Exhibit 10.3

PUT OPTION AGREEMENT

PUT OPTION AGREEMENT, dated as of August 2, 2007, between Callisto
Pharmaceuticals, Inc., a Delaware company (the “Company”), and the purchaser
(the “Purchaser”) of certain shares of the Company’s Series B Convertible
Preferred Stock, $.001 par value (“Series B Stock”) whose name appears on the
signature page hereof.

WHEREAS, subject to the terms and conditions specified in that certain
Securities Purchase Agreement entered into on one or more dates including the
date hereof between the Company and certain investors (the “Investors”)
including the Purchaser (the “Securities Purchase Agreement”), the Purchaser has
agreed to purchase from the Company and the Company has agreed to issue and to
sell to the Purchaser the number of shares of Series B Stock set forth on the
signature page hereto (the “Shares”), together with three year Warrants to
purchase shares of the Company’s common stock for $0.70 per share (the
“Warrants”) on the basis of 20 Warrants for each Share purchased;

WHEREAS,    the Investors, including the Purchaser, have been designated “Lead
Investors” under the terms of the Securities Purchase Agreement;

WHEREAS, the Lead Investors as a group will purchase and the Company will issue
and sell to the Lead Investors an aggregate of 1,000,000 Shares and 20,000,000
Warrants; and

WHEREAS, in consideration of, and as a material inducement to, the Purchaser to
enter into the transactions contemplated under the Securities Purchase
Agreement, the Company has agreed to provide the Lead Investors with the
benefits of certain mandatory redemption and other rights set forth herein and
the Lead Investor Escrow Agreement.

NOW THEREFORE, in consideration of the mutual covenants herein contained, the
parties agree as follows:

1.                                       Definitions.

All capitalized terms used herein and not otherwise defined herein shall have
the meanings for such terms as set forth in the Securities Purchase Agreement. 
In addition, the following terms shall have the meanings indicated for the
purposes of this Put Option Agreement:

“Beneficially Own” shall mean, with respect to any securities, having
“beneficial ownership” of such securities (as determined pursuant to Rule 13d-3
under the Exchange Act), including pursuant to any agreement, arrangement or
understanding, whether or not in writing.

“Business Day” means any day that is not a Saturday, Sunday or a day on which
banking institutions in New York, New York are not required to be open for
business.

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“Common Stock Equivalent” means securities (including, without limitation,
options, warrants and evidences of indebtedness) that are outstanding at the
time of a determination that are directly or indirectly convertible into, or
exchangeable or exercisable for, shares of Common Stock.

“Issue Date” shall mean August 2, 2007.

“Issue Price” shall equal $10.00 per Share at the Issue Date, and thereafter
shall be subject to adjustment as provided in Section 4.

“Lead Investors Escrow Account” means the escrow account maintained by the Lead
Investors Escrow Agent.

“Lead Investors Escrow Agent” means StockTrans, Inc.

“Lead Investors Escrow Agreement” means the escrow agreement among the Company,
the Lead Investors Escrow Agent and the Lead Investors.

“Lead Investors Escrow Amount” means a minimum of $8,480,000 of the net proceeds
from the sale of the Shares and Warrants to the Lead Investors.

“Permitted Transfer” means, with respect to any Person, (i) a Transfer to a
trust for the benefit of such Person’s spouse or issue or to a family
partnership, limited liability company or similar entity of which the members
are solely such Person. or such Person’s spouse or issue and as to which such
Person exercises voting control, (ii) a Transfer to an Affiliate of such Person,
(iii) a Transfer between Lead Investors, or (iv) if such Person is a limited or
general partnership, a Transfer to its partners in connection with a
distribution of securities held by such Person to its partners.

“Person” means any individual, company, limited liability company, limited or
general partnership, joint venture, association, joint-stock company or other
business entity, trust, unincorporated organization or government or any agency
or political subdivisions thereof

“Put Exercise Notice” shall have the meaning set forth in Section 2(a).

“Put Trigger Event” shall have the meaning set forth in Section 2(a).

“Stock” means (i) any shares of Common Stock and (ii) any Common Stock
Equivalents, in each case, whether owned on the date hereof or acquired
hereafter by a shareholder.

“Transfer” as to any Stock, means to sell, or in any other way directly or
indirectly transfer, assign, distribute, pledge, encumber or otherwise dispose
of, either voluntarily or involuntarily.

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2.                                       Put Option.

(a)                                  Subject to the conditions set forth in this
Section 2 and prior to the termination of the put rights in accordance with
Section 3, below, upon notice (“Put Exercise Notice”) from the Purchaser to the
Escrow Agent and the Company within thirty (30) days (“Put Trigger Notice”) of
the Company giving written notice of the occurrence of any of the events set
forth in paragraphs 2(a)(i) to (iii) (each a “Put Trigger Event”), the Purchaser
shall have the right to require the Company to redeem the number of Shares (the
“Put Shares”) and sixteen (16) of the Warrants multiplied by the number of such
Shares (the “Put Warrants”) set forth in the Put Exercise Notice for the Issue
Price multiplied by the number of Put Shares (the “Put Consideration”), payable
in cash as set forth in Section 2(b).  Any remaining Warrants held by the
Purchaser shall not be redeemable, cancelable or callable by the Company.

The Purchaser shall have the right to require redemption of the Put Shares and
Put Warrants pursuant to this Section 2 only upon the occurrence of any of the
following events:

(i)            the Company shall have not received the approval of its common
stockholders of the issuance of Shares of Common Stock issuable upon the
Conversion of the Shares or the exercise of the Warrants (the “Underlying
Shares”) by 5:00 pm New York time on September 30, 2007; or

(ii)           The American Stock Exchange (“AMEX”) shall not have approved the
Listing of Additional Securities application filed by the Company relating to
the Underlying Shares by 5:00 pm New York time on September 30, 2007 (for a
reason other than the Purchaser failing to timely provide AMEX with information
reasonably requested by AMEX Listing Qualification as part of their review of
the application); or

(iii)          AMEX or the Company delists the Company’s Common Stock on or
before 5:00 pm New York time on September 30, 2007.

(b)                                 The Company shall notify the Lead Investors
promptly in writing following the occurrence of any of the Put Trigger Events.
The Put Shares and Put Warrants shall be redeemed by the Company within ten (10)
days after receipt by the Company of the Put Exercise Notice from the
Purchaser.  Payment to the Purchaser for the Put Shares and Put Warrants shall
first be made out of the Lead Investors Escrow Amount attributable to such
Purchaser in accordance with the terms of the Lead Investors Escrow Agreement. 
If the funds in the Lead Investors Escrow Account are insufficient to redeem all
of the Put Shares and the Put Warrants, and the Company does not have sufficient
legally available funds for redemption pursuant to this Section 2, as reasonably
determined by the Board, to redeem all of the Put Shares and the Put Warrants,
the Company shall first redeem that number Put Shares for the Put Consideration
determined by the Board to be legally permissible and the Company shall issue a
promissory note (a “Promissory Note”) in favor of the Purchaser delivering a Put
Option Notice in a principal amount equal to (i) the funds required to redeem
the Put Shares and Put Warrants in full less (ii) the Put Consideration actually
paid to such Purchaser.  The Promissory Note shall bear interest at a rate

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of 2% per month for a period of six (6) months from the date of issuance and
shall increase to 3% per month for each month thereafter.  The Promissory Note
shall contain such other terms as agreed to between the Purchaser and the
Company.  Once the Company has paid the entire unpaid principal amount and any
accrued and unpaid interest on the Promissory Note, the Purchaser shall deliver
any remaining Put Shares or Put Warrants not previously delivered to the Company
for redemption in full.  During the period beginning on the date the Company
receives a Put Exercise Notice and until all Put Shares and Put Warrants set
forth in such Notice have been redeemed, the Company shall not, without the
written consent of each Lead Investor, (i) make any capital expenditures in
excess of the amount approved by the Board in the Company’s annual budget, (ii)
acquire any entity or any assets of any business in any transaction or series of
related transactions if the aggregate acquisition price is greater than
$1,000,000, or (iii) make any distributions to its equity holders.

3.                                       Termination of Put Option.

The rights of the Purchaser under Section 2 shall terminate and be of no further
force or effect if:

(a)                                  No Put Trigger Event shall have occurred on
or before 5:00 pm New York time, September 30, 2007 and the Company has provided
each Purchaser with written confirmation to such effect; or

(b)                                 The Purchaser has not provided the Company
with a Put Exercise Notice on or before 5:00 pm New York time on the 30th day
following the Company giving notice of a Put Trigger Event.

4.                                       Redemption of Warrants.         
Beginning two (2) years after the date on which the Purchaser has converted or
disposed of all of their Shares, the Company shall have the right, on twenty
(20) Business Days notice to the Purchaser (a “Redemption Notice” and the date
such notice is received by the Purchaser, the “Redemption Notice Date”, to
redeem any portion of the Warrants then held by the Purchaser for $0.0001 per
Warrant provided that the Warrants shall not be redeemable by the Company if the
Put Option has been exercised and the Company has paid the Issue Price to the
Purchaser pursuant to Section 2 herein.

5.                                       Miscellaneous.

(a)                                  Severability.   If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement and such exhibits shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated. It is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms, provisions, covenants
and restrictions without including any of such which may be hereafter declared
invalid, void or unenforceable.

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(b)                                 Specific Enforcement.   The Purchaser, on
the one hand, and the Company, on the other, acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction to prevent breaches of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state thereof having jurisdiction, this being in addition to any
other remedy to which they may be entitled at law or equity.

(c)                                Entire Agreement.   This Agreement contains
the entire understanding of the parties with respect to the transactions
contemplated hereby.

(d)                               Counterparts.   This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more of the counterparts have
been signed by each party and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.

(e)                                  Notices and Other Communications.   All
notices, consents, requests, instructions, approvals, financial statements,
proxy statements, reports and other communications provided for herein shall be
deemed given, if in writing and delivered personally, by telecopy or sent by
registered mail, postage prepaid, if to:

If to the Company:

Gary Jacob

420 Lexington Avenue, Suite 1609

New York, NY 10170

(212) 297-0010

With a copy to:

Jeffrey Fessler

Sichenzia Ross Friedman Ference LLP

61 Broadway

New York, NY 10006

(212) 930-9700

If to the Purchaser at the address set forth on the signature page hereof.

or to such other address as any party may, from time to time, designate in a
written notice given in a like manner. All such notices, requests, consents and
other communications, if sent via facsimile shall be deemed to have been given
when received, if sent by overnight courier shall be deemed to have been given
one (1) Business Day after deposit with such overnight courier and if sent via
U.S. mail, shall be deemed to have been given three (3) Business Days after
deposit in a U.S. postal depository.

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(f)                                    Amendments; Waiver.   This Agreement may
be amended only by written agreement between the Company and the Purchaser.  No
provision of this Agreement may be waived, or discharged orally, but only by an
agreement in writing signed by the party or parties against whom enforcement of
any waiver or discharge is sought or by parties with the right to consent to
such waiver or discharge on behalf of such party.

(g)                                 Cooperation; Further Assurances.

(i)            The Purchaser and the Company agree to take, or cause to be
taken, all such further or other actions as shall reasonably be necessary to
make effective and consummate the transactions contemplated by this Agreement.

(ii)           The Company shall take all actions necessary to ensure that the
Certificate of Incorporation and By-Laws of the Company do not at any time
conflict with the provisions of this Agreement.

(h)                                 Successors and Assigns.   All covenants and
agreements contained herein shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns.  Notwithstanding the
foregoing, the Purchaser may not assign the benefits of this Agreement without
the Company’s prior written consent, unless such assignment is coupled with an
assignment of all Shares and Warrants Beneficially Owned by the Purchaser, or
such assignment is a Permitted Transfers.

(i)                                     Survival.   All covenants, agreements,
representations and warranties contained herein and in any certificates
delivered pursuant hereto in connection with the transactions occurring on the
Closing shall survive the Closing and the delivery of the Transaction Documents,
regardless of any investigation made by or on behalf of any party.

(j)                                     Governing Law.    THIS AGREEMENT AND THE
SECURITIES SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF
THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK EXCLUDING
CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE
APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.

(k)                                  Submission to Jurisdiction.    Each of the
parties hereto hereby irrevocably and unconditionally consents to submit to the
exclusive jurisdiction of the courts of the State of New York and of the United
States of America, in each case located in the County of New York, for any
action, proceeding or investigation in any court or before any governmental
authority (“Litigation”) arising out of or relating to the transactions
contemplated hereby (and agrees not to commence any Litigation relating thereto
except in such courts), and further agrees that service of any process, summons,
notice or document by U.S. registered mail to its respective address set forth
in this Agreement shall be effective service of process for any Litigation
brought against it in any such court. Each of the parties hereto hereby
irrevocably and unconditionally waives any

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objection to the laying of venue of any Litigation arising out of this Agreement
or the transactions contemplated hereby in the courts of the State of New York
or the United State of America, in each case located in the County of New York,
and hereby further irrevocably and unconditionally waives and agrees not to
plead or claim in any such court that any such Litigation brought in any such
court has been brought in an inconvenient forum.

(l)                                   Service of Process.    Nothing herein
shall affect the right of any holder of any Securities to serve process in any
other manner permitted by law or to commence legal proceedings or otherwise
proceed against the Company in any other jurisdiction.

(m)                               Waiver of Jury Trial.   THE COMPANY HEREBY
WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION,
PROCEEDING OR LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH, THIS AGREEMENT.

(n)                                 Signatures.     This Agreement shall be
effective upon delivery of original signature pages or facsimile copies thereof
executed by each of the parties hereto.

[Signatures on Following Page]

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IN WITNESS WHEREOF, the Company and the Purchaser have caused this Agreement to
be executed and delivered by their respective officers or partners thereunto
duly authorized.

Callisto Pharmaceuticals, Inc.

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

Gary Jacob

 

Title:

 

 CEO

 

 

 

 

 

 

 

 

 

RAB Special Situations (Master) Fund Limited by

 

 

 

 

 

 

 

 

 

 

 

 

(Signature)

 

 

 

 

 

 

(Name)

 

 

 

 

 

 

(Signature

 

 

 

 

(Name)

 

 

 

 

 

Authorised signatories for RAB Capital plc for and
on behalf of RAB Special Situations (Master) Fund
Limited

 

 

 

Address:  c/o RAB Capital plc

 

1 Adam Street

 

London WC2N 6LE

 

United Kingdom

 

 

 

Facsimile: (+44) 20 7389 7057

 

 

 

Number of Shares:  500,000

 

Number of Warrants:  10,000,000

 

 

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Absolute Octane Master Fund Limited

 

 

 

 

 

 

 

 

 

(Signature)

 

 

 

 

 

 

 

 

 

(Name)

 

 

 

 

 

 

 

 

Number of Shares: 500,000

 

 

Number of Warrants: 10,000,000

 

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