Document:

Exhibit 10.2

EXHIBIT C

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

COMMON STOCK PURCHASE WARRANT

CERAGENIX
PHARMACEUTICALS, INC.

 

	
  Warrant Shares:               

  	
  Initial Exercise Date:
  December     , 2006

  

 

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

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

Section
2.               Exercise.

a)             Exercise
of Warrant.  Exercise of the purchase
rights represented by this Warrant may be made, in whole or in part, at any
time or times on or after the Initial Exercise Date and on or before the
Termination Date by delivery to the Company of a

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duly executed facsimile copy of the Notice of Exercise Form annexed
hereto (or such other office or agency of the Company as it may designate by
notice in writing to the registered Holder at the address of such Holder
appearing on the books of the Company); and, within 3 Trading Days of the date
said Notice of Exercise is delivered to the Company, the Company shall have
received payment of the aggregate Exercise Price of the shares thereby
purchased by wire transfer or cashier’s check drawn on a United States
bank.  Notwithstanding anything herein to
the contrary, the Holder shall not be required to physically surrender this
Warrant to the Company until the Holder has purchased all of the Warrant Shares
available hereunder and the Warrant has been exercised in full, in which case,
the Holder shall surrender this Warrant to the Company for cancellation within
3 Trading Days of the date the final Notice of Exercise is delivered to the
Company.  Partial exercises of this
Warrant resulting in purchases of a portion of the total number of Warrant
Shares available hereunder shall have the effect of lowering the outstanding
number of Warrant Shares purchasable hereunder in an amount equal to the
applicable number of Warrant Shares purchased. 
The Holder and the Company shall maintain records showing the number of
Warrant Shares purchased and the date of such purchases.  The Company shall deliver any objection to
any Notice of Exercise Form within two (2) Business Days of receipt of such
notice.  The Holder and any assignee, by
acceptance of this Warrant, acknowledge and agree that, by reason of the
provisions of this paragraph, following the purchase of a portion of the
Warrant Shares hereunder, the number of Warrant Shares available for purchase
hereunder at any given time may be less than the amount stated on the face
hereof.

b)            Exercise Price.  The exercise price per share of the Common
Stock under this Warrant shall be $2.37, subject
to adjustment hereunder (the “Exercise Price”).

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

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

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

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

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

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d)            Holder’s
Restrictions.  The Company shall not
effect any exercise of this Warrant, and a Holder shall not have the right to
exercise any portion of this Warrant, pursuant to Section 2(c) or otherwise, to
the extent that after giving effect to such issuance after exercise as set
forth on the applicable Notice of Exercise, such Holder (together with such
Holder’s Affiliates, and any other person or entity acting as a group together
with such Holder or any of such Holder’s Affiliates), as set forth on the applicable
Notice of Exercise, would beneficially own in excess of the Beneficial
Ownership Limitation (as defined below).  For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned by such
Holder and its Affiliates shall include the number of shares of Common Stock
issuable upon exercise of this Warrant with respect to which such determination
is being made, but shall exclude the number of shares of Common Stock which
would be issuable upon (A) exercise of the remaining, nonexercised portion of
this Warrant beneficially owned by such Holder or any of its Affiliates and (B)
exercise or conversion of the unexercised or nonconverted portion of any other
securities of the Company (including, without limitation, any other Debentures
or Warrants) subject to a limitation on conversion or exercise analogous to the
limitation contained herein beneficially owned by such Holder or any of its
affiliates.  Except as set forth in the preceding sentence, for purposes
of this Section 2(d)(i), beneficial ownership shall be calculated in accordance
with Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder, it being acknowledged by a Holder that the Company is
not representing to such Holder that such calculation is in compliance with
Section 13(d) of the Exchange Act and such Holder is solely responsible for any
schedules required to be filed in accordance therewith.   To the extent that the limitation contained
in this Section 2(d) applies, the determination of whether this Warrant is
exercisable (in relation to other securities owned by such Holder together with
any Affiliates) and of which a portion of this Warrant is exercisable shall be
in the sole discretion of a Holder, and the submission of a Notice of Exercise
shall be deemed to be each Holder’s determination of whether this Warrant is
exercisable (in relation to other securities owned by such Holder together with
any Affiliates) and of which portion of this Warrant is exercisable, in each
case subject to such aggregate percentage limitation, and the Company shall
have no obligation to verify or confirm the accuracy of such
determination.   In addition, a
determination as to any group status as contemplated above shall be determined
in accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder.  For
purposes of this Section 2(d), in determining the number of outstanding shares
of Common Stock, a Holder may rely on the number of outstanding shares of
Common Stock as reflected in (x) the Company’s most recent Form 10-QSB or Form
10-KSB, as the case may be, (y) a more recent public announcement by the
Company or (z) any other notice by the Company or the Company’s Transfer Agent
setting forth the number of shares of Common Stock outstanding.  Upon the
written or oral request of a Holder, the Company shall within two Trading Days
confirm orally and in writing to such Holder the number of shares of Common
Stock then outstanding.  In any case, the number of outstanding shares of
Common Stock shall be determined after giving effect to the conversion or
exercise of securities of the Company, including this Warrant, by such Holder
or its Affiliates since the date as of which such number of outstanding shares
of Common

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Stock was reported.  The “Beneficial
Ownership Limitation” shall be 4.99% of the number of shares of the Common
Stock outstanding immediately after giving effect to the issuance of shares of
Common Stock issuable upon exercise of this Warrant.  The Beneficial Ownership Limitation
provisions of this Section 2(d)(i) may be waived by such Holder, at the
election of such Holder, upon not less than 61 days’ prior notice to the
Company to change the Beneficial Ownership Limitation to 9.99% of the number of
shares of the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock upon exercise of this Warrant, and the
provisions of this Section 2(d) shall continue to apply.  Upon such a change by a Holder of the
Beneficial Ownership Limitation from such 4.99% limitation to such 9.99%
limitation, the Beneficial Ownership Limitation may not be further waived by
such Holder.  The provisions of this
paragraph shall be construed and implemented in a manner otherwise than in
strict conformity with the terms of this Section 2(d)(i) to correct this
paragraph (or any portion hereof) which may be defective or inconsistent with
the intended Beneficial Ownership Limitation herein contained or to make
changes or supplements necessary or desirable to properly give effect to such
limitation. The limitations contained in this paragraph shall apply to a
successor holder of this Warrant.

e)             Mechanics
of Exercise.

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

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

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

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

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

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to timely deliver certificates representing shares of Common Stock upon
exercise of the Warrant as required pursuant to the terms hereof.

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

vii.       Charges,
Taxes and Expenses.  Issuance of
certificates for Warrant Shares shall be made without charge to the Holder for
any issue or transfer tax or other incidental expense in respect of the
issuance of such certificate, all of which taxes and expenses shall be paid by
the Company, and such certificates shall be issued in the name of the Holder or
in such name or names as may be directed by the Holder; provided, however,
that in the event certificates for Warrant Shares are to be issued in a name
other than the name of the Holder, this Warrant when surrendered for exercise
shall be accompanied by the Assignment Form attached hereto duly executed by
the Holder; and the Company may require, as a condition thereto, the payment of
a sum sufficient to reimburse it for any transfer tax incidental thereto.

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

Section
3.               Certain Adjustments.

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

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pursuant to this Section 3(a) shall become effective immediately after
the record date for the determination of stockholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.

b)            Subsequent
Equity Sales. If the Company or any Subsidiary thereof, as applicable, at
any time while this Warrant is outstanding, shall sell or grant any option to
purchase, or sell or grant any right to reprice its securities, or otherwise
dispose of or issue (or announce any offer, sale, grant or any option to
purchase or other disposition) any Common Stock or Common Stock Equivalents
entitling any Person to acquire shares of Common Stock, at an effective price
per share less than the then Exercise Price (such lower price, the “Base
Share Price” and such issuances collectively, a “Dilutive Issuance”)
(if the holder of the Common Stock or Common Stock Equivalents so issued shall
at any time, whether by operation of purchase price adjustments, reset
provisions, floating conversion, exercise or exchange prices or otherwise, or
due to warrants, options or rights per share which are issued in connection
with such issuance, be entitled to receive shares of Common Stock at an
effective price per share which is less than the Exercise Price, such issuance
shall be deemed to have occurred for less than the Exercise Price on such date
of the Dilutive Issuance), then the Exercise Price shall be reduced and only
reduced to equal the Base Share Price and the number of Warrant Shares issuable
hereunder shall be increased such that the aggregate Exercise Price payable
hereunder, after taking into account the decrease in the Exercise Price, shall
be equal to the aggregate Exercise Price prior to such adjustment.  Such adjustment shall be made whenever such Common
Stock or Common Stock Equivalents are issued. 
Notwithstanding the foregoing, no adjustments shall be made, paid or
issued under this Section 3(b) in respect of an Exempt Issuance. For clarity,
any adjustment to the conversion price or exercise price of the Notes and/or
Series A Warrants shall not constitute an Exempt Issuance, and, any such
adjustment to an effective price per share that is lower than the then Exercise
Price shall constitute a Dilutive Issuance subject to this Section 3(b).  The Company shall notify the Holder in
writing, no later than the two (2) Trading Days following the issuance of any
Common Stock or Common Stock Equivalents subject to this Section 3(b),
indicating therein the applicable issuance price, or applicable reset price,
exchange price, conversion price and other pricing terms (such notice the “Dilutive
Issuance Notice”).  For purposes of
clarification, whether or not the Company provides a Dilutive Issuance Notice
pursuant to this Section 3(b), upon the occurrence of any Dilutive Issuance,
after the date of such Dilutive Issuance the Holder is entitled to receive a
number of Warrant Shares based upon the Base Share Price regardless of whether
the Holder accurately refers to the Base Share Price in the Notice of Exercise.

c)             Subsequent
Rights Offerings.  If the Company, at
any time while the Warrant is outstanding, shall issue rights, options or
warrants to all holders of Common Stock (and not to Holders) entitling them to
subscribe for or purchase shares of Common Stock at a price per share less than
the VWAP at the record date mentioned below, then the Exercise Price shall be
multiplied by a fraction, of which the denominator shall be the number of
shares of the Common Stock outstanding on the date of issuance of such rights
or warrants plus the number of additional shares of Common Stock offered for

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subscription or purchase, and of which the numerator shall be the
number of shares of the Common Stock outstanding on the date of issuance of
such rights or warrants plus the number of shares which the aggregate offering
price of the total number of shares so offered (assuming receipt by the Company
in full of all consideration payable upon exercise of such rights, options or
warrants) would purchase at such VWAP. 
Such adjustment shall be made whenever such rights or warrants are
issued, and shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights, options or
warrants.

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

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

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

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

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

h)            Notice
to Holder.

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

ii.         Notice
to Allow Exercise by Holder. If (A) the Company shall declare a dividend
(or any other distribution in whatever form) on the Common Stock; (B) the
Company shall declare a special nonrecurring

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

Section
4.               Transfer of Warrant.

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

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

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

d)            Transfer
Restrictions. If, at the time of the surrender of this Warrant in
connection with any transfer of this Warrant, the transfer of this Warrant
shall not be registered pursuant to an effective registration statement under
the Securities Act and under applicable state securities or blue sky laws, the
Company may require, as a condition of allowing such transfer, that (i) the
Holder or transferee of this Warrant, as the case may be, furnish to the
Company a written opinion of counsel (which opinion shall be in form, substance
and scope customary for opinions of counsel in comparable transactions) to the
effect that such transfer may be made without registration under the Securities
Act and under applicable state securities or blue sky laws, and (ii) the Holder
or transferee execute and deliver to the Company an investment letter in form
and substance acceptable to the Company, and (iii) the transferee be an “accredited
investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8)
promulgated under the Securities Act or a “qualified institutional buyer” as
defined in Rule 144A(a) promulgated under the Securities Act.

Section
5.               Miscellaneous.

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

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

 11
 

 

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

d)            Authorized
Shares.

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

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

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

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

 12
 

 

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

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

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

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

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

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

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

m)            Severability.  Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Warrant.

 13
 

 

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

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

 14
 

 

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

 

	
  

  	
  CERAGENIX PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 15

 

NOTICE OF EXERCISE

TO:         CERAGENIX
PHARMACEUTICALS, INC.

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

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

o
in lawful money of the United States; or

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

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

 

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

 

 

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

[SIGNATURE OF HOLDER]

	
  Name of Investing Entity:

  	
   

  
	
  Signature of Authorized Signatory of Investing
  Entity:

  	
   

  
	
  Name of Authorized Signatory:

  	
   

  
	
  Title of Authorized Signatory:

  	
   

  
	
  Date:

  	
   

  
						

 

 

ASSIGNMENT FORM

(To assign the foregoing warrant, execute

this form and supply required information. 

Do not use this form to exercise the warrant.)

 

 

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

                                                                                                          whose
address is

                                                                                                                                              .

 

 

	
  

  	
  Dated:

  	
   

  	
  ,

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Holder’s Signature:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Holder’s Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  
	
   

  
	
  Signature Guaranteed:

  	
   

  	
   

  
										

NOTE:  The signature to this Assignment Form must
correspond with the name as it appears on the face of the Warrant, without
alteration or enlargement or any change whatsoever, and must be guaranteed by a
bank or trust company.  Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.Exhibit 10.3

AMENDED
AND RESTATED SECURITY AGREEMENT

1.             Identification.

This Amended and
Restated Security Agreement (the “Agreement”), dated as of December 5, 2006, is
entered into by and between Ceragenix Pharmaceuticals, Inc., a Delaware
corporation (“Parent”), Ceragenix Corporation, a Colorado corporation (“Guarantor”
and together with Parent, each a “Debtor” and collectively the “Debtors”), and
Barbara R. Mittman, as collateral agent acting in the manner and to the extent
described in the Collateral Agent Agreement defined below (the “Collateral
Agent”), for the benefit of the parties identified on Schedule A hereto
(collectively, the “Lenders”).

2.             Recitals.

2.1           The
Lenders have made, are making and will be making loans to Parent (the “Loans”).  It is beneficial to each Debtor that the
Loans were made and are being made.

2.2           The Loans
are and will be evidenced by certain convertible promissory notes (each a “Convertible
Note”) issued by Parent on or about November 28, 2005 and by convertible
debentures issued on or about the date hereof (the “Convertible Debentures”,
and together with the Convertible Notes, the “Notes”) pursuant to subscription
agreements and/or securities purchase agreements (each a “Subscription
Agreement”) to which Parent and Lenders are parties.  The Notes are further identified on Schedule
A hereto and were and will be executed by Parent as “Borrower” or “Debtor” for
the benefit of each Lender as the “Holder” or “Lender” thereof.  Schedule A hereto may be amended to include
such other Lenders who become parties hereto and sign this Agreement, the
Collateral Agent Agreement and any other agreement reasonably requested by the
Collateral Agent, who will have purchased Notes pursuant to a Subscription
Agreement.

2.3           In
consideration of the Loans made and to be made by Lenders to Parent and for
other good and valuable consideration, and as security for the performance by
Parent of its obligations under the Notes and as security for the repayment of
the Loans and all other sums due from Debtors to Lenders arising under the
Transaction Documents (as defined in the Subscription Agreement), and any other
agreement between or among them (collectively, the “Obligations”), each Debtor,
for good and valuable consideration, receipt of which is acknowledged, has
agreed to grant to the Collateral Agent, for the benefit of the Lenders, a
security interest in the Collateral (as such term is hereinafter defined), on
the terms and conditions hereinafter set forth. 
Obligations include all future advances by Lenders to Debtor made
pursuant to a Subscription Agreement.

2.4           The
Lenders have appointed Barbara R. Mittman as Collateral Agent pursuant to that
certain Amended and Restated Collateral Agent Agreement dated at or about
December 5, 2006 (“Collateral Agent Agreement”), among the Lenders and
Collateral Agent.

 1
 

 

2.5           The
following defined terms which are defined in the Uniform Commercial Code in
effect in the State of New York on the date hereof are used herein as so
defined:  Accounts, Chattel Paper,
Documents, Equipment, General Intangibles, Instruments, Inventory and Proceeds.

2.6           This
Agreement supersedes and replaces that certain other Security Agreement, dated
November 28, 2005, by and among the Parent, Ceragenix Corporation, Longview
Fund, L.P., Longview Equity
Fund, L.P., Alpha Capital Aktiengesellschaft and
Iroquois Capital.

3.             Grant of
General Security Interest in Collateral.

3.1           As
security for the Obligations of Debtors, each Debtor hereby grants the
Collateral Agent, for the benefit of the Lenders, a security interest in the
Collateral.

3.2           “Collateral”
shall mean all of the following property of Debtors:

(A)          All
now owned and hereafter acquired right, title and interest of Debtors in, to
and in respect of all Accounts, Goods, real or personal property, all present
and future books and records relating to the foregoing and all products and
Proceeds of the foregoing, and as set forth below:

(i)            All
now owned and hereafter acquired right, title and interest of Debtors in, to
and in respect of all: Accounts, interests in goods represented by Accounts,
returned, reclaimed or repossessed goods with respect thereto and rights as an
unpaid vendor; contract rights; Chattel Paper; investment property; General
Intangibles (including but not limited to, tax and duty claims and refunds,
registered and unregistered patents, trademarks, service marks, certificates,
copyrights trade names, applications for the foregoing, trade secrets,
goodwill, processes, drawings, blueprints, customer lists, licenses, whether as
licensor or licensee, chooses in action and other claims, and existing and
future leasehold interests in equipment, real estate and fixtures); Documents;
Instruments; letters of credit, bankers’ acceptances or guaranties; cash
moneys, deposits; securities, bank accounts, deposit accounts, credits and
other property now or hereafter owned or held in any capacity by Debtors, as
well as agreements or property securing or relating to any of the items
referred to above;

(ii)           Goods:  All now owned and hereafter acquired right,
title and interest of Debtors in, to and in respect of goods, including, but
not limited to:

(a)           All Inventory, wherever located, whether now
owned or hereafter acquired, of whatever kind, nature or description, including
all raw materials, work-in-process, finished goods, and materials to be used or
consumed in Debtors’ business; finished goods, timber cut or to be cut, oil,
gas, hydrocarbons, and minerals extracted or to be extracted, and all names or
marks affixed to or to be affixed thereto for purposes of selling same by the
seller, manufacturer, lessor or licensor thereof and all Inventory which may be
returned to any Debtor by its customers or repossessed by any Debtor and all of
Debtors’ right, title and interest in and to the foregoing (including all of a
Debtor’s rights as a seller of goods);

 2
 

 

(b)           All
Equipment and fixtures, wherever located, whether now owned or hereafter
acquired, including, without limitation, all machinery, furniture and fixtures,
and any and all additions, substitutions, replacements (including spare parts),
and accessions thereof and thereto (including, but not limited to Debtors’
rights to acquire any of the foregoing, whether by exercise of a purchase
option or otherwise);

(iii)          Property:  All now owned and hereafter
acquired right, title and interests of Debtors in, to and in respect of any
other personal property in or upon which a Debtor has or may hereafter have a
security interest, lien or right of setoff;

(iv)          Books and
Records:  All present and future
books and records relating to any of the above including, without limitation,
all computer programs, printed output and computer readable data in the
possession or control of the Debtors, any computer service bureau or other
third party; and

(v)           Products and
Proceeds:  All products and Proceeds
of the foregoing in whatever form and wherever located, including, without
limitation, all insurance proceeds and all claims against third parties for
loss or destruction of or damage to any of the foregoing.

(B)           All now owned
and hereafter acquired right, title and interest of Debtors in, to and in
respect of the following:

(i)            the
shares of stock, partnership interests, member interests or other equity
interests at any time and from time to time acquired by Debtors of any and all
entities now or hereafter existing, (such entities, being hereinafter referred
to collectively as the “Pledged Issuers” and individually as a “Pledged Issuer”),
the certificates representing such shares, partnership interests, member
interests or other interests all options and other rights, contractual or
otherwise, in respect thereof and all dividends, distributions, cash,
instruments, investment property and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of such shares, partnership interests, member interests or other interests;
provided, however, that the Collateral shall exclude the interest of the Debtor
in the securities of its wholly-owned subsidiary Global Alaska Industries, Inc.
and its wholly-owned subsidiary Alaska Bingo Supply, Inc. unless Global Alaska
Industries, Inc. and Alaska Bingo Supply, Inc. are direct or indirect
Subsidiaries of the Debtors at any time after February 1, 2006;

(ii)           all
additional shares of stock, partnership interests, member interests or other
equity interests from time to time acquired by Debtors, of any Pledged Issuer,
the certificates representing such additional shares, all options and other
rights, contractual or otherwise, in respect thereof and all dividends,
distributions, cash, instruments, investment property and other property from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such additional shares, interests or equity; and

 3
 

 

(iii)          all
security entitlements of Debtors in, and all Proceeds of any and all of the
foregoing in each case, whether now owned or hereafter acquired by a Debtor and
howsoever its interest therein may arise or appear (whether by ownership,
security interest, lien, claim or otherwise).

Notwithstanding anything to the contrary
contained herein or any Transaction Document, Collateral shall not include any
personal property which is, or at the time of a Debtor’s acquisition thereof
shall be subject to a purchase money mortgage or other purchase money lien or
security interest (including capital leases).

3.3           The
Collateral Agent is hereby specifically authorized, after the Maturity Date
(defined in the Notes) accelerated or otherwise, or after an Event of Default
(as defined herein) and the expiration of any applicable cure period, to
transfer any Collateral into the name of the Collateral Agent and to take any
and all action deemed advisable to the Collateral Agent to remove any transfer
restrictions affecting the Collateral.

4.             Perfection
of Security Interest.

4.1           Each
Debtor shall prepare, execute and deliver to the Collateral Agent UCC-1
Financing Statements.  The Collateral
Agent is instructed to prepare and file at each Debtor’s cost and expense, financing
statements in such jurisdictions deemed advisable to the Collateral Agent,
including but not limited to the States of Delaware and Colorado.  The Financing Statements are deemed to have
been filed for the benefit of the Collateral Agent and Lenders identified on
Schedule A hereto.

4.2           The
Parent shall deliver to Collateral Agent promptly stock certificates
representing all of the shares of outstanding capital stock of the Guarantor
(the “Securities”).  All such
certificates shall be held by or on behalf of Collateral Agent pursuant hereto
and shall be delivered in suitable form for transfer by delivery, or shall be
accompanied by duly executed instruments of transfer or assignment or undated
stock powers executed in blank, all in form and substance satisfactory to
Collateral Agent.

4.3             All other certificates and instruments
constituting Collateral from time to time required to be pledged to Collateral
Agent pursuant to the terms hereof (the “Additional Collateral”) shall be
delivered to Collateral Agent promptly upon receipt thereof by or on behalf of
Debtors.  All such certificates and
instruments shall be held by or on behalf of Collateral Agent pursuant hereto
and shall be delivered in suitable form for transfer by delivery, or shall be
accompanied by duly executed instruments of transfer or assignment or undated
stock powers executed in blank, all in form and substance satisfactory to
Collateral Agent.  If any Collateral
consists of uncertificated securities, unless the immediately following sentence
is applicable thereto, Debtors shall cause Collateral Agent (or its custodian,
nominee or other designee) to become the registered holder thereof, or cause
each issuer of such securities to agree that it will comply with instructions
originated by Collateral Agent with respect to such securities without further
consent by Debtors.  If any Collateral
consists of security entitlements, Debtors shall transfer such security
entitlements to

 4
 

 

Collateral Agent (or its custodian,
nominee or other designee) or cause the applicable securities intermediary to
agree that it will comply with entitlement orders by Collateral Agent without
further consent by Debtors.

4.4           Within
five (5) days after the receipt by a Debtor of any Additional Collateral, a
Pledge Amendment, duly executed by such Debtor, in substantially the form of
Annex I hereto (a “Pledge Amendment”), shall be delivered to Collateral Agent
in respect of the Additional Collateral to be pledged pursuant to this
Agreement. Each Debtor hereby authorizes Collateral Agent to attach each Pledge
Amendment to this Agreement and agrees that all certificates or instruments
listed on any Pledge Amendment delivered to Collateral Agent shall for all
purposes hereunder constitute Collateral.

4.5           If Debtor
shall receive, by virtue of Debtor being or having been an owner of any
Collateral, any (i) stock certificate (including, without limitation, any
certificate representing a stock dividend or distribution in connection with
any increase or reduction of capital, reclassification, merger, consolidation,
sale of assets, combination of shares, stock split, spin-off or split-off),
promissory note or other instrument, (ii) option or right, whether as an
addition to, substitution for, or in exchange for, any Collateral, or otherwise,
(iii) dividends payable in cash (except such dividends permitted to be retained
by Debtor pursuant to Section 5.2 hereof) or in securities or other property or
(iv) dividends or other distributions in connection with a partial or
total liquidation or dissolution or in connection with a reduction of capital,
capital surplus or paid-in surplus, Debtor shall receive such stock
certificate, promissory note, instrument, option, right, payment or
distribution in trust for the benefit of Collateral Agent, shall segregate it
from Debtor’s other property and shall deliver it forthwith to Collateral
Agent, in the exact form received, with any necessary endorsement and/or
appropriate stock powers duly executed in blank, to be held by Collateral Agent
as Collateral and as further collateral security for the Obligations.

5.             Distribution.

5.1           So long
as no Event of Default exists, Debtors shall be entitled to exercise all voting
power pertaining to any of the Collateral, provided such exercise is not
contrary to the interests of the Lenders and does not impair the Collateral.

5.2.          At any
time an Event of Default exists or has occurred, all rights of Debtors, upon
notice given by Collateral Agent, to exercise the voting power and receive
payments, which it would otherwise be entitled to pursuant to Section 5.1,
shall cease and all such rights shall thereupon become vested in Collateral
Agent, which shall thereupon have the sole right to exercise such voting power
and receive such payments.

5.3           All
dividends, distributions, interest and other payments which are received by
Debtors contrary to the provisions of Section 5.2 shall be received in trust
for the benefit of Collateral Agent as security and Collateral for payment of
the Obligations shall be segregated from other funds of Debtors, and shall be
forthwith paid over to Collateral Agent as Collateral in the exact form
received with any necessary endorsement and/or appropriate stock powers duly
executed in

 5
 

 

blank, to be held by Collateral
Agent as Collateral and as further collateral security for the Obligations.

6.             Further
Action By Debtors; Covenants and Warranties.

6.1           Collateral
Agent at all times shall have a perfected security interest in (a) the
Collateral to the extent a security interest can be perfected by the filing of
a financial statement under the Uniform Commercial Code of the relevant
jurisdiction (b) the Securities and (c) Additional Collateral (the “Perfected
Collateral”).  Each Debtor has and will
continue to have full title to the Collateral free from any liens, leases,
encumbrances, judgments or other claims. 
Collateral Agent’s security interest in the Collateral constitutes and
will continue to constitute a first, prior and indefeasible security interest
in favor of Collateral Agent.  Each
Debtor will do all acts and things, and will execute and file all instruments
(including, but not limited to, security agreements, financing statements,
continuation statements, etc.) reasonably requested by Collateral Agent to
establish, maintain and continue the perfected security interest of Collateral
Agent in the Perfected Collateral, and will promptly on demand, pay all costs
and expenses of filing and recording, including the costs of any searches
reasonably deemed necessary by Collateral Agent from time to time to establish
and determine the validity and the continuing priority of the security interest
of Collateral Agent, and also pay all other claims and charges that, in the
opinion of Collateral Agent, exercised in good faith, are reasonably likely to
materially prejudice, imperil or otherwise affect the Collateral or Collateral
Agent’s or Lenders’ security interests therein.

6.2           Other
than in the ordinary course of business, and except for Collateral which is
substituted by assets of identical or greater value or which has become
obsolete or is of inconsequential in value, each Debtor will not sell,
transfer, assign or pledge those items of Collateral (or allow any such items
to be sold, transferred, assigned or pledged), without the prior written
consent of Collateral Agent other than a transfer of the Collateral to a
wholly-owned subsidiary or to another Debtor on prior notice to Collateral
Agent, and provided the Collateral remains subject to the security interest
herein described.  Although Proceeds of
Collateral are covered by this Agreement, this shall not be construed to mean
that Collateral Agent consents to any sale of the Collateral, except as
provided herein.  Sales of Collateral in
the ordinary course of business shall be free of the security interest of
Lenders and Collateral Agent and Lenders and Collateral Agent shall promptly
execute such documents (including without limitation releases and termination
statements) as may be required by Debtors to evidence or effectuate the same.

6.3           Each
Debtor will, at all reasonable times during regular business hours and upon
reasonable notice, allow Collateral Agent or its representatives free and
complete access to the Collateral and all of such Debtor’s records which in any
way relate to the Collateral, for such inspection and examination as Collateral
Agent reasonably deems necessary.

6.4           Each
Debtor, at its sole cost and expense, will protect and defend this Security
Agreement, all of the rights of Collateral Agent and Lenders hereunder, and the
Collateral against the claims and demands of all other persons.

 6
 

 

6.5           Debtors
will promptly notify Collateral Agent of any levy, distraint or other seizure
by legal process or otherwise of any part of the Collateral, and of any
threatened or filed claims or proceedings that are reasonably likely to affect
or impair any of the rights of Collateral Agent under this Security Agreement
in any material respect.

6.6           Each
Debtor, at its own expense, will obtain and maintain in force insurance
policies covering losses or damage to those items of Collateral which
constitute physical personal property, which insurance shall be of the types
customarily insured against by companies in the same or similar business,
similarly situated, in such amounts (with such deductible amounts) as is
customary for such companies under the same or similar circumstances, similarly
situated.  Debtors shall make the
Collateral Agent a loss payee thereon to the extent of its interest in the
Collateral. Collateral Agent is hereby irrevocably (until the Obligations are
paid in full) appointed each Debtor’s attorney-in-fact to endorse any check or
draft that may be payable to such Debtor so that Collateral Agent may collect
the proceeds payable for any loss under such insurance.  The proceeds of such insurance, less any
costs and expenses incurred or paid by Collateral Agent in the collection
thereof, shall be applied either toward the cost of the repair or replacement
of the items damaged or destroyed, or on account of any sums secured hereby,
whether or not then due or payable.

6.7           Collateral
Agent may, at its option, and without any obligation to do so, pay, perform and
discharge any and all amounts, costs, expenses and liabilities herein agreed to
be paid or performed by Debtor.  Upon
Debtor’s failure to do so, all amounts expended by Collateral Agent in so doing
shall become part of the Obligations secured hereby, and shall be immediately
due and payable by Debtor to Collateral Agent upon demand and shall bear
interest at the lesser of 15% per annum or the highest legal amount from the
dates of such expenditures until paid.

6.8           Upon the
request of Collateral Agent, Debtors will furnish to Collateral Agent within
five (5) business days thereafter, or to any proposed assignee of this Security
Agreement, a written statement in form reasonably satisfactory to Collateral
Agent, duly acknowledged, certifying the amount of the principal and interest
and any other sum then owing under the Obligations, whether to its knowledge
any claims, offsets or defenses exist against the Obligations or against this
Security Agreement, or any of the terms and provisions of any other agreement
of Debtors securing the Obligations.  In
connection with any assignment by Collateral Agent of this Security Agreement,
each Debtor hereby agrees to cause the insurance policies required hereby to be
carried by such Debtor, if any, to be endorsed in form satisfactory to
Collateral Agent or to such assignee, with loss payable clauses in favor of
such assignee, and to cause such endorsements to be delivered to Collateral
Agent within ten (10) calendar days after request therefor by Collateral Agent.

6.9           Each
Debtor will, at its own expense, make, execute, endorse, acknowledge, file
and/or deliver to the Collateral Agent from time to time such vouchers,
invoices, schedules, confirmatory assignments, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates, reports
and other reasonable assurances or instruments and take further steps relating
to the Collateral and other property or rights covered by the security interest
hereby granted, as the Collateral Agent may reasonably require to perfect its
security interest hereunder.

 7
 

 

6.10         Debtors
represent and warrant that they are the true and lawful exclusive owners of the
Collateral, free and clear of any liens and encumbrances.

6.11         Each
Debtor hereby agrees not to divest itself of any right under the Collateral
except as permitted herein absent prior written approval of the Collateral
Agent, except to a subsidiary organized and located in the United States on
prior notice to Collateral Agent provided the Collateral remains subject to the
security interest herein described.

6.12         Each
Debtor shall cause each Subsidiary of such Debtor in existence on the date
hereof and each Subsidiary not in existence on the date hereof to execute and
deliver to Collateral Agent promptly and in any event within 10 days after the
formation, acquisition or change in status thereof (A) a guaranty guaranteeing
the Obligations and (B) if requested by Collateral Agent, a security and pledge
agreement substantially in the form of this Agreement together with (x)
certificates evidencing all of the capital stock of each Subsidiary of and any
entity owned by such Subsidiary, (y) undated stock powers executed in blank
with signatures guaranteed, and (z) such opinion of counsel and such approving
certificate of such Subsidiary as Collateral Agent may reasonably request in
respect of complying with any legend on any such certificate or any other
matter relating to such shares and (C) such other agreements, instruments,
approvals, legal opinions or other documents reasonably requested by Collateral
Agent in order to create, perfect, establish the first priority of or otherwise
protect any lien purported to be covered by any such pledge and security
agreement or otherwise to effect the intent that all property and assets of
such Subsidiary shall become Collateral for the Obligations.  For purposes of this Agreement, “Subsidiary”
means, with respect to any entity at any date, any corporation, limited or
general partnership, limited liability company, trust, estate, association,
joint venture or other business entity) of which more than 50% of
(A) the outstanding capital stock having (in the absence of contingencies)
ordinary voting power to elect a majority of the board of directors or other
managing body of such entity, (B) in the case of a partnership or limited
liability company, the interest in the capital or profits of such partnership
or limited liability company or (C) in the case of a trust, estate,
association, joint venture or other entity, the beneficial interest in such
trust, estate, association or other entity business is, at the time of
determination, owned or controlled directly or indirectly through one or more
intermediaries, by such entity.  Annex I
annexed hereto contains a list of all Subsidiaries of the Debtors as of the
date of this Agreement.

6.13         Without limiting the generality of the other obligations of the Debtors hereunder, each Debtor shall promptly (i) cause to be registered at the United States Copyright Office all of its material copyrights, (ii) cause the security interest contemplated hereby with respect to all intellectual property registered at the United States Copyright Office or United States Patent and Trademark Office to be duly recorded at the applicable office, and (iii) give the Collateral Agent notice whenever it acquires (whether absolutely or by license) or creates any additional material intellectual property.
6.14         Schedule B attached hereto lists all of the patents, patent applications, trademarks, trademark applications, registered copyrights, and domain names owned by any of the Debtors as of the date hereof.  Schedule B lists all material licenses in favor of any Debtor for the use of any

 8
 

 

patents, trademarks, copyrights and domain names as of the date hereof.  All material patents and trademarks of the Debtors have been duly recorded at the United States Patent and Trademark Office and all material copyrights of the Debtors have been duly recorded at the United States Copyright Office.

7.             Power of
Attorney.

At any time an
Event of Default exists or has occurred, each Debtor hereby irrevocably
constitutes and appoints the Collateral Agent as the true and lawful attorney
of such Debtor, with full power of substitution, in the place and stead of such
Debtor and in the name of such Debtor or otherwise, at any time or times, in
the discretion of the Collateral Agent, to take any action and to execute any
instrument or document which the Collateral Agent may deem necessary or
advisable to accomplish the purposes of this Agreement.  This power of attorney is coupled with an
interest and is irrevocable until the Obligations are satisfied.

8.             Performance
By The Collateral Agent.

If a Debtor
fails to perform any material covenant, agreement, duty or obligation of such
Debtor under this Agreement, the Collateral Agent may, after any applicable
cure period, at any time or times in its discretion, take action to effect
performance of such obligation.  All
reasonable expenses of the Collateral Agent incurred in connection with the
foregoing authorization shall be payable by Debtors as provided in Paragraph
12.1 hereof.  No discretionary right,
remedy or power granted to the Collateral Agent under any part of this
Agreement shall be deemed to impose any obligation whatsoever on the Collateral
Agent with respect thereto, such rights, remedies and powers being solely for
the protection of the Collateral Agent.

9.             Event of
Default.

An event of
default (“Event of Default”) shall be deemed to have occurred hereunder upon
the occurrence of any event of default as defined and described in this
Agreement, in the Notes, the Subscription Agreement, and any other agreement to
which Debtor and a Lender are parties.  
Upon and after any Event of Default, after the applicable cure period,
if any, any or all of the Obligations shall become immediately due and payable
at the option of the Collateral Agent, for the benefit of the Lenders, and the
Collateral Agent may dispose of Collateral as provided below.  A default by Debtor of any of its material
obligations pursuant to this Agreement and any of the Transaction Documents (as
defined in any Subscription Agreement) shall be an Event of Default hereunder
and an “Event of Default” as defined in the Notes, and Subscription Agreement.

10.           Disposition
of Collateral.

Upon
and after any Event of Default which is then continuing,

 9
 

 

10.1         The
Collateral Agent may exercise its rights with respect to each and every component
of the Collateral, without regard to the existence of any other security or
source of payment for the Obligations. 
In addition to other rights and remedies provided for herein or
otherwise available to it, the Collateral Agent shall have all of the rights
and remedies of a lender on default under the Uniform Commercial Code then in
effect in the State of New York.

10.2         If any
notice to Debtors of the sale or other disposition of Collateral is required by
then applicable law, five business (5) days prior written notice (which Debtors
agree is reasonable notice within the meaning of Section 9.612(a) of the
Uniform Commercial Code) shall be given to Debtors of the time and place of any
sale of Collateral which Debtors hereby agree may be by private sale.  The rights granted in this Section are in
addition to any and all rights available to Collateral Agent under the Uniform
Commercial Code.

10.3         The
Collateral Agent is authorized, at any such sale, if the Collateral Agent deems
it advisable to do so, in order to comply with any applicable securities laws,
to restrict the prospective bidders or purchasers to persons who will represent
and agree, among other things, that they are purchasing the Collateral for
their own account for investment, and not with a view to the distribution or
resale thereof, or otherwise to restrict such sale in such other manner as the
Collateral Agent deems advisable to ensure such compliance.  Sales made subject to such restrictions shall
be deemed to have been made in a commercially reasonable manner.

10.4         All
proceeds received by the Collateral Agent for the benefit of the Lenders in
respect of any sale, collection or other enforcement or disposition of
Collateral, shall be applied (after deduction of any amounts payable to the
Collateral Agent pursuant to Paragraph 12.1 hereof) against the Obligations pro
rata among the Lenders in proportion to their interests in the
Obligations.   Upon payment in full of
all Obligations, Debtors shall be entitled to the return of all Collateral,
including cash, which has not been used or applied toward the payment of
Obligations or used or applied to any and all costs or expenses of the
Collateral Agent incurred in connection with the liquidation of the Collateral
(unless another person is legally entitled thereto).  Any assignment of Collateral by the
Collateral Agent to Debtors shall be without representation or warranty of any
nature whatsoever and wholly without recourse. 
To the extent allowed by law, each Lender may purchase the Collateral
and pay for such purchase by offsetting up to such Lender’s pro rata portion of
the purchase price with sums owed to such Lender by Debtors arising under the
Obligations or any other source.

11.           Waiver of
Automatic Stay.   Debtor acknowledges and
agrees that should a proceeding under any bankruptcy or insolvency law be
commenced by or against Debtor, or if any of the Collateral should become the
subject of any bankruptcy or insolvency proceeding, then the Collateral Agent
should be entitled to, among other relief to which the Collateral Agent or
Lenders may be entitled under the Note, Subscription Agreement and any other
agreement to which the Debtor, Lenders or Collateral Agent are parties,
(collectively “Loan Documents”) and/or applicable law, an order from the court
granting immediate relief from the automatic stay pursuant to 11 U.S.C. Section
362 to permit the Collateral Agent to exercise all of its rights and remedies
pursuant to the Loan Documents and/or applicable law.  Debtor EXPRESSLY WAIVES THE BENEFIT OF THE
AUTOMATIC STAY IMPOSED BY 11 U.S.C. SECTION 362.  FURTHERMORE, Debtor EXPRESSLY

 10
 

 

ACKNOWLEDGES AND AGREES THAT
NEITHER 11 U.S.C. SECTION 362 NOR ANY OTHER SECTION OF THE BANKRUPTCY CODE OR
OTHER STATUTE OR RULE (INCLUDING, WITHOUT LIMITATION, 11 U.S.C. SECTION 105)
SHALL STAY, INTERDICT, CONDITION, REDUCE OR INHIBIT IN ANY WAY THE ABILITY OF
THE COLLATERAL AGENT TO ENFORCE ANY OF ITS RIGHTS AND REMEDIES UNDER THE LOAN
DOCUMENTS AND/OR APPLICABLE LAW.  Debtor
hereby consents to any motion for relief from stay which may be filed by the
Collateral Agent in any bankruptcy or insolvency proceeding initiated by or
against Debtor, and further agrees not to file any opposition to any motion for
relief from stay filed by the Collateral Agent. 
Debtor represents, acknowledges and agrees that this provision is a
specific and material aspect of this Agreement, and that the Collateral Agent
would not agree to the terms of this Agreement if this waiver were not a part
of this Agreement.  Debtor further
represents, acknowledges and agrees that this waiver is knowingly,
intelligently and voluntarily made, that neither the Collateral Agent nor any
person acting on behalf of the Collateral Agent has made any representations to
induce this waiver, that Debtor has been represented (or has had the
opportunity to be represented) in the signing of this Agreement and in the
making of this waiver by independent legal counsel selected by Debtor and that
Debtor has had the opportunity to discuss this waiver with counsel.   Debtor further agrees that any bankruptcy or
insolvency proceeding initiated by Debtor will only be brought in the Federal
Court within the Southern District of New York.

12.           Miscellaneous.

12.1         Expenses.  Debtors shall pay to the Collateral Agent,
and each Lender on demand, the amount of any and all reasonable expenses,
including, without limitation, attorneys’ fees, legal expenses and brokers’
fees, which the Collateral Agent or any Lender may incur in connection with (a)
sale, collection or other enforcement or disposition of Collateral; (b)
exercise or enforcement of any the rights, remedies or powers of the Collateral
Agent hereunder or with respect to any or all of the Obligations upon breach or
threatened breach; or (c) failure by Debtors to perform and observe any
agreements of Debtors contained herein which are performed by the Collateral
Agent.

12.2         Waivers,
Amendment and Remedies. 
No course of dealing by the Collateral Agent and no failure by the
Collateral Agent to exercise, or delay by the Collateral Agent in exercising,
any right, remedy or power hereunder shall operate as a waiver thereof, and no
single or partial exercise thereof shall preclude any other or further exercise
thereof or the exercise of any other right, remedy or power of the Collateral
Agent.  No amendment, modification or
waiver of any provision of this Agreement and no consent to any departure by
Debtors therefrom, shall, in any event, be effective unless contained in a
writing signed by the Collateral Agent, and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given.  The rights, remedies and
powers of the Collateral Agent, not only hereunder, but also under any
instruments and agreements evidencing or securing the Obligations and under
applicable law are cumulative, and may be exercised by the Collateral Agent
from time to time in such order as the Collateral Agent may elect.

12.3         Notices.  All notices or other communications given or
made hereunder shall be in writing and shall be personally delivered or deemed
delivered the first business day after being faxed

 11
 

 

(provided that a copy is delivered
by first class mail) to the party to receive the same at its address set forth
below or to such other address as either party shall hereafter give to the
other by notice duly made under this Section:

	
  To Debtors:

  	
  Ceragenix Pharmaceuticals, Inc.

  
	
   

  	
  1444 Wazee
  Street, Suite 210

  
	
   

  	
  Denver, CO 80202

  
	
   

  	
  Attn: Steven S.
  Porter, CEO

  
	
   

  	
  Fax: (303)
  534-1860

  
	
   

  	
   

  
	
  With a copy by telecopier

  	
   

  
	
  only to:

  	
  John Kellogg, Esq.

  
	
   

  	
  McKenna Long
  & Aldridge LLP

  
	
   

  	
  1875 Lawrence
  Street, Suite 200

  
	
   

  	
  Denver,
  Colorado 80202

  
	
   

  	
  Fax: 
  303-634-4400

  
	
   

  	
   

  
	
  To Lenders:

  	
  To the addresses and telecopier numbers set forth

  
	
   

  	
  on Schedule A

  
	
   

  	
   

  
	
  To the
  Collateral Agent:

  	
  Barbara R.
  Mittman, Esq.

  
	
   

  	
  Grushko & Mittman, P.C.

  
	
   

  	
  551 Fifth Avenue, Suite 1601

  
	
   

  	
  New York, NY 10176

  
	
   

  	
  Fax: (212) 697-3575

  
	
   

  	
   

  
	
  With a copy by telecopier only to:

  
	
   

  
	
   

  	
  Grushko & Mittman, P.C.

  
	
   

  	
  551 Fifth Avenue, Suite 1601

  
	
   

  	
  New York, New York 10176

  
	
   

  	
  Fax: (212) 697-3575

  

 

Any party may
change its address by written notice in accordance with this paragraph.

12.4         Term;
Binding Effect.  This Agreement shall (a)
remain in full force and effect until payment and satisfaction in full of all
of the Obligations; (b) be binding upon each Debtor, and its successors and
permitted assigns; and (c) inure to the benefit of the Collateral Agent, for
the benefit of the Lenders and their respective successors and assigns.

12.5         Captions.  The captions of Paragraphs, Articles and
Sections in this Agreement have been included for convenience of reference
only, and shall not define or limit the provisions hereof and have no legal or
other significance whatsoever.

 12
 

 

12.6         Governing
Law; Venue; Severability.  This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York without regard to conflicts of laws principles that would
result in the application of the substantive laws of another jurisdiction,
except to the extent that the perfection of the security interest granted
hereby in respect of any item of Collateral may be governed by the law of
another jurisdiction.  Any legal action
or proceeding against a Debtor with respect to this Agreement may be brought in
the courts in the State of New York or of the United States for the Southern
District of New York, and, by execution and delivery of this Agreement, each
Debtor hereby irrevocably accepts for itself and in respect of its property,
generally and unconditionally, the jurisdiction of the aforesaid courts.  Each Debtor hereby irrevocably waives any
objection which they may now or hereafter have to the laying of venue of any of
the aforesaid actions or proceedings arising out of or in connection with this
Agreement brought in the aforesaid courts and hereby further irrevocably waives
and agrees not to plead or claim in any such court that any such action or
proceeding brought in any such court has been brought in an inconvenient
forum.  If any provision of this
Agreement, or the application thereof to any person or circumstance, is held
invalid, such invalidity shall not affect any other provisions which can be
given effect without the invalid provision or application, and to this end the
provisions hereof shall be severable and the remaining, valid provisions shall
remain of full force and effect.

12.7         Entire
Agreement.  This Agreement contains
the entire agreement of the parties and supersedes all other agreements and
understandings, oral or written, with respect to the matters contained herein.

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

13.           Intercreditor
Terms.

13.1         As
between the Lenders, any distribution under paragraph 10.4 shall be made
proportionately based upon the remaining principal amount (plus accrued and
unpaid interest) to each as to the total amount then owed to the Lenders as a
whole.  The rights of each Lender
hereunder are pari passu to the rights of the other Lenders
hereunder.  Any recovery hereunder shall
be shared ratably among the Lenders according to the then remaining principal
amount owed to each (plus accrued and unpaid interest) as to the total amount
then owed to the Lenders as a whole.

13.2         If an
Event of Default occurs and any Lender receives payment from a Debtor, the
other parties hereto shall be immediately notified and such payment shall be
shared with all of the other Secured Parties pursuant to Section 13.1
above.  Each Lender agrees not to
commence any action or proceeding concerning the Obligations or the Collateral
without providing at least one business day’s notice to all Lenders.  Notwithstanding anything to the contrary
contained in any Transaction Document, this Agreement or any document executed
in connection with the

 13
 

 

Obligations and irrespective of:
(i) the time, order or method of attachment or perfection of the security
interests created in favor of the Lenders, (ii) the time or order of filing or
recording of financing statements or other documents filed or recorded to
perfect security interests in any Collateral; (iii) anything contained in any
filing or agreement to which any Lender now or hereafter may be a party; and
(iv) the rules for determining perfection or priority under the Uniform
Commercial Code or any other law governing the relative priorities of secured
creditors, each Lender acknowledges that (x) all other Lenders have a valid
security interest in the Collateral and (y) the security interests of the
Lenders in any Collateral pursuant to any outstanding Obligations shall be pari
passu with each other. Each Lender (“Indemnifying Party”),
severally and not jointly with the other Lenders, shall indemnify, defend, and
hold harmless each other Lender (“Indemnified Party”) against and in
respect of any and all claims, demands, losses, costs, expenses, obligations,
liabilities, damages, recoveries, and deficiencies, including interest,
penalties, and reasonable professional and attorneys’ fees, including those
arising from settlement negotiations, that any Indemnified Party shall incur or
suffer, which arise, result from, or relate to a breach of, or failure by the
Indemnifying Party to perform under this Agreement.

13.3         For
clarity, an event of default under the Convertible Debentures and Transaction
Documents executed in connection therewith shall also constitute an event of
default under the Convertible Notes and the Transaction Documents executed in
connection therewith, and an event of default under the Convertible Notes and
Transaction Documents executed in connection therewith shall also constitute an
event of default under the Convertible Debentures and the Transaction Documents
executed in connection therewith.

14.           Termination;
Release.  When the Obligations have
been indefeasibly paid and performed in full or all outstanding Notes have been converted to common stock pursuant
to the terms of the Notes and the Subscription Agreements, this
Agreement shall terminated, and the Collateral Agent, at the request and sole
expense of the Debtors, will execute and deliver to the Debtors the proper
instruments (including UCC termination statements) acknowledging the
termination of the Security Agreement, and duly assign, transfer and deliver to
the Debtors, without recourse, representation or warranty of any kind
whatsoever, such of the Collateral, including, without limitation, Securities
and any Additional Collateral, as may be in the possession of the Collateral
Agent.

15.           Collateral
Agent.

15.1         Collateral
Agent Powers.  The powers conferred on
the Collateral Agent hereunder are solely to protect its interest (on behalf of
the Lenders) in the Collateral and shall not impose any duty on it to exercise
any such powers.

15.2         Reasonable
Care.  The Collateral Agent is
required to exercise reasonable care in the custody and preservation of any
Collateral in its possession; provided, however, that the Collateral Agent
shall be deemed to have exercised reasonable care in the custody and
preservation of any of the Collateral if it takes such action for that purposes
as any owner thereof reasonably requests in writing at times other than upon
the occurrence and during the continuance of any Event of Default,

 14
 

 

but failure of the Collateral
Agent, to comply with any such request at any time shall not in itself be
deemed a failure to exercise reasonable care.

[THIS SPACE INTENTIONALLY LEFT BLANK]

 15
 

 

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

	
  “PARENT”

  	
  “THE COLLATERAL
  AGENT”

  
	
  CERAGENIX PHARMACEUTICALS, INC.

  	
  BARBARA R. MITTMAN

  
	
  a Delaware corporation

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Its:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  “SUBSIDIARY”

  	
   

  
	
  CERAGENIX CORPORATION

  	
   

  
	
  a Colorado corporation

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Its:

  	
   

  	
   

  	
   

  

[SIGNATURE PAGE
CONTINUES]

 16
 

 

[SIGNATURE PAGE TO CGXP SECURITY AGREEMENT]

APPROVED BY “LENDERS”:

	
  Name of Lender:

  	
   

  
	
   

  
	
  Signature
  of Authorized Signatory of Lender:

  	
   

  
	
   

  
	
  Name of
  Authorized Signatory:

  	
   

  
	
   

  
	
  Title of
  Authorized Signatory:

  	
   

  
					

 

This Security Agreement
may be signed by facsimile signature and

delivered by confirmed facsimile transmission.

 17
 

 

SCHEDULE
A TO SECURITY AGREEMENT

	
  LENDER

  	
   

  	
  PURCHASE PRICE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

 18
 

 

ANNEX I

TO

SECURITY AGREEMENT

PLEDGE AMENDMENT

This Pledge Amendment, dated                            200   ,
is delivered pursuant to Section 4.3 of the Security Agreement referred to
below.  The undersigned hereby agrees
that this Pledge Amendment may be attached to the Amended and Restated Security
Agreement, dated December 5, 2006, as it may heretofore have been or hereafter
may be amended, restated, supplemented or otherwise modified from time to time
and that the shares listed on this Pledge Amendment shall be hereby pledged and
assigned to Collateral Agent and become part of the Collateral referred to in
such Security Agreement and shall secure all of the Obligations referred to in
such Security Agreement.

 

	
  Name of Issuer

  	
   

  	
  Number

  of Shares

  	
   

  	
  Class

  	
   

  	
  Certificate

  Number(s)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  

  	
  CERAGENIX
  PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  

 

 19
 

 

SCHEDULE B

INTELLECTUAL PROPERTY

 20

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