Document:

Exhibit 10.15

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT, dated as of
                    ,
2008, is made by Callisto Pharmaceuticals, Inc.,
a Delaware corporation  (the “Pledgor”)
and Sommer & Schneider, LLP (the
“Escrow Agent”) for the benefit of the parties set forth on the signature page hereto
(the “Lenders”).

 

RECITALS

 

A.            In order to induce the Lenders to make a loan
to Pledgor pursuant to a Securities Purchase Agreement of even date herewith
(the “Securities Purchase Agreement”) in the aggregate principal amount of
$500,000 made concurrently with the execution of this Security Agreement and
evidenced by a series of 11% Secured Promissory Notes due April 15, 2010
(the “Notes”) of even date herewith, the Pledgor has agreed to pledge 1,900,000 shares of the Common Stock (the “Pledged
Securities”) of Synergy Pharmaceuticals, Inc., a Florida corporation (“SGYP”)
as security for the full payment and performance of Pledgor’s obligation under
the Notes.

 

B.            The Lenders have agreed to accept the Pledged
Securities as security for such obligations.

 

NOW, THEREFORE, it is agreed as follows:

 

1.             Pledge.  As collateral security for the
payment, performance and observance of the terms of the Notes, the Pledgor
herewith pledges, assigns, transfers, hypothecates, and grants to the Lenders,
a security interest in the Pledged Securities and the certificate(s) evidencing
the same and such additional property at any time and from time to time
receivable by the Pledgor as a dividend or in respect of or in exchange for any
or all such shares, the Pledgor herewith pledges, together with any and all
products and proceeds of any of the foregoing in whatever form (the Pledged
Securities and the products and proceeds thereof may be referred to
collectively as the “Pledged Collateral”).

 

2.             Delivery to Agent for Lender.  Concurrently with the execution of this
Security Agreement, the Pledgor shall deliver the certificates representing the
Pledged Securities to the Escrow Agent, acting as agent for the Lender solely
for the purposes of perfecting the security interest granted hereby.  Acting in such capacity, the Escrow Agent
shall maintain possession of the Pledged Securities until they are required to
be released to either the Pledgor or the Lender pursuant to the provisions of
this Agreement. The Pledgor has deposited with the Escrow Agent stock powers
duly executed in blank with signatures guaranteed by a Medallion Participant.

 

3.             Title.  The Pledgor agrees to use
reasonable efforts to defend the Lender’s right, title, lien and security
interest in and to the Pledged Collateral against the claims and demands of all
persons whomsoever. The Pledgor also represents and warrants to the Lender that
it has good title to all of the Pledged Collateral, free and clear of all
claims, mortgages, pledges, liens, encumbrances and security interests of every
nature whatsoever (“Liens”) except those

 

 

granted
to the Lender herein and that no consent or approval of any governmental or
regulatory authority, or of any securities exchange is required to be obtained
by the Pledgor in connection herewith.

 

4.             Delivery of the Pledged Securities by Escrow
Agent.  Upon the failure of the Pledgor to pay the
interest or principal on the Note when due in accordance with the terms thereof
or occurrence of an Event of Default defined in the Note (an “Event of Default”)
and upon five business days written notice given by each Lender on its own
behalf to the Escrow Agent and the Pledgor, the Escrow Agent shall deliver the
Pro Rata portion of the Pledged Securities and additional collateral held
pursuant to Section 5 hereof or otherwise to the Lender giving such
notice. For the purposes of this agreement, “Pro Rata” means that fraction
determined by dividing the amount of the principal amount of the Notes held by the
Lender to the total principal amount of the Notes outstanding as shown on the
books of the Pledgor, and multiplying that fraction by the number of Pledged
Securities or other Pledged Collateral, as the case may be. Upon payment in
full of the Note (and if in default, such penalties and reimbursable expenses
as are set forth in the Note) and upon one business day notice given by the
Pledgor to the Escrow Agent and all the Lenders, the Escrow Agent shall deliver
the certificate(s) for the Pledged Securities and additional collateral
held pursuant to Section 5 hereof or otherwise to the Pledgor and the
Pledged Collateral shall no longer be subject to the security interest granted
hereby.

 

5.             Dividends.  If, upon the dissolution or
liquidation (in whole or in part) of the Lender, any sum shall be paid as a
liquidating dividend or otherwise upon or with respect to any of the Pledged
Securities, and if any other dividends of any kind shall be otherwise paid upon
or with respect to any of the Pledged Securities under any other circumstances,
such sum shall be paid over to the Escrow Agent, to be held as additional
collateral hereunder. In case any stock or other dividend shall be declared on
any of the Pledged Securities, or any shares of stock or fractions thereof
shall be issued pursuant to any stock split involving any of the Pledged
Securities, or any shares shall be distributed upon or with respect to the
Pledged Securities pursuant to a recapitalization or reclassification of the
capital of the Lender, or pursuant to the dissolution, liquidation (in whole or
in part), bankruptcy or reorganization of the Lender, or to the merger or
consolidation of the Lender with or into another Lender, the shares,
obligations or other property so distributed shall be delivered to the Escrow
Agent (together with stock powers executed in blank by the Pledgor, where
appropriate), to be held by it as additional collateral hereunder, and all of
the same shall constitute Pledged Collateral for all purposes hereof.

 

6.             Voting.

 

(a)  Until there is an Event of Default, the Pledgor shall have
the sole and absolute right to exercise all voting power with respect to the
Pledged Securities.  The voting rights
granted to Pledgor shall survive the retention or purchase of the Pledged
Securities by Lender and are coupled with an interest in the surplus which may
be recouped by Pledgor in the event of the Pledged Securities are sold in
part.  In such event the Lenders hereby
appoint the Pledgor as the Lenders’ true and lawful proxy to vote such shares
in any manner which the Pledgor deems advisable for or against all matters
which may be submitted to a vote of such stockholders.

 

 

(b)  If an Event of Default occurs and is continuing, the Lenders
shall have the sole and absolute right, in addition to any other rights granted
herein, to exercise any and all voting power with respect to their Pro Rata
share of the Pledged Securities until such Default has been cured. The voting
rights granted to Lenders are coupled with an interest.  In such event the Pledgor hereby appoints the
Lenders as the Pledgors’ true and lawful proxy to vote their respective Pro
Rata portion of the Pledged Securities in any manner which each Lender deems
advisable for or against all matters which may be submitted to a vote of such
stockholders.

 

7.             Rights of Secured Party.  The Pledgor agrees that, upon an Event of
Default, the Lenders shall have the rights and remedies provided in the Uniform
Commercial Code in force in the State of New York at the date of this agreement
and in this connection, the Lender may upon five days’ notice to the Pledgor,
sent by registered mail, and without liability for any diminution in price
which may have occurred, sell all the Pledged Collateral in such manner and for
such price as the Lender may determine or propose to retain the Pledged
Collateral in lieu of repayment of the Loan (including any penalties and
expenses due thereon).  At any bona fide
public sale the Lender shall be free to purchase all or any part of the Pledged
Securities.  Out of the proceeds of any
sale the Lender may retain an amount equal to the principal and interest
(including penalty interest) then due on the Loan, plus the amount of the
expenses of the sale.  Lender agrees
that, upon an Event of Default, it shall look first to the sale or retention of
the Pledged Collateral for satisfaction of any unpaid obligations of the
Pledgor under the terms of the Loan; provided, however, that the foregoing
shall in no way limit the rights and remedies of the Lender provided in the
Uniform Commercial Code in force in the State of New York at the date of this
Agreement.

 

8.             Endorsement.  Upon an Event of Default in
respect of the Note, the Lender shall have the right, for and in the name,
place and stead of the Pledgor, to execute endorsements, assignments or other
instruments of conveyance or transfer with respect to their Pro Rata share of
the Pledged Collateral and each Lender hereby appoints the Escrow Agent their
attorney-in-fact to complete the stock powers and other instruments of transfer
delivered to the Escrow Agent in order to deliver the Pledged Securities in
accordance with Section 4 of this Agreement.

 

9.             Indemnification and Costs.

 

(a)           The Pledgor and the Lenders release the
Escrow Agent from any claims, causes of action and demands at any time arising
out of or with respect to this Agreement, the Pledged Collateral and/or any
actions, taken or omitted to be taken by the Escrow Agent with respect thereto,
and the Pledgor and the Lenders hereby agree to hold the Escrow Agent harmless
from and with respect to any and all such claims, causes of action and demands
other than those resulting from the gross negligence or willful misconduct of
the Escrow Agent.

 

(b)           The Pledgor shall be exclusively responsible
for all costs and expenses (if any) incidental to the performance by the Escrow
Agent of its duties as agent hereunder.

 

 

(c)           The Lenders acknowledge that the Escrow Agent
is acting in solely a ministerial capacity with respect to the release of
Pledged Collateral and that such Pledged Collateral may be commingled with
additional collateral pledged by the Pledgor to secure additional obligations,
including secured promissory notes of like tenor to the Note in the aggregate
principal amount of $500,000.  The
Lenders will not seek to hold the Escrow Agent for following directions of
other parties with respect to the Pledged Collateral, in good faith in order
received, by batch or any other administratively convenient order.

 

10.           Rights Duties and Immunities.

 

(a)           The duties and obligations of the Escrow
Agent shall be determined solely by the express provisions of this
Agreement.  The Escrow Agent shall not be
liable except for the performance of such duties and obligations as are specifically
set out in this Agreement and the Escrow Agent shall not be deemed to have any
knowledge of, or responsibility for, the terms of any other agreement,
instrument or document.

 

(b)           The Escrow Agent shall not be responsible in
any manner whatsoever for any failure or inability of any party hereto, or of
any one else, to deliver documents to the Escrow Agent or otherwise to honor
any of the provisions of this Agreement.

 

(c)           The Escrow Agent shall be entitled to rely
upon any judgment, certification, demand, notice, instrument or other writing
delivered to it hereunder without being required to determine the authenticity
of the correctness of any fact stated therein or the propriety or validity or
the service thereof.  The Escrow Agent
shall be fully protected in acting on and relying upon any written notice,
direction, request, waiver, consent, receipt or other paper or document which
the Escrow Agent believes to be genuine. 
The Escrow Agent may act in reliance upon any instrument or signature it
reasonably believes to be genuine and the Escrow Agent may assume that any
person purporting to give any advice or make any statement in connection with
the provisions hereof has been duly authorized to do so.

 

(d)           The Escrow Agent shall not be liable for any
error of judgment, or for any act done or step taken or omitted by it in good
faith, or for any mistake of fact or law, or for anything which it may do or
refrain from doing in connection herewith, except its own bad faith, willful
misconduct or gross negligence.

 

(e)           The Escrow Agent may seek the advice of legal
counsel as to any question arising from or relating to the construction of any
of the provisions of this Agreement or its duties or obligations hereunder or
otherwise, and it shall incur no liability and shall be fully protected in
respect of any action taken, omitted or suffered by it in good faith in
accordance with the advice of such counsel.

 

(f)            The Escrow Agent does not make and will not
be required or deemed to make any representation as to the validity or
genuineness of any agreement, document or other instrument held by or delivered
to it.

 

(g)           If a dispute arises between one or more of
the parties hereto, or between

 

 

any
of the parties hereto and any person not a party hereto, as to whether or not
or to whom the Escrow Agent shall deliver any of the Pledged Securities or as
to any other matter arising from or relating to this Agreement or any related
agreement, the Escrow Agent shall not be required to determine such dispute and
need not make any delivery of any of the Pledged Securities, but will retain
the same until the rights of the parties to the dispute shall have finally been
determined by written agreement among the parties to the dispute or by final
non-appealable order of a court of competent jurisdiction.  In the event that the Escrow Agent has
received notice of such order or any such agreement, the Escrow Agent shall
cause the Pledged Securities to be released and delivered in accordance with
such agreement or order.

 

(h)           The Escrow Agent shall be entitled to assume
that no dispute of the type referred to in Section 10(g) has arisen
unless it has received a written notice that such a dispute has arisen, which
written notice refers specifically to this Agreement and identifies by name and
address the adverse claimants in such dispute. 
Any party delivering written notice of a dispute pursuant to this Section 10(h) shall
simultaneously therewith deliver a copy of such notice to all parties.  For purposes of this Section 10(h), the
Escrow Agent shall not be deemed to have received a written notice until all
parties to this Agreement have received such written notice.  If a dispute of the type referred to in Section 10(g) arises,
the Escrow Agent may, in its sole discretion (but shall not be obligated to),
commence interpleader or similar actions or proceedings for determination of
such dispute.

 

11.           Successor Escrow Agent.

 

(a)           The Escrow Agent may, at any time, resign as
such with or without the prior written consent of all the parties hereto, in
which case the Escrow Agent (and any successor escrow agent) shall deliver the
Pledged Securities, a copy of this Agreement and any other documents delivered
to it hereunder to any successor escrow agent jointly designated by the Lenders
holding not less than 70% of the outstanding principal of the Notes (the “Requisite
Amount”) and Pledgor in writing, or to any court of competent jurisdiction,
whereupon the Escrow Agent shall be discharged of and from any and all further
duties and obligations arising in connection with this Agreement.  The resignation of the Escrow Agent shall
take effect on the earlier of (i) the appointment of a successor escrow
agent, or (ii) the day which is two business days after the date of the
delivery of the Pledged Securities, a copy of this Agreement and any other
documents delivered to the Escrow Agent hereunder to any court of competent
jurisdiction.  In the event that a
successor escrow agent has not been appointed at the expiration of such two-day
period, the Escrow Agent’s sole responsibilities hereunder shall be: (i) to
maintain the safekeeping of the Pledged Securities and any other documents
delivered to it hereunder, if any, and (ii) to release and deliver the
Pledged Securities and any such documents in accordance with Section 4 of
this Agreement.

 

(b)           If the Escrow Agent receives a written notice
signed by the Lenders which hold the Requisite Amount of the Notes and Pledgor
stating that they have selected a successor escrow agent, the Escrow Agent
shall deliver the Pledged Securities (and any other documents then held by it
hereunder, if any) to the successor escrow agent named in the aforesaid notice
within 15 days after receipt of such written notice.

 

 

12.           Power of Attorney.  Upon
an Event of Default which is continuing, the Pledgor hereby appoints the Lender
or Lender’s designees, successors or assigns as the Pledgor’s attorney-in-fact
for the purpose of carrying out the provisions of this Agreement and taking any
action and executing any instrument which the Lender may deem necessary or
advisable to accomplish the purposes hereof. Without limiting the generality of
the foregoing, the Lender shall have the right and power to receive, endorse
and collect all checks and other orders for the payment of money made payable
to the Pledgor representing any interest or dividend or other distribution
payable in respect of the Pledged Collateral which the Lender is entitled to
receive hereunder or any part thereof and to give full discharge for the same.

 

13.           Notices.  Any notice or demand upon the
Pledgor shall be deemed to have been sufficiently given for all purposes
thereof if mailed, postage prepaid, by registered or certified mail, return
receipt requested, or if delivered, to the addresses set out below or at such
other address as the parties hereto may heretofore have designated in writing:

 

If to the Pledgor:

 

Callisto Pharmaceutical, Inc.

420 Lexington Avenue, Suite 1609

New York, New York 10710

Facsimile: 212 297-0020

 

with a copy to:

 

Jeffrey Fessler, Esq.

Sichenzia Ross Friedman
Ference LLP

61 Broadway

New York, NY 10006

Facsimile: 212 930-9725

 

If to the Lender at the address set forth on the signature page hereto.

 

If to the Escrow Agent:

 

Herbert H. Sommer, Esq.

Sommer & Schneider LLP

595 Stewart Avenue, Suite 710

Garden City, NY 11530

Facsimile No.: (516) 908-4000

 

14.           Choice of Law.  THIS
AGREEMENT AND THE NOTES 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.

 

 

15.           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 New York County, for any action, proceeding or investigation in
any court or before any governmental authority (“Litigation”) arising out of or
relating to the Transaction Documents and the transactions contemplated thereby
(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 of any Litigation brought
against it in any such court.  Each of
the parties hereto hereby irrevocably and unconditionally waives any 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
Untied States of America, in each case located in New York County, and hereby
further irrevocably and unconditionally waives and agrees not to plead or claim
in any court that any such Litigation brought in any such court has been
brought in an inconvenient forum.

 

16.           Counterparts; Signatures By Facsimile. 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 counterparts have been signed by each party and
delivered to the other party. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.

 

17.           Headings. The headings of
this Agreement are for convenience of reference and shall not form part of, or
affect the interpretation of, this Agreement.

 

18.           Severability. If any provision
of this Agreement shall be invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall not affect the validity or enforceability
of the remainder of this Agreement or the validity or enforceability of this
Agreement in any other jurisdiction.

 

19.           Entire Agreement; Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and supersede all previous
communication, representation, or Agreements whether oral or written, between
the parties with respect to the matters covered herein. Except as specifically
set forth herein or therein, neither the Company nor the Buyer makes any
representation, warranty, covenant or undertaking with respect to such
matters.  The Agreement may not be orally
modified. Only a modification in writing, signed authorized representatives of
the Pledgor, the Escrow Agent and the Lenders then holding the Requisite Amount
of the Notes.

 

20.           Successors And Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. Neither
the Pledgor nor any Lender shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, each Lender may assign its rights hereunder

 

 

to
any person that purchases the Notes in a private transaction from such Lender
or an assignment by Lender to any of its “affiliates,” as that term is defined
under the 1934 Act, without the consent of the Pledgor.

 

21.           Third Party Beneficiaries. This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns,
and is not for the benefit of, nor may any provision hereof be enforced by, any
other person.

 

22.           Further Assurances. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as other parties may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

 

23.           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.

 

[SIGNATURE PAGE FOLLOWS]

 

 

IN WITNESS
WHEREOF, the Pledgor has executed this Agreement as of the day and year first
above.

 

	
   

  	
   

  	
  “PLEDGOR”

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  CALLISTO
  PHARMACEUTICALS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Gary S.
  Jacob, President and CEO

  

 

Accepted and Agreed this

          
day of                   ,
2008.

 

“ESCROW AGENT”

 

SOMMER & SCHNEIDER LLP

 

 

	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Herbert H.
  Sommer

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Partner

  	
   

  	
   

  

 

LENDERS SIGNATURE PAGES FOLLOW

 

 

CALLISTO PHARMACEUTICALS, INC.

 

Lender’s Execution of Security Agreement

 

Accepted and Agreed this

          
day of                     ,
2008.

 

 

	
   

  	
   

  	
   

  
	
  Your
  Signature

  	
   

  	
  PRINT
  EXACT NAME OF LENDER

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  DELIVERY INSTRUCTIONS:

  
	
  Name: Please Print

  	
   

  	
  Please type or print
  address where your securities are to be delivered

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ATTN.:

  	
   

  
	
  Title/Representative
  Capacity (if applicable)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name of Company You
  Represent (if applicable)

  	
   

  	
  Street Address

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Place of Execution of this
  Agreement

  	
   

  	
  City, State or Province,
  Country, Offshore Postal Code

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Phone Number (For Federal
  Express)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Fax Number (re: Notice)

  	
   

  	
   

  

 

 

Exhibit A

 

CERTIFICATE

 

Reference is
made to a Security Agreement between the undersigned lender (“Lender”) and
Callisto Pharmaceuticals, Inc. (“Pledgor”).

 

The undersigned, either as Lender or as the
duly appointed agent of Lender, certifies and instructs the Escrow Agent as
follows:

 

1.             The Pledgor has defaulted in the payment
or other obligation of Pledgor, giving the Lender the rights set forth in the
Security Agreement (“Pledge”).

 

2.             Lender hereby demands delivery of                 
shares of the Pledged Collateral as follows:

 

                                                                        

Account No.

 

3.             The Lender certifies:

 

(a)           The sum of (1) the
number of shares of common stock beneficially owned by Lender and Lender’s
affiliates (other than shares of common stock which may be deemed beneficially
owned through the Pledge) and (ii) the number of shares of common stock to
which the determination in this paragraph is being made, would result in
beneficial ownership by Lender of more than 4.99% of the outstanding shares of
common stock of the issuer of the Pledged Collateral.  For purposes of the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section 13(d) of
the Securities Exchange Act of 1934, as amended, and Regulation 13D-G
thereunder, except as otherwise provided in the parenthetical set forth in
clause (i) of the immediately preceding sentence.

 

(b)           The Lender is not, and has not for at least
the 90 days preceding the date of this certificate, been an affiliate of the
issuer of the Pledged Collateral.

 

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Lender or
  Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Print NameExhibit 10.16

 

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

 

                ,
2008                                                                  WG-

 

COMMON STOCK PURCHASE WARRANT

 

To Purchase
                  
Shares of Common Stock of

 

CALLISTO
PHARMACEUTICALS, INC.

 

THIS COMMON STOCK
PURCHASE WARRANT (the “Warrant”) certifies that, for value received,
                        
(the “Holder”), is entitled, upon the terms and subject to the
limitations on exercise and the conditions hereinafter set forth, at any time
on or after the date hereof (the “Initial Exercise Date”) and on or
prior to the close of business on December 31, 2016 (the “Termination
Date”) but not thereafter, to subscribe for and purchase from Callisto
Pharmaceuticals, Inc., a Delaware corporation (the “Company”), up
to                   
shares (the “Warrant Shares”) of Common Stock, par value
$.0001 per share, of the Company (the “Common Stock”).  The purchase price of one share of Common
Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).  This Warrant is part of an authorized class
of up to 57,500,000 warrants of like tenor.

 

Section 1.                                            Definitions.  Capitalized
terms used and not otherwise defined herein shall have the meanings set forth
in that certain Securities Purchase and Exchange Agreement (the “Purchase
Agreement”), dated December 30, 2008, among the Company and the
purchasers signatory thereto.

 

Section 2.                                            Exercise.

 

a)                                      Exercise
of Warrant.  Exercise of the purchase
rights represented by this Warrant may be made at any time or times on or after
the Initial Exercise Date and on or before the Termination Date by delivery to
the Company of a duly executed facsimile copy of the Notice of Exercise Form annexed
hereto (or such other office or agency of the Company as it may designate by
notice in writing to the registered Holder at the address of such Holder
appearing on the books of the Company);  provided, however, within
5 Trading Days of the date said Notice of Exercise is delivered to the Company,

 

 

the Holder shall
have surrendered this Warrant to the Company and the Company shall have
received payment of the aggregate Exercise Price of the shares thereby
purchased by wire transfer or cashier’s check drawn on a United States bank.

 

b)                                     Exercise Price.  The exercise price of the Common Stock under
this Warrant shall be $0.02, subject
to adjustment hereunder (the “Exercise Price”).

 

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

 

(A) = the volume weighted average trading price
of the Common Stock on the principal the principal market in upon which the
Common Stock may be listed or is traded (the “Trading Market”) over the twenty
(20) consecutive Trading Days immediately preceding the date of such election (“VWAP”);

 

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

 

(X) = the number of Warrant Shares issuable upon
exercise of this Warrant in accordance with the terms of this Warrant by means
of a cash exercise rather than a cashless exercise.

 

d)                                     Exercise
Limitations.

 

The Holder shall not have the right to exercise any
portion of this Warrant, pursuant to Section 2(c) or otherwise, to
the extent that after giving effect to such issuance after exercise, the Holder
(together with the Holder’s affiliates), as set forth on the applicable Notice
of Exercise, would beneficially own in excess of 4.99% of the number of shares
of the Common Stock outstanding immediately after giving effect to such
issuance.  For purposes of the foregoing sentence, the number of shares of
Common Stock beneficially owned by the Holder and its affiliates shall include
the number of shares of Common Stock issuable upon exercise of this Warrant and
any other security of the Company convertible into Common Stock with respect to
which the determination of such sentence is being made.  Except as set
forth in the preceding sentence, for purposes of this Section 2(d),
beneficial ownership shall be calculated in accordance with Section 13(d) of
the Exchange Act, it being acknowledged by Holder that the Company is not
representing to Holder that such calculation is in compliance with Section 13(d) of
the Exchange Act and Holder is solely responsible for any schedules required to
be filed in accordance therewith.  To the
extent that the limitation contained in this Section 2(d) applies,
the determination of whether this Warrant is exercisable (in relation to other
securities owned by the Holder) and of which portion of this Warrant is
exercisable shall be in the sole discretion of such Holder, and the 

 

 

submission of a Notice of Exercise shall be deemed to
be such Holder’s determination of whether this Warrant is exercisable (in
relation to other securities owned by such Holder) and of which portion of this
Warrant is exercisable, in each case subject to such aggregate percentage
limitation, and the Company shall have no obligation to verify or confirm the
accuracy of such determination.  For
purposes of this Section 2(d), in determining the number of outstanding
shares of Common Stock, the Holder may rely on the number of outstanding shares
of Common Stock as reflected in (x) the Company’s most recent Form 10-Q
or Form 10-K, as the case may be, (y) a more recent public
announcement by the Company or (z) any other notice by the Company or the
Company’s Transfer Agent setting forth the number of shares of Common Stock
outstanding.  Upon the written or oral request of the Holder, the Company
shall within two Trading Days confirm orally and in writing to the Holder the
number of shares of Common Stock then outstanding.  In any case, the
number of outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company, including
this Warrant, by the Holder or its affiliates since the date as of which such
number of outstanding shares of Common Stock was reported.  The provisions of this Section 2(d) may
be waived by the Holder upon, at the election of the Holder, not less than 61
days’ prior notice to the Company, and the provisions of this Section 2(d) shall
continue to apply until such 61st day (or such later date, as determined by the
Holder, as may be specified in such notice of waiver).

 

e)                                      Mechanics
of Exercise.

 

i.                                          Authorization
of Warrant Shares.  The Company
covenants that all Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of the purchase
rights represented by this Warrant, be duly authorized, validly issued, fully
paid and nonassessable and free from all taxes, liens and charges in respect of
the issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).  The
Company covenants that during the period the Warrant is outstanding, it will
reserve from its authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of the Warrant Shares upon the exercise of
any purchase rights under this Warrant. 
The Company further covenants that its issuance of this Warrant shall
constitute full authority to its officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates
for the Warrant Shares upon the exercise of the purchase rights under this
Warrant.  The Company will take all such
reasonable action as may be necessary to assure that such Warrant Shares may be
issued as provided herein without violation of any applicable law or
regulation, or of any requirements of the Trading Market upon which the Common
Stock may be listed.

 

 

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

 

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

 

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

 

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

 

 

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

 

Section 3.                                            Certain Adjustments.

 

a)              Stock Dividends
and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays
a stock dividend or otherwise makes a distribution or distributions on shares
of its Common Stock or any other equity or equity equivalent securities payable
in shares of Common Stock (which, for avoidance of doubt, shall not include any
shares of Common Stock issued by the Company pursuant to this Warrant), (ii) subdivides
outstanding shares of Common Stock into a larger number of shares, (iii) combines
(including by way of reverse stock split) outstanding shares of Common Stock
into a smaller number of shares, or (iv) issues by reclassification of
shares of the Common Stock any shares of capital stock of the Company, then in
each case the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding before such event and of which the denominator
shall be the number of shares of Common Stock outstanding after such event and
the number of shares issuable upon exercise of this Warrant shall be
proportionately adjusted. 
Notwithstanding the forgoing, in the event an adjustment under
paragraphs 3(a)(iii) or (iv) would result in an Exercise Price
greater than $0.02, following the calculation of the number of shares issuable
as adjusted, the Exercise Price shall thereafter be fixed at $0.04.  Any adjustment made pursuant to this Section 3(a) shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.

 

b)             Redemption.  Beginning twelve (12) months after the
Initial Exercise Date, provided the Equity Conditions, defined below, are
satisfied, if the daily closing price of the Common Stock equals $1.00 or more
(subject to adjustment for stock splits, reclassifications, combinations and
similar adjustments) per share for the 20 consecutive Trading Days (such calculation
to occur no earlier than twelve (12) months after the Initial Exercise Date)
immediately prior to the Redemption Notice Date (as defined below), and average
daily dollar volume of the Common Stock on the Trading Market is at least
$1,000,000, unless the Holder is prohibited from exercising the Warrants
pursuant to Section 1(d)(i) hereof, the Company shall have the right,
on twenty (20) business days’ notice to the Holder (an “Redemption Notice”
and the date such notice is received by the Holder, the “Redemption Notice
Date”), to redeem any portion of the Warrants then held by the Holder for
$0.001 per Warrant. To effect a Redemption hereunder, the Holder shall not be
required to physically surrender the Warrant certificate to the Company.  “Equity Conditions” shall mean, during
the period in question, (i) the Company 

 

 

shall have duly
honored all Warrant exercises scheduled to occur or occurring by virtue of one
or more Notices of Exercise, if any, (ii) there is an effective
Registration Statement pursuant to which the Holder is permitted to utilize the
prospectus thereunder to resell all of the shares issuable pursuant to the
Transaction Documents (and the Company believes, in good faith, that such
effectiveness will continue uninterrupted for the foreseeable future), (iii) the
Common Stock is trading on the Trading Market and all of the shares issuable
pursuant to the Transaction Documents are listed for trading on a Trading
Market (and the Company believes, in good faith, that trading of the Common Stock
on a Trading Market will continue uninterrupted for the foreseeable future), (iv) there
is a sufficient number of authorized but unissued and otherwise unreserved
shares of Common Stock for the issuance of all of the shares issuable pursuant
to the Transaction Documents, and (v) no public announcement of a pending
or proposed Fundamental Transaction, Change of Control Transaction or
acquisition transaction has occurred that has not been consummated.

 

c)              Subsequent Equity
Sales. Other than pursuant to an Exempt Issuance, for the period commencing
on the date this warrant is originally issued until June 30, 2010, if the
Company shall sell or grant any option to purchase or otherwise dispose of or
issue any Common Stock or Common Stock Equivalents entitling any Person to
acquire shares of Common Stock, at an effective price per share less than the
then Exercise Price (such lower price, the “Base Share Price” and such
issuances collectively, a “Dilutive Issuance”), as adjusted hereunder
(if the holder of the Common Stock or Common Stock Equivalents so issued shall
at any time, whether by operation of purchase price adjustments, reset
provisions, floating conversion, exercise or exchange prices or otherwise, or
due to warrants, options or rights per share which is issued in connection with
such issuance, be entitled to receive shares of Common Stock at an effective
price per share which is less than the Exercise Price, such issuance shall be
deemed to have occurred for less than the Exercise Price), then, the Exercise
Price shall be reduced then to an amount equal to the Base Share Price. Such
adjustment shall be made whenever such Common Stock or Common Stock Equivalents
are issued.  The Company shall notify the
Holder in writing, no later than the Trading Day following the issuance of any
Common Stock or Common Stock Equivalents subject to this section, indicating
therein the applicable issuance price, or of applicable reset price, exchange
price, conversion price and other pricing terms (such notice the “Dilutive
Issuance Notice”).  For purposes of
clarification, whether or not the Company provides a Dilutive Issuance Notice
pursuant to this Section 3(b), upon the occurrence of any Dilutive
Issuance, after the date of such Dilutive Issuance the Holder is entitled to
purchase number of Warrant Shares determined by dividing the product of the
Exercise Price and the number of Warrant Shares which could be obtained upon
the exercise of the Warrants prior to such adjustment by the Base Share Price
regardless of whether the Holder accurately refers to the Base Share Price in
the Notice of Exercise.

 

 

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

 

e)              Calculations.
All calculations under this Section 3 shall be made to the nearest cent or
the nearest 1/100th of a share, as the case may be. The number of shares of
Common Stock outstanding at any given time shall not includes shares of Common
Stock owned or held by or for the account of the Company, and the description
of any such shares of Common Stock shall be considered on issue or sale of
Common Stock.  For purposes of this Section 3,
the number of shares of Common Stock deemed to be issued and outstanding as of
a given date shall be the sum of the number of shares of Common Stock
(excluding treasury shares, if any) issued and outstanding.

 

f)                Notice to
Holders.

 

i.                                          Adjustment
to Exercise Price. Whenever the Exercise Price is adjusted pursuant to this
Section 3, the Company shall promptly mail to each Holder a notice setting
forth the Exercise Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment.

 

ii.                                       Notice
to Allow Exercise by Holder. If (A) the Company shall declare a
dividend (or any other distribution) on the Common Stock; (B) the Company
shall declare a special nonrecurring cash dividend on or a redemption of the
Common Stock; (C) the Company shall authorize the granting to all holders
of the Common Stock rights or warrants to subscribe for or purchase any shares
of capital stock of any class or of any rights; (D) the approval of any
stockholders of the Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, of any compulsory share exchange whereby the Common
Stock is converted into 

 

 

other securities,
cash or property; (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs of the
Company; then, in each case, the Company shall cause to be mailed to the Holder
at its last addresses as it shall appear upon the Warrant Register of the
Company, at least 10 calendar days prior to the applicable record or effective
date hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of the Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be determined or (y) the
date on which such reclassification, consolidation, merger, sale, transfer or
share exchange is expected to become effective or close, and the date as of
which it is expected that holders of the Common Stock of record shall be
entitled to exchange their shares of the Common Stock for securities, cash or
other property deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange;  provided, that the
failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice.  The Holder is entitled
to exercise this Warrant during the 10-day period commencing the date of such
notice to the effective date of the event triggering such notice.

 

g)             Reorganizations, Etc.   In case,
at any time during the Exercise Period, of any capital reorganization, of any
reclassification of the stock of the Company (other than a change in par value
or from par value to no par value or from no par value to par value or as a
result of a stock dividend or subdivision, split-up or combination of shares),
or the consolidation or merger of the Company with or into another corporation
(other than a consolidation or merger in which the Company is the continuing
operation and which does not result in any change or reclassification in the
Warrant Shares) or of the sale of all or substantially all the properties and
assets of the Company as an entirety to any other corporation, the Company, at
its sole discretion, shall have the right and option to (A) provide 30
days prior written notice of such event to the Holder and this Warrant shall
terminate and be of no further force and effect on and after the effective date
of such capital reorganization or reclassification or the consummation of such
consolidation, sale or merger; or (B) provide that this Warrant shall,
after such reorganization, reclassification, consolidation, merger or sale, be
exercisable for the kind and number of shares of stock or other securities or
property of the Company or of the corporation resulting from such consolidation
or surviving such merger or to which such properties and assets shall have been
sold to which such holder would have been entitled if he, she or it had held
the Warrant Shares issuable upon the exercise hereof immediately prior to such
reorganization, reclassification, consolidation, merger or sale.

 

 

h)             Exempt Issuance.
“‘Exempt Issuance’ means the issuance of (i) shares of Common Stock
or options to employees, officers, directors or bona fide consultants of the
Company (including shares of Common Stock issued pursuant to the exercise of
such options) pursuant to any stock or option plan duly adopted by a majority
of the non-employee members of the Board of Directors of the Company or a
majority of the members of a committee of non-employee directors established
for such purpose, (ii) securities issued upon the exercise or exchange of
or conversion of any Securities issued hereunder and/or securities exercisable
or exchangeable for or convertible into shares of Common Stock issued and
outstanding on the date of this Warrant was originally issued, provided that
such securities have not been amended since the date this Warrant was
originally issued to increase the number of such securities or to decrease the
exercise, exchange or conversion price of any such securities, (c) securities
issued in lieu of cash payments for bona fide license fees or royalties,  (d) securities issued in a single
financing transaction for cash in an amount less than $100,000  or in a series of financing transaction
occurring over a period of 60 consecutive day in an amount less than $100,000,
and (e) securities issued pursuant to acquisitions or strategic
transactions approved by a majority of the disinterested directors, provided
any such issuance shall only be to a Person which is, itself or through its
subsidiaries, an operating company in a business synergistic with the business
of the Company and in which the Company receives benefits in addition to the
investment of funds, but shall not include a transaction in which the Company
is issuing securities primarily for the purpose of raising capital or to an
entity whose primary business is investing in securities,

 

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

 

Section 4.               Transfer
of Warrant.

 

a)              Transferability.  Subject to compliance with any applicable
securities laws and the conditions set forth in Sections 5(a) and 4(d) hereof
and to the provisions of Section 4.1 of the Purchase Agreement, this
Warrant and all rights hereunder are transferable, in whole or in part, upon
surrender of this Warrant at the principal office of the Company, together with
a written assignment of this Warrant substantially in the form attached hereto
duly executed by the Holder or its agent or attorney and funds sufficient to
pay any transfer taxes payable upon the making of such transfer.  Upon such surrender and, if required, such
payment, the Company shall execute and deliver a new Warrant or Warrants in the
name of the assignee or assignees and in the denomination or denominations
specified in such instrument of assignment, and shall issue to the assignor a
new Warrant evidencing the portion of this Warrant not so assigned, and this
Warrant shall promptly be cancelled.  A 

 

 

Warrant, if
properly assigned, may be exercised by a new holder for the purchase of Warrant
Shares without having a new Warrant issued.

 

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

 

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

 

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

 

Section 5.               Registration Rights.

 

a)             Joining other Registration
Statements.            If at any time
or times, the Company proposes to file one or more Registration Statements on Form S-1
or S-3 or other appropriate form for the registration of its Common Stock or
other equity securities under the Securities Act for a public offering, whether
or not underwritten (excluding the issuance of shares pursuant to employees’
options, incentive or similar plans, or in connection with an acquisition,
merger or exchange of securities which involves no distribution for cash), it
shall give a Notice of Registration to the Holder and shall include in each
Registration Statement referred to in such notice all such Warrant Shares with
respect to which the Holder shall have delivered to the Company a Notice of 

 

 

Intent to Sell within 20
days after the Company has given its Notice of Registration.   Such Notice of Registration shall be given
not later than ten (10) days prior to the filing of any such Registration
Statement.   All expenses incurred by the
Company in complying with the foregoing registration requirements (except fees
and disbursements of counsel for the Holder; registration fees of the
Commission for registration of the Securities, underwriting discounts,
commissions or similar expenses to be incurred in connection with the sale of
securities to be registered for the Holder) shall be borne by the Company.  The Company shall have no obligation to register
any Securities under this Section 5(a) unless the Holder agrees to
join in the underwriting arrangements, 
if any, proposed for the other securities being registered on the same
terms as other participants in the distribution, unless such underwriters decline
to include the Warrant Shares therein in which event the Company may delay the
delivery of prospectuses to the Holder for a period not in excess of 45 days
from the effective date of such Registration Statement.  The foregoing rights of registration shall be
applicable on one, and only one occasion, regardless of the number of shares
included therein, provided that the Registration statement shall have become
effective and shall remain effective and in compliance with the Securities Act,
subject to the limitations of Section 5(b)   The Holder’s rights pursuant to this Section 5(a) 
shall expire on December 31, 2011.

 

b)            Notice of Intent to Sell and
Notice of Registration.  “Notice of
Intent to Sell” shall mean a written notice signed by the Holder (i) setting
forth the number of units of Warrant Shares which the Holder desires to have
registered for sale, (ii) representing that the Holder has a present
intention to sell the same, (iii) setting forth (if delivered pursuant to Section 5(a))
the intended method by which such sale will be effected and the names of the
underwriters, if any; whose services are intended to be used to effect such
sale, and (iv) agreeing to execute all consents, powers of attorneys,
registration statements, and other documents required in order to permit such
Registration Statement to be made effective and carry out the
distribution.  “Notice of Registration”
shall mean a written notice signed by an officer of the Company and setting
forth the approximate date on which it intends to file a Registration Statement
on Form, S-1 or S-3 or other appropriate form for the registration of its
Common Stock pursuant to the Securities Act, and the approximate date on which
it contemplates such Registration Statement will become effective whether the
Registration Statement is being filed pursuant to Section 5(a) of
this Warrant.

 

c)             Indemnification.  The obligation of the Company to register
Warrant Shares for the Holder pursuant to this Agreement shall be subject to
the receipt by the Company of an agreement from the Holder and each underwriter
of any securities registered for the Holder, in form and substance satisfactory
to the Company,  indemnifying the Company
against liability arising out of or based upon any untrue statement or alleged untrue
statement of a material fact in the Registration statement or the omission or
alleged omission to state therein any material fact required to be stated
therein or necessary in order to make the statements therein not misleading, if
such statement or omission was made by the Company in reliance upon and in
conformity with written information furnished to the Company specifically. for
use in such Registration Statement by or on behalf of the Holder with respect
to the Holder or any underwriter of any securities registered for the
Holder.  In connection with registration
under the 

 

 

Securities Act of
securities owned by the Holder,  the
Company hereby agrees to indemnify the Holder and each underwriter of any
securities registered for the Holder against liability arising out of or based
upon any untrue statement or alleged untrue statement of a material fact in a
Registration statement filed by the Company pursuant hereto, or the omission or
alleged omission to state in such Registration Statement any material fact
required to be stated therein or necessary in order to make the statement
therein not misleading, other than any such statement included in, or omission
from, such Registration Statement by the Company in reliance upon and in
conformity with written information furnished to the Company,  specifically for use therein by or on behalf
of the Holder with respect to the Holder or by any underwriter of the
securities included therein and to join in an underwriting agreement having
usual and customary terms, including customary representations warranties and
agreements (in addition to the indemnification agreements provided by this Section 5(c)).

 

d)            Certain Terms and Conditions.          The following provisions shall be
applicable to all registration rights granted in this Section 5:

 

i.      the
Company shall have the right to require any registration required under Section 5(a) to
contemplate offerings in the same manner as other shares registered therein,
provided they are offerings by way of either (i) firm underwritings, (ii) 
exchange distributions or (iii) “shelf” registration statements;

 

ii.     the
Company shall not be required to maintain any Registration Statement under Section 5(a) in
effect for a period of more than six months; provided, however,  that this period shall be extended at the
request of the Holder to no more than nine months to meet the requirements of
underwriters of such securities pursuant to the terms of an underwriting
agreement;

 

iii.    the
Company need not include any Warrants or shares owned by the Holder in any
Registration Statement provided for under Sections 5(a) if in the opinion
of counsel for the Company satisfactory to counsel for the Holder, registration
of such shares under the Securities Act is not necessary for the Holder to dispose
of such shares in a public offering and distribution in the open market in
compliance with the Securities Act; provided, in such case the opinion of such
counsel shall be in writing addressed to the Holder and shall be rendered
within twenty (20) days after the Notice of Intent to Sell is received by the
Company.

 

Section 6.               Miscellaneous.

 

a)              Title
to Warrant.  Prior to the Termination
Date and subject to compliance with applicable laws and Section 4 of this
Warrant, this Warrant and all rights hereunder are transferable, in whole or in
part, at the office or agency of the Company by the Holder in person or by duly
authorized attorney, upon surrender of this Warrant together with the
Assignment Form annexed hereto 

 

 

properly endorsed. 
The transferee shall sign an investment letter in form and substance
reasonably satisfactory to the Company.

 

b)             No
Rights as Shareholder Until Exercise. 
This Warrant does not entitle the Holder to any voting rights or other
rights as a shareholder of the Company prior to the exercise hereof.  Upon the surrender of this Warrant and the
payment of the aggregate Exercise Price (or by means of a cashless exercise),
the Warrant Shares so purchased shall be and be deemed to be issued to such
Holder as the record owner of such shares as of the close of business on the
later of the date of such surrender or payment.

 

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

 

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

 

e)              Authorized
Shares.

 

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

 

Except and to the extent as waived or consented to by
the Holder, the Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the 

 

 

carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate to protect the rights of
Holder as set forth in this Warrant against impairment.  Without limiting the generality of the
foregoing, the Company will (a) not increase the par value of any Warrant
Shares above the amount payable therefor upon such exercise immediately prior
to such increase in par value, (b) take all such action as may be
necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable Warrant Shares upon the exercise of this
Warrant, and (c) use commercially reasonable efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company to perform its
obligations under this Warrant.

 

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

 

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

 

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

 

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

 

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

 

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

 

 

stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.

 

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

 

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

 

m)           Amendment.  This Warrant may be modified or amended or
the provisions hereof waived with the written consent of the Company and the
holders of not less than 70% of the Warrants of like tenor then outstanding as
shown of the books and records of the Company. 
In such event, the Company will promptly mail notice of any such
modification or amendment to all holders of the Warrants that have not
consented thereto.

 

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

 

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

 

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

 

 

IN WITNESS WHEREOF, the
Company has caused this Warrant to be executed by its officer thereunto duly
authorized.

 

 

Dated:  December 30, 2008

 

 

	
   

  	
  CALLISTO PHARMACEUTICALS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Gary S. Jacob 

  
	
   

  	
   

  	
  Title: 

  	
  CEO

  

 

 

NOTICE OF EXERCISE

 

TO:         CALLISTO
PHARMACEUTICALS, INC.

 

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

 

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

 

o
in lawful money of the United States; or

 

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

 

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

 

 

The Warrant Shares
shall be delivered to the following:

 

 

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

 

[SIGNATURE OF
HOLDER]

 

	
  Name of
  Investing Entity:

  	
   

  
	
   

  
	
  Signature of Authorized Signatory of Investing Entity:

  	
   

  
	
   

  
	
  Name of Authorized Signatory:

  	
   

  
	
  Title of Authorized Signatory:

  	
   

  
	
   

  
	
  Date:

  	
   

  
					

 

 

ASSIGNMENT FORM

 

(To assign the
foregoing warrant, execute

this form and supply required information. 

Do not use this form to exercise the warrant.)

 

FOR VALUE RECEIVED, the
foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

	
   

  	
  whose address is

  
	
   

  	
   

  
	
   

  	
  .

  
	
   

  
	
   

  
	
  Dated:

  	
   

  	
  ,

  	
   

  	
   

  
					

 

 

	
   

  	
  Holder’s Signature:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Holder’s Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

 

	
  Signature Guaranteed:

  	
   

  	
   

  

 

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

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