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.













“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.



 2
 









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



 3
 









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.



 4
 









(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.



 5
 









(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



 6
 









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]



 7
 









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

  
							



 


 



 8
 









 




	
  

  	
   

  	
  Absolute Octane Master Fund Limited

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Signature)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Name)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Number of Shares: 500,000

  
	
   

  	
   

  	
  Number of Warrants: 10,000,000

  






 



 9