT (this “Agreement”), dated as
of May 7, 2008, by and between Cellceutix Corporation, a Nevada corporation
(“Company”),
and Cellceutix Pharma, Inc., a Delaware corporation (“Cellceutix Delaware”
and, together with the Company, the “Debtors”), and the
secured party signatory hereto (the “Secured
Party”).

     

    W I T N E
S S E T H:

     

    WHEREAS,
the Company has agreed to issue to the Secured Party and the Secured Party has
agreed to purchase from Company a Convertible Promissory Note due on the first
day of the nineteenth month from the date of issue (the “Note”), which is
convertible into shares of Company’s Common Stock, par value $0.001 per share
(the “Common
Stock”); and

     

    WHEREAS,
Cellceutix Delaware has agreed to guarantee the Company’s obligations under the
Note pursuant to the Guaranty (the “Guaranty”) delivered to the Secured Party on
the date hereof; and

     

    WHEREAS,
in order to induce the Secured Party to purchase the Notes, Debtors have agreed
to execute and deliver to the Secured Party this Agreement for the benefit of
the Secured Party and to grant to it a first priority security interest in
certain property of Debtors to secure the prompt payment, performance and
discharge in full of all of Company’s obligations under the Note and Cellceutix
Delaware’s obligations under the Guaranty.

     

    NOW,
THEREFORE, in consideration of the agreements herein contained and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:

     

    1.           Certain Definitions.
 As used in this Agreement, the following terms shall have the meanings set
forth in this Section 1.  Terms used but not otherwise defined in this
Agreement that are defined in Article 9 of the UCC (such as “general intangibles”
and “proceeds”)
shall have the respective meanings given such terms in Article 9 of the
UCC.

    

    (a)           “Collateral” means the
collateral in which the Secured Party is granted a security interest by this
Agreement and which shall include the following, whether presently owned or
existing or hereafter acquired or coming into existence, wherever situated, and
all additions and accessions thereto and all substitutions and replacements
thereof, and all proceeds, products and accounts thereof, including, without
limitation, all proceeds from the sale or transfer of the Collateral and of
insurance covering the same and of any tort claims in connection
therewith:

    

    (i) All goods of the Debtors,
including, without limitations, all machinery, equipment, computers, motor
vehicles, trucks, tanks, boats, ships, appliances, furniture, special and
general tools, fixtures, test and quality control devices and other equipment of
every kind and nature and wherever situated, together with all documents of
title and documents representing the same, all additions and accessions thereto,
replacements therefor, all parts therefor, and all substitutes for any of the
foregoing and all other items used and useful in connection with the Debtor’s
businesses and all improvements thereto (collectively, the “Equipment”);
and

    

    (ii) All
Inventory of the Debtors, including all materials, work in process and finished
goods; and

    

    (iii) All
of the Debtors’ contract rights and other general intangibles, including,
without limitation, all Intellectual Property, all partnership interests,
membership interests, stock or other securities, licenses, distribution and
other agreements, computer software, computer software development rights,
leases, franchises, customer lists, quality control procedures, grants and
rights, goodwill, trademarks, service marks, trade styles, trade names, patents,
patent applications, copyrights, deposit accounts, and income tax refunds
(collectively, the “General
Intangibles”); and

    

    (iv) All
Receivables of the Debtors including all insurance proceeds, and rights to
refunds or indemnification whatsoever owing, together with all instruments, all
documents of title representing any of the foregoing, all rights in any
merchandising, goods, equipment, motor vehicles and trucks which any of the same
may represent, and all right, title, security and guaranties with respect to
each Receivable, including any right of stoppage in transit; and

    

    (v) All
of the Debtors’s documents, instruments and chattel paper, files, records, books
of account, business papers, computer programs, investment property and the
products and proceeds of all of the foregoing Collateral set forth in clauses
(i)-(iv) above.

    

    (b)  “Company” shall mean,
collectively, Company and all of the subsidiaries of Company.

    

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

    

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

    

    (e)  “UCC” means the
Uniform Commercial Code, as currently in effect in the State of New
York.

    

    2.  Grant of Security
Interest.  As an inducement for the Secured Party to purchase the
Notes and to secure the complete and timely payment, performance and discharge
in full, as the case may be, of all of the Obligations, the Debtors hereby,
unconditionally and irrevocably, pledges, grants and hypothecates to the Secured
Party, a continuing security interest in, a continuing first lien upon, an
unqualified right to possession and disposition of and a right of set-off
against, in each case to the fullest extent permitted by law, all of the
Debtor’s right, title and interest of whatsoever kind and nature in and to the
Collateral (the “Security
Interest”).

    

    3.  Representations, Warranties,
Covenants and Agreements of the Debtors. Each Debtor represents and
warrants to, and covenants and agrees with, the Secured Party as
follows:

    

    (a)  The
Debtor has the requisite corporate power and authority to enter into this
Agreement and otherwise to carry out its obligations thereunder.  The
execution, delivery and performance by the Debtor of this Agreement and the
filings contemplated therein have been duly authorized by all necessary action
on the part of the Debtor and no further action is required by the Debtor.
 This Agreement has been duly executed by the Debtor.  This
Agreement constitutes a legal, valid and binding obligation of the Debtor
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditor’s rights generally.

    

    (b)  The
Debtor is the sole owner of the Collateral (except for non-exclusive licenses
granted by the Debtor in the ordinary course of business), free and clear of any
liens, security interests, encumbrances, rights or claims, and is fully
authorized to grant the Security Interest in and to pledge the Collateral,
except as set forth on Schedule B.
 There is not on file in any governmental or regulatory authority, agency
or recording office an effective financing statement, security agreement,
license or transfer or any notice of any of the foregoing (other than those that
have been filed in favor of the Secured Party pursuant to this Agreement)
covering or affecting any of the Collateral, except as set forth on Schedule B.  So
long as this Agreement shall be in effect, the Debtor shall not execute and
shall not knowingly permit to be on file in any such office or agency any such
financing statement or other document or instrument (except to the extent filed
or recorded in favor of the Secured Party pursuant to the terms of this
Agreement), except as set forth on Schedule
B

    

    (c)  No
part of the Collateral has been judged invalid or unenforceable.  No
written claim has been received that any Collateral or the Debtor’s use of any
Collateral violates the rights of any third party. There has been no adverse
decision to the Debtor’s claim of ownership rights in or exclusive rights to use
the Collateral in any jurisdiction or to the Debtor’s right to keep and maintain
such Collateral in full force and effect, and there is no proceeding involving
said rights pending or, to the best knowledge of the Debtor, threatened before
any court, judicial body, administrative or regulatory agency, arbitrator or
other governmental authority.

    

    (d)  The
Debtor shall at all times maintain its books of account and records relating to
the Collateral at its principal place of business and may not relocate such
books of account and records or tangible Collateral unless it delivers to the
Secured Party at least ten (10) days prior to such relocation (i) written notice
of such relocation and the new location thereof (which must be within the United
States) and (ii) evidence that appropriate financing statements and other
necessary documents have been filed and recorded and other steps have been taken
to perfect the Security Interest to create in favor of the Secured Party valid,
perfected and continuing first priority liens in the Collateral.

    

    (e)  This
Agreement creates in favor of the Secured Party a valid security interest in the
Collateral securing the payment and performance of the Obligations and, upon
making the filings described in the immediately following sentence, a perfected
first priority security interest in such Collateral.  Except for the filing
of financing statements on Form-1 under the UCC with the jurisdictions indicated
on Schedule B,
attached hereto, no authorization or approval of or filing with or notice to any
governmental authority or regulatory body is required either  for the grant
by the Debtor of, or the effectiveness of, the Security Interest granted hereby
or for the execution, delivery and performance of this Agreement by the Debtor
or  for the perfection of or exercise by the Secured Party of its rights
and remedies hereunder.

    

    (f)  The
Debtors authorize the Secured Party to make any and all financing statement
filings deemed reasonably necessary by the Secured Party.  The Secured
Party is authorized to describe the Collateral in such financing statements as
“all assets”..

    

    (g)  The
execution, delivery and performance of this Agreement does not conflict with or
cause a breach or default, or an event that with or without the passage of time
or notice, shall constitute a breach or default (with or without notice, lapse
of time or both), under its organizational documents, applicable law or any
agreement to which the Debtor is a party or by which the Debtor is bound.
 No consent (including, without limitation, from stock holders or creditors
of the Debtor) is required for the Debtor to enter into and perform its
obligations hereunder.

    

    (h)  The
Debtor shall at all times maintain the liens and Security Interest provided for
hereunder as valid and perfected first priority liens and security interests in
the Collateral in favor of the Secured Party until this Agreement and the
Security Interest hereunder shall terminate pursuant to Section 11.  The
Debtor hereby agrees to defend the same against any and all persons.  The
Debtor shall safeguard and protect all Collateral for the account of the Secured
Party.  At the request of the Secured Party, the Debtor will sign and
deliver to the Secured Party at any time or from time to time one or more
financing statements pursuant to the UCC (or any other applicable statute) in
form reasonably satisfactory to the Secured Party and will pay the cost of
filing the same in all public offices wherever filing is, or is deemed by the
Secured Party to be, necessary or desirable to effect the rights and obligations
provided for herein. Without limiting the generality of the foregoing, the
Debtor shall pay all fees, taxes and other amounts necessary to maintain the
Collateral and the Security Interest hereunder, and the Debtor shall obtain and
furnish to the Secured Party from time to time, upon demand, such releases
and/or subordinations of claims and liens which may be required to maintain the
priority of the Security Interest hereunder.

    

    (i)  The
Debtor will not transfer, pledge, hypothecate, encumber, license (except for
non-exclusive licenses granted and sales of inventory made by the Debtor in the
ordinary course of business), sell or otherwise dispose of any of the Collateral
without the prior written consent of the Secured Party.

    

    (j)  The
Debtor shall keep and preserve its Equipment, Inventory and other tangible
Collateral in good condition, repair and order and shall not operate or locate
any such Collateral (or cause to be operated or located) in any area excluded
from insurance coverage.

    

    (k)  The
Debtor shall, within ten (10) days of obtaining knowledge thereof, advise the
Secured Party promptly, in sufficient detail, of any substantial change in the
Collateral, and of the occurrence of any event which would have a material
adverse effect on the value of the Collateral or on the Secured Party’s security
interest therein.

    

    (l)  The
Debtor shall promptly execute and deliver to the Secured Party such further
deeds, mortgages, assignments, security agreements, financing statements or
other instruments, documents, certificates and assurances and take such further
action as the Secured Party may from time to time request and may in its sole
discretion deem necessary to perfect, protect or enforce its security interest
in the Collateral including, without limitation, the execution and delivery of a
separate security agreement with respect to the Company’s intellectual property
(“Intellectual
Property Security Agreement”) in which the Secured Party has been granted
a security interest hereunder, substantially in a form acceptable to the Secured
Party, which Intellectual Property Security Agreement, other than as stated
therein, shall be subject to all of the terms and conditions
hereof.

    .

    

    (m)  The
Debtor shall permit the Secured Party and its representatives and agents to
inspect the Collateral at any time, and to make copies of records pertaining to
the Collateral as may be requested by the Secured Party from time to
time.

    

    (n)  The
Debtor will take all steps reasonably necessary to diligently pursue and seek to
preserve, enforce and collect any rights, claims, causes of action and accounts
receivable in respect of the Collateral.

    

    (o)  The
Debtor shall promptly notify the Secured Party in sufficient detail upon
becoming aware of any attachment, garnishment, execution or other legal
process levied against any Collateral and of any other information received by
the Debtor that may materially affect the value of the Collateral, the Security
Interest or the rights and remedies of the Secured Party hereunder.

    

    (p)  All
information heretofore, herein or hereafter supplied to the Secured Party by or
on behalf of the Debtor with respect to the Collateral is accurate and complete
in all material respects as of the date furnished.

    

    (q)  The
Debtor shall at all times preserve and keep in full force and effect its valid
existence and good standing and any rights and franchises material to its
businesses.

    

    (r)  The
Debtor was organized and remains organized solely under the laws of the state or
other jurisdiction set forth next to the Debtor’s name in  Schedule C attached
hereto, which Schedule
C sets forth the Debtor’s organizational identification number or, if the
Debtor does not have one, states that one does not exist.  The Debtor
further represents: (i) the actual name of the Debtor is the name set forth in
Schedule D
attached hereto; (ii) the Debtor has no trade names except as set forth on
Schedule E attached hereto; (iii) the Debtor has not used any name other than
that stated in the preamble hereto or as set forth on Schedule E for the
preceding five years; and (iv) no entity has merged into the Debtor or been
acquired by the Debtor within the past five years except as set forth on Schedule
E.

    

    (s)           The
Debtor will from time to time, at the sole expense of the Debtor, promptly
execute and deliver all such further instruments and documents, and take all
such further action as may be necessary or desirable, or as the Secured Party
may reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Secured Party to
exercise and enforce its rights and remedies hereunder and with respect to any
Collateral or to otherwise carry out the purposes of this
Agreement.

    

    4.  Defaults.  The
following events shall be “Events of
Default”:

    

    (a)  The
occurrence of an Event of Default (as defined in the Note) under the
Note;

    

    
      	
              (b)  

            	
              The
      breach of Cellceutix Delaware’s obligations under the
      Guaranty;

            

    

    

    (c) Any
representation or warranty of the Debtor herein shall prove to have been
incorrect in any material respect when made; or

    

    (d) The
failure by the Debtor to observe or perform any of its obligations hereunder for
five (5) days after delivery to the Debtor of notice of such failure by or on
behalf of the Secured Party unless such default is capable of cure but cannot be
cured within such time frame and the Debtor is using best efforts to cure same
in a timely fashion; or

    

    (e)  If
any provision of this Agreement shall at any time for any reason be declared to
be null and void, or the validity or enforceability thereof shall be contested
by any Debtor, or a proceeding shall be commenced by the Debtor, or by any
governmental authority having jurisdiction over the Debtor, seeking to establish
the invalidity or unenforceability thereof, or the Debtor shall deny that it has
any liability or obligation purported to be created under this
Agreement.

    

    5.  Duty To Hold In
Trust.  Upon the occurrence of any Event of Default and at any time
thereafter, the Debtors shall, upon receipt by them of any revenue, income or
other sums subject to the Security Interest, whether payable pursuant to the
Note or otherwise, or of any check, draft, note, trade acceptance or other
instrument evidencing an obligation to pay any such sum, hold the same in trust
for the Secured Party and shall forthwith endorse and transfer any such sums or
instruments, or both, to the Secured Party for application to the satisfaction
of the Obligations.  If the Debtor shall become entitled to receive or
shall receive any securities or other property, the Debtor agrees to (i) accept
the same as the agent of the Secured Party; (ii) hold the same in trust on
behalf of and for the benefit of the Secured Party; and (iii) deliver any and
all certificates or instruments evidencing the same to the Secured Party on or
before the close of business on the fifth business day following the receipt
thereof by the Debtor, in the exact form received together with any necessary
endorsements, to be held by the Secured Party subject to the terms of this
Agreement as Collateral.

    

    6.  Rights and Remedies Upon
Default.  Upon occurrence of any Event of Default and at any time
thereafter, the Secured Party shall have the right to exercise all of the
remedies conferred hereunder and under the Note, and the Secured Party shall
have all the rights and remedies of a secured party under the UCC and/or any
other applicable law (including the Uniform Commercial Code of any jurisdiction
in which any Collateral is then located).  Without limitation, the Secured
Party shall have the right:

    

    (i)
Subject to the provisions of the UCC and applicable state laws, to take
possession of the Collateral and, for that purpose, enter, with the aid and
assistance of any person, any premises where the Collateral, or any part
thereof, is or may be placed and remove the same, and the Debtors shall assemble
the Collateral and make it available to the Secured Party at places which the
Secured Party shall reasonably select, whether at the Company’s premises or
elsewhere, and make available to the Secured Party, without rent, all of the
Debtors’ respective premises and facilities for the purpose of the Secured Party
taking possession of, removing or putting the Collateral in saleable or
disposable form.

    

    (ii)           Upon
written notice to the Debtor by the Secured Party, all rights of the Debtor to
exercise the voting and other consensual rights which it would otherwise be
entitled to exercise and all rights of the Debtor to receive the dividends and
interest which it would otherwise be authorized to receive and retain, shall
cease.  Upon such notice, the Secured Party shall have the right to
receive any interest, cash dividends or other payments on the Collateral and, at
the option of the Secured Party, to exercise in the Secured Party’s discretion
all voting rights pertaining thereto.  Without limiting the generality
of the foregoing, the Secured Party shall have the right (but not the
obligation) to exercise all rights with respect to the Collateral as if it were
the sole and absolute owner thereof, including, without limitation, to vote
and/or to exchange, at its sole discretion, any or all of the Collateral in
connection with a merger, reorganization, consolidation, recapitalization or
other readjustment concerning or involving the Collateral or the Debtor or any
of its direct or indirect subsidiaries.

     

    (iii)   The
Secured Party shall have the right to operate the business of the Debtor using
the Collateral and shall have the right to assign, sell, lease or otherwise
dispose of and deliver all or any part of the Collateral, at public or private
sale or otherwise, either with or without special conditions or stipulations,
for cash or on credit or for future delivery, in such parcel or parcels and at
such time or times and at such place or places, and upon commercially reasonable
terms and conditions  Upon each such sale, lease, assignment or other
transfer of Collateral, the Secured Party, may, unless prohibited by applicable
law which cannot be waived, purchase all or any part of the Collateral being
sold, free from and discharged of all trusts, claims, right of redemption and
equities of the Debtor, which are hereby waived and released.

     

     

    (iv)                      The
Secured Party shall have the right (but not the obligation) to notify any
account debtors and any obligors under instruments or accounts to make payments
directly to the Secured Party, and to enforce the Debtor’s rights against such
account debtors and obligors.

     

     

    (v)           The
Secured Party, may (but is not obligated to) direct any financial intermediary
or any other person or entity holding any investment property to transfer the
same to the Secured Party, or its designee.

     

     

    (vi)                      The
Secured Party may (but is not obligated to) transfer any or all Intellectual
Property registered in the name of the Debtor at the United States Patent and
Trademark Office and/or Copyright Office into the name of the Secured Party or
any designee or any purchaser of any Collateral.

     

    7.           Applications of
Proceeds.  The proceeds of any such sale, lease or other disposition
of the Collateral hereunder shall be applied first, to the expenses of retaking,
holding, storing, processing and preparing for sale, selling, and the like
(including, without limitation, any taxes, fees and other costs incurred in
connection therewith) of the Collateral, to the reasonable attorneys’ fees and
expenses incurred by the Secured Party in enforcing its rights hereunder and in
connection with collecting, storing and disposing of the Collateral, and then to
satisfaction of the Obligations, and to the payment of any other amounts
required by applicable law, after which the Secured Party shall pay to the
Debtors any surplus proceeds.  If, upon the sale, license or other
disposition of the Collateral, the proceeds thereof are insufficient to pay all
amounts to which the Secured Party is legally entitled, the Debtors will be
liable for the deficiency, together with interest thereon, at the rate of 15%
per annum (the “Default Rate”), and
the reasonable fees of any attorneys employed by the Secured Party to collect
such deficiency.  To the extent permitted by applicable law, the Debtors
waive all claims, damages and demands against the Secured Party arising out of
the repossession, removal, retention or sale of the Collateral, unless due to
the gross negligence or willful misconduct of the Secured Party.

    

    8.           Costs and
Expenses. The Debtors agree to pay all out-of-pocket fees, costs and
expenses incurred in connection with any filing required hereunder, including
without limitation, any financing statements, continuation statements, partial
releases and/or termination statements related thereto or any expenses of any
searches reasonably required by the Secured Party.  The Debtors shall also
pay all other claims and charges which in the reasonable opinion of the Secured
Party might prejudice, imperil or otherwise affect the Collateral or the
Security Interest therein.  The Debtors will also, upon demand, pay to the
Secured Party the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts and agents, which
the Secured Party may incur in connection with the enforcement of this
Agreement, the custody or preservation of, or the sale of, collection from, or
other realization upon, any of the Collateral, or the exercise or enforcement of
any of the rights of the Secured Party under the Note.  Until so paid, any
fees payable hereunder shall be added to the principal amount of the Note and
shall bear interest at the Default Rate.

    

    9.           Responsibility for
Collateral.  The Debtors assume all liabilities and responsibility
in connection with all Collateral, and the obligations of the Debtors hereunder
or under the Note shall in no way be affected or diminished by reason of the
loss, destruction, damage or theft of any of the Collateral or its
unavailability for any reason.   Without limiting the generality
of the foregoing, (a) in no event shall the Secured Party (i) have any duty
(either before or after an Event of Default) to collect any amounts in respect
of the Collateral or to preserve any rights relating to the Collateral, or (ii)
have any obligation to clean-up or otherwise prepare the Collateral for sale,
and (b) the Debtor shall remain obligated and liable under each contract or
agreement included in the Collateral to be observed or performed by the Debtor
thereunder.  The Secured Party shall not have any obligation or
liability under any such contract or agreement by reason of or arising out of
this Agreement or the receipt by the Secured Party of any payment relating to
any of the Collateral, nor shall the Secured Party be obligated in any manner to
perform any of the obligations of the Debtor under or pursuant to any such
contract or agreement, to make inquiry as to the nature or sufficiency of any
payment received by the Secured Party in respect of the Collateral or as to the
sufficiency of any performance by any party under any such contract or
agreement, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to the Secured Party or to which the Secured Party may be entitled at
any time or times.

    

    10.           Security Interest
Absolute.  All rights of the Secured Party and all Obligations of
the Debtors hereunder, shall be absolute and unconditional, irrespective of:
 (a) any lack of validity or enforceability of this Agreement, the Notes,
the Warrants or any agreement entered into in connection with the foregoing, or
any portion hereof or thereof; (b) any change in the time, manner or place
of payment or performance of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any departure
from the Notes, the Warrants or any other agreement entered into in connection
with the foregoing;  (c) any exchange, release or nonperfection of any
of the Collateral, or any release or amendment or waiver of or consent to
departure from any other collateral for, or any guaranty, or any other security,
for all or any of the Obligations; (d) any action by the Secured Party to
obtain, adjust, settle and cancel in its sole discretion any insurance claims or
matters made or arising in connection with the Collateral; or (e) any other
circumstance which might otherwise constitute any legal or equitable defense
available to the Debtors, or a discharge of all or any part of the Security
Interest granted hereby.  Until the Obligations shall have been paid and
performed in full, the rights of the Secured Party shall continue even if the
Obligations are barred for any reason, including, without limitation, the
running of the statute of limitations or bankruptcy.  The Debtors expressly
waive presentment, protest, notice of protest, demand, notice of nonpayment and
demand for performance.  In the event that at any time any transfer of any
Collateral or any payment received by the Secured Party hereunder shall be
deemed by final order of a court of competent jurisdiction to have been a
voidable preference or fraudulent conveyance under the bankruptcy or insolvency
laws of the United States, or shall be deemed to be otherwise due to any party
other than the Secured Party, then, in any such event, the Debtors’ obligations
hereunder shall survive cancellation of this Agreement, and shall not be
discharged or satisfied by any prior payment thereof and/or cancellation of this
Agreement, but shall remain a valid and binding obligation enforceable in
accordance with the terms and provisions hereof.  The Debtors waive all
right to require the Secured Party to proceed against any other person or to
apply any Collateral which the Secured Party may hold at any time, or to marshal
assets, or to pursue any other remedy.  The Debtors waive any defense
arising by reason of the application of the statute of limitations to any
obligation secured hereby.

    

    11.           Term of Agreement.
 This Agreement and the Security Interest shall terminate on the date on
which all payments under the Note have been made in full and all other
Obligations have been paid or discharged.  Upon such termination, the
Secured Party, at the request and at the expense of the Debtors, will join in
executing any termination statement with respect to any financing statement
executed and filed pursuant to this Agreement.

    

    12.           Power of Attorney; Further
Assurances.

    

    (a)  The
Debtors authorize the Secured Party, and does hereby make, constitute and
appoint it, and its respective officers, agents, successors or assigns with full
power of substitution, as the Debtors’ true and lawful attorney-in-fact, with
power, in its own name or in the name of the Debtors, to, after the occurrence
and during the continuance of an Event of Default,  endorse any notes,
checks, drafts, money orders, or other instruments of payment (including
payments payable under or in respect of any policy of insurance) in respect of
the Collateral that may come into possession of the Secured Party;  to sign
and endorse any UCC financing statement or any invoice, freight or express bill,
bill of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with accounts, and other
documents relating to the Collateral;  to pay or discharge taxes, liens,
security interests or other encumbrances at any time levied or placed on or
threatened against the Collateral;  to demand, collect, receipt for,
compromise, settle and sue for monies due in respect of the Collateral; and
 generally, to do, at the option of the Secured Party, and at the Debtors’
expense, at any time, or from time to time, all acts and things which the
Secured Party deems necessary to protect, preserve and realize upon the
Collateral and the Security Interest granted therein in order to effect the
intent of this Agreement, the Note and the, all as fully and effectually as the
Debtors might or could do; and the Debtors hereby ratify all that said attorney
shall lawfully do or cause to be done by virtue hereof.  This power of
attorney is coupled with an interest and shall be irrevocable for the term of
this Agreement and thereafter as long as any of the Obligations shall be
outstanding.

    

    (b)  On
a continuing basis, the Debtors will make, execute, acknowledge, deliver, file
and record, as the case may be, in the proper filing and recording places in any
jurisdiction, including, without limitation, the jurisdictions indicated on
Schedule B,
attached hereto, all such instruments, and take all such action as may
reasonably be deemed necessary or advisable, or as reasonably requested by the
Secured Party, to perfect the Security Interest granted hereunder and otherwise
to carry out the intent and purposes of this Agreement, or for assuring and
confirming to the Secured Party the grant or perfection of a security interest
in all the Collateral.

    

    (c)  The
Debtors hereby irrevocably appoint the Secured Party as the Debtors’
attorney-in-fact, with full authority in the place and stead of the Debtors and
in the name of the Debtors, from time to time in the Secured Party’s discretion,
to take any action and to execute any instrument which the Secured Party may
deem necessary or advisable to accomplish the purposes of this Agreement,
including the filing, in its sole discretion, of one or more financing or
continuation statements and amendments thereto, relative to any of the
Collateral without the signature of the Debtors where permitted by
law.

    

    13.           Notices.  All
notices, requests, demands and other communications hereunder shall be in
writing, with copies to all the other parties hereto, and shall be deemed to
have been duly given when if delivered by hand, upon receipt, if sent by
facsimile, upon receipt of proof of sending thereof, if sent by nationally
recognized overnight delivery service (receipt requested), the next business day
or if mailed by first-class registered or certified mail, return receipt
requested, postage prepaid, four days after posting in the U.S. mails, in each
case if delivered to the following addresses:

    
      	
              If
      to the Company:

            

    

    Cellceutix
Corporation

    187
Ballard Vale Street, Suite A225

    Wilmington,
Massachusetts 01887

    

    Telephone:
 (973) 633-3623

    Facsimile:
 (   )

    

    With a
copy to:

    

    Tarter,
Krinsky & Drogin, LLP

    New York,
NY 10018

    Attention:  Peter
Campitiello, Esq.

    Telephone:  (212)
216-8085

    Facsimile:   (212)
216-8001

     

    If to the
Secured Party:

    

     

    

     

    Attention:

    Facsimile:

    

    

    With a
copy to:

    

    Burak
Anderson & Melloni, PLC

    30 Main
Street

    Burlington,
Vermont 05401

    Attn:
Shane McCormack, Esq.

    Tel:
(802) 862-0500

    Fax:
(802) 862-8176

    

     

    14.           Other
Security.  To the extent that the Obligations are now or
hereafter secured by property other than the Collateral or by the guarantee,
endorsement or property of any other person, firm, corporation or other entity,
then the Secured Party shall have the right, in its sole discretion, to pursue,
relinquish, subordinate, modify or take any other action with respect thereto,
without in any way modifying or affecting any of the Secured Party’s rights and
remedies hereunder.

    

    15.           Miscellaneous.

    

    (a)  No
course of dealing between the Debtors and the Secured Party, nor any failure to
exercise, nor any delay in exercising, on the part of the Secured Party, any
right, power or privilege hereunder or under the Note shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.

    

    (b)  All
of the rights and remedies of the Secured Party with respect to the Collateral,
whether established hereby or by the Note or by any other agreements,
instruments or documents or by law shall be cumulative and may be exercised
singly or concurrently.

    

    (c)  This
Agreement (together with the related agreements contemplated hereby) constitutes
the entire agreement of the parties with respect to the subject matter hereof
and is intended to supersede all prior negotiations, understandings and
agreements with respect thereto.  No provision of this Agreement may be
modified or amended except by a written agreement specifically referring to this
Agreement and signed by the parties hereto.

    

    (d)  In
the event that any provision of this Agreement is held to be invalid, prohibited
or unenforceable in any jurisdiction for any reason, unless such provision is
narrowed by judicial construction, this Agreement shall, as to such
jurisdiction, be construed as if such invalid, prohibited or unenforceable
provision had been more narrowly drawn so as not to be invalid, prohibited or
unenforceable.  If, notwithstanding the foregoing, any provision of this
Agreement is held to be invalid, prohibited or unenforceable in any
jurisdiction, such provision, as to such jurisdiction, shall be ineffective to
the extent of such invalidity, prohibition or unenforceability without
invalidating the remaining portion of such provision or the other provisions of
this Agreement and without affecting the validity or enforceability of such
provision or the other provisions of this Agreement in any other
jurisdiction.

    

    (e)  No
waiver of any breach or default or any right under this Agreement shall be
considered valid unless in writing and signed by the party giving such waiver,
and no such waiver shall be deemed a waiver of any subsequent breach or default
or right, whether of the same or similar nature or otherwise.

    

    (f)  This
Agreement shall be binding upon and inure to the benefit of each party hereto
and its successors and assigns.

    

    (g)  Each
party shall take such further action and execute and deliver such further
documents as may be necessary or appropriate in order to carry out the
provisions and purposes of this Agreement.

    

    (h)  This
Agreement shall be construed in accordance with the laws of the State of New
York, except to the extent the validity, perfection or enforcement of a security
interest hereunder in respect of any particular Collateral which are governed by
a jurisdiction other than the State of New York in which case such law shall
govern.  Each of the parties hereto irrevocably submit to the exclusive
jurisdiction of any New York State or United States Federal court sitting in
Manhattan county over any action or proceeding arising out of or relating to
this Agreement, and the parties hereto hereby irrevocably agree that all claims
in respect of such action or proceeding may be heard and determined in such New
York State or Federal court.  The parties hereto agree that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.  The parties hereto further waive any objection to venue
in the State of New York and any objection to an action or proceeding in the
State of New York on the basis of forum non conveniens.

    

    (i)  EACH
PARTY HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT.  THE
SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY DISPUTES THAT MAY
BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATER OF THIS AGREEMENT,
INCLUDING WITHOUT LIMITATION CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS
AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.  EACH PARTY HERETO
ACKNOWLEDGES THAT THIS WAIVED IS A MATERIAL INDUCEMENT FOR EACH PARTY TO ENTER
INTO A BUSINESS RELATIONSHIP, THAT EACH PARTY HAS ALREADY RELIED ON THIS WAIVER
IN ENTERING INTO THIS AGREEMENT AND THAT EACH PARTY WILL CONTINUE TO RELY ON
THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY FURTHER WARRANTS AND
REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT
SUCH PARTY HAS KNOWINGLY AND VOLUNTARILY WAIVES ITS RIGHTS TO A JURY TRIAL
FOLLOWING SUCH CONSULTATION.  THIS WAIVER IS IRREVOCABLE, MEANING
THAT,  NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS AND SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT.  IN THE EVENT OF A LITIGATION, THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.

    

    (j)  This
Agreement may be executed in any number of 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.  In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.

    

    (k) The
Debtor shall indemnify, reimburse and hold harmless the Secured Party and its
partners, members, shareholders, officers, directors, employees and agents (and
any other persons with other titles that have similar functions) (collectively,
“Indemnitees”)
from and against any and all losses, claims, liabilities, damages, penalties,
suits, costs and expenses, of any kind or nature, (including fees relating to
the cost of investigating and defending any of the foregoing) imposed on,
incurred by or asserted against such Indemnitee in any way related to or arising
from or alleged to arise from this Agreement or the Collateral, except any such
losses, claims, liabilities, damages, penalties, suits, costs and expenses which
result from the gross negligence or willful misconduct of the Indemnitee as
determined by a final, nonappealable decision of a court of competent
jurisdiction.  This indemnification provision is in addition to, and
not in limitation of, any other indemnification provision in the Note, the
Transaction Documents or any other agreement, instrument or other document
executed or delivered in connection herewith or therewith.

    

     

    

    IN WITNESS WHEREOF, the parties hereto
have caused this Security Agreement to be duly executed on the day and year
first above written.

     

    CELLCEUTIX
CORPORATION

     

    By:
/s/ George W. Evans

          George
W. Evans,

          Chief
Executive Officer

    

     

    CELLCEUTIX
PHARMA INC.

     

    

     

    By: /s/
George W. Evans

          George
W. Evans,

          Chief
Executive Officer

    

     

    SECURED
PARTIES

     

    

     

    Putnam
Partners

     

    White
Star LLC

     

    Dahlia
Nordlicht

     

    

     

    

     

    _____________________________

     

    

    
      
        
          
             

             

          

           

        

        
           

          
            

          

        

        
           

        

      

    

    

    SCHEDULE
B

     

    

     

    

     

    None.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    

    
      
        
          
             

            

             

          

           

        

        
           

          
            

          

        

        
           

        

      

    

    

    SCHEDULE
C

     

    

     

    Entity:                                                                           Jurisdiction:

     

    

     

    Cellceutix
Corporation                                                                                     Nevada

     

    Cellceutix
Pharma,
Inc.                                                                                     Delaware

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    
 

     

    

    
      
        
          
             

            

             

          

           

        

        
           

          
            

          

        

        
           

        

      

    

    

    SCHEDULE
D

     

    

     

    

     

    CELLCEUTIX
CORPORATION

     

    

     

    CELLCEUTIX
PHARMA, INC.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    

    
      
        
          
             

            

             

          

           

        

        
           

          
            

          

        

        
           

        

      

    

    

    SCHEDULE
E

     

    

     

    None.

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