COMMON STOCK PURCHASE AGREEMENT


     This Common Stock Purchase Agreement (this "Agreement") is made as of March
8, 2005 between  Callisto  Pharmaceuticals,  Inc., a Delaware  corporation  (the
"Company"),  and the  investors  listed on  EXHIBIT  A hereto,  each of which is
herein referred to as an "Investor" and collectively, the "Investors".

                                    RECITALS:

     WHEREAS, the Investors desire to purchase from the Company, and the Company
desires  to sell to the  Investors,  1,985,791  shares of the  Company's  common
stock,  par value  $0.0001 per share (the  "Common  Stock"),  upon the terms and
subject to the conditions set forth herein;

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

     1. PURCHASE AND SALE OF SHARES.

          1.1  PURCHASE  AND SALE OF SHARES.  Upon the terms and  subject to the
conditions of this  Agreement,  at the Closing (as defined  below),  the Company
agrees to sell to the Investors,  and each Investor  agrees to purchase from the
Company the number of shares of the  Company's  Common Stock set forth  opposite
such  Investor's  name on  EXHIBIT  A hereto  (the  "Shares")  at the per  share
purchase price of $1.52 ("Purchase Price").

          1.2  CLOSING.  The closing of the purchase and sale of the Shares (the
"Closing") shall take place at the offices of the Company at 12:00 noon, Eastern
time on March 9, 2005, or such other location, time or date as the parties shall
mutually  agree,  but only  after  the  satisfaction  or  waiver  of each of the
conditions set forth in Sections 6 and 7 (the "Closing Date").

          1.3  DELIVERIES.  At the Closing,  the Company  shall  deliver to each
Investor at the address set forth on such  Investor's  signature page hereto,  a
certificate or certificates,  registered in the name of the applicable Investor,
representing  the Shares  purchased by such  Investor,  and each Investor  shall
deliver to the  Company  the  aggregate  Purchase  Price,  by wire  transfer  of
immediately available funds to the following account:


     2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

     For purposes of this Section,  all references to "Company" in Sections 2.1,
2.4 (with the exception of subsection  (a) thereof),  2.7, 2.9 through 2.12, and
2.14  through  2.20 shall be deemed to be a reference  to the Company and all of
its direct and indirect subsidiaries. The Company hereby represents and warrants
to each  Investor  that,  except as set forth on a Schedule of  Exceptions  (the
"Company  Schedule  of  Exceptions")   attached  hereto  as  SCHEDULE  A,  which
exceptions  shall be  deemed to be  representations  and  warranties  as if made
hereunder:

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          2.1  CORPORATE  ORGANIZATION.   The  Company  is  a  corporation  duly
organized,  validly existing and in good standing under the laws of its state of
incorporation,  and has the  requisite  corporate  power and authority to own or
lease its  properties and to carry on its business as now being  conducted.  The
Company is duly qualified as a foreign corporation to do business and is in good
standing in every  jurisdiction  in which the property  owned or leased by it or
the nature of the business conducted by it makes such  qualification  necessary,
except to the extent that the  failure to be so  qualified  or in good  standing
would not have, individually or in the aggregate, a Material Adverse Effect. For
purposes of this  Agreement,  "Material  Adverse  Effect"  shall mean, as to any
entity,  any material  adverse  effect on the business,  operations,  conditions
(financial  or  otherwise),  assets,  results of operations or prospects of that
entity individually or of the Company and its subsidiaries as a whole.

          2.2 CAPITALIZATION; ORGANIZATIONAL DOCUMENTS.

               (a) The  authorized  capital  stock of the Company  will  consist
immediately  prior to the Closing of 75,000,000 shares of Common Stock, of which
as of the date  hereof,  29,243,102  shares  are  issued  and  outstanding,  and
20,000,000  shares of preferred  stock of the Company,  of which, as of the date
hereof,  no shares are issued or outstanding.  All of the issued and outstanding
shares  have been duly and validly  issued and are fully paid and  nonassessable
and have  been  issued  in  accordance  with all  applicable  federal  and state
securities  laws. No shares of Common Stock are subject to preemptive  rights or
any other  similar  rights or any liens  suffered or  permitted  by the Company.
There are no  preemptive  rights or rights of first  refusal or  similar  rights
which are  binding on the  Company  permitting  any person to  subscribe  for or
purchase from the Company  shares of its capital stock pursuant to any provision
of applicable  law, the Certificate of  Incorporation  (as defined below) or the
Company's   By-laws.   There  are  no  securities  or   instruments   containing
anti-dilution  or similar  provisions  that will be triggered by the issuance of
the Shares.  The Company has made  available to each  Investor  true and correct
copies of the  Company's  Certificate  of  Incorporation,  as amended  and as in
effect  on the  date  hereof  (the  "Certificate  of  Incorporation"),  and  the
Company's By-laws, as in effect on the date hereof (the "By-laws").

               (b) Upon issuance of the Shares and payment of the Purchase Price
therefor in accordance with the terms of this Agreement, the Shares will be duly
authorized, validly issued, fully paid and nonassessable,  and free and clear of
any restrictions on transfer and any taxes,  claims,  liens,  pledges,  options,
security interests,  purchase rights, preemptive rights, trusts, encumbrances or
other rights or interests of any other person (other than any restrictions under
the Securities Act of 1933, as amended (the "Securities Act").

          2.3  AUTHORIZATION;  ENFORCEMENT.  (a) The Company  has the  requisite
corporate  power and authority to enter into and perform its  obligations  under
this Agreement and to issue,  sell and perform its  obligations  with respect to
the Shares in accordance  with the terms hereof,  (b) the execution and delivery
of this Agreement by the Company and the  consummation by it of the transactions
contemplated  hereby  have  been  duly  authorized  by the  Company's  Board  of
Directors  and its  stockholders  and no  further  consent or  authorization  is
required by the Company,  its Board of Directors or its stockholders,  except as
disclosed on the Company  Schedule of Exceptions and (c) this Agreement has been
duly executed and delivered by the


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Company. This Agreement, when executed and delivered by the Company, constitutes
a valid and binding obligation of the Company enforceable against the Company in
accordance  with its  terms,  except as such  enforceability  may be  limited by
general   principles   of   equity   or   applicable   bankruptcy,   insolvency,
reorganization,   moratorium,  liquidation  or  similar  laws  relating  to,  or
affecting generally, the enforcement of creditors' rights and remedies.

          2.4 NO CONFLICTS.  The  execution,  delivery and  performance  of this
Agreement  by  the  Company,   and  the  consummation  by  the  Company  of  the
transactions  contemplated  hereby,  will not (a) result in a  violation  of the
Certificate  of  Incorporation  or By-laws  of the  Company,  or (b)  violate or
conflict  with,  or result in a breach of, any  provision  of, or  constitute  a
default (or an event  which with notice or lapse of time or both would  become a
default)  under,  or  give to  others  any  rights  of  termination,  amendment,
acceleration  or  cancellation  of, or result in the  creation of any lien on or
against  any of the  properties  of  the  Company,  any  note,  bond,  mortgage,
agreement,  license, indenture or instrument to which the Company is a party, or
result in a violation of any statute, law, rule,  regulation,  writ, injunction,
order,  judgment or decree applicable to the Company or by which any property or
asset  of the  Company  is bound  or  affected,  except  where  such  violation,
conflict,  breach or other consequence would not have a Material Adverse Effect.
Except as  specifically  contemplated  by this  Agreement,  the  Company  is not
required to obtain any consent, authorization or order of, or make any filing or
registration  with, any court or governmental  or regulatory or  self-regulatory
agency in order for it to  execute,  deliver or perform  any of its  obligations
under or contemplated by this Agreement in accordance with the terms hereof. All
consents, authorizations,  orders, filings and registrations that the Company is
required to obtain  pursuant to the  preceding  sentence  have been  obtained or
effected on or prior to the date hereof.

          2.5 SEC  DOCUMENTS;  FINANCIAL  STATEMENTS.  The Company has filed all
reports,  schedules,  forms, statements and other documents required to be filed
by it with the Securities and Exchange  Commission  (the "SEC")  pursuant to the
reporting  requirements of the Securities  Exchange Act of 1934, as amended (the
"Exchange Act") (all of the foregoing,  and all other documents and registration
statements  heretofore  filed  by the  Company  with the SEC  being  hereinafter
referred to as the "SEC Documents"). The Common Stock is currently listed on the
American  Stock  Exchange.  The Company has delivered or made  available to each
Investor true and complete copies of the SEC Documents.  As of their  respective
dates, the SEC Documents complied in all material respects with the requirements
of the Securities Act, and the Exchange Act and the rules and regulations of the
SEC promulgated thereunder applicable to the SEC Documents,  and none of the SEC
Documents,  at the time they were filed with the SEC (except those SEC Documents
that were  subsequently  amended),  contained any untrue statement of a material
fact or  omitted  to state a  material  fact  required  to be stated  therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not  misleading.  Except as disclosed in the Company
Schedule of Exceptions,  as of their respective dates, the financial  statements
of the Company and its  subsidiaries  included (or incorporated by reference) in
the SEC Documents  complied as to form in all material  respects with applicable
accounting  requirements  and the published  rules and regulations of the SEC or
other  applicable  rules and regulations  with respect  thereto.  Such financial
statements have been prepared in accordance with generally  accepted  accounting
principles applied on a consistent basis during the periods involved (except (a)
as may be otherwise indicated in such financial statements or the


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notes thereto, or (b) in the case of unaudited interim statements, to the extent
they may exclude footnotes or may be condensed or summary statements) and fairly
present the  financial  position of the Company and its  subsidiaries  as of the
dates thereof and the results of its  operations  and cash flows for the periods
then ended  (subject,  in the case of unaudited  statements,  to normal year-end
audit  adjustments).  As of the date hereof, the Company has, on a timely basis,
made all filings required to be made by the Company with the SEC and the Company
is  eligible  to file a  registration  statement  on Form  S-3 with  respect  to
outstanding shares of its Common Stock to be offered for sale for the account of
any person other than the Company.

          2.6 SECURITIES LAW EXEMPTION.  Assuming the truth and accuracy of each
Investor's  representations  set forth in this  Agreement,  the offer,  sale and
issuance of the Shares as  contemplated  by this  Agreement  are exempt from the
registration  requirements of the Securities Act and applicable state securities
laws, and neither the Company nor any authorized  agent acting on its behalf has
taken or will  take any  action  hereafter  that  would  cause  the loss of such
exemption.

          2.7 LITIGATION.  All actions, suits, arbitrations or other proceedings
or, to the Company's knowledge, investigations pending or threatened against the
Company that would have a Material Adverse Effect on the Company,  are disclosed
in the SEC Documents.  There is no action, suit, proceeding or, to the Company's
knowledge,  investigation  that  questions  this  Agreement  or the right of the
Company to execute, deliver and perform under same.

          2.8 USE OF  PROCEEDS.  The net  proceeds  from the sale of the  Shares
shall be used solely for general corporate and working capital purposes.

          2.9  INTELLECTUAL  PROPERTY.  The Company owns, or has the contractual
right to use, sell or license all  intellectual  property  necessary or required
for the conduct of its  business as  presently  conducted  and as proposed to be
conducted,  including,  without limitation, all trade secrets, processes, source
code,  licenses,   trademarks,   service  marks,  trade  names,  logos,  brands,
copyrights,  patents, franchises,  domain names and permits. The Company has not
received  any  communications  alleging  that the  Company has  violated  or, by
conducting  its business  presently  conducted  or as proposed to be  conducted,
violates or will violate any intellectual property rights of any other person or
entity.

          2.10 TITLE TO PROPERTY AND ASSETS. The Company has good and marketable
title to or,  in the case of leases  and  licenses,  has  valid  and  subsisting
leasehold  interests or licenses in, all of its properties  and assets  (whether
real or personal,  tangible or intangible)  free and clear of any liens or other
encumbrances,  except for liens or other encumbrances that do not,  individually
or in the aggregate,  have a Material  Adverse Effect.  With respect to property
leased by the  Company,  the  Company  has a valid  leasehold  interest  in such
property pursuant to leases which are in full force and effect,  and the Company
is in compliance in all material respects with the provisions of such leases.

          2.11  COMPLIANCE  WITH LAWS. The Company is and has been in compliance
with all  laws,  rules,  regulations,  orders,  judgments  or  decrees  that are
applicable  to the Company,  the conduct of its business as presently  conducted
and as proposed to be  conducted,  and the


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ownership  of its  property  and  assets  (including,  without  limitation,  all
Environmental  Laws (as defined below) and laws related to occupational  safety,
health, wage and hour, and employment discrimination).  All required reports and
filings  with  governmental  authorities  have  been  properly  made as and when
required,  except where the failure to report or file would not, individually or
in the aggregate, have a Material Adverse Effect. "Environmental Laws" means all
federal,   state,  local  and  foreign  laws,   ordinances,   treaties,   rules,
regulations,  guidelines  and permit  conditions  relating to  contamination  or
pollution of the  environment  (including  ambient air,  surface  water,  ground
water, land surface or subsurface  strata) or the protection of human health and
worker safety, including,  without limitation,  laws and regulations relating to
transportation,  storage, use, manufacture,  disposal or release of, or exposure
of employees or others to, Hazardous  Materials (as defined below) or emissions,
discharges,  releases or threatened releases of Hazardous Materials.  "Hazardous
Materials"  means any substance  that has been  designated  by any  governmental
entity or by applicable  Environmental Laws to be radioactive,  toxic, hazardous
or  otherwise  a  danger  to  health  or  the  environment,  including,  without
limitation,  PCBs,  asbestos,  petroleum,  urea  formaldehyde and all substances
listed as  hazardous  substances  pursuant  to the  Comprehensive  Environmental
Response,  Compensation,  and Liability Act of 1980, as amended, or defined as a
hazardous waste pursuant to the Resource  Conservation and Recovery Act of 1976,
as amended, and the regulations  promulgated pursuant to Environmental Laws, but
excluding  office  and  janitorial   supplies   maintained  in  accordance  with
Environmental Laws.

          2.12 LICENSES AND PERMITS.  The Company has obtained and maintains all
material  federal,  state,  local  and  foreign  licenses,   permits,  consents,
approvals,   registrations,   memberships,   authorizations  and  qualifications
required to be maintained in  connection  with the  operations of the Company as
presently  conducted  and as proposed to be  conducted,  the lack of which could
have a Material  Adverse  Effect.  The Company is not in default in any material
respect under any of such licenses, permits, consents, approvals, registrations,
memberships, authorizations and qualifications.

          2.13 RELATED  ENTITIES.  Except for the  Subsidiaries set forth on the
Company  Schedule of Exceptions,  the Company does not presently own or control,
directly  or  indirectly,  any  interest in any other  subsidiary,  corporation,
association  or other business  entity.  The Company is not a party to any joint
venture, partnership or similar arrangement.

          2.14  CHANGES.   Except  as  disclosed  on  the  Company  Schedule  of
Exceptions,  since  December  31,  2004,  the Company has  operated its business
diligently  and in the ordinary  course of business and, to the knowledge of the
Company, there has not been, or the Company has not (as the case may be):

               (a) any Material Adverse Effect;

               (b) any damage,  destruction  or loss,  whether or not covered by
insurance, which would have a Material Adverse Effect;

               (c) any waiver or compromise  by the Company of a valuable  right
or of a material debt owed it;


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               (d) sold, encumbered, assigned or transferred any material assets
or properties of the Company, other than in the ordinary course of business;

               (e) incurred any liability, whether accrued, absolute, contingent
or otherwise,  and whether due or to become due,  other than (i) in the ordinary
course of  business or (ii)  liabilities  that are not,  individually  or in the
aggregate,  material  to  the  business,  operations,  condition  (financial  or
otherwise), assets or results of operations of the Company;

               (f) created,  incurred, assumed or guaranteed any indebtedness or
subjected any of its assets to any lien or encumbrance, except for indebtedness,
liens or encumbrances that are not,  individually or in the aggregate,  material
to the  business,  operations,  condition  (financial or  otherwise),  assets or
results of operations of the Company;

               (g)  directly or  indirectly  redeemed,  purchased  or  otherwise
acquired any shares of capital stock of the Company;

               (h)  declared,  set aside or paid any dividends or made any other
distributions in cash or property on the Company's capital stock;

               (i) except in the  ordinary  course of business  of the  Company,
materially  increased  the  compensation  payable  or to become  payable  by the
Company to any of its officers,  employees or directors or materially  increased
any  bonus,  insurance,  pension  or other  employee  benefit  plan,  payment or
arrangement  made by the Company  for or with any such  officers,  employees  or
directors;

               (j)  made  any  direct  or  indirect  loan  to  any  stockholder,
employee,  officer or director of the Company,  other than  advances made in the
ordinary course of business;

               (k) changed any  agreement  to which the Company is a party which
would have a Material Adverse Effect; or

               (l) entered  into any  agreement or  commitment  to do any of the
things described in this Section 2.14.

          2.15 EMPLOYEE  BENEFIT PLANS.  All "employee  benefit  plans," as such
term is defined in the  Employee  Retirement  Income  Security  Act of 1974,  as
amended  ("ERISA"),  to which  the  Company  has any  liability  or  obligation,
contingent  or  otherwise,  comply  in  all  material  respects  and  have  been
maintained and  administered  in material  compliance  with ERISA,  the Internal
Revenue Code of 1986, as amended (the "Code"),  and all other  statutes,  orders
and  governmental  rules and  regulations  applicable to such  employee  benefit
plans.  To the Company's  knowledge,  the Company has not incurred any liability
pursuant to ERISA or the penalty or excise tax  provisions  of the Code relating
to employee  benefit plans (as defined in ERISA),  and no event,  transaction or
condition has occurred or exists that could  reasonably be

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expected to result in the incurrence of any such liability by the Company, or in
the  imposition  of any lien on any of the rights,  properties  or assets of the
Company  pursuant to ERISA or to such  penalty or excise tax  provisions  of the
Code.  The Company does not maintain or contribute to, and has not maintained or
contributed to, any "multiemployer plan," as such term is defined in ERISA.

          2.16 TAXES.  The Company has timely  filed all tax returns and reports
(federal,  state and local)  required to be filed and these  returns and reports
are true and correct in all  material  respects.  The Company has paid all taxes
and other  assessments  shown to be due on such returns or reports.  Neither the
Internal Revenue Service nor any state or local taxing authority has, during the
past three (3) years,  examined or informed  the Company it is in the process of
examining  any such tax  returns and  reports.  The  provision  for taxes of the
Company as shown on the  financial  statements  included  in the most recent SEC
Filing,  is adequate  for taxes due or accrued as of the date  thereof and since
that  date the  Company  has  provided  adequate  accruals  in  accordance  with
generally  accepted  accounting  principals in its financial  statements for any
taxes incurred that have not been paid, whether or not shown as being due on any
tax returns. The Company has not elected, pursuant to the Code, to be treated as
a collapsible  corporation  pursuant to Section  341(f) of the Code,  nor has it
made any other elections  pursuant to the Code (other than elections that relate
solely to methods of accounting, depreciation or amortization) that would have a
Material Adverse Effect.

          2.17  INSURANCE.  The  Company  has in full  force  and  effect  fire,
casualty and  liability  insurance  policies  sufficient  in amount  (subject to
reasonable  deductibles)  to allow the Company to replace any of its  properties
that might be damaged or destroyed to the extent and in the manner customary for
companies in similar business similarly situated.

          2.18  EMPLOYEES.  The Company does not have any collective  bargaining
agreements  with  any of its  employees.  There  is no  labor  union  organizing
activity pending or, to the Company's knowledge,  threatened with respect to the
Company.

          2.19  MATERIAL  CONTRACTS.  All  contracts,  agreements,  instruments,
leases, licenses, arrangements,  understandings or other documents filed with or
required  to be filed as  exhibits  to the SEC  Documents  to which the  Company
therein is a party or by which it may be bound have been so filed (the "Material
Contracts").  The  Material  Contracts  that have  been  filed as  exhibits  are
complete and correct copies of the contracts,  agreements,  instruments, leases,
licenses, arrangement, understanding or other documents of which they purport to
be copies.  The Material  Contracts are valid and in full force and effect as to
the Company,  and, to the Company's  knowledge,  to the other  parties  thereto.
Except as otherwise  disclosed  herein,  the Company is not in violation  of, or
default  under  (and there does not exist any event or  condition  which,  after
notice or lapse of time or both,  would  constitute such a default  under),  the
Material  Contracts,  except to the extent  that such  violations  or  defaults,
individually  or in the  aggregate,  could not  reasonably be expected to have a
Material Adverse Effect. The Company has not received any notice of cancellation
or any written communication  threatening  cancellation of any Material Contract
by any other  party  thereto.  The Company is not a party to and is not bound by
any contract,  agreement or instrument,  or subject to any restriction under the
Certificate of


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Incorporation,  its  bylaws  or other  governing  documents  that  would  have a
Material Adverse Effect.

          2.20  SUPPLIERS.  No supplier that was material to the Company  during
the previous  twenty-four  (24) months,  has terminated,  materially  reduced or
threatened to terminate or material reduce its provision of products or services
to the Company.

          2.21  BROKERS AND  FINDERS.  The Company has not  employed any broker,
finder,   consultant  or  intermediary  in  connection  with  the   transactions
contemplated by this Agreement that would be entitled to a broker's, finder's or
similar fee or commission in connection herewith and therewith.

          2.22 DISCLOSURE. This Agreement, Schedules and Exhibits hereto and all
other documents  delivered to the Investors in connection  herewith or therewith
at the Closing,  do not contain any untrue statement of a material fact, or omit
to state a material fact necessary to make the statements  therein,  in light of
the circumstances under which they were made, not misleading. There are no facts
that,  individually  or in the aggregate,  would have a Material  Adverse Effect
that have not been disclosed to each Investor in this  Agreement  (including the
Schedules  and  Exhibits  hereto),  the SEC  Documents  or any  other  documents
delivered to each Investor in connection herewith or therewith at the Closing.

     3. REPRESENTATIONS AND WARRANTIES OF INVESTOR.

     Each of the  Investors,  severally and not jointly,  hereby  represents and
warrants to the Company as to itself and not as to any other Investor, that:

          3.1  ORGANIZATION.  The Investor is a corporation,  limited  liability
company or limited  partnership,  as the case may be,  duly  organized,  validly
existing and in good standing in the jurisdiction of its formation. The Investor
has all requisite power and authority to execute, deliver and perform all of its
obligations of this Agreement.

          3.2  AUTHORIZATION;  ENFORCEMENT.  (a) The Investor has the  requisite
power and  authority  to enter  into and  perform  its  obligations  under  this
Agreement,  (b) the execution and delivery of this Agreement by the Investor and
the  consummation by it of the transactions  contemplated  hereby have been duly
authorized by all necessary  corporate  action on the part of the Investor,  and
(c) this Agreement has been duly executed and delivered by the Investor.  To the
knowledge of the Investor,  no other proceedings on the part of the Investor are
necessary to approve and authorize the execution and delivery of this Agreement.
This  Agreement,  when executed and  delivered,  constitutes a valid and binding
obligation of the Investor,  enforceable against the Investor in accordance with
its terms, except as such enforceability may be limited by general principles of
equity  or  applicable  bankruptcy,  insolvency,   reorganization,   moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of creditors' rights and remedies.

          3.3 NO CONFLICTS.  The  execution,  delivery and  performance  of this
Agreement  by  the  Investor,  and  the  consummation  by  the  Investor  of the
transactions  contemplated  hereby  will not (a)  result in a  violation  of the
organizational  documents of the  Investor,  or (b) result in a

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violation  of any statute,  law,  rule,  regulation,  writ,  injunction,  order,
judgment or decree  applicable  to the  Investor,  except where such  violation,
conflict,  breach or other consequence would not have a Material Adverse Effect.
The Investor is not required to obtain any consent,  authorization  or order of,
or make any filing or registration with, any court or governmental or regulatory
or self-regulatory agency in order for it to execute,  deliver or perform any of
its  obligations  under or contemplated by this Agreement in accordance with the
terms hereof.

          3.4 INVESTMENT REPRESENTATIONS.

               (a) The  Investor  is an  "accredited  investor",  as  defined in
Regulation D  promulgated  under the  Securities  Act,  and has such  knowledge,
sophistication  and  experience  in  financial  and  business  matters  that the
Investor is capable of evaluating  the merits and risks of the investment in the
Shares.

               (b) The  Investor (i) has  adequate  means of  providing  for its
current  financial  needs  and  possible  contingencies,  and  has no  need  for
liquidity of  investment  in the Company,  (ii) can afford to hold  unregistered
Shares  for an  indefinite  period of time and  sustain a  complete  loss of the
entire amount of the subscription,  and (iii) has not made an overall commitment
to investments which are not readily marketable that is so  disproportionate  as
to cause such overall commitment to become excessive.

               (c) The Investor agrees and understands that the Shares are being
offered and sold to the Investor in reliance upon specific  exemptions  from the
registration  requirements  of the Securities Act and the rules and  regulations
promulgated  thereunder and that, in order to determine the availability of such
exemptions  and the  eligibility  of the  Investor to acquire  the  Shares,  the
Company is relying upon the truth and accuracy of the Investor's representations
and warranties, and compliance with the Investor's covenants and agreements, set
forth in this Agreement.  The Investor  further agrees with the Company that (i)
no Shares were  offered or sold to the  Investor by means of any form of general
solicitation or general advertising,  and in connection therewith,  the Investor
did not (1)  receive  or  review  any  advertisement,  article,  notice or other
communication published in a newspaper or magazine or similar media or broadcast
over television or radio, whether closed circuit or generally available;  or (2)
attend any seminar meeting or industry investor  conference whose attendees were
invited by any general solicitation or general advertising.  The Investor hereby
acknowledges that the offering of the Shares has not been reviewed by the SEC or
any state  regulatory  authority since the offering of the Shares is intended to
be exempt from the registration  requirements of Section 5 of the Securities Act
pursuant to Regulation D promulgated  thereunder.  The Investor understands that
the Shares have not been  registered  under the Securities Act and agrees not to
sell or  otherwise  transfer  the Shares  unless they are  registered  under the
Securities Act or unless an exemption from such registration is available.

               (d) The Shares are being  purchased  by the  Investor for its own
account,  for investment purposes only, not for the account of any other person,
or  corporation  and not with a view to  distribution,  assignment  or resale to
others in whole or in part.  The Investor  has no present  intention of selling,
granting  any  participation  in, or  otherwise  distributing  the  Shares.  The
Investor does not have any contract, undertaking,  agreement or


                                       9
<PAGE>

arrangement with any person to sell, transfer,  pledge,  hypothecate,  grant any
option to purchase or  otherwise  dispose of any of the Shares.  Nothing  herein
shall prevent the distribution of any Shares to any subsidiary, member, partner,
stockholder,  affiliate or former member,  partner,  stockholder or affiliate of
the Investor in compliance  with the Securities  Act and applicable  state "blue
sky" laws.

               (e) The Investor has had access to the  Company's  SEC  Documents
and other public filings.

               (f)  With   respect   to   corporate   tax  and  other   economic
considerations  involved in an  investment  in the Shares,  the  Investor is not
relying on the Company.  The Investor has carefully  considered  and has, to the
extent the Investor  believes  such  discussion  necessary,  discussed  with its
professional legal, tax, accounting and financial advisors the suitability of an
investment in the Shares for its particular tax and financial  situation and has
determined that the Shares are a suitable investment for the Investor.

               (g) The Company has made  available to the Investor all documents
and information that the Investor has requested relating to an investment in the
Shares.

               (h) Subject to the Company's  disclosures  in this  Agreement and
the SEC  Documents,  the Investor  recognizes  that the Company has generated no
revenues to date,  is not expected to have any products  commercially  available
for a number of years,  if at all, and that  investment in the Company  involves
substantial  risks,  including loss of the entire amount of such  investment and
has taken full cognizance of and understands all of the risk factors relating to
the purchase of the Shares.

               (i) The Investor has not been formed for the specific  purpose of
acquiring the Shares.

     4. COVENANTS.

          4.1   CONFIDENTIALITY.   Each  Investor   hereby   acknowledges   that
unauthorized  disclosure  of  information  regarding  the offering of the Shares
pursuant to this  Agreement  may cause the Company to violate  Regulation FD and
each Investor agrees to keep such  information  confidential.  The Company shall
not  publicly  disclose  the name of any  Investor,  or include  the name of any
Investor in any filing with the Commission or any  regulatory  agency or trading
market,  without  the prior  written  consent  of such  Investor,  except (i) as
required by the federal  securities laws and in connection with the registration
statement  contemplated by this Agreement and (ii) to the extent such disclosure
is required by law or trading market regulations.

          4.2 RESTRICTIONS ON TRANSFER.

               (a) Each Investor hereby agrees, severally and not jointly, that,
except in accordance with a registration statement filed pursuant to Section 5.2
of this Agreement,  it will not dispose of any of such Investor's  Shares (other
than pursuant to Rule 144  promulgated  under the Securities Act ("Rule 144") or
pursuant  to a  registration  statement  filed  with  the  SEC  pursuant  to the
Securities  Act)  unless and until such  Investor  shall have (A)  notified  the


                                       10
<PAGE>

Company of the proposed  disposition and shall have furnished the Company with a
statement of the circumstances  surrounding the proposed  disposition and (B) if
requested  by the  Company,  furnished  the Company  with an opinion of counsel,
reasonably  satisfactory  in form and substance to the Company and the Company's
counsel, to the effect that such disposition will not require registration under
the Securities  Act. The  restrictions  on transfer  imposed by this Section 4.2
shall cease and  terminate as to the Shares held by an Investor  when:  (x) such
Shares shall have been effectively  registered under the Securities Act and sold
by the holder thereof in accordance with such  registration,  or (y) on delivery
of an opinion of the kind  described in the  preceding  sentence with respect to
such Shares.  Each  certificate  evidencing the Shares shall bear an appropriate
restrictive legend as set forth in Section 4.2(b), except that such legend shall
not be required after a transfer is made in compliance with Rule 144 or pursuant
to a  registration  statement or if the opinion of counsel  referred to above is
issued and  provides  that such  legend is not  required  in order to  establish
compliance  with any provisions of the  Securities  Act. The Company agrees that
pursuant  to the prior  sentence,  it will,  no later  than five  Business  Days
("Business  Day" shall mean any day banks are open for business in New York, New
York)  following  (a) receipt by the Company's  transfer  agent of a certificate
representing  Shares  issued  with  a  restrictive  legend,   accompanied  by  a
certification  of the Investor in form  suitable for  processing  by the Company
that a  prospectus  has  been  delivered  (in  the  case  of  sale  pursuant  to
prospectus,  a  "Prospectus  Letter")  or  customary  supporting  documentation,
including  legal opinion if required  pursuant to Clause (B) above,  "Supporting
Documentation") and (b) receipt by the Company of notice of such delivery to the
transfer agent and Prospectus  Letter or Supporting  Documentation,  as the case
may be (such notice to be sent by facsimile  to the  attention of the  Company's
president and CEO at the fax number set forth in Section 8.6 hereof)  deliver or
cause  to be  delivered  (evidence  of  deposit  for next  day  delivery  with a
nationally  recognized  overnight  delivery service shall be deemed delivery) to
such  Investor a  certificate  representing  such  Shares  that is free from all
restrictive  and other  legends.  The Company  may not make any  notation on its
records or give  instructions  to any transfer agent of the Company that enlarge
the  restrictions  on  transfer  set  forth in this  Section.  In the  event the
Prospectus  Letter  or  Supporting  Documentation  is not in form  suitable  for
processing  by to the  Company,  the five  Business  Days  shall  toll until the
Company receives a Prospectus Letter or Supporting Documentation that is in form
suitable for processing.

               (b)   Notwithstanding   the  provisions  of  Section  4.2(a),  no
registration  statement or opinion of counsel  shall be necessary for a transfer
by an Investor of the Securities to a subsidiary,  member, partner,  stockholder
or affiliate of that Investor, if the transferee agrees in writing to be subject
to the terms  hereof to the same extent as if such  transferee  were an Investor
hereunder.

               (c) It is understood that, subject to Sections 4.2(a) and 4.2(b),
the certificates evidencing the Shares will bear the following legends:

               (i) THESE SHARES HAVE NOT BEEN  REGISTERED  UNDER THE  SECURITIES
ACT OF 1933 (THE "SECURITIES ACT") OR UNDER APPLICABLE STATE SECURITIES LAWS AND
MAY NOT BE SOLD,  TRANSFERRED OR OTHERWISE  DISPOSED OF UNLESS  REGISTERED UNDER
THE  SECURITIES  ACT AND ANY  APPLICABLE  STATE  SECURITIES  LAWS OR PURSUANT TO
AVAILABLE

                                       11
<PAGE>

EXEMPTIONS  FROM SUCH  REGISTRATION,  PROVIDED  THAT THE SELLER  DELIVERS TO THE
COMPANY AN OPINION OF COUNSEL (WHICH OPINION IS REASONABLY  SATISFACTORY  TO THE
COMPANY) CONFIRMING THE AVAILABILITY OF SUCH EXEMPTION.

                    (ii) Any legend required by the laws of any other applicable
jurisdiction.

               (d) In addition to such Investor's other available remedies,  the
Company shall pay to an Investor,  in cash,  as liquidated  damages and not as a
penalty,  for each $1,000 of Shares  (based on the  closing  price of the Common
Stock on the date such Securities are submitted to the Company's transfer agent)
delivered to the transfer agent subject to Section 4.2(a),  $10 per Business Day
(increasing  to $20 per Business  Day five (5) Business  Days after such damages
have begun to accrue) for each Business Day after such fifth  Business Day until
such certificate is delivered.  Nothing herein shall limit such Investor's right
to pursue  actual  damages  for the  Company's  failure to deliver  certificates
representing  any Shares as  required  by the  transaction  documents,  and such
Investor  shall have the right to pursue all remedies  available to it at law or
in equity including, without limitation, a decree of specific performance and/or
injunctive relief.

          4.3 SECURITIES COMPLIANCE. The Company shall take all action necessary
to  comply  with  any  federal  or  state  securities  laws  applicable  to  the
transactions contemplated hereunder.

     5. REGISTRATION RIGHTS.

          5.1 REGISTRABLE SHARES. As used herein the term "Registrable Security"
means (a) each of the Shares,  and (b) any Common Stock of the Company issued as
(or  issuable  on the  conversion  or exercise  of any  warrant,  right or other
security that is issued as) a dividend or other distribution with respect to, or
in  exchange  for, or in  replacement  of, the shares  referenced  in clause (a)
above;  PROVIDED,  HOWEVER,  that with  respect  to any  particular  Registrable
Security  held by an Investor,  such  security  shall cease to be a  Registrable
Security  when,  as of the date of  determination,  (a) it has been  effectively
registered  under the  Securities Act and disposed of pursuant  thereto,  or (b)
registration  under the Securities  Act is no longer  required for the immediate
public  distribution of any particular  Registrable Shares held by that Investor
and its affiliates. In the event of any merger,  reorganization,  consolidation,
recapitalization  or other change in corporate  structure  affecting  the Common
Stock, such adjustment shall be made in the definition of "Registrable Security"
as is  appropriate in order to prevent any dilution or enlargement of the rights
granted pursuant to this Section 5.

          5.2 MANDATORY REGISTRATION.

          (a) On or before the later of (i) 30 days  following  the Closing Date
or (ii) five (5)  business  days after the  Company's  Form  10-KSB for the year
ended  December  31, 2004 is filed with the SEC, the Company  shall  prepare and
file with the Commission the Registration  Statement  covering the resale of all
of the  Registrable  Shares for an  offering  to be made on a  continuous  basis
pursuant to Rule 415 (the "Required Filing Date").  The  Registration  Statement


                                       12
<PAGE>

required  hereunder  shall be on Form S-3  (except  if the  Company  is not then
eligible to  register  for resale the  Registrable  Shares on Form S-3, in which
case  the  Registration  Statement  shall  be on  another  appropriate  form  in
accordance herewith).  The Company shall use its commercially reasonable efforts
to  cause  the  Registration  Statement  to  be  declared  effective  under  the
Securities  Act as  promptly as possible  after the filing  thereof,  but in any
event not later than the 120th day after the  Closing  Date (the  "Effectiveness
Date"),  and  shall  use  its  commercially   reasonable  efforts  to  keep  the
Registration Statement continuously effective under the Securities Act until the
earlier of the date when all  Registrable  Shares  covered  by the  Registration
Statement  (a) have been  sold  pursuant  to the  Registration  Statement  or an
exemption from the registration requirements of the Securities Act or (b) may be
sold without  volume  restrictions  pursuant to Rule 144(k) as determined by the
counsel to the Company  pursuant  to a written  opinion  letter to such  effect,
addressed  and  acceptable  to the  Company's  transfer  agent and the  affected
Investors or (c) the second  anniversary  of the date on which the  Registration
Statement is declared effective (the "EFFECTIVENESS PERIOD") or such longer time
as the Company may determine.

          (b) If: (i) the Registration Statement is not filed on or prior to its
Required  Filing Date (if the Company  files a  Registration  Statement  without
affording  the  Investor  the  opportunity  to review and comment on the same as
required by Section  5.3(a),  the Company shall not be deemed to have  satisfied
this  clause  (i)),  or (ii) the  Company  fails to file with the  Commission  a
request for  acceleration  in  accordance  with Rule 461  promulgated  under the
Securities  Act,  within  five  business  days of the date that the  Company  is
notified  (orally or in writing,  whichever is earlier) by the Commission that a
Registration Statement will not be "reviewed", or not subject to further review,
or (iii) a Registration Statement filed or required to be filed hereunder is not
declared  effective by the  Commission  on or before the required  Effectiveness
Date, or (iv) after a Registration  Statement is first declared effective by the
Commission,  it ceases for any reason to remain continuously effective as to all
Registrable  Securities  for  which  it is  required  to be  effective,  or  the
Investors  are not  permitted to utilize the  Prospectus  therein to resell such
Registrable  Securities,  for in any such cases 30 business days (which need not
be  consecutive  days) in the  aggregate  during any  12-month  period (any such
failure or breach  being  referred to as an "EVENT")  and for purposes of clause
(i) or (iii) the date on which such Event occurs, or for purposes of clause (ii)
the date on which such five business day period is exceeded,  or for purposes of
clause (iv) the date on which such 30  business  day period is  exceeded,  being
referred to as "EVENT DATE",  then in addition to any other rights the Investors
may have hereunder or under  applicable law: (1) the Company shall issue to each
Investor a number of warrants (the "Warrants"), as liquidated damages and not as
a penalty, equal to 1% of the number of Registrable Securities purchased by such
Investor  pursuant to this  Agreement  then held by such  Investor for the first
month of an Event; and (2) on each subsequent  monthly  anniversary of each such
Event  Date (if the  applicable  Event  shall not have been  cured by such date)
until the applicable  Event is cured, the Company shall issue to each Investor a
number of Warrants,  as liquidated damages and not as a penalty,  equal to 1% of
the number of Registrable Securities purchased by such Investor pursuant to this
Agreement then held by such Investor.  The  liquidated  damages  pursuant to the
terms hereof shall apply on a pro-rata basis for any portion of a month prior to
the cure of an Event. The Warrants shall have an exercise price equal to 110% of
the  Purchase  Price of the Shares and shall be  exercisable  for five (5) years
from the date of issuance.


                                       13
<PAGE>

          (c) Notwithstanding the foregoing, if the Company shall furnish to the
Investors a  certificate  signed by the Chief  Executive  Officer of the Company
stating that in the good faith judgment of the Board of Directors of the Company
it would  not be in the  best  interest  of the  Company  for such  registration
statement  to be filed,  the Company  shall have the right to defer  taking such
action  with  respect to such  filing for a period of not more than  thirty (30)
days after the date of such  certificate;  PROVIDED,  HOWEVER,  that the Company
shall not defer its  obligation in this manner more than once in any twelve (12)
month period.

          (d) In the event,  the Investor  fails to provide the Company with any
information that is required to be provided in the  Registration  Statement with
respect to such  Investor  pursuant  to Section  5.3(k)  within ten (10) days of
receiving a request for such  information  from the Company,  the Company  shall
send an additional request to the Investor (the "Additional Request") and in the
event the  Investor  fails to respond  to the  Company  within  five (5) days of
receipt of the Additional Request, the Company shall be entitled to exclude such
Investor's Registrable Shares from the Registration Statement.

          5.3   COVENANTS  OF  THE  COMPANY   WITH   RESPECT  TO   REGISTRATION.

     The Company covenants and agrees as follows:

          (a) Not less  than  five  business  days  prior to the  filing  of the
Registration  Statement or any related Prospectus or any amendment or supplement
thereto,  furnish to the Investors  copies of all such documents  proposed to be
filed (including  documents  incorporated or deemed incorporated by reference to
the extent  requested by such person),  which  documents  will be subject to the
review of such  Investors  within such five business days. The Company shall not
file the  Registration  Statement or any such  Prospectus  or any  amendments or
supplements thereto to which the holders of a majority of the Registrable Shares
shall  reasonably  object in good faith  based on the advice of counsel  and the
Company shall make reasonable  efforts to address the objections  raised. In the
event the holders of a majority  of the  Registrable  Shares  object to any such
filing  pursuant to the  previous  sentence,  then the  Required  Filing Date or
Effectiveness  Date, as the case may be, shall be extended by the number of days
that elapse between the date the Company is notified of the objection  until the
day  following  the date the Company has been  notified  that such  objection no
longer exists.

          (b) Following the effective date of the  Registration  Statement under
Section 5.2, the Company  shall,  upon the request of the  Investors,  forthwith
supply  such  reasonable  number  of  copies  of  the  Registration   Statement,
preliminary prospectus and prospectus meeting the requirements of the Securities
Act, and other  documents  necessary or incidental to the public offering of the
Registrable Shares, as shall be reasonably  requested by the Investors to permit
the Investors to make a public distribution of the Registrable Shares registered
in connection with the Registration Statement.

          (c) The Company  shall  prepare and file with the SEC such  amendments
and  supplements  to such  Registration  Statement  and the  prospectus  used in
connection with such  Registration  Statement as may be necessary to comply with
the Securities Act with respect to the


                                       14
<PAGE>

disposition  of all Shares  covered by such  Registration  Statement  during the
period of time such Registration Statement remains effective;

          (d) The  Company  shall use its  commercially  reasonable  efforts  to
register and qualify the Shares  covered by such  Registration  Statement  under
such  other  securities  or Blue  Sky  laws of such  jurisdictions  as  shall be
reasonably  requested by the  Investors;  provided that the Company shall not be
required in  connection  therewith  or as a  condition  thereto to qualify to do
business  or to file a general  consent to service of process in any such states
or jurisdictions;

          (e)  During  the period of time such  Registration  Statement  remains
effective,  the Company shall notify each Investor of Registrable Shares covered
by such registration statement at any time when a prospectus relating thereto is
required to be delivered  under the Securities Act or the happening of any event
as a result of which the prospectus included in such Registration  Statement, as
then in effect,  includes  an untrue  statement  of a material  fact or omits to
state a material  fact  required to be stated  therein or  necessary to make the
statements  therein  not  misleading  in the  light  of the  circumstances  then
existing;

                  (f) The Company shall use its commercially  reasonable efforts
to cause all such Registrable  Shares registered  hereunder to be listed on each
securities  exchange on which securities of the same class issued by the Company
are then listed;

          (g) The Company shall  provide a transfer  agent and registrar for all
Registrable  Shares  registered  hereunder  and a  CUSIP  number  for  all  such
Registrable  Shares,  in each case not  later  than the  effective  date of such
registration; and

          (k) The  obligations  of the  Company  hereunder  with  respect to the
Registrable Shares are subject to the Investors'  furnishing to the Company such
information  concerning the Investors,  the Registrable  Shares and the terms of
the  Investors'  offering  of such  Registrable  Shares  as are  required  to be
included in the Registration  Statement by Commission regulations or pursuant to
a specific Commission comment on the Registration Statement.

          5.4  EXPENSES.  All  expenses  incurred in  effecting  a  registration
pursuant to this Agreement  (including,  without  limitation,  all registration,
qualification  and filing fees,  printing  expenses,  fees and  disbursements of
counsel  for the  Company,  blue sky fees  and  expenses)  shall be borne by the
Company.  All transfer  taxes,  underwriting  discounts and selling  commissions
applicable to the sale of the Registrable Shares shall be borne by the Investors
thereof.

          5.5 INDEMNIFICATION.  In the event any Registrable Shares are included
in a Registration Statement under this Section 5:

               (a) To the extent  permitted by law,  the Company will  indemnify
and  hold  harmless  each   Investor,   the   partners,   officers,   directors,
stockholders,  members and managers of such Investor,  each person,  if any, who
controls such Investor  within the meaning of the Securities Act or the Exchange
Act, against any losses,  claims,  damages, or liabilities (joint or several) to
which they may become  subject  under the  Securities  Act,  the Exchange Act or
other  federal  or state  law,  insofar  as such  losses,  claims,  damages,  or
liabilities  (or actions in respect  thereof) arise out of or are based upon any
of the following statements,  omissions or


                                       15
<PAGE>

violations  (each, a  "Violation"):  (i) any untrue  statement or alleged untrue
statement of a material fact contained in such Registration Statement, including
any  preliminary  prospectus  or  final  prospectus  contained  therein  or  any
amendments  or  supplements  thereto,  (ii) the omission or alleged  omission to
state  therein a material fact  required to be stated  therein,  or necessary to
make the statements  therein not  misleading,  or (iii) any violation or alleged
violation by the Company of the  Securities  Act,  the  Exchange  Act, any state
securities law or any rule or regulation  promulgated  under the Securities Act,
the Exchange Act or any state  securities  law; and the Company will pay to each
such  Investor,  underwriter or controlling  person,  as incurred,  any legal or
other expenses  reasonably  incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; PROVIDED, HOWEVER,
that the indemnity agreement contained in this Section 5.5(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld or delayed),  nor shall the Company be liable
to any Investor,  underwriter  or controlling  person for any such loss,  claim,
damage,  liability,  or action to the  extent  that it arises out of or is based
upon a Violation  which occurs in reliance upon and in  conformity  with written
information  furnished expressly for use in connection with such registration by
any such Investor, underwriter or controlling person.

               (b) To the extent  permitted by law,  each selling  Investor will
indemnify  and hold  harmless the Company,  each of its  directors,  each of its
officers who has signed the  Registration  Statement,  each person,  if any, who
controls  the Company  within the  meaning of the  Securities  Act,  against any
losses,  claims,  damages, or liabilities (joint or several) to which any of the
foregoing persons may become subject, under the Securities Act, the Exchange Act
or other  federal or state law,  insofar as such  losses,  claims,  damages,  or
liabilities  (or actions in respect  thereto) arise out of or are based upon any
Violation,  in each  case to the  extent  (and  only to the  extent)  that  such
Violation  occurs in reliance  upon and in conformity  with written  information
furnished  by  such  Investor   expressly  for  use  in  connection   with  such
registration;  and each such Investor will pay, as incurred,  any legal or other
expenses reasonably incurred by any person indemnified  pursuant to this Section
5.5(b),  in connection  with  investigating  or defending any such loss,  claim,
damage,  liability, or action;  PROVIDED,  HOWEVER, that the indemnity agreement
contained in this Section  5.5(b) shall not apply to amounts paid in  settlement
of any such loss,  claim,  damage,  liability  or action if such  settlement  is
effected  without  the  consent  of the  Investor  (which  consent  shall not be
unreasonably  withheld or delayed);  PROVIDED FURTHER that in no event shall any
indemnity  under this Section  5.5(b)  exceed the net proceeds from the offering
received by such Investor.

               (c) Promptly  after  receipt by an  indemnified  party under this
Section  5.5  of  notice  of  the  commencement  of any  action  (including  any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying  party under this Section 5.5, deliver to
the  indemnifying  party a written  notice of the  commencement  thereof and the
indemnifying  party shall have the right to  participate  in, and, to the extent
the indemnifying  party so desires,  jointly with any other  indemnifying  party
similarly  noticed,   to  assume  the  defense  thereof  with  counsel  mutually
satisfactory  to the  parties;  PROVIDED,  HOWEVER,  that an  indemnified  party
(together with all other  indemnified  parties which may be represented  without
conflict by one counsel)  shall have the right to retain one  separate  counsel,
with the


                                       16
<PAGE>

reasonable  fees  and  expenses  to  be  paid  by  the  indemnifying  party,  if
representation  of  such  indemnified  party  by  the  counsel  retained  by the
indemnifying  party would be inappropriate due to actual or potential  differing
interests between such indemnified party and any other party represented by such
counsel  in such  proceeding.  The  failure  to  deliver  written  notice to the
indemnifying  party  within a  reasonable  time  after  receipt of notice of the
commencement  of any such action,  if  prejudicial to its ability to defend such
action,   shall  relieve  such  indemnifying  party  of  any  liability  to  the
indemnified party under this Section 5.5, but the omission so to deliver written
notice to the  indemnifying  party will not relieve it of any liability  that it
may have to any indemnified party otherwise than under this Section 5.5.

               (d) If the  indemnification  provided  for in this Section 5.5 is
held by a court of competent  jurisdiction  to be  unavailable to an indemnified
party with respect to any loss, liability,  claim, damage or expense referred to
therein,  then the indemnifying  party, in lieu of indemnifying such indemnified
party  hereunder,  shall  contribute  to the  amount  paid  or  payable  by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such  proportion  as is  appropriate  to reflect  the  relative  fault of the
indemnifying  party on the one hand and of the indemnified party on the other in
connection  with  the  statements  or  omissions  that  resulted  in such  loss,
liability,  claim,  damage or  expense as well as any other  relevant  equitable
considerations;  PROVIDED that in no event shall any contribution by an Investor
under this Section 5.5(d) exceed the net proceeds from the offering  received by
such  Investor.  The  relative  fault  of  the  indemnifying  party  and  of the
indemnified  party shall be  determined  by reference  to,  among other  things,
whether  the  untrue or  alleged  untrue  statement  of a  material  fact or the
omission  to state a  material  fact  relates  to  information  supplied  by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge,  access to  information,  and  opportunity to correct or prevent such
statement or omission.

               (e)  Notwithstanding  the  foregoing,  to  the  extent  that  the
provisions on  indemnification  and  contribution  contained in the underwriting
agreement  entered into in connection with the underwritten  public offering are
in conflict with the foregoing  provisions,  the provisions in the  underwriting
agreement shall control.

               (f) The  obligations  of the  Company  and  Investors  under this
Section 5.5 shall survive the completion of any offering of  Registrable  Shares
in a registration statement and the termination of this Agreement.

          5.6 SUSPENSION OF SALES.

               (a) With respect to the Registration  Statement filed pursuant to
Section 5.2,  subject to the payment of any liquidated  damages which may accrue
pursuant to Section  5.2(b)(iv),  the Company may suspend  sales of  Registrable
Shares under such  Registration  Statement  for a period of not more than ninety
(90) days in any twelve  (12) month  period  with  respect to such  Registration
Statement if, at any time the Company is engaged in confidential negotiations or
other  confidential  business  activities,  the  disclosure  of  which  would be
required  if such sales were not  suspended  and the Board of  Directors  of the
Company  determines in good faith that such suspension would be in the Company's
best interest at such time; PROVIDED, that the Company shall not be permitted to
suspend  such  sales for more than


                                       17
<PAGE>

ninety  (90) days in any twelve  (12) month  period.  In order to suspend  sales
pursuant to this Section  5.6(a),  the Company shall  promptly (but in any event
within  five (5)  business  days),  upon  determining  to seek such  suspension,
deliver  to each  holder  of  Registrable  Shares  a  certificate  signed  by an
executive  officer of the Company  stating that the Company is  suspending  such
filing pursuant to this Section 5.6(a). Each holder of Registrable Shares hereby
agrees  to  keep  confidential  any  information  disclosed  to it in  any  such
certificate (including the fact that a certificate was delivered).

               (b) If the Company suspends such Registration  Statement pursuant
to Section 5.6(a) above, the Company shall, as promptly as practicable following
the termination of the circumstances  which entitled the Company to do so but in
no event more than  fifteen  (15) days  thereafter,  take such actions as may be
necessary to file or reinstate the effectiveness of such Registration  Statement
and/or give written notice to the selling  Investors  authorizing them to resume
sales pursuant to such  Registration  Statement.  If, as a result  thereof,  the
prospectus  included in such  Registration  Statement has been amended to comply
with the  requirements  of the  Securities  Act, the Company  shall enclose such
revised  prospectus  with the notice to the selling  Investors given pursuant to
this Section 5.6(b),  and the selling Investors shall make no offers or sales of
Shares  pursuant  to such  Registration  Statement  other  than by means of such
revised prospectus.

          5.7 TRANSFER OR ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause
the Company to register Registrable Shares granted to an Investor by the Company
under  this  Section  5 may be  transferred  or  assigned  by an  Investor  to a
transferee  or assignee  of such  Registrable  Shares that (i) is a  subsidiary,
parent, current or former partner, current or former limited partner, current or
former member, current or former manager or stockholder of an Investor,  (ii) is
an entity  controlling,  controlled by or under common control,  or under common
investment  management,  with  an  Investor,   including  without  limitation  a
corporation,  partnership  or  limited  liability  company  that is a direct  or
indirect  parent or  subsidiary  of the  Investor,  or (iii) is a transferee  or
assignee  of not less than 50,000  shares of  Registrable  Shares (as  presently
constituted  and  subject to  subsequent  adjustments  for stock  splits,  stock
dividends,  reverse  stock  splits and the like),  PROVIDED  that the Company is
given  written  notice at the time of or within a  reasonable  time  after  said
transfer  or  assignment,  stating the name and  address of said  transferee  or
assignee  and  identifying  the Shares with  respect to which such  registration
rights  are  being  transferred  or  assigned,  and  PROVIDED  FURTHER  that the
transferee or assignee of such rights  assumes the  obligations of such Investor
under this Section 5.

          5.8 REPORTS UNDER EXCHANGE ACT. With a view to making available to the
Investors the benefits of Rule 144 promulgated  under the Securities Act and any
other rule or  regulation  of the SEC that may at any time permit an Investor to
sell  Shares of the  Company to the public  without  registration,  the  Company
agrees to:

                    (a) Make and keep  public  information  available,  as those
terms are used in SEC Rule 144, at all times;

                    (b) File with the SEC in a timely  manner  all  reports  and
other  documents  required  of the  Company  under  the  Securities  Act and the
Exchange Act;


                                       18
<PAGE>

                    (c) Furnish to any  Investor,  so long as the Investor  owns
any Registrable  Shares,  forthwith on request,  (i) a written  statement by the
Company that it has complied  with the reporting  requirements  of SEC Rule 144,
the  Securities  Act and the Exchange Act, (ii) a copy of the most recent annual
or quarterly report of the Company and such other reports and documents so filed
by the Company,  and (iii) such other information as may be reasonably requested
in availing any Investor of any rule or  regulation  of the SEC that permits the
selling of any such securities without registration; and

                    (d) Undertake any additional actions reasonably necessary to
maintain the availability of the use of Rule 144.

          5.9 DELAY OF REGISTRATION.  No Investor shall have any right to obtain
or seek an injunction  restraining or otherwise delaying any registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Section 5.

     6. CONDITIONS TO INVESTOR OBLIGATIONS AT CLOSING.

     The  obligations of the Investors to purchase the Shares at the Closing are
subject to the  fulfillment  on or prior to the Closing of each of the following
conditions:

          6.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company  contained in Section 2 shall be true in all material respects on
and as of the Closing  Date with the same effect as though such  representations
and  warranties  had been made on and as of the  Closing  Date,  except that any
representations  and  warranties  stated as being true and  correct as of a date
other than the date hereof shall be true and correct as of such other date.

          6.2  PERFORMANCE.  The Company shall have  performed and complied with
all agreements,  obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.

          6.3 QUALIFICATIONS. All authorizations, approvals, or permits, if any,
of any governmental  authority or regulatory body of the United States or of any
state of the United  States  that are  required  in  connection  with the lawful
issuance  and sale of the Shares to the  Investors  pursuant  to this  Agreement
shall have been duly obtained and shall be effective on and as of the Closing.

          6.4  PROCEEDINGS  AND DOCUMENTS.  All corporate and other  proceedings
undertaken in connection with the  transactions  contemplated at the Closing and
all documents  incident  thereto shall be  reasonably  satisfactory  in form and
substance to each  Investor,  and they shall have received all such  counterpart
original and certified or other copies of such  documents as they may reasonably
request.

          6.5 ABSENCE OF LITIGATION. No proceeding challenging this Agreement or
the transactions  contemplated hereby or thereby, or seeking to prohibit, alter,
prevent or delay the  Closing,  shall have been  instituted  against the Company
before any court,  arbitrator or governmental body, agency or official and shall
be pending.


                                       19
<PAGE>

          6.6 COMPLIANCE CERTIFICATE. The Company shall deliver to the Investors
at the Closing,  relating to the  Investors'  purchase of Shares,  a certificate
signed by the Chief  Executive  Officer of the Company  stating that the Company
has  complied  with  or  satisfied  each  of the  conditions  to the  Investors'
obligation  to  consummate  the Closing set forth in Sections  6.1 through  6.5,
unless waived in writing by the Investors.

          6.7 LEGAL  PROHIBITION.  The  purchase of the Shares by the  Investors
shall not be prohibited by any law or governmental order or regulation.

     7. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING.

     The  obligations  of the  Company  under  Section 1 of this  Agreement  are
subject to the  fulfillment  on or before the  Closing of each of the  following
conditions:

          7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of each Investor  contained in Section 3 shall be true in all respects on and as
of the  Closing  Date with the same effect as though  such  representations  and
warranties  had  been  made  on and as of the  Closing  Date,  except  that  any
representations  and  warranties  stated as being true and  correct as of a date
other than the date hereof shall be true and correct as of such other date.

          7.2 PERFORMANCE.  Each Investor shall have performed and complied with
all agreements,  obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.

          7.3 QUALIFICATIONS. All authorizations, approvals, or permits, if any,
of any governmental  authority or regulatory body of the United States or of any
state of the United  States  that are  required  in  connection  with the lawful
issuance  and sale of the Shares to the  Investors  pursuant  to this  Agreement
shall have been duly obtained and shall be effective on and as of the Closing.

          7.4  PROCEEDINGS  AND DOCUMENTS.  All corporate and other  proceedings
undertaken in connection  with the  transactions  contemplated by this Agreement
and all documents incident thereto shall be reasonably  satisfactory in form and
substance to the Company and its counsel,  and they shall have received all such
counterpart original and certified or other copies of such documents as they may
reasonably request.

     8. MISCELLANEOUS.

          8.1  SURVIVAL  OF   WARRANTIES.   The   warranties,   representations,
agreements, covenants and undertakings of the Company or the Investors contained
in or made pursuant to this  Agreement  shall survive the execution and delivery
of this  Agreement  and the  Closing  and  shall  in no way be  affected  by any
investigation  of  the  subject  matter  thereof  made  by or on  behalf  of the
Investors or the Company.

          8.2 INCORPORATION BY REFERENCE. All Exhibits and Schedules appended to
this Agreement are herein incorporated by reference and made a part hereof.


                                       20
<PAGE>

          8.3  SUCCESSOR  AND  ASSIGNEES.  All  terms,  covenants,   agreements,
representations,  warranties and  undertakings  in this Agreement made by and on
behalf of any of the parties  hereto  shall bind and inure to the benefit of the
respective  successors and assigns of the parties hereto (including  transferees
of any Shares) whether so expressed or not, subject to Section 5.7.

          8.4 AMENDMENTS  AND WAIVERS.  Neither this Agreement nor any provision
hereof shall be waived, modified, changed,  discharged,  terminated,  revoked or
canceled except by an instrument in writing signed by the party against whom any
change,  discharge or termination is sought. Failure of either party to exercise
any right or remedy  under this  Agreement  or any other  agreement  between the
Company  and the  Investors,  or  otherwise,  or  delay  by the  Company  or the
Investors  in  exercising  such  right or remedy,  will not  operate as a waiver
thereof,  nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by law.

          8.5  GOVERNING  LAW.  This  Agreement  shall be deemed a contract made
under the laws of the State of New York,  without giving effect to the conflicts
of law principles thereof.

          8.6 NOTICES. All notices, requests, consents, demands, notice or other
communication required or permitted under this Agreement shall be in writing and
shall be deemed duly given and received when delivered personally or transmitted
by facsimile,  or one business day after being  deposited for next-day  delivery
with a nationally  recognized  overnight  delivery service,  or three days after
being deposited as first class mail with the United States Postal Services,  all
charges or postage prepaid, and properly addressed:

                           to the Company at:

                           Callisto Pharmaceuticals, Inc.
                           420 Lexington Avenue, Suite 1609
                           New York, New York 10170
                           Tel:  (212) 297-0010
                           Fax:  (212) 297-0020
                           Attention:  Chief Executive Officer

                           with a copy (which shall not constitute notice) to:

                           Sichenzia Ross Friedman Ference LLP
                           1065 Avenue of the Americas
                           New York, New York 10018
                           Fax: (212) 930-9725
                           Attention: Jeffrey J. Fessler


                                       21
<PAGE>


               or to the  Investors  at the  address  set  forth  opposite  each
          Investor's name on Exhibit A hereto

     or such other address as may be furnished in writing by a party hereto.

          8.7 COUNTERPARTS.  This Agreement may be executed in counterparts, all
of which together shall constitute one and the same instrument.

          8.8 EFFECT OF HEADINGS.  The section and paragraph headings herein are
included for convenience only and shall not affect the construction hereof.

          8.9 ENTIRE  AGREEMENT.  This  Agreement and the Exhibits and Schedules
hereto and thereto  constitute  the entire  agreement  among the Company and the
Investors   with   respect  to  the  subject   matter   hereof.   There  are  no
representations,  warranties,  covenants  or  undertakings  with  respect to the
subject  matter  hereof  other  than  those  expressly  set forth  herein.  This
Agreement  supersedes all prior  agreements  between the parties with respect to
the Shares purchased hereunder and the subject matter hereof.

          8.10  PUBLICITY.  Neither party shall  originate any  publicity,  news
release or other public  announcement,  written or oral, whether relating to the
performance under this Agreement or the existence of any arrangement between the
parties,  without the prior  written  consent of the other party (which  consent
shall not be  unreasonably  withheld or delayed),  except where such  publicity,
news release or other public  announcement is required by law or by Section 4.1;
PROVIDED  that,  in such event,  each such party shall (a) promptly  consult the
other party in connection with any such publicity,  news release or other public
announcement  prior to its release;  (b) promptly provide the other party a copy
thereof;  and (c) use  commercially  reasonable  efforts  to  ensure  that  such
portions of such  information as may reasonably be designated by the other party
are accorded confidential treatment by the applicable governmental entity.

          8.11  SEVERABILITY.  If any  provision of this  Agreement is held by a
court of competent  jurisdiction to be unenforceable  under applicable law, such
provision  shall be replaced with a provision that  accomplishes,  to the extent
possible,  the  original  business  purpose  of such  provision  in a valid  and
enforceable  manner, and the balance of the Agreement shall be interpreted as if
such provision were so modified and shall be enforceable in accordance  with its
terms.

          8.12  INTERPRETATION.  This Agreement shall be construed  according to
its fair language.  The rule of  construction to the effect that any ambiguities
are to be  resolved  against  the  drafting  party  shall not be employed in the
interpretation of this Agreement.

          8.13 NO STRICT CONSTRUCTION.  The language used in this Agreement will
be deemed to be the  language  chosen by the  parties  to express  their  mutual
intent, and no rules of strict construction will be applied against any party.

          8.14  INDEPENDENT  NATURE OF INVESTORS'  OBLIGATIONS  AND RIGHTS.  The
obligations of each Investor under this Agreement are several and not joint with
the obligations of any other


                                       22
<PAGE>

Investor, and no Investor shall be responsible in any way for the performance of
the obligations of any other Investor under this Agreement. The decision of each
Investor to purchase  Shares  pursuant to this  Agreement  has been made by such
Investor   independently  of  any  other  Investor  and   independently  of  any
information,  materials,  statements  or opinions as to the  business,  affairs,
operations, assets, properties,  liabilities,  results of operations,  condition
(financial or otherwise) or prospects of the Company which may have been made or
given by any other  Investor or by any agent or employee of any other  Investor,
and no Investor or any of its agents or  employees  shall have any  liability to
any other  Investor (or any other  person)  relating to or arising from any such
information, materials, statements or opinions. Nothing contained herein, and no
action taken by any Investor pursuant thereto, shall be deemed to constitute the
Investors as a partnership, an association, a joint venture or any other kind of
entity,  or create a  presumption  that the  Investors  are in any way acting in
concert  or as a group  with  respect to such  obligations  or the  transactions
contemplated  by this  Agreement.  Each  Investor  acknowledges  that  no  other
Investor  has acted as agent for such  Investor  in  connection  with making its
investment  hereunder and that no other Investor will be acting as agent of such
Investor in connection with monitoring its investment  hereunder.  Each Investor
shall be entitled  to  independently  protect and enforce its rights,  including
without limitation the rights arising out of this Agreement, and it shall not be
necessary  for any other  Investor  to be joined as an  additional  party in any
proceeding  for such  purpose.  The Company has elected to provide all Investors
with the  same  terms  and form of this  Agreement  for the  convenience  of the
Company and not because it was required or requested to do so by the Investors.


                                       23
<PAGE>


     IN WITNESS  WHEREOF,  this Agreement has been executed as of the date first
above written, by the duly authorized representatives of the parties hereto.

                                           CALLISTO PHARMACEUTICALS, INC.



                                           By: _________________________________

                                           Name:________________________________

                                           Title:_______________________________



                                               INVESTOR



                                               By:______________________________


                                       24
<PAGE>


                                   Schedule A

                         COMPANY SCHEDULE OF EXCEPTIONS

None


<PAGE>


                                    EXHIBIT A


--------------------------------------------------------------------------------
                                                   Cash
                  Investor Name and              Investment          Number of
                    Notice Address                 Amount             Shares
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
The Pharmaceutical/Medical
Technology Fund, L.P.                               $     380,000        250,000

Atlas Equity I, Ltd.                                      760,000        500,000

Orion Biomedical Fund, L.P.                               821,500.72     540,461

Orion Biomedical Offshore Fund, L.P.                      178,499.68     117,434

Alexandra Global Master Fund Ltd.                         760,000        500,000

Panetta Partners, Ltd.                                     38,000         25,000

Gary S. Jacob                                              25,000.96      16,448

Christoph Bruening                                         30,400         20,000

Daniel D'Agostino                                          25,000.96      16,448
                                                    ----------------   ---------

         Total                                          3,018,402.32   1,985,791