Document:

Exhibit 4.1

                          CELLEGY PHARMACEUTICALS, INC.
                         COMMON STOCK PURCHASE AGREEMENT

         THIS COMMON STOCK PURCHASE  AGREEMENT  (this  "Agreement")  is made and
entered into as of October 2, 2000 by and among Cellegy Pharmaceuticals, Inc., a
California  corporation (the "Company"),  and the parties listed on the Schedule
of Investors separately delivered to the Investors (the "Schedule of Investors")
(each  hereinafter  individually  referred to as an "Investor" and  collectively
referred to as the "Investors").

         1. AGREEMENT TO PURCHASE AND SELL STOCK.

                1.1  Authorization.  As of the Closing  (as  defined  below) the
Company will have authorized the issuance,  pursuant to the terms and conditions
of this Agreement, of up to 1.5 million shares of the Company's Common Stock, no
par value (the "Common Stock").

                1.2 Agreement to Purchase and Sell.  The Company  agrees to sell
to each  Investor at the Closing,  and each Investor  agrees,  severally and not
jointly,  to purchase  from the Company at the Closing,  the number of shares of
Common Stock for the aggregate  price set forth beside such  Investor's  name on
the Schedule of Investors, at the price per share for such Investor set forth on
the  Schedule  of  Investors.  The  shares of Common  Stock  purchased  and sold
pursuant to this Agreement will be collectively  hereinafter  referred to as the
"Purchased Shares."

         2. CLOSING.

                2.1 The Closing.  The purchase and sale of the Purchased  Shares
will take  place at the  offices of  Fenwick & West LLP,  Two Palo Alto  Square,
Suite 800, Palo Alto, California,  at 2:30 p.m. Pacific Time, on October 2, 2000
or at such other time and place as the Company and  Investors who have agreed to
purchase a majority of the Purchased  Shares listed on the Schedule of Investors
mutually  agree upon (which time and place are referred to in this  Agreement as
the "Closing"),  provided that the closing may not be delayed for more than five
business days without the consent of all Investors.  At the Closing, the Company
will deliver to each Investor a certificate representing the number of Purchased
Shares  that such  Investor  has agreed to  purchase  hereunder  as shown on the
Schedule of Investors  against  delivery to the Company by such  Investor of the
full purchase price of such Purchased Shares, paid by (i) a check payable to the
Company's  order,  (ii)  wire  transfer  of funds to the  Company  or (iii)  any
combination of the foregoing.

         3.  REPRESENTATIONS  AND WARRANTIES OF THE COMPANY.  The Company hereby
represents and warrants to Investor that,  except as set forth in the Disclosure
Schedule and  Schedule of  Exceptions  (the  "Disclosure  Schedule")  separately
delivered by the Company to the Investors  (which  Disclosure  Schedule shall be
deemed to be  representations  and  warranties  to the  Investors by the Company
under this Section and to qualify each of the representations and warranties set
forth herein),  the statements in the following paragraphs of this Section 3 are
all true and correct:
<PAGE>

                  3.1 Organization, Good Standing and Qualification. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the  State of  California,  and has all  requisite  corporate  power and
authority  to conduct  its  business  as  currently  conducted.  The  Company is
qualified to do business as a foreign  corporation  in each  jurisdiction  where
failure to be so  qualified  could  reasonably  be  expected  to have a material
adverse  effect on the  business,  assets,  financial  condition  or  results of
operations or assets of the Company (the "Business") (such effect referred to as
a "Material Adverse Effect").

                  3.2   Capitalization.   Immediately  before  the  Closing  the
capitalization of the Company will consist of the following:

                           (a) Preferred Stock. A total of 5,000,000  authorized
shares of Preferred Stock, no par value per share (the "Preferred Stock"),  none
of which are issued and outstanding.

                           (b) Common Stock.  A total of  20,000,000  authorized
shares of Common Stock, of which approximately 12,262,614 shares were issued and
outstanding as of September 27, 2000.

                           (c) Options,  Warrants,  Reserved Shares. Except for:
(i) the approximately 2,523,711 shares of Common Stock issuable upon exercise of
options  outstanding  as  of  September  27,  2000,  (ii)  approximately  75,500
additional shares of Common Stock reserved for issuance under the Company's 1995
Directors Stock Option Plan, (iii) approximately  1,100,789 additional shares of
Common Stock  reserved for issuance  under the Company's  1995 Equity  Incentive
Plan and (iv)  warrants to  purchase an  aggregate  of  approximately  1,034,200
shares of Common Stock, there are not outstanding any options,  warrants, rights
or agreements for the purchase or acquisition  from the Company of any shares of
its capital stock or any securities convertible into or ultimately  exchangeable
or exercisable for any shares of the Company's capital stock.

                  3.3 Subsidiaries.  Except for Cellisis Pharmaceuticals,  Inc.,
Cellegy Australia Pty Ltd, and Cellegy International, Inc., each of which is not
a  "significant  subsidiary"  as defined  in Rule 1-02 of  Regulation  S-X,  the
Company does not presently own or control, directly or indirectly,  any interest
in any other corporation,  partnership,  trust, joint venture,  association,  or
other entity.

                  3.4 Due Authorization;  No Violation.  All corporate action on
the part of the Company and its officers,  directors and shareholders  necessary
for the  authorization,  execution and delivery of, and the  performance  of all
obligations  of the  Company  under,  this  Agreement,  and  the  authorization,
issuance,  reservation for issuance and delivery of all of the Purchased  Shares
being sold under this  Agreement,  has been taken or will be taken  prior to the
Closing,  and this Agreement  constitutes a valid and legally binding obligation
of the Company,  enforceable  against the Company in accordance  with its terms,
except  as  enforceability   may  be  limited  by  (i)  applicable   bankruptcy,
insolvency,  reorganization or other laws of general application  relating to or
affecting the enforcement of creditors'  rights generally and (ii) the effect of
rules of law  governing  the  availability  of equitable  remedies.  Neither the
execution,  delivery or  performance  by the Company of this  Agreement  nor the
consummation  by the Company of the  transactions  contemplated  hereby will (i)
conflict with or result in a breach of any provision of the Restated

                                       2
<PAGE>

Articles  of  Incorporation  of the Company  (the  "Restated  Articles")  or the
Company's  Bylaws,  (ii) conflict  with,  result in a violation or breach of, or
cause a  default  (or give  rise to any right of  termination,  cancellation  or
acceleration) under any of the terms, conditions or provisions of any agreement,
instrument or  obligation  to which the Company is a party,  which default could
reasonably  be expected to have a Material  Adverse  Effect or (iii) violate any
law, statute, rule or regulation or judgment,  order, writ, injunction or decree
of any  governmental  authority,  in each case  applicable to the Company or its
properties  or  assets  and  which,  individually  or in  the  aggregate,  could
reasonably be expected to have a Material Adverse Effect.

                  3.5  Valid  Issuance  of Stock.  The  Purchased  Shares,  when
issued,  sold and delivered in accordance  with the terms of this  Agreement for
the consideration  provided for herein,  will be duly and validly issued,  fully
paid and nonassessable and are not subject to preemptive or other similar rights
of any shareholder of the Company.

                  3.6  Governmental  Consents.  No consent,  approval,  order or
authorization of, or registration,  qualification,  designation,  declaration or
filing with, any federal,  state or local governmental  authority on the part of
the Company is required in connection  with the valid  execution and delivery of
this Agreement,  the offer,  sale and issuance of the Purchased  Shares,  or the
consummation of the  transactions  contemplated  by this  Agreement,  except for
qualifications  or filings  under the  Securities  Act of 1933,  as amended (the
"Act") and the applicable rules and regulations (the "Rules and Regulations") of
the Securities and Exchange Commission (the "Commission") under the Act, and all
other  applicable  securities  laws as may be  required in  connection  with the
transactions  contemplated by this Agreement.  All such  qualifications  will be
effective  on the  Closing,  and all  such  filings  be  made  within  the  time
prescribed by law.

                  3.7 Absence of Changes. After the respective dates as of which
information is given in the Company's  Proxy Statement for the annual meeting of
shareholders  held on May 31, 2000, the Company's Annual Report on Form 10-K for
the year ended  December 31, 1999,  and the Company's  Quarterly  Report on Form
10-Q for the quarter ended June 30, 2000, respectively (such documents, together
with the  Disclosure  Schedule,  referred  to  collectively  as the  "Disclosure
Documents"), there has not been (i) any material adverse change in the Business,
(ii) any  transaction  that is material to the  Company,  (iii) any  obligation,
direct or contingent,  that is material to the Company, incurred by the Company,
(iv) any change in the outstanding  indebtedness of the Company that is material
to the Company, (v) any dividend declared,  paid or made on the capital stock of
the Company or (vi) any loss or damage  (whether or not insured) to the property
of the Company which has been  sustained  which could  reasonably be expected to
have a Material Adverse Effect.

                  3.8 Litigation.  There is no action, suit, proceeding,  claim,
arbitration or investigation ("Action") pending (or, to the Company's knowledge,
currently threatened) against the Company, its activities, properties or assets,
which (i) might prevent the consummation of the transactions contemplated hereby
or (ii) if adversely  resolved  against the Company could reasonably be expected
to have a Material Adverse Effect.

                  3.9 Nasdaq Listing. The Common Stock is registered pursuant to
Section 12(g) of the Securities  Exchange Act of 1934, as amended (the "Exchange
Act"),  and is listed on the Nasdaq Stock Market (Nasdaq National  Market).  The
Company has not received any  notification  that the  Commission or the National
Association of Securities Dealers, Inc. is

                                       3
<PAGE>

contemplating the termination of such registration or listing.  Before the Shelf
Registration  Statement (as defined in Section 7.2) is declared effective by the
Commission,  the Purchased  Shares will, if required by the listing rules of the
Nasdaq  Stock  Market,  have been  approved  for  quotation  on the Nasdaq Stock
Market, subject to notice of issuance.

                  3.10  Exchange Act Filings.  The Company has filed in a timely
manner all reports and other  information  required to be filed ("Filings") with
the Commission pursuant to the Exchange Act during the preceding twelve calendar
months. On their respective dates of filing,  the Filings complied as to form in
all  material  respects  with the  requirements  of the  Exchange  Act,  and the
published rules and  regulations of the Commission  promulgated  thereunder.  On
their  respective  dates of  filing,  the  Filings  did not  include  any untrue
statement of a material fact required to be stated  therein or necessary to make
the statements  therein,  in light of the circumstances in which they were made,
not  misleading,  and all financial  statements  contained in the Filings fairly
present the  financial  position of the Company on the dates of such  statements
and the results of operations for the periods covered thereby in accordance with
generally accepted  accounting  principles  consistently  applied throughout the
periods involved and prior periods,  except as otherwise  indicated in the notes
to such financial statements.

                  3.11 Disclosure.  The  representations  and warranties made by
the  Company in this  Agreement  (including  the  Disclosure  Schedule)  and the
Filings  when read  together do not contain any untrue  statement  of a material
fact and do not omit to state a material fact  necessary to make the  statements
herein as a whole not misleading.

                  3.12  Governmental  Permits,  Etc. The Company  possesses  all
licenses,  franchises,  governmental  approvals,  permits or other  governmental
authorizations (collectively, "Authorizations") relating to the operation of the
Business,  except for those Authorizations the failure of which to possess would
not,  separately or in the aggregate,  have a Material  Adverse  Effect.  To the
Company's knowledge after reasonable investigation, the Company is in compliance
with the terms of all Authorizations and all laws,  ordinances,  regulations and
decrees which to the Company's knowledge are applicable to the Business,  except
for such non-compliance  which does not, separately or in the aggregate,  have a
Material Adverse Effect.

                  3.13  Insurance.  The  Company is covered  by  insurance  with
companies  the  Company  believes  to be  responsible  and in such  amounts  and
covering  such  risks as it  believes  to be  adequate  for the  conduct  of its
Business  and the value of its  properties  and as is  customary  for  companies
engaged  in  similar  businesses  in  similar  industries.  The  Company  has no
knowledge  that any such  carrier  has  grounds  or intends to cancel or fail to
renew such policies.

                  3.14 Intellectual  Property.  To the Company's knowledge after
reasonable  investigation,  the Company  owns or possesses  the patents,  patent
rights, licenses, inventions,  copyrights, know-how (including trade secrets and
other unpatented and/or  unpatentable  proprietary or confidential  information,
systems or  procedures)  and other rights or interests in items of  intellectual
property as are necessary for the operation of the Business  operated by it (the
"Patent and  Proprietary  Rights"),  except  where the failure to own or possess
such  rights  would not have a Material  Adverse  Effect;  the  Company  has not
received  notice of any  asserted  rights with  respect to any of the Patent and
Proprietary  Rights  which,  if  determined  unfavorably  with  respect  to  the
interests of the Company would have a Material  Adverse Effect;  and the Company
has not received notice or is otherwise aware of any infringement of or conflict
with

                                       4
<PAGE>

asserted  rights of others  with  respect  to any of the  Patent or  Proprietary
Rights,  which  infringement  or  conflict  (if the  subject of any  unfavorable
decision, ruling or finding),  individually or in the aggregate, would result in
a Material Adverse Effect.

         4.  REPRESENTATIONS,  WARRANTIES  AND CERTAIN  AGREEMENTS OF INVESTORS.
Each Investor  hereby  represents and warrants to, and agrees with, the Company,
that:

                  4.1  Authorization.  All  corporate  action on the part of the
Investor  and  its  officers,  directors  and  stockholders  necessary  for  the
authorization, execution and delivery of, and the performance of all obligations
of the Investor  under,  this Agreement has been taken or will be taken prior to
the  Closing,  and  this  Agreement  constitutes  a valid  and  legally  binding
obligation of the Investor,  enforceable against the Investor in accordance with
its terms, except as enforceability may be limited by (i) applicable bankruptcy,
insolvency,  reorganization or other laws of general application  relating to or
affecting the enforcement of creditors'  rights generally and (ii) the effect of
rules of law governing the availability of equitable remedies.

                  4.2  Purchase  for Own  Account.  The  Purchased  Shares to be
purchased by such Investor  hereunder  will be acquired for  investment for such
Investor's  own account,  not as a nominee or agent,  and not with a view to the
public resale or  distribution  thereof  within the meaning of the Act, and such
Investor has no present intention of selling,  granting any participation in, or
otherwise  distributing  the same.  If not an  individual,  such  Investor  also
represents  that such  Investor has not been formed for the specific  purpose of
acquiring Purchased Shares.

                  4.3  Disclosure  of  Information.  The Investor has received a
copy of the Disclosure  Documents and has received or has had full access to all
the  information  it  considers  necessary  or  appropriate  to make an informed
investment  decision with respect to the Purchased Shares to be purchased by the
Investor under this  Agreement.  Investor  further has had an opportunity to ask
questions  and  receive  answers  from  the  Company  regarding  the  terms  and
conditions  of the  offering of the  Purchased  Shares and to obtain  additional
information  (to the extent the  Company  possessed  such  information  or could
acquire it  without  unreasonable  effort or  expense)  necessary  to verify any
information  furnished to the Investor or to which the Investor had access.  The
foregoing,  however, does not in any way limit or modify the representations and
warranties made by the Company in Section 3.

                  4.4 Investment Experience.  Such Investor understands that the
purchase of the Purchased Shares involves  substantial risk. Such Investor:  (i)
has  experience  as an investor in  securities  of companies in the  development
stage and acknowledges  that such Investor is able to fend for itself,  can bear
the economic risk of such Investor's  investment in the Purchased Shares and has
such  knowledge  and  experience  in  financial  or business  matters  that such
Investor is capable of evaluating the merits and risks of this investment in the
Purchased  Shares and  protecting  its own  interests  in  connection  with this
investment and/or (ii) has a preexisting personal or business  relationship with
the Company and certain of its officers,  directors or controlling  persons of a
nature and duration  that enables  such  Investor to be aware of the  character,
business acumen and financial circumstances of such persons.

                                       5
<PAGE>

                  4.5 Accredited  Investor Status.  Unless  otherwise  expressly
indicated on the Schedule of Investors to this  Agreement,  such  Investor is an
"accredited  investor" within the meaning of Regulation D promulgated  under the
Act.

                  4.6 Restricted Securities.  Such Investor understands that the
Purchased  Shares are  characterized  as "restricted  securities"  under the Act
inasmuch  as they are being  acquired  from the  Company  in a  transaction  not
involving a public offering and that under the Act and the Rules and Regulations
such securities may be resold without registration under the Act only in certain
limited  circumstances.  In this connection,  such Investor represents that such
Investor is familiar with Rule 144 of the Commission and  understands the resale
limitations  imposed thereby and by the Act. Such Investor  understands that the
Company is under no obligation to register any of the Purchased Shares except as
provided in Section 7 below.

                  4.7 Further  Limitations  on  Disposition.  Without in any way
limiting the  representations  set forth above, such Investor further agrees not
to make any disposition of all or any portion of the Purchased Shares unless and
until:

                           (a) there is then in effect a registration  statement
under the Act covering such proposed disposition and such disposition is made in
accordance with such  registration  statement and the provisions of Section 7 of
this Agreement; or

                           (b) (i) such Investor shall have notified the Company
of the  proposed  disposition  and  shall  have  furnished  the  Company  with a
statement of the circumstances  surrounding the proposed  disposition,  and (ii)
such Investor shall have furnished the Company,  at the expense of such Investor
or its transferee,  with an opinion of counsel,  reasonably  satisfactory to the
Company,  that such disposition will not require registration of such securities
under the Act.

                Notwithstanding  the provisions of paragraphs (a) and (b) above,
no such registration  statement or opinion of counsel shall be required: (i) for
any routine transfer of any Purchased Shares in compliance with Rule 144 or Rule
144A  (except  that an opinion of counsel may be required for other than routine
Rule 144  transactions),  or (ii) for any  transfer  of  Purchased  Shares by an
Investor  that  is a  partnership  or a  corporation  to (A) a  partner  of such
partnership or shareholder  of such  corporation,  or (B) the estate of any such
partner or  shareholder,  or (iii) for the  transfer by gift,  will or intestate
succession  by any  Investor  to his or her  spouse  or  lineal  descendants  or
ancestors or any trust for any of the foregoing;  provided,  that in each of the
foregoing  cases the transferee  agrees in writing to be subject to the terms of
this Section 4 (other than Section 4.5) to the same extent as if the  transferee
were an original Investor hereunder.

                  4.8 Legends. It is understood that the certificates evidencing
the Purchased Shares will bear the legends set forth below:

                           (a) THE SECURITIES  REPRESENTED  HEREBY HAVE NOT BEEN
REGISTERED  UNDER THE SECURITIES  ACT OF 1933, AS AMENDED (THE "ACT"),  OR UNDER
THE  SECURITIES  LAWS  OF  CERTAIN  STATES.  THESE  SECURITIES  ARE  SUBJECT  TO
RESTRICTIONS ON TRANSFERABILITY  AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD
EXCEPT AS PERMITTED  UNDER

                                       6
<PAGE>

THE ACT AND THE APPLICABLE STATE  SECURITIES  LAWS,  PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR
THE FINANCIAL  RISKS OF THIS  INVESTMENT  FOR AN INDEFINITE  PERIOD OF TIME. THE
ISSUER OF THESE  SECURITIES  MAY  REQUIRE  AN  OPINION  OF  COUNSEL  IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR
RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

                           (b) THE  SHARES  EVIDENCED  BY THIS  CERTIFICATE  ARE
SUBJECT TO THE PROVISIONS OF, AND MAY HAVE CERTAIN  REGISTRATION RIGHTS PURSUANT
TO, THE PROVISIONS OF A PURCHASE  AGREEMENT  BETWEEN THE COMPANY AND THE HOLDER,
WHICH MAY RESTRICT THE TRANSFER OF SUCH SHARES IN CERTAIN CIRCUMSTANCES.  A COPY
OF SUCH AGREEMENT MAY BE OBTAINED,  WITHOUT CHARGE,  AT THE COMPANY'S  PRINCIPAL
OFFICE.

                           (c) After consultation with counsel for the Investor,
any legend that counsel to the Company  reasonably deems  appropriate  under the
laws of the State of California.

         The legends set forth in (a) and (b) above  shall,  upon the request of
an Investor, be promptly removed by the Company from any certificate  evidencing
Purchased  Shares  upon  delivery to the Company of an opinion of counsel to the
Investor, reasonably satisfactory to the Company, that the legended security can
be freely transferred in a public sale without a registration statement being in
effect  under  the Act  and in  compliance  with  exemption  requirements  under
applicable  state securities laws and that such transfer will not jeopardize the
exemption or exemptions from  registration  pursuant to which the Company issued
the Purchased Shares; provided,  however, that no such opinion shall be required
in  connection  with  routine  sales of Purchased  Shares  pursuant to the Shelf
Registration  Statement (as defined below). In connection with any such opinion,
the Investor  shall provide such  certifications  as may be reasonably be deemed
necessary for the delivery of such opinion.

                  4.9  Resale  Restrictions.  To  the  extent  requested  by the
Company or an underwriter or placement agent of securities of the Company,  each
Investor agrees that it will not directly or indirectly offer, sell, contract or
grant an option to sell, pledge,  encumber, or otherwise dispose of or otherwise
transfer, or enter into any swap or other arrangement that transfers to another,
in whole or in part, any of the economic  consequences  of ownership of (whether
any such  transaction  described  above is to be settled by  delivery  of Common
Stock or such other  securities,  in cash or otherwise) (a  "Disposition"),  any
Purchased Shares (other than to donees, shareholders or partners of the Investor
who agree to be similarly bound) from the date such a registration  statement is
filed until up to 90 days after the effective date of a  registration  statement
of the Company relating to an underwritten offering of securities of the Company
filed  under  the Act;  provided,  however,  that (i)  this  paragraph  shall be
applicable  only to the first such  registration  statement of the Company filed
after the date of this Agreement that covers securities to be sold on its behalf
to the public in a firm commitment  underwritten offering and (ii) all executive
officers and directors of the Company then holding Common Stock who beneficially
own more than one percent of the  outstanding  shares of Common Stock enter into
similar

                                       7
<PAGE>

agreements.   This  paragraph   shall  not  preclude   Investor  from  including
Registrable Securities in such registration statement.

         5. CONDITIONS TO INVESTOR'S OBLIGATIONS AT CLOSING.

                  5.1 Closing.  The obligations of each Investor under Section 2
of this Agreement to purchase the Purchased Shares at the Closing are subject to
the  fulfillment or waiver,  on or before the Closing,  of each of the following
conditions,  and the  Company  shall use all  reasonable  efforts  to cause such
conditions to be satisfied on or before the Closing:

                           5.1.1  Representations  and Warranties  True. Each of
the  representations  and warranties of the Company contained in Section 3 shall
be true and correct on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the Closing.

                           5.1.2  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 and shall have obtained all approvals,  consents and  qualifications
necessary to complete the purchase and sale described herein.

                           5.1.3 Compliance Certificate.  The Company shall have
delivered to the Investors at the Closing a certificate  signed on its behalf by
its President,  Chief Executive  Officer,  or Chief Financial Officer certifying
that the conditions specified in Sections 5.1.1 and 5.1.2 have been fulfilled.

                           5.1.4 Registration;  Securities Exemptions. The offer
and sale of the  Purchased  Shares to the Investors  pursuant to this  Agreement
shall  be  exempt  from  the  registration  requirements  under  the Act and the
California  Corporate  Securities  Law  of  1968,  as  amended,  and  the  rules
thereunder (the "Law") and the registration and/or qualification requirements of
all other applicable state securities laws.

                           5.1.5 No  Material  Change.  There shall have been no
material adverse change in the Business from the date of this Agreement.

                           5.1.6 Opinion of Counsel.  The  Investors  shall have
received  an  opinion of counsel  to the  Company  substantially  in the form of
Exhibit A attached hereto.

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

                  6.1.  Closing.  The  obligations  of the  Company  under  this
Agreement  to sell the  Purchased  Shares to the  Investors  at the  Closing are
subject to the  fulfillment  or waiver on or before  the  Closing of each of the
following conditions by the Investor, and each Investor shall use all reasonable
efforts to cause such conditions to be satisfied on or before the Closing:

                           6.1.1    Representations    and    Warranties.    The
representations  and warranties of the Investor  contained in Section 4 shall be
true and  correct on and as of the  Closing  with the same effect as though such
representations and warranties had been made on and as of the Closing.

                                       8
<PAGE>

                           6.1.2 Payment of Purchase  Price.  The Investor shall
have  delivered  to the  Company the  purchase  price for the  Purchased  Shares
specified for such  Investor on the Schedule of Investors  attached  hereto,  in
accordance with the provisions of Section 2.

                           6.1.3 Registration;  Securities Exemptions. The offer
and sale of the  Purchased  Shares to the  Investor  pursuant to this  Agreement
shall be exempt from the  registration  requirements  under the Act and shall be
exempt  from  the  qualification  requirements  of the Law and the  registration
and/or qualification requirements of all other applicable state securities laws.

         7. REGISTRATION RIGHTS.

                  7.1  Definitions.  For purposes of this Agreement:

                           (a) Form S-3.  The term  "Form  S-3"  means such form
under the Act as is in effect on the date hereof or any  successor  registration
form under the Act subsequently adopted by the Commission that permits inclusion
or  incorporation  of substantial  information  by reference to other  documents
filed by the Company with the Commission.

                           (b) Holder.  The term "Holders" shall mean holders of
Registrable Securities that have registration rights pursuant to this Agreement.

                           (c) Registration. The terms "register," "registered,"
and  "registration"  refer to a registration  effected by preparing and filing a
registration  statement  in  compliance  with the Act,  and the  declaration  or
ordering of effectiveness of such registration statement.

                           (d)  Registrable  Securities.  The term  "Registrable
Securities" means: (1) all of the Purchased Shares, and (2) any shares of Common
Stock of the Company issued as a dividend or other distribution with respect to,
or in exchange for or in replacement of, any of the Purchased Shares;  provided,
however, that the term "Registrable Securities" shall exclude in all events (and
such  securities  shall  not  constitute   "Registrable   Securities")  (i)  any
Registrable Securities sold or transferred by a person in a transaction in which
the  registration  rights  granted  under this  Agreement  are not  assigned  in
accordance  with  the  provisions  of  this  Agreement,   (ii)  any  Registrable
Securities sold in a public offering pursuant to a registration  statement filed
with the  Commission  or sold  pursuant  to Rule 144  promulgated  under the Act
("Rule 144") or (iii) as to any Holder, the Registrable  Securities held by such
Holder if all of such Registrable Securities can be publicly sold without volume
restriction within a three-month period pursuant to Rule 144.

                           (e) Prospectus:  The term "Prospectus" shall mean the
prospectus  included in any Shelf  Registration  Statement  (including,  without
limitation,  a prospectus that discloses  information  previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule  430A  promulgated  under the  Act),  as  amended  or  supplemented  by any
prospectus supplement (including,  without limitation, any prospectus supplement
with  respect to the terms of the  offering  of any  portion of the  Registrable
Securities  covered  by  such  Shelf  Registration  Statement),  and  all  other
amendments  and   supplements  to  the

                                       9
<PAGE>

Prospectus,  including post-effective  amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.

                           (f) Shelf Registration Statement. See Section 7.2(a).

                  7.2  Form S-3 Shelf Registration.

                           (a) Registration.  The Company shall prepare and file
with the Commission  within 60 days following the Closing and use all reasonable
efforts  to  have  declared  effective  as  soon as  practicable  thereafter,  a
registration  statement on Form S-3 (or, if the Company is not then  eligible to
use Form S-3,  then another  appropriate  form)  providing for the resale by the
Holders  of  all  of  the  Registrable   Securities  (the  "Shelf   Registration
Statement").  The Shelf Registration Statement may include securities other than
those held by  Holders.  If the Shelf  Registration  Statement  is not  declared
effective by January 31, 2001 and does not remain  effective  for 45  continuous
days after its effective date (except for the duration of any Blackout Notice as
described in Section  7.2(b)  below),  then the  Investors  holding  Registrable
Securities shall be entitled to receive from the Company (pro rata in accordance
with their ownership of Registrable Securities) an aggregate number of shares of
Common Stock equal to 1% of the number of Purchased  Shares for each month after
January  31,  2001,  that  the  Shelf  Registration  Statement  is not  declared
effective (or does not remain effective), up to a maximum aggregate amount of 5%
of the  Purchased  Shares.  The Company  shall use its best  efforts to keep the
Shelf Registration Statement continuously effective (subject to Section 7.2(b)),
pursuant to the Act and the Rules and Regulations promulgated thereunder,  until
(i) the date when such  Registrable  Securities  cease to meet the definition of
Registrable   Securities   pursuant  to  Section  7.1,  or  (ii)  the  Company's
obligations  hereunder  terminate.  In the  event  that the  Shelf  Registration
Statement  shall cease to be effective,  the Company shall promptly  prepare and
file a new registration  statement covering the Registrable Securities and shall
use its best efforts to have such registration  statement  declared effective as
soon as possible.  Any such registration  statement shall be considered a "Shelf
Registration Statement" hereunder.

                           (b)  Blackout  Notice.  In the  event  (i)  that  the
Company  concludes  that it is  necessary  for the  Company  to  supplement  the
Prospectus or make an  appropriate  filing under the Exchange Act so as to cause
the  Prospectus  to  become  current,  or  (ii)  that,  in the  judgment  of the
President,  Chief Executive  Officer or the Company's Board of Directors,  it is
advisable to suspend use of the Prospectus for a discrete  period of time due to
undisclosed  pending  corporate  developments or pending public filings with the
Commission (which need not be described in detail),  the Company shall deliver a
written  notice  (the  "Blackout  Notice")  to the  Holder to the  effect of the
foregoing and, upon delivery of the Blackout  Notice,  the Holder shall not sell
any Purchased Shares or any other securities of the Company that are held by the
Holder,  shall not otherwise engage in any other Disposition with respect to the
Company's  securities,  and shall not  disclose  to any third  party that such a
notice has been given or the contents of the notice.  The Permitted Window shall
resume  upon the  Holder's  receipt  of copies of the  supplemented  or  amended
Prospectus,  or at such time as the Holder is advised in writing by the  Company
that the  Prospectus  may be used,  and at such time as the Holder has  received
copies of any additional or supplemental filings that are incorporated or deemed
incorporated  by  reference  in such  Prospectus  and which are  required  to be
delivered  as part of the  Prospectus.  In any event,  such  restrictions  shall
terminate  no later  than 45 days  after the date of  delivery  of the  Blackout
Notice.

                                       10
<PAGE>

If the Company has  delivered a Blackout  Notice within 90 days of the date that
it delivers another Blackout Notice pursuant this section,  then the 45-day time
period  set  forth in the  preceding  sentence  shall be  shortened  so that the
restrictions  imposed by the Blackout  Notice shall expire no later than 10 days
after delivery of such Blackout Notice.

                           (c)  Expenses.  The  registration  fees and  expenses
incurred by the Company in connection with the Shelf Registration  Statement and
actions taken by the Company in connection  with each Permitted  Window shall be
borne by the Company.  Holder shall be responsible  for any fees and expenses of
its counsel or other advisers.

                  7.3  Obligations of the Company.  Whenever  required to effect
the registration of any Registrable Securities under this Agreement, the Company
shall, as expeditiously as reasonably possible:

                           (a)  Furnish to the Holder such number of copies of a
Prospectus,   including  a  preliminary  Prospectus,   in  conformity  with  the
requirements of the Act, and such other  documents as it may reasonably  request
in order to facilitate the disposition of the Registrable Securities owned by it
that are included in such registration.

                           (b)  Use  all  reasonable  efforts  to  register  and
qualify the securities  covered by such registration  statement under such other
securities  or Blue  Sky  laws of such  jurisdictions  as  shall  be  reasonably
requested  by the Holder,  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.

                           (c) Notify the Holder  promptly (i) of any request by
the Commission or any other federal or state  governmental  authority during the
period  of  effectiveness   of  a  registration   statement  for  amendments  or
supplements  to  such  registration  statement  or  related  prospectus  or  for
additional  information,  (ii) of the  issuance by the  Commission  or any other
federal  or state  governmental  authority  of any  stop  order  suspending  the
effectiveness  of a registration  statement or the initiation of any proceedings
for that  purpose and (iii) of the  receipt by the  Company of any  notification
with  respect  to  the  suspension  of  the   qualification  or  exemption  from
qualification of any of the Registrable  Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose.

                           (d)  Make  every  reasonable  effort  to  obtain  the
withdrawal of any order suspending the  effectiveness of the Shelf  Registration
Statement at the earliest possible time.

                  7.4 Furnish Information.  It shall be a condition precedent to
the  obligations of the Company to take any action  pursuant to Section 7.2 that
the Holder  shall  furnish to the Company  such  information  regarding  it, the
Registrable  Securities  held by it, and the intended  method of  disposition of
such  securities as shall be required to timely effect the  registration  of its
Registrable Securities.

                  7.5 Indemnification.  In the event any Registrable  Securities
are included in a registration statement under this Agreement:

                                       11
<PAGE>

                           (a) By the Company.  To the extent  permitted by law,
the Company  will  indemnify  and hold  harmless  the Holder,  the  officers and
directors of the Holder and each  person,  if any, who controls the Holder (such
persons and entities referred to as "Holder Indemnified  Parties"),  against any
losses, expenses,  damages or liabilities to which they may become subject under
the Act, the Exchange Act or other  federal or state law (a "Loss"),  insofar as
such Losses (or actions in respect  thereof)  arise out of any claim,  action or
proceeding  brought  by a third  party  arising  out of or based upon any of the
following statements, omissions or violations (collectively a "Violation"):

                           (i) any untrue  statement or alleged untrue statement
                  of a material fact contained in a registration statement filed
                  pursuant to this Section 7;

                           (ii) the  omission or alleged  omission to state in a
                  registration  statement  filed  pursuant  to this  Section 7 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 Act,  the  Exchange  Act,  any federal or state
                  securities law or any rule or regulation promulgated under the
                  Act, the Exchange Act or any federal or state  securities law,
                  in each case in connection  with the offering  covered by such
                  registration statement;

and the Company will  reimburse each Holder  Indemnified  Party for any legal or
other  expenses  reasonably  incurred by them, as incurred,  in connection  with
investigating  or defending  any such  Violation;  provided,  however,  that the
indemnity agreement contained in this subsection shall not apply to amounts paid
in  settlement  of any such Loss,  if such  settlement  is effected  without the
consent of the Company, nor shall the Company be liable in any such case for any
such Loss 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  statement by the Holder
Indemnified Party; and provided further, that the Company will not be liable for
the  reasonable  legal fees and  expenses of more than one counsel to the Holder
Indemnified Parties.

                           (b) By the Holder.  To the extent  permitted  by law,
each Holder will indemnify and hold harmless the Company, each of its directors,
each of its  officers  who have  signed  the  registration  statement,  and each
person,  if any, who  controls  the Company  within the meaning of the Act (such
persons and entities referred to as "Company  Indemnified  Parties") against any
Losses to which such Company  Indemnified  Parties may become  subject under the
Act, the Exchange Act or other federal or state law,  insofar as such Losses (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 the Holder
expressly for use in connection with such registration statement; and the Holder
will reimburse any legal or other expenses  reasonably  incurred by such Company
Indemnified  Parties in  connection  with  investigating  or defending  any such
Violation;  provided,  however,  that the indemnity  agreement contained in this
subsection  shall not apply to amounts  paid in  settlement  of any such Loss if
such settlement is effected without the consent of the

                                       12
<PAGE>

Holder; provided further, that the Holder shall not be liable for the reasonable
legal fees and  expenses  of more than one  counsel to the  Company  Indemnified
Parties;  and provided  further,  that the total amounts payable in indemnity by
the Holder under this  subsection in respect of any  Violation  shall not exceed
the net proceeds received by the Holder in the registered  offering out of which
such Violation arises.

                           (c) Notice.  Promptly after receipt by an indemnified
party under this Section of notice of the commencement of any action  (including
any  governmental   action),  such  indemnified  party  will,  if  a  claim  for
indemnification  in respect thereof is to be made against any indemnifying party
under this Section,  deliver to the  indemnifying  party a written notice of the
commencement of such an action 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  selected  by  the  indemnifying   party  and  reasonably
acceptable  to a majority  in  interest of the  indemnified  parties;  provided,
however,  that an  indemnified  party  shall  have the right to  retain  its own
counsel,  with the reasonable  fees and expenses to be paid by the  indemnifying
party,  if the  indemnified  party has been  advised in writing by counsel  that
representation  of  such  indemnified  party  by  the  counsel  retained  by the
indemnifying  party would be  inappropriate  due to actual conflict of 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 of the  commencement  of any such action shall
relieve such indemnifying party of liability to the indemnified party under this
Section to the extent such delay caused  material  prejudice to the  indemnified
party, 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.

                           (d)  Defect  Eliminated  in  Final  Prospectus.   The
foregoing indemnity  agreements of the Company and the Holder are subject to the
condition  that,  insofar as they relate to any Violation  made in a preliminary
prospectus but eliminated or remedied in the amended prospectus on file with the
Commission at the time the registration  statement in question becomes effective
or in the amended  prospectus filed with the Commission  pursuant to Rule 424(b)
of the Commission (the "Final Prospectus"),  such indemnity agreements shall not
inure  to the  benefit  of any  person  if a copy of the  Final  Prospectus  was
furnished in a timely manner to the  indemnified  party and was not furnished to
the person  asserting  the loss,  liability,  claim or damage at or prior to the
time such action is required by the Act.

                           (d) Survival.  The obligations of the Company and the
Holder  under this  Section  shall  survive the  completion  of any  offering of
Registrable Securities in a registration statement, and otherwise.

                  7.6 Rule 144  Reporting.  With a view to making  available the
benefits of certain rules and  regulations of the  Commission,  which may at any
time  permit  the  sale of the  Registrable  Securities  to the  public  without
registration,  for so long as the Holder owns any  Registrable  Securities,  the
Company agrees to:

                           (a)   Make   and  keep   adequate,   current   public
information  available,  as those terms are  understood  and defined in Rule 144
under the Act, at all times;

                                       13
<PAGE>

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

                           (c)  So  long  as the  Holder  owns  any  Registrable
Securities,  to furnish to the Holder forthwith upon request a written statement
by the Company as to its compliance with the reporting requirements of said Rule
144, a copy of the most recent  annual or quarterly  report of the Company,  and
such other  reports and  documents  of the Company as the Holder may  reasonably
request in availing itself of any rule or regulation of the Commission  allowing
a Holder to sell any such securities without registration.

                  7.7  Termination of Cellegy's  Obligations.  The Company shall
have no obligation to register, or maintain, a registration  statement governing
Registrable  Securities,  (i) if all Registrable Securities have been registered
and sold pursuant to registrations effected pursuant to this Agreement,  or (ii)
with  respect  to any  particular  Holder,  at  such  time  as  all  Registrable
Securities  held by such  Holder may be sold  without  any  volume  restrictions
within a three month  period  under Rule 144, as it may be amended  from time to
time,  including but not limited to  amendments  that reduce that period of time
that securities must be held before such securities may be sold pursuant to such
rule.

                  7.8  Piggyback  Registrations.  (a) The Company  shall use its
best efforts to notify all Holders of Registrable Securities in writing at least
twenty  (20) days before  filing any  registration  statement  under the Act for
purposes  of  effecting  an  underwritten  public  offering  by the  Company  of
securities of the Company  (excluding  registration  statements  relating to any
employee benefit plan or a corporate merger,  acquisition or reorganization,  or
any  Form  S-3  or  similar  shelf  registration   statements  relating  to  the
non-underwritten  offer and sale of  securities  for the  account  of persons or
entities other than the Company) and will afford each such Holder an opportunity
to include in such  registration  statement  all or any part of the  Registrable
Securities then held by such Holder. Each Holder desiring to include in any such
registration  statement all or any part of the  Registrable  Securities  held by
such Holder  shall,  within ten (10) days after  receipt of the  above-described
notice from the  Company,  so notify the Company in writing,  and in such notice
shall  inform the Company of the number of  Registrable  Securities  such Holder
wishes to include in such  registration  statement.  If a Holder  decides not to
include all of its  Registrable  Securities in any such  registration  statement
filed by the Company,  such Holder shall nevertheless continue to have the right
to include any Registrable  Securities in any subsequent  registration statement
or  registration  statements  as may be filed by the  Company  with  respect  to
offerings of its securities, all upon the terms and conditions set forth herein.
The Holders' rights to include any Registrable  Securities in any offering under
this  Section  are  subject  in all  events  to  the  ability  of  the  managing
underwriter  for  such  offering  to  exclude  some  or all  of the  Registrable
Securities requested to be registered on the basis of a good faith determination
that  inclusion of such  securities  might  adversely  affect the success of the
offering or otherwise adversely affect the Company.  Any such exclusion shall be
pro rata among all Holders who have requested to sell Registrable  Securities in
such registration.

                           (b) Underwriting.  If a registration  statement under
which the  Company  gives  notice  under  this  Section  is for an  underwritten
offering,   then  the  Company  shall  so  advise  the  Holders  of  Registrable
Securities. In such event, the right of any such Holder's Registrable Securities
to be included in a  registration  pursuant to this Section shall be

                                       14
<PAGE>

conditioned  upon  such  Holder's  participation  in such  underwriting  and the
inclusion of such Holder's  Registrable  Securities in the  underwriting  to the
extent provided herein.  All Holders  proposing to distribute their  Registrable
Securities through such underwriting shall enter into an underwriting  agreement
in customary  form with the managing  underwriter or  underwriters  selected for
such  underwriting  and shall  furnish  such  information  and  documents as the
Company or the managing  underwriter or  underwriters  may  reasonably  request.
Notwithstanding  any  other  provision  of  this  Agreement,   if  the  managing
underwriter  determine(s)  in  good  faith  that  marketing  factors  require  a
limitation  of the  number  of  shares  to be  underwritten,  then the  managing
underwriter(s) may exclude Registrable  Securities from the registration and the
underwriting,  pro rata among all Holders who have requested to sell Registrable
Securities in such  registration.  If any Holder disapproves of the terms of any
such underwriting, such Holder may elect to withdraw therefrom by written notice
to the Company and the  underwriter,  delivered at least ten (10)  business days
prior to the  effective  date of the  registration  statement.  Any  Registrable
Securities  excluded or withdrawn from such  underwriting  shall be excluded and
withdrawn from the registration.

                           (c) Expenses.  The Holders shall be  responsible  for
there  pro  rata  share of  registration  fees and  underwriters'  and  brokers'
discounts and  commissions  relating to any Registrable  Securities  included in
such  registration.  Other  registration  expenses (such as legal and accounting
fees of counsel to the Company, printing fees, road show expenses, and the like)
shall be shall be borne by the Company.

                           (d) Number of Piggyback Registrations.  The piggyback
registration rights granted to the Holders under this Section shall apply to the
first three registrations filed by the Company after the Closing.

         8.  ASSIGNMENT.  Notwithstanding  anything herein to the contrary,  the
registration rights of the Holder under Section 7 hereof may be assigned only to
a party who  acquires  from the Holder at least  100,000  shares of  Registrable
Securities (as such number may be adjusted to reflect subdivisions, combinations
and stock dividends of the Company's  Common Stock),  (such party is referred to
as a "Assignee");  provided,  however,  that (w) no party may be assigned any of
the foregoing  rights until the Company is given written notice by the assigning
party at the  time of such  assignment  stating  the  name  and  address  of the
Assignee and identifying the securities of the Company as to which the rights in
question  are being  assigned;  (x) that any such  Assignee  shall  receive such
assigned rights subject to all the terms and conditions of this  Agreement;  and
(y) no such  assignment or  assignments  shall  increase the  obligations of the
Company hereunder.

         9.  MISCELLANEOUS.

                  9.1 Survival of Warranties.  The  representations,  warranties
and covenants of the Company and 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,  their  counsel  or the
Company, as the case may be.

                  9.2 Successors  and Assigns.  The terms and conditions of this
Agreement  shall  inure to the  benefit  of and be binding  upon the  respective
successors and assigns of the parties.

                                       15
<PAGE>

                  9.3 Governing  Law;  Consent to  Jurisdiction.  This Agreement
shall be  governed  by and  construed  under the  internal  laws of the State of
California as applied to agreements among California  residents entered into and
to be performed entirely within  California,  without reference to principles of
conflict of laws or choice of laws.

                  9.4  Counterparts.  This  Agreement  may be executed in two or
more counterparts,  each of which shall be deemed an original,  but all of which
together shall constitute one and the same instrument.

                  9.5 Headings. The headings and captions used in this Agreement
are used for  convenience  only and are not to be  considered  in  construing or
interpreting  this  Agreement.  All  references  in this  Agreement to sections,
paragraphs,  exhibits, and schedules shall, unless otherwise provided,  refer to
sections and paragraphs hereof and exhibits and schedules  attached hereto,  all
of which exhibits and schedules are incorporated herein by this reference.

                  9.6 Notices. Unless otherwise provided, any notice required or
permitted  under this  Agreement  shall be given in writing  and shall be deemed
effectively  given  upon  personal  delivery  to the  party to be  notified,  by
telecopier or upon deposit with the United States Post Office,  by registered or
certified mail, postage prepaid and addressed to the party to be notified in the
case of the Company,  at 349 Oyster Point  Boulevard,  South San  Francisco,  CA
94080, attention:  President, with a copy to C. Kevin Kelso, Fenwick & West LLP,
Two Palo Alto Square,  Palo Alto,  California 94306, or in the case of Investor,
at the  record  address  for such  Investor  as  reflected  on the  books of the
Company,  or at such other address as any party may designate by giving ten (10)
days  advance  written  notice  to the  other  party.  Notices  shall be  deemed
delivered  upon  delivery  if  personally  delivered,  one  business  day  after
transmission with  confirmation of receipt if sent by telecopier,  or three days
after deposit in the mails if mailed.

                  9.7 No Finder's Fees. Each party represents that it neither is
nor  will be  obligated  for any  finder's  or  broker's  fee or  commission  in
connection with this transaction.  Each Investor agrees to indemnify and to hold
harmless the Company from any liability for any  commission or  compensation  in
the nature of a finder's or broker's fee (and any asserted  liability) for which
the Investor or any of its officers, partners,  employees, or representatives is
responsible.  The Company agrees to indemnify and to hold harmless each Investor
from any  liability  for any  commission  or  compensation  in the  nature  of a
finder's or broker's fee (and any asserted  liability)  for which the Company or
any of its officers, employees or representatives is responsible.

                  9.8 Costs, Expenses. Each party's costs in connection with the
preparation,  execution  delivery and  performance of this Agreement  (including
without limitation legal fees) shall be borne by that party.

                  9.9 Amendments and Waivers.  Any term of this Agreement may be
amended and the  observance of any term of this  Agreement may be waived (either
generally   or  in  a   particular   instance   and  either   retroactively   or
prospectively),  only with the  written  consent of the  Company  and  Investors
holding a  majority  of the  Purchased  Shares  purchased  hereunder;  provided,
however,  that no amendment or waiver of the Company's obligations under Section
7 of this Agreement  that  significantly  and adversely  affects the rights of a
holder of Purchased  Shares shall be binding upon that holder unless that holder
has consented in writing to such

                                       16
<PAGE>

amendment  or waiver.  Subject  to the  limitations  set forth in the  preceding
sentence, any amendment or waiver effected in accordance with this Section shall
be binding  upon each  holder of any  Purchased  Shares at the time  outstanding
(even if such  Investor or other  holder did not vote with  respect to, or voted
against, such amendment or waiver),  each future holder of such securities,  and
the Company. The Investors acknowledge that by virtue of this provision, holders
of a majority of the  Purchased  Shares may bind other  holders to  amendment or
waivers that such other holders may have voted to oppose.

                  9.10 Severability. If one or more provisions of this Agreement
are held to be invalid,  illegal or  unenforceable  under  applicable  law, such
provision(s)  shall be  excluded  from this  Agreement  and the  balance  of the
Agreement  shall be  interpreted  as if such  provision(s)  were so excluded and
shall be enforceable in accordance with its terms.

                  9.11  Entire  Agreement.  This  Agreement,  together  with any
exhibits or schedules hereto, constitutes the entire agreement and understanding
of the parties with respect to the subject  matter hereof and supersedes any and
all prior negotiations,  correspondence,  agreements,  understandings  duties or
obligations between the parties with respect to the subject matter hereof.

                  9.12  Further  Assurances.  From  and  after  the date of this
Agreement,  upon the request of an Investor or the Company,  the Company and the
Investors  shall  execute  and  deliver  such  instruments,  documents  or other
writings as may be  reasonably  necessary  or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement.

                [Remainder of this page intentionally left blank]

                                       17
<PAGE>

         IN WITNESS WHEREOF,  the parties hereto have executed this Common Stock
Purchase Agreement as of the date first above written.

THE COMPANY:                                      INVESTOR:
-----------                                       --------

Cellegy Pharmaceuticals, Inc.,                    Framlington Health Fund
  a California corporation                        ------------------------------
                                                  Name of Investor

By:  /s/ Richard Juelis                        By:  /s/ Antony Milford
     ------------------------------------           -------------------------

Title:  VP, Finance, CFO                       Title:  Trust Accounts Supervisor
        ---------------------------------              ----------------------

                           [COUNTERPART SIGNATURE PAGE
                        COMMON STOCK PURCHASE AGREEMENT]

                                       18
<PAGE>

         IN WITNESS WHEREOF,  the parties hereto have executed this Common Stock
Purchase Agreement as of the date first above written.

THE COMPANY:                                 INVESTOR:
-----------                                  --------

Cellegy Pharmaceuticals, Inc.,               Munder Framlington Healthcare Fund
  a California corporation                   ------------------------------
                                             Name of Investor

By:  /s/ A. Richard Juelis                   By:  /s/ Antony Milford
     ------------------------------------         -------------------------

Title:  VP, Finance, CFO                     Title:  Trust Accounts Supervisor
        ---------------------------------            ----------------------

                           [COUNTERPART SIGNATURE PAGE
                        COMMON STOCK PURCHASE AGREEMENT]

                                       19

<PAGE>

         IN WITNESS WHEREOF,  the parties hereto have executed this Common Stock
Purchase Agreement as of the date first above written.

THE COMPANY:                                      INVESTOR:
-----------                                       --------

Cellegy Pharmaceuticals, Inc.,                    SMALL CAP World Fund, Inc.
  a California corporation                        ------------------------------
                                                  Name of Investor

By:  /s/ A. Richard Juelis                     By:  /s/ Michael J. Downer
     ------------------------------------           -------------------------

Title:  VP, Finance, CFO                       Title:  Secretary
        ---------------------------------              ----------------------

                           [COUNTERPART SIGNATURE PAGE
                        COMMON STOCK PURCHASE AGREEMENT]

                                       20
<PAGE>

         IN WITNESS WHEREOF,  the parties hereto have executed this Common Stock
Purchase Agreement as of the date first above written.

THE COMPANY:                                      INVESTOR:
-----------                                       --------

Cellegy Pharmaceuticals, Inc.,                    Four Partners
  a California corporation                        ------------------------------
                                                  Name of Investor

By:  /s/ A. Richard Juelis                     By:  /s/ Thomas J. Tisch
     ------------------------------------           -------------------------

Title:  VP, Finance, CFO                       Title:  Manager, Four Partners
        ---------------------------------              ----------------------

                           [COUNTERPART SIGNATURE PAGE
                        COMMON STOCK PURCHASE AGREEMENT]

                                       21Exhibit 4.2

         THE WARRANTS  REPRESENTED BY THIS  CERTIFICATE AND THE SHARES
         ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED  UNDER
         THE  SECURITIES  ACT OF 1933,  AS  AMENDED  (THE  "SECURITIES
         ACT"),   OR  ANY  STATE   SECURITIES   LAWS  AND,  UNLESS  SO
         REGISTERED,  MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
         EXEMPTION  FROM,  OR IN A  TRANSACTION  NOT  SUBJECT  TO, THE
         REGISTRATION  REQUIREMENTS  OF THE  SECURITIES  ACT  AND  ANY
         APPLICABLE STATE SECURITIES LAWS.

                         THE TRANSFER OF THIS WARRANT IS
                         RESTRICTED AS DESCRIBED HEREIN.

                          CELLEGY PHARMACEUTICALS, INC.

               Warrant for the Purchase of Shares of Common Stock,
                                  no par value

No. 1                                                             150,000 Shares

                  THIS CERTIFIES that, for value received, GRUNTAL & CO., L.L.C.
(the  "Holder"),  is  entitled  to  subscribe  for  and  purchase  from  CELLEGY
PHARMACEUTICALS,  INC., a California corporation (the "Company"), upon the terms
and  conditions  set forth herein,  at any time or from time to time after March
21, 2001,  and before 5:00 p.m., New York time, on March 21, 2004 (the "Exercise
Period"),  150,000 shares of the Company's  Common Stock,  no par value ("Common
Stock"),  at a price of $8.50 per share (the  "Exercise  Price")  (collectively,
including any warrants issued upon the exercise or transfer of any such warrants
in whole or in part, the  "Warrants").  All of the 150,000 shares subject to the
Warrant shall vest on the date hereof.  As used herein,  the term "this Warrant"
shall mean and include this Warrant and any Warrant or Warrants hereafter issued
as a  consequence  of the  exercise or  transfer of this  Warrant in whole or in
part.  This  Warrant may not be sold,  transferred,  assigned  or  hypothecated,
except that, upon compliance with the procedures  described in Section 4, it may
be  transferred,  in whole or in part, to (i) one or more  directors,  officers,
members  or  employees  of the Holder (or the  directors,  officers,  members or
employees of any such  member);  (ii) any other firm which  participated  in the
transactions  contemplated by the engagement letter (the  "Transaction") (or the
directors,  officers,  members or employees of any such firm); (iii) a successor
to the Holder, or the officers,  members or employees of such successor;  (iv) a
purchaser of substantially  all of the assets of the Holder; or (v) by operation
of law, in each case so long as the sale,  transfer or assignment  complies with
applicable  securities  laws and such  assignee  or  transferee  agrees with the
Company in writing  to be bound by the terms of this  Warrant,  and the term the
"Holder" as used herein shall  include any  transferee  to whom this Warrant has
been transferred in accordance with the above.

<PAGE>

                  The number of shares of Common Stock issuable upon exercise of
the Warrant (the "Warrant  Shares") and the Exercise  Price may be adjusted from
time to time as hereinafter set forth.

                  1. Exercise. This Warrant may be exercised during the Exercise
Period,  as to the whole or any lesser  number of whole Warrant  Shares,  by the
surrender  of this  Warrant  (with  the  election  form at the end  hereof  duly
executed) to the Company at its office at 394 Oyster Point Boulevard, Suite 200,
San  Francisco,  California  94080 or at such other  place as is  designated  in
writing by the  Company,  together  with a  certified  or bank  cashier's  check
payable to the order of the  Company in an amount  equal to the  Exercise  Price
multiplied  by the  number of Warrant  Shares  for which  this  Warrant is being
exercised (the "Stock Purchase Price").

                  2.  Conversion.  (a) In  lieu  of  the  payment  of the  Stock
Purchase  Price,  the Holder  shall have the right (but not the  obligation)  to
require the Company to convert this Warrant, in whole or in part, into shares of
Common  Stock (the  "Conversion  Right") as provided for in this Section 2. Upon
exercise  of the  Conversion  Right,  the  Company  shall  deliver to the Holder
(without  payment by the Holder of any of the Stock Purchase  Price) that number
of  shares of Common  Stock  (the  "Conversion  Shares")  equal to the  quotient
obtained by  dividing  (x) the value of this  Warrant (or portion  thereof as to
which the Conversion  Right is being exercised if the Conversion  Right is being
exercised in part) at the time the Conversion Right is exercised  (determined by
subtracting  the aggregate Stock Purchase Price of the shares of Common Stock as
to which the Conversion Right is being exercised in effect  immediately prior to
the exercise of the Conversion Right from the aggregate Current Market Price (as
defined in Section 6(c)  hereof),  as of the date of exercise of the  Conversion
Right,  of the shares of Common Stock as to which the Conversion  Right is being
exercised) by (y) the Current  Market Price of one share of Common Stock,  as of
the date of exercise of the Conversion Right.

                           (b) The Conversion Rights provided under this Section
2 may be  exercised,  in whole or in  part,  at any time and from  time to time,
while any portion of the Warrant remains  outstanding.  In order to exercise the
Conversion  Right,  the Holder shall  surrender to the Company,  at its offices,
this Warrant with the Cashless  Exercise  Form at the end hereof duly  executed.
The  presentation  and  surrender  shall  be  deemed a  waiver  of the  Holder's
obligation to pay all or any portion of the aggregate purchase price payable for
the shares of Common Stock as to which such Conversion Right is being exercised.
This Warrant (or so much thereof as shall have been  surrendered for conversion)
shall be  deemed  to have  been  converted  immediately  prior  to the  close of
business on the day of surrender of such Warrant for  conversion  in  accordance
with the foregoing provisions.

                  3. Holder of Record. Upon each exercise of the Holder's rights
to purchase Warrant Shares or Conversion  Shares,  the Holder shall be deemed to
be the holder of record of the Warrant Shares or Conversion Shares issuable upon
such  exercise or  conversion,  notwithstanding  that the transfer  books of the
Company shall then be closed or certificates representing such Warrant Shares or
Conversion Shares shall not then have been actually  delivered to the Holder. As
soon as practicable after each such exercise or conversion of this Warrant,  the
Company shall issue and deliver to the Holder a certificate or certificates  for
the  Warrant  Shares  or  Conversion  Shares  issuable  upon  such  exercise  or
conversion,  registered  in the  name of the  Holder  or its  designee.  If this
Warrant should be exercised or converted in part

                                       2
<PAGE>

only,  the Company  shall,  upon  surrender  of this  Warrant for  cancellation,
execute and deliver a new Warrant evidencing the right of the Holder to purchase
the  balance of the Warrant  Shares (or  portions  thereof)  subject to purchase
hereunder.

                  4. Warrant Register.  Any Warrants issued upon the transfer or
exercise or  conversion  in part of this Warrant  shall be numbered and shall be
registered  in a Warrant  Register  as they are  issued.  The  Company  shall be
entitled to treat the registered  holder of any Warrant on the Warrant  Register
as the  owner  in fact  thereof  for all  purposes  and  shall  not be  bound to
recognize  any  equitable  or other claim to or interest in such  Warrant on the
part of any  other  person,  and shall not be  liable  for any  registration  or
transfer of Warrants  which are  registered or to be registered in the name of a
fiduciary  or the nominee of a fiduciary  unless made with the actual  knowledge
that a fiduciary or nominee is committing a breach of trust in  requesting  such
registration  or  transfer,  or with  the  knowledge  of  such  facts  that  its
participation  therein amounts to bad faith.  This Warrant shall be transferable
only on the books of the Company  upon  delivery  thereof  duly  endorsed by the
Holder or by his duly authorized  attorney or representative,  or accompanied by
proper  evidence of  succession,  assignment,  or authority to transfer.  In all
cases of transfer by an attorney,  executor,  administrator,  guardian, or other
legal representative,  duly authenticated evidence of his or its authority shall
be produced.  Upon any registration of transfer, the Company shall deliver a new
Warrant  or  Warrants  to the  person  entitled  thereto.  This  Warrant  may be
exchanged,  at the option of the Holder thereof,  for another Warrant,  or other
Warrants  of  different  denominations,  of like tenor and  representing  in the
aggregate  the right to  purchase a like number of Warrant  Shares (or  portions
thereof),   upon  surrender  to  the  Company  or  its  duly  authorized  agent.
Notwithstanding  the  foregoing,  the Company  shall have no obligation to cause
Warrants  to be  transferred  on its books to any person  if, in the  opinion of
counsel to the Company, such transfer does not comply with the provisions of the
Securities  Act of 1933, as amended (the "Act"),  and the rules and  regulations
thereunder.  In  connection  with any  proposed  sale,  transfer  or  assignment
(including  pursuant to the first  paragraph  of this  Warrant) of the  Warrant,
Warrant Shares or Conversion  Shares,  the Holder shall provide the Company with
such  information  regarding  the proposed  sale,  transfer or assignment as the
Company may reasonably request.  The Company may condition approval of the sale,
transfer or assignment  upon the receipt of an opinion of counsel to the Holder,
addressed to the Company and in form and substance  reasonably  satisfactory  to
the Company,  that the transfer complies with federal and state securities laws;
provided,  however, that no such opinion will be required in the case of routine
sales of Warrant Shares or Conversion  Shares  pursuant to Rule 144 where Holder
represents  that it has complied with Rule 144(d) and (e) in reasonable  detail,
the selling  broker  represents  that it has complied with Rule 144(f),  and the
Company is  provided  with a copy of  Holder's  notice of  proposed  sale and/or
transfer.

                  5. Valid Issuance.  The Company shall at all times reserve and
keep available out of its authorized and unissued  Common Stock,  solely for the
purpose of  providing  for the  exercise of the rights to  purchase  all Warrant
Shares and/or Conversion Shares granted pursuant to the Warrants, such number of
shares of Common Stock as shall, from time to time, be sufficient therefor.  The
Company covenants that all shares of Common Stock issuable upon exercise of this
Warrant,  upon receipt by the Company of the full Exercise Price  therefor,  and
all shares of Common Stock  issuable upon  conversion of this Warrant,  shall be
validly issued,  fully paid and  nonassessable,  without any personal  liability
attaching to the ownership  thereof,  and will not be issued in violation of any
preemptive rights of stockholders,  optionholders,

                                       3
<PAGE>

warrantholders  and any other persons and the Holders will receive good title to
the  securities  purchased by them,  respectively,  free and clear of all liens,
security interests, pledges, charges, encumbrances, stockholders' agreements and
voting trusts which might be created by acts or omissions to act of the Company.

                  6. Adjustments.

                           (a)  Stock  Splits,  Recapitalizations,  Etc.  If the
Company (i) pays a dividend in shares of capital  stock or other  securities  on
its outstanding  Common Stock, (ii) subdivides its outstanding  shares of Common
Stock in a transaction  that increases the amount of its  outstanding  shares of
Common  Stock,  or (iii)  combines its  outstanding  shares of Common Stock in a
transaction that decreases the amount of its outstanding shares of Common Stock,
then upon  exercise or  conversion  of this  Warrant,  for each Warrant Share or
Conversion  Share acquired  ("Shares"),  Holder shall  receive,  without cost to
Holder,  the total number and kind of securities to which Holder would have been
entitled  had Holder  owned the  Shares of record as of the date such  dividend,
distribution, subdivision or combination occurred.

                           (b) Reclassification. In case of any reclassification
or change of the shares of Common Stock  issuable upon exercise or conversion of
this Warrant  (other than a change in par value or from a specified par value to
no par value, or as a result of a subdivision or combination,  but including any
change in such shares into two or more  classes or series of shares),  excluding
any reclassification or change addressed elsewhere in this Section 6, or in case
of any consolidation or merger of another  corporation into the Company in which
the   Company  is  the   continuing   corporation   and  in  which  there  is  a
reclassification  or change  (including a change to the right to receive cash or
other property) of the shares of Common Stock (other than a change in par value,
or from a specified  par value to no par value,  or as a result of a subdivision
or combination,  but including any change in the shares into two or more classes
or series of shares),  excluding any consolidation or merger addressed elsewhere
in this  Section 6, the Holder shall have the right  thereafter  to receive upon
exercise  of this  Warrant,  the kind,  amount and number of shares of stock and
other securities, property, cash or any combination thereof that are received as
a result of such reclassification, change, consolidation, or merger, by a holder
of record of the number of shares of Common Stock for which this  Warrant  would
have  been  exercisable  immediately  prior  to such  reclassification,  change,
consolidation or merger.

                           (c)  Adjustments of Warrant Price. If the outstanding
shares of Common  Stock are combined or  consolidated,  by  reclassification  or
otherwise,  into a  lesser  number  of  shares,  the  Exercise  Price  shall  be
proportionately increased. If the outstanding shares of Common Stock are divided
by reclassification or otherwise,  into a greater number of shares, the Exercise
Price shall be proportionately decreased.

                           (d) Adjustment is Cumulative.  The provisions of this
Section 6 shall similarly apply to successive stock  dividends,  stock splits or
combinations, reclassifications, exchanges, substitutions, or other events.

                           (e)  No   Impairment.   The  Company  shall  not,  by
amendment of its articles of incorporation or through a reorganization, transfer
of assets, consolidation,  merger, dissolution,  issue, or sale of securities or
any other voluntary action, avoid or seek to avoid the

                                       4
<PAGE>

observance or performance of any of the terms to be observed or performed  under
this  Warrant  by the  Company,  but  shall at all  times  carry  out of all the
provisions of this Section 6.

                           (f)   Certificate  as  to   Adjustments.   Upon  each
adjustment of the Exercise Price,  the Company at its expense shall compute such
adjustment, and furnish Holder with a certificate of its Chief Financial Officer
setting forth such adjustment and the facts upon which such adjustment is based.
The Company shall,  upon written request,  furnish Holder a certificate  setting
forth the  Exercise  Price in effect  upon the date  thereof  and the  series of
adjustments leading to such Exercise Price. Any dispute relating to the accuracy
of the  computation of any such  adjustment  shall be resolved by submitting the
dispute to an independent  public  accounting firm of national  standing that is
not  associated  with either the  Company or the  Holder.  In the event that the
Company  and the  Holder are  unable to agree on such a firm,  each party  shall
select a firm and those two firms shall select a third firm, which shall resolve
the  dispute.  The fees and  expenses of any such firms shall be shared and paid
equally by the Company and the Holder.

                           (g) For purposes of this  Agreement,  "Current Market
Price" shall mean the Market Price on the relevant date, as long as the national
securities exchanges were open for trading on such date, provided, however, that
if the national securities  exchanges were not open for trading on such date, it
shall  mean the  Market  Price on the most  recent  date for which the  national
securities  exchanges were open for trading,  and further  provided,  that if no
Common  Stock is then listed or admitted to trading on any  national  securities
exchange or quoted in the  over-the-counter  market,  the Current  Market  Price
shall be the Market Price on such date. The "Market Price" shall mean the amount
per share of Common  Stock  equal to (a) the last sale  price of such  shares of
Common  Stock on such date or, if no such sale  takes  place on such  date,  the
average of the closing bid and asked prices  thereof on such date,  in each case
as officially reported on the principal national  securities  exchanges on which
such  shares of Common  Stock are then  listed or  admitted to trading or (b) if
such  shares of Common  Stock are not then  listed or admitted to trading on any
national  securities  exchange but are  designated  as a national  market system
security by the NASD,  the last  trading  price of the shares of Common Stock on
such  date,  or (c) if there  shall  have been no trading on such date or if the
shares of Common Stock are not so designated, the average of the closing bid and
asked  prices of the  shares  of Common  Stock on such date as shown by the NASD
automated  quotation  system, or (d) if such shares of Common Stock are not then
listed  or  admitted  to  trading  on any  national  exchange  or  quoted in the
over-the-counter  market, the higher of (x) the book value thereof as determined
by any firm of independent public accountants of recognized standing selected by
the Board of  Directors  of the  Company as of the last day of any month  ending
within sixty (60) days preceding the date as of which the determination is to be
made or (y) the fair  value  thereof  determined  in good  faith by the Board of
Directors  of the  Company as of a date which is within  twenty (20) days of the
date as of which the determination is to be made.

                           (h) No  adjustment  in the  Exercise  Price  shall be
required  if such  adjustment  is less than $.05;  provided,  however,  that any
adjustments  which by reason of this  Section  6(h) are not  required to be made
shall be carried  forward and taken into account in any  subsequent  adjustment.
All  calculations  under this  Section 6 shall be made to the nearest cent or to
the nearest one-thousandth of a share, as the case may be.

                                       5
<PAGE>

                           (i)  The  Company  shall  not be  required  to  issue
fractions of shares of Common Stock or other  capital  stock of the Company upon
the exercise or conversion of this Warrant.  If any fraction of a share would be
issuable on the exercise or conversion  of this Warrant (or  specified  portions
thereof)  but for the  preceding  sentence,  the  Company  shall  purchase  such
fraction for an amount in cash equal to the same fraction of the Current  Market
Price of such share of Common  Stock on the date of  exercise or  conversion  of
this Warrant.

                  7. Assumption of Obligations.

                           (a) In case of any  consolidation  with or  merger of
the  Company  with  or  into  another   corporation  (other  than  a  merger  or
consolidation  in which the Company is the surviving or continuing  corporation)
where the  consideration  for the  acquisition  to be received by the  Company's
shareholders consists solely of stock or securities of the acquiror or an entity
affiliated  with the  acquiror,  such  successor  corporation  shall  assume the
obligations  of this  Warrant  and shall  execute  with the Holder an  agreement
providing  that the Holder  shall  have the right  thereafter  to  receive  upon
exercise of this Warrant solely the kind and amount of shares of stock and other
securities  receivable  upon such  consolidation  or merger that would have been
issuable in the  consolidation or merger with respect to the number of shares of
Common  Stock for which this  Warrant  would have been  exercisable  immediately
prior to such consolidation or merger.

                           (b) Notwithstanding the foregoing. In the case of (a)
a merger or  consolidation  where the  consideration  for the  acquisition to be
received by the Company's  shareholders in return for their capital stock of the
Company consists of cash or a combination of cash and other property, or (b) the
proposed  liquidation  and  dissolution  of the Company,  the Company shall give
Holder at least  fifteen  (15) days  advance  written  notice of such event (the
"Company Notice"), which notice shall include the Company's best estimate of the
value of the Shares  receivable  upon exercise or conversion of this Warrant and
the proposed date upon which such event is expected to occur. During such notice
period,  Holder may  exercise or convert  this  Warrant in  accordance  with its
terms, whether or not exercise or conversion is contingent upon the happening of
such event. Subject to prior exercise or conversion as provided in the preceding
sentence, this Warrant will terminate at 5:00 p.m. Pacific time on the day prior
to the date such event is expected to occur as set forth in the Company  Notice,
provided that the event actually occurs within sixty (60) days after the date it
is expected to occur, as such date was specified in the Company Notice.

                           (c) The  above  provisions  of this  Section  7 shall
similarly apply to successive  reclassifications and changes of shares of Common
Stock and to successive consolidations, mergers, sales, leases or conveyances.

                  8.  Notice  of  Adjustments.  In case at any time the  Company
shall propose

                           (i) to pay any dividend or make any  distribution  on
shares of Common Stock in shares of Common Stock or make any other  distribution
(other than regularly scheduled cash dividends which are not in a greater amount
per share than the most recent such dividend) to all holders of Common Stock; or

                                       6
<PAGE>

                           (ii)  to  issue  any   rights,   warrants   or  other
securities  to all  holders  of Common  Stock  entitling  them to  purchase  any
additional  shares  of  Common  Stock or any  other  rights,  warrants  or other
securities; or

                           (iii) to  effect  any  reclassification  or change of
outstanding shares of Common Stock, or any consolidation or merger where holders
of Common Stock will be entitled to receive  securities of another issuer,  or a
sale of all or substantially all of the Company's  assets,  described in Section
7; or

                           (iv)  to  effect  any  liquidation,   dissolution  or
winding-up of the Company; or

                           (v) to take any other  action  which  would  cause an
adjustment to the Exercise Price;

then,  and in any one or more of such  cases,  the  Company  shall give  written
notice  thereof,  by registered  mail,  postage  prepaid,  to each Holder at the
address for such Holder as it shall  appear in the Warrant  Register,  mailed no
later than the date on which such notice is given to the Company's shareholders,
and shall  include in such notice (i) the date as of which the holders of record
of  shares  of  Common  Stock to be  entitled  to  receive  any  such  dividend,
distribution,  rights, warrants, other securities are to be determined, (ii) the
approximate  date on which  any such  reclassification,  change  of  outstanding
shares of Common  Stock,  consolidation,  merger,  sale,  lease,  conveyance  of
property,   liquidation,   dissolution  or  winding-up  is  expected  to  become
effective,  and the date as of which it is  expected  that  holders of record of
shares of Common Stock shall be entitled to exchange their shares for securities
or other property,  if any,  deliverable upon such  reclassification,  change of
outstanding shares, consolidation,  merger, sale, lease, conveyance of property,
liquidation,  dissolution or winding-up,  or (iii) the date of such action which
would require an adjustment to the Exercise Price.

                  9. Taxes.  The issuance of any shares or other securities upon
the exercise or conversion of this Warrant,  and the delivery of certificates or
other instruments  representing  such shares or other securities,  shall be made
without  charge to the Holder for any tax (other than income  taxes,  if any, of
Holder) or other  charge in respect of such  issuance.  The  Company  shall not,
however,  be  required  to pay any tax which may be  payable  in  respect of any
transfer  involved in the issue and delivery of any  certificate in a name other
than  that of the  Holder  and the  Company  shall not be  required  to issue or
deliver any such certificate  unless and until the person or persons  requesting
the issue thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.

                  10.  Registration  Rights.  (a) If,  at any  time  during  the
four-year  period  commencing  on March  21,  2001,  the  Company  shall  file a
registration  statement (other than on Form S-4, Form S-8 or any successor form)
with the  Securities  and  Exchange  Commission  (the  "Commission")  while  any
Eligible Securities (as hereinafter defined) are outstanding,  the Company shall
give all of the then holders of any Eligible Securities (the "Eligible Holders")
at least  15 days  prior  written  notice  of the  filing  of such  registration
statement.  If requested by any Eligible  Holder in writing within 15 days after
delivery of any such notice,  the Company  shall,  at the Company's sole expense
(other than the fees and  disbursements  of counsel for the Eligible

                                       7
<PAGE>

Holders  and the  underwriting  discounts,  if any,  payable  in  respect of the
Eligible Securities sold by any Eligible Holder), register or qualify all or, at
each Eligible  Holder's  option,  any portion of the Eligible  Securities of any
Eligible  Holder  who  shall  have  made  such  request,  concurrently  with the
registration  of such other  securities,  all to the extent required to permit a
public  offering and sale of the Eligible  Securities  through the facilities of
all appropriate  securities exchanges and over-the-counter  markets on which the
Company Stock are then traded.  Notwithstanding  the foregoing,  if the managing
underwriter  of any such  offering  shall advise the Company in writing that, in
its opinion,  the  distribution  of all or a portion of the Eligible  Securities
requested  by  the  Eligible   Holders  to  be  included  in  the   registration
concurrently   with  the  securities  being  registered  by  the  Company  would
materially  adversely  affect the distribution of such securities by the Company
for its own account,  then such Eligible  Securities  shall be excluded from the
registration,   pro  rata  with  shares  held  by  any  other  shareholder  with
registration  rights who requested  that shares be included in the  registration
statement.  As used herein,  "Eligible Securities" shall mean the Warrant Shares
and the Conversion  Shares which,  in each case,  have not been  previously sold
pursuant  to a  registration  statement  or  previously  sold,  or which are not
eligible for sale, pursuant to Rule 144 promulgated under the Act or which would
not be so  eligible  if the Warrant had been  converted  and  Conversion  Shares
issued pursuant to Section 2.

                           (b) If,  during the  six-month  period  commencing on
March 21, 2001, the Company has not filed a registration  statement  (other than
on Form S-4,  Form S-8 or any  successor  form)  with the  Commission  while any
Eligible  Securities  are  outstanding,  and the Eligible  Holders have not been
given the opportunity to exercise their registration  rights pursuant to Section
10(a) above,  the Eligible Holders who in the aggregate own (or upon exercise of
all  Warrants  then  outstanding  would own) a majority  of the total  number of
shares of Common Stock then included (or upon such  exercise  would be included)
in the Eligible  Securities (the "Majority  Holders") will have the right to, at
any time during the three and one-half (3-1/2) year period  commencing after the
expiration of the six-month period  mentioned  above,  give a written request to
the Company to register the sale of all or part of such Eligible Securities. The
Company shall, as promptly as practicable,  prepare and file with the Commission
a registration  statement  sufficient to permit the public  offering and sale of
the Eligible  Securities  through the facilities of all  appropriate  securities
exchanges  and the  over-the-counter  markets on which the Common  Stock is then
listed, and will use all reasonable efforts to cause such registration statement
to become  effective as promptly as  practicable;  provided,  however,  that the
Company  shall only be obligated  to file one such  registration  statement  for
which all expenses incurred in connection with such registration (other than the
fees and  disbursements  of counsel for the  Eligible  Holders and  underwriting
discounts,  if any,  payable in respect of the Eligible  Securities  sold by the
Eligible  Holders)  shall  be  borne  by the  Company  and one  additional  such
registration statement for which all such expenses shall be paid by the Eligible
Holders.  Within three business days after receiving any request contemplated by
this  Section  10(b),  the Company  shall give  written  notice to all the other
Eligible  Holders advising each of them that the Company is proceeding with such
registration  and  offering  to include  therein  all or any portion of any such
other Eligible Securities,  provided that the Company receives a written request
to do so from such Eligible Holder within 15 days after delivery to him or it of
the Company's notice.

                           (c) In the event of a  registration  pursuant  to the
provisions  of this Section 10, the Company  shall use its best efforts to cause
the Eligible  Securities  so  registered  to be registered or qualified for sale
under the  securities  or blue sky laws of such  jurisdictions  as the

                                       8
<PAGE>

Holder or Holders may reasonably request;  provided,  however,  that the Company
shall not for any such  purpose  be  required  to (A)  qualify  generally  to do
business  as a  foreign  corporation  in  any  jurisdiction  wherein  it is  not
otherwise  required to be so  qualified,  (B) subject  itself to taxation in any
jurisdiction  wherein it is not so subject or (C) consent to general  service of
process in any such  jurisdiction or otherwise take action that would subject it
to the general jurisdiction of the courts of any jurisdiction to which it is not
so subject.

                           (d) The  Company  shall use its best  efforts to keep
effective any registration or qualification  contemplated by this Section 10 and
shall from time to time, subject to the provisions of Section 10(e) below, amend
or supplement each applicable  registration  statement,  preliminary prospectus,
final  prospectus,  application,  document and  communication for such period of
time as the Company,  in its  discretion,  maintains  the  effectiveness  of the
registration  statement,  provided,  however, that in the case of a registration
pursuant to Section  10(b),  the Company  shall use its best efforts to keep the
registration  statement  effective  as long as shall be  required  to permit the
Eligible  Holders  to  complete  the offer and sale of the  Eligible  Securities
covered thereby,  but the Company shall in no event be required to keep any such
registration  or  qualification  in effect  for a period in excess of six months
from the date on which the Eligible Holders are first free to sell such Eligible
Securities.

                           (e) Each  Eligible  Holder  shall give at least three
business  days'  prior  written  notice (a "Sale  Notice") to the Company of any
proposed sale of any Eligible  Securities pursuant to any registration and shall
not make such sale (i) unless such three  business days lapse  without  response
from the Company,  (ii) during any Blackout Period as described  below, or (iii)
if the Company  responds within such three business day period by stating that a
prospectus supplement or post-effective amendment will be filed pursuant to this
Warrant or that it is necessary  for the Company to make an  appropriate  filing
under the Securities Exchange Act of 1934, as amended (the "1934 Act"), so as to
cause the prospectus to become current. Upon the occurrence of one of the events
described in the preceding  sentence,  such  Eligible  Holder shall not make any
such sale of any Eligible Securities until the Company has notified the Eligible
Holder that any such post-effective  amendment has become effective,  prospectus
supplement  has been  filed or 1934 Act filing  has been  made.  If the  Company
determines that an amendment,  supplement or 1934 Act filing will be prepared or
filed as provided above, it will cause the amendment, supplement or filing to be
made as soon as practicable  thereafter and, in all events,  within 45 days from
the date of delivery of the Sales  Notice and, in the case of an  amendment,  to
become  effective as soon as  practicable  and will notify the  Eligible  Holder
promptly when such filing has been made and, in the case of an amendment, become
effective.  A Sale  Notice  shall be  effective  for 30 days after the date upon
which an  Eligible  Holder is first  entitled  to sell the  Eligible  Securities
proposed for sale following a Sale Notice.

                           For  purposes of this  Warrant,  a "Blackout  Period"
means a period of time during  which the Company  would advise  against,  and/or
prohibit,  an executive  officer of the Company from  engaging in an open market
purchase  or  sale of the  Company's  securities  because  of the  existence  of
nonpublic  information that in the Company's reasonable judgment would require a
prospectus supplement or post-effective  amendment to be filed with the SEC, and
terminating  when  (i)  such   information  is  no  longer  material   nonpublic
information  or  (ii)  until  further  public  disclosures  (including,  without
limitation, an amendment or supplement to a registration statement or a 1934 Act
filing) of such  information  are made.  Each  Eligible  Holder

                                       9
<PAGE>

agrees that the Company may delay the Eligible Holder's ability to sell Eligible
Securities  pursuant to the  registration  statement  if the Company  delivers a
certificate  in writing to Holder (a  "Blackout  Notice")  to the effect  that a
Blackout  Period is in effect.  In such an event,  the Eligible Holder shall not
sell  or  enter  into  any  agreements  or  arrangements  to sell  any  Eligible
Securities,  from the period  commencing with receipt of the Blackout Notice and
ending  upon  receipt of the notice  referred to in the next  sentence  that the
Blackout  Period has  terminated.  If the Eligible  Holder has  delivered a Sale
Notice and the Company has delivered a Blackout  Notice,  then the Company shall
notify the Eligible Holder, promptly but in no event later than two (2) business
days  following  the  termination  of any Blackout  Period.  The Company may not
impose consecutive Blackout Notices.

                           (f) In the event of a  registration  pursuant  to the
provisions of this Section 10, the Company shall furnish to each Eligible Holder
such number of copies of the  registration  statement and of each  amendment and
supplement  thereto (in each case,  including  all  exhibits),  such  reasonable
number of copies of each prospectus contained in such registration statement and
each supplement or amendment  thereto  (including each preliminary  prospectus),
all of which  shall  conform  to the  requirements  of the Act and the rules and
regulations  thereunder,  and such other  documents,  as any Eligible Holder may
reasonably  request to facilitate  the  disposition  of the Eligible  Securities
included in such registration.

                           (g) In the event of a  registration  pursuant  to the
provisions of this Section 10, the Company shall furnish each Eligible Holder of
any Eligible Securities so registered with an opinion of its counsel (reasonably
acceptable  to  the  Eligible  Holders)  to the  effect  that  the  registration
statement has become effective under the Act and to such counsel's  knowledge no
order suspending the effectiveness of the registration statement,  preventing or
suspending the use of the registration  statement,  any preliminary  prospectus,
any final prospectus or any amendment or supplement thereto has been issued, nor
has the Commission or any  securities or blue sky authority of any  jurisdiction
instituted or threatened  to institute any  proceedings  with respect to such an
order.

                           (h) If the  registration  relates to an  underwritten
public offering of the Company's securities and Eligible Securities are included
in the registration, then the Company shall enter into an underwriting agreement
containing conventional representations,  warranties, indemnities, allocation of
expenses, and customary closing conditions.

                           (i) The Company  covenants and agrees that, until all
the  Eligible  Securities  have  been sold  under a  registration  statement  or
pursuant to Rule 144 under the Act, it shall keep current in filing all reports,
statements  and other  materials  required  to be filed with the  Commission  to
permit  holders of the Eligible  Securities to sell such  securities  under Rule
144.

                           (j) The Company may delay any requested  registration
hereunder  by giving  written  notice to Eligible  Holders  who have  elected to
include their Eligible Securities in a registration under this Section 10 if the
Company's  Board of Directors  determines in good faith that a  registration  at
such time would be materially  detrimental to the Company provided that any such
delay  shall not exceed  ninety (90) days and the Company  cannot  provide  this
notice more than twice in any twelve-month period.

                                       10
<PAGE>

                           (k) Each Holder hereby agrees that, without the prior
written  consent  of  the  managing  underwriters  (the  "Underwriters")  of  an
underwritten  public  offering of securities by the Company in which such Holder
participates after the date of this Warrant (the "Public Offering"),  and except
for any securities sold by the Holder in such Public Offering,  Holder will not,
during the period  commencing  on the date on which the  Company  notifies  such
Holder of its intention to effect such a Public Offering (but only if the Holder
actually  participates  as a selling  stockholder  in the Public  Offering)  and
ending 90 days  after the date of the final  prospectus  relating  to the Public
Offering (the  "Prospectus"),  (1) offer,  pledge,  sell or contract to sell any
option or contract to purchase,  purchase any option or contract to sell,  grant
any option, right or warrant to purchase, lend, or otherwise transfer or dispose
of,  directly  or  indirectly,  any  shares  of Common  Stock or any  securities
convertible  into or exercisable or exchangeable  for Common Stock, or (2) enter
into any swap or other  arrangement  that  transfers to another,  in whole or in
part, any of the economic consequences of ownership of the Common Stock, whether
any such  transaction  described in clauses (1) or (2) above is to be settled by
delivery of Common Stock or such other  securities,  in cash or  otherwise.  The
foregoing sentence shall apply only to the first Public Offering completed after
the date  hereof  and only if the  Holder  actually  participates  as a  selling
stockholder in the Public  Offering,  and shall not apply to (a) the sale of any
Eligible Securities to the Underwriters  pursuant to any underwriting  agreement
entered  into in  connection  with  the  Public  Offering,  or (b)  transactions
relating solely to shares of Common Stock or other  securities  acquired in open
market transactions after the completion of the Public Offering.

                  11.  Indemnification.  (a) Subject to the conditions set forth
below,  the Company agrees to indemnify and hold harmless each Eligible  Holder,
its  officers,  directors,  members,  employees,  agents and  counsel,  and each
person, if any, who controls any such person within the meaning of Section 15 of
the Act or Section  20(a) of the 1934 Act,  from and  against  any and all loss,
liability,  charge,  claim,  damage and expense whatsoever (which shall include,
for  all  purposes  of  this  Section  11,  but not be  limited  to,  reasonable
attorneys'  fees and any and all  reasonable  expenses  whatsoever  incurred  in
investigating,  preparing  or  defending  against any  litigation,  commenced or
threatened,  or any claim whatsoever, by a third party (i.e., a party other than
the  Company or its  officers,  directors,  employees  or agents)  against  such
persons and any and all amounts paid in settlement of any claim or  litigation),
as and when  incurred,  arising out of, based upon,  or in  connection  with any
untrue statement or alleged untrue statement of a material fact contained (A) in
any registration statement,  preliminary prospectus or final prospectus (as from
time to time amended and supplemented),  or any amendment or supplement thereto,
relating  to  the  sale  of  any  of  the  Eligible  Securities,  or  (B) in any
application or other document or communication  (in this Section 11 collectively
called an "application")  executed by or on behalf of the Company, or based upon
written  information  furnished  by or on  behalf of the  Company,  filed in any
jurisdiction  in order to  register or qualify  any of the  Eligible  Securities
under the  securities  or blue sky laws thereof or filed with the  Commission or
any securities exchange; or any omission or alleged omission to state a material
fact required to be stated therein or necessary to make the  statements  therein
not misleading,  unless such statement or omission was made in reliance upon and
in conformity with written information  furnished to the Company with respect to
such Eligible  Holder by or on behalf of such person  expressly for inclusion in
any registration statement,  preliminary prospectus or final prospectus,  or any
amendment or supplement thereto, or in any application,  as the case may be. The
foregoing

                                       11
<PAGE>

agreement to  indemnify  shall be in addition to any  liability  the Company may
otherwise have, including liabilities arising under this Warrant.

                  If any action is brought against any Eligible Holder or any of
its  officers,   directors,  members,  employees,  agents  or  counsel,  or  any
controlling persons of such person (an "indemnified party"), in respect of which
indemnity may be sought against the Company pursuant to the foregoing paragraph,
such  indemnified  party or parties shall promptly notify the Company in writing
of the institution of such action  (provided that the failure so to notify shall
not relieve the Company from any liability  pursuant to this Section 11(a),  but
shall only  reduce the amount of the  indemnification  if any to the extent that
the Company is prejudiced by such delay) and the Company shall  promptly  assume
the defense of such action,  including  the  employment  of counsel  (reasonably
satisfactory to such indemnified party or parties) and payment of expenses. Such
indemnified  party or  parties  shall  have the right to employ its or their own
counsel in any such case,  but the fees and expenses of such counsel shall be at
the expense of such  indemnified  party or parties unless the employment of such
counsel shall have been  authorized in writing by the Company in connection with
the  defense of such  action or the  Company  shall not have  promptly  employed
counsel  reasonably  satisfactory to such  indemnified  party or parties to have
charge of the defense of such action or such indemnified  party or parties shall
have reasonably  concluded that there may be a conflict of interest  between the
indemnified  party or parties  and the  Company in the conduct of the defense of
such  action,  in any of which  events such  reasonable  fees and expenses (of a
single counsel for all such  indemnified  parties) shall be borne by the Company
and the Company shall not have the right to direct the defense of such action on
behalf of the indemnified  party or parties.  Anything in this Section 11 to the
contrary notwithstanding,  the Company shall not be liable for any settlement of
any such claim or action effected without its written  consent,  which shall not
be  unreasonably  withheld.  The Company  shall not,  without the prior  written
consent of each  indemnified  party that is not  released as  described  in this
sentence, settle or compromise any action, or permit a default or consent to the
entry of judgment in or otherwise  seek to terminate  any pending or  threatened
action,  in respect of which indemnity may be sought  hereunder  (whether or not
any indemnified party is a party thereto),  unless such settlement,  compromise,
consent or termination  includes an  unconditional  release of each  indemnified
party from all liability in respect of such action.  The Company agrees promptly
to  notify  the  Eligible  Holders  of the  commencement  of any  litigation  or
proceedings  against  the  Company  or any  of  its  officers  or  directors  in
connection  with  the  sale  of  any  Eligible  Securities  or  any  preliminary
prospectus,  prospectus,  registration  statement,  or amendment  or  supplement
thereto, or any application relating to any sale of any Eligible Securities.

                           (b) The Holder  agrees to indemnify and hold harmless
the Company, each director of the Company, each officer of the Company who shall
have signed any registration  statement covering Eligible Securities held by the
Holder,  each other person,  if any, who controls the Company within the meaning
of Section 15 of the Act or Section  20(a) of the Exchange Act, and its or their
respective  employees,  agents and counsel,  to the same extent as the foregoing
indemnity from the Company to the Holder in Section 11(a), but only with respect
to  statements  or  omissions,  if  any,  made  in any  registration  statement,
preliminary  prospectus  or final  prospectus  (as from time to time amended and
supplemented), or any amendment or supplement thereto, or in any application, in
reliance  upon and in  conformity  with  written  information  furnished  to the
Company with respect to the Holder by or on behalf of the Holder

                                       12
<PAGE>

expressly  for  inclusion  in  any  such  registration  statement,   preliminary
prospectus or final prospectus,  or any amendment or supplement  thereto,  or in
any application,  as the case may be. If any action shall be brought against the
Company  or any  other  person  so  indemnified  based on any such  registration
statement,  preliminary  prospectus  or final  prospectus,  or any  amendment or
supplement thereto, or in any application, and in respect of which indemnity may
be sought against the Holder  pursuant to this Section  11(b),  the Holder shall
have the rights and duties given to the Company,  and the Company and each other
person so indemnified  shall have the rights and duties given to the indemnified
parties, by the provisions of Section 11(a).

                           (c) To provide for just and  equitable  contribution,
if an indemnified  party makes a claim for  indemnification  pursuant to Section
11(a) or 11(b) (subject to the  limitations  thereof) but it is found in a final
judicial determination, not subject to further appeal, that such indemnification
may not be enforced in such case, even though this Agreement  expressly provides
for  indemnification  in such case, then the Company (including for this purpose
any  contribution  made by or on  behalf of any  director  of the  Company,  any
officer  of  the  Company  who  signed  any  such  registration  statement,  any
controlling person of the Company, and its or their respective counsel),  as one
entity,  and the Eligible  Holders of the Eligible  Securities  included in such
registration in the aggregate  (including for this purpose any  contributions by
or on behalf of an indemnified  party), as a second entity,  shall contribute to
the losses, liabilities, claims, damages and expenses whatsoever to which any of
them may be subject,  on the basis of relevant equitable  considerations such as
the relative fault of the Company and such Eligible  Holders in connection  with
the facts  which  resulted  in such  losses,  liabilities,  claims,  damages and
expenses. The relative fault, in the case of an untrue statement, alleged untrue
statement,  omission or alleged  omission,  shall be determined  by, among other
things, whether such statement, alleged statement,  omission or alleged omission
relates to information  supplied by the Company or by such Eligible Holders, and
the parties' relative intent,  knowledge,  access to information and opportunity
to correct or prevent such  statement,  alleged  statement,  omission or alleged
omission.  The  Company  and the  Holder  agree  that it  would  be  unjust  and
inequitable  if the  respective  obligations  of the  Company  and the  Eligible
Holders for contribution were determined by pro rata or per capita allocation of
the aggregate  losses,  liabilities,  claims,  damages and expenses (even if the
Holder and the other  indemnified  parties  were  treated as one entity for such
purpose)  or by any  other  method  of  allocation  that  does not  reflect  the
equitable considerations referred to in this Section 11(c). In no case shall any
Eligible  Holder be  responsible  for a portion of the  contribution  obligation
imposed on all  Eligible  Holders  in excess of its pro rata share  based on the
number of shares of Common Stock owned by it (or which would be owned by it upon
exercise  of all  Eligible  Securities)  and  included in such  registration  as
compared to the number of shares of Common  Stock owned by it (or which would be
owned by it upon exercise of all Eligible  Securities  by all Eligible  Holders)
and  included  in  such   registration.   No  person   guilty  of  a  fraudulent
misrepresentation  (within  the  meaning of  Section  11(f) of the Act) shall be
entitled to  contribution  from any person who is not guilty of such  fraudulent
misrepresentation.  For purposes of this Section 11(c), each person, if any, who
controls  any  Eligible  Holder  within the  meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act and each officer,  director, member, employee,
agent and counsel of each such Eligible  Holder or control person shall have the
same rights to contribution as such Eligible Holder or control person,  and each
person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20(a) of the 1934 Act, each officer of the Company who shall have
signed any such registration statement, each director of the Company,

                                       13
<PAGE>

and its or their  respective  counsel shall have the same rights to contribution
as the Company,  subject in each case to the  provisions of this Section  11(c).
Anything in this Section 11(c) to the contrary  notwithstanding,  no party shall
be liable for contribution with respect to the settlement of any claim or action
effected  without  its  written  consent.  This  Section  11(c) is  intended  to
supersede any right to contribution under the Act, the 1934 Act or otherwise.

                  12. Representations and Warranties. The Company represents and
warrants to Holder as follows:

                           (a)  This  Warrant  has  been  duly   authorized  and
executed by the Company  and is a valid and  binding  obligation  of the Company
enforceable  in  accordance   with  its  terms  (i)  as  limited  by  applicable
bankruptcy,  insolvency,  reorganization,  moratorium, and other laws of general
application  affecting  enforcement  of  creditors'  rights  generally,  (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies, and (iii) to the extent the indemnification
provisions  contained  herein  may be  limited  by  applicable  federal or state
securities laws;

                           (b) The  shares of Common  Stock  issuable  hereunder
have been duly  authorized  and reserved  for issuance by the Company and,  when
issued in accordance with the terms hereof,  will be validly issued,  fully paid
and nonassessable;

                           (c) The  execution  and  delivery of this  Warrant is
not,  and the  issuance  of the  shares of Common  Stock upon  exercise  of this
Warrant in accordance with the terms hereof will not be,  inconsistent  with the
Company's  articles of incorporation or by-laws,  do not and will not contravene
any law,  governmental  rule or regulation,  judgment or order applicable to the
Company,  and,  except for  consents  that have  already  been  obtained  by the
Company,  do not and will not conflict with or  contravene  any provision of, or
constitute  a  default  under,  any  indenture,   mortgage,  contract  or  other
instrument  of which the  Company  is a party or by which it is bound or require
the consent or approval  of, the giving of notice to, the  registration  with or
the  taking of any  action in  respect  of or by,  any  federal,  state or local
governmental authority or agency or other person.

                  13. Legend.  Unless  Warrant  Shares or Conversion  Shares are
being sold pursuant to a  registration  statement  pursuant to the provisions of
Section 10 hereof,  the Warrant Shares or Conversion Shares issued upon exercise
or conversion of the Warrants  shall be subject to a stop transfer order and the
certificate or certificates  evidencing such Warrant Shares or Conversion Shares
shall bear the following legend:

                  "THE  SHARES  REPRESENTED  BY THIS  CERTIFICATE  HAVE NOT BEEN
         REGISTERED   UNDER  THE   SECURITIES  ACT  OF  1933,  AS  AMENDED  (THE
         "SECURITIES  ACT"),  OR  ANY  STATE  SECURITIES  LAWS  AND,  UNLESS  SO
         REGISTERED,  MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EXEMPTION
         FROM OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION  REQUIREMENTS
         OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS."

                                       14
<PAGE>

                  14.  Reservation and Listing of Securities.  The Company shall
at all times  reserve and keep  available  out of its  authorized  Common Stock,
solely for the  purpose of issuance  upon the  exercise  of the  Warrants,  such
number of shares of Common Stock or other  securities,  properties  or rights as
shall be issuable upon the exercise  thereof.  The Company  covenants and agrees
that,  upon exercise of the Warrants and payment of the Exercise Price therefor,
all Common Stock and other securities  issuable upon such exercise shall be duly
and validly issued, fully paid,  nonassessable and not subject to the preemptive
rights of any  shareholder.  As long as the Warrants shall be  outstanding,  the
Company  shall use its best efforts to cause all Common Stock  issuable upon the
exercise  of the  Warrants  to be  listed  on all  securities  exchanges  and/or
included in the automated  quotation  system of the Nasdaq  (subject to official
notice of issuance)  with respect to which the Common Stock issued to the public
in connection herewith may then be listed and/or quoted.

                  15.  Destroyed  or Lost  Warrants.  Upon  receipt of  evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant (and upon  surrender of any Warrant if  mutilated)  and, if requested by
the Company or its  transfer  agent,  the receipt by the Company of a reasonable
and   customary   indemnification   agreement  or  indemnity   bond,   and  upon
reimbursement of the Company's reasonable incidental expenses, the Company shall
execute and deliver to the Holder thereof a new Warrant of like date,  tenor and
denomination.

                  16.  Notices to Warrant Holders.  In the event of

                           (a) any  taking  by the  Company  of a record  of the
holders of any class of securities  for the purpose of  determining  the holders
thereof who are entitled to receive any dividend or other  distribution,  or any
right to subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right, or

                           (b) any capital  reorganization  of the Company,  any
reclassification  or recapitalization of the capital stock of the Company or any
consolidation  or merger  involving  the Company and any other  person where the
holders  of Common  Stock will be  entitled  to  receive  securities  of another
issuer, or any transfer of all or substantially all the assets of the Company to
any other person, or

                           (c)  any   voluntary  or   involuntary   dissolution,
liquidation or winding-up of the Company,

                           then  the  Company  will  mail  to each  Holder  of a
Warrant  a notice  specifying  (i) the date or  expected  date on which any such
record is to be taken for the purpose of such dividend,  distribution  or right,
and the amount and character of such dividend,  distribution or right,  and (ii)
the date or expected  date on which any such  reorganization,  reclassification,
recapitalization,  consolidation,  merger, transfer, dissolution, liquidation or
winding-up  is to take  place and time,  if any such time is to be fixed,  as of
which the  holders  of record of  Common  Stock (or other  securities)  shall be
entitled to exchange their shares of Common Stock (or other  securities) for the
securities   or   other   property   deliverable   upon   such   reorganization,
reclassification,    recapitalization,    consolidation,    merger,    transfer,
dissolution,  liquidation  or  winding-up.  Such notice shall be mailed no later
than the date on which such notice is given to the Company's shareholders.

                                       15
<PAGE>

                  17.  Notices.  All  notices,  requests,   consents  and  other
communications  hereunder  shall be in writing  and shall be deemed to have been
duly given or made at the time delivered by hand if personally  delivered;  five
calendar  days after  mailing if sent by  registered  or  certified  mail;  when
answered  back, if telexed;  one business day after  transmission  by telecopier
with electronic  confirmation of receipt; and the next business day after timely
delivery to the courier, if sent by overnight air courier  guaranteeing next day
delivery  (except that a notice of change of address shall not be deemed to have
been given until actually received by the addressee):

                           (a) If to the registered  Holder of the Warrants,  to
the address of such Holder as shown on the books of the Company, or

                           (b) If to the  Company,  to the  address set forth in
Section 1 hereof or to such other address as the Company may designate by notice
to the Holders.

                  18. Supplements and Amendments. The Company and the Holder may
from time to time supplement or amend this Agreement without the approval of any
other  Holders  of  Warrants  (other  than  such  Holder)  in  order to cure any
ambiguity,  to correct or supplement any provision contained herein which may be
defective  or  inconsistent  with  any  provisions  herein,  or make  any  other
provisions in regard to matters or questions arising hereunder which the Company
and the Holder may deem  necessary or  desirable.  In addition,  if a portion of
this  Warrant is  transferred  or assigned to one or more persons or entities so
that there is more than one Holder of Warrants,  then all  outstanding  Warrants
may be amended,  and any provision thereof may be waived,  either  prospectively
and retroactively  with the written agreement of the Company and Holders holding
a majority in interest (based on the number of Warrant Shares issued or issuable
to such Holder) of the Warrants, and any amendment or waiver so adopted shall be
binding on all Holders of Warrants.

                  19. No Notice of Meetings. The Holder of any Warrant shall not
have,  solely on account of such  status,  any  rights of a  stockholder  of the
Company,  either  at  law  or in  equity,  or  to  any  notice  of  meetings  of
stockholders or of any other  proceedings of the Company,  except as provided in
this Warrant.

                  20.  Governing  Law.  This  Warrant  shall be  governed by and
construed in  accordance  with the laws of the State of New York  applicable  to
contracts made and performed within such State, without regard to the principles
thereof respecting conflicts of law.

                  21. Representations and Warranties of the Holder.

                           (a)  Representations.  Holder hereby  represents  and
warrants to the Company as follows:  Holder is a  sophisticated  investor having
such knowledge and experience in business and investment  matters that Holder is
capable of protecting Holder's own interests in connection with the acquisition,
exercise or disposition of this Warrant.  Holder is an "accredited  investor" as
defined in  Regulation D  promulgated  under the Act.  Holder is aware that this
Warrant and the Shares (and the  securities  issuable,  directly or  indirectly,
upon  conversion  of  the  Shares,  if  any)  (hereinafter,   collectively,  the
"Restricted  Securities")  are being,  or will be,  issued to Holder in reliance
upon  Holder's  representation  in this  Warrant  and that such  securities

                                       16
<PAGE>

are  restricted  securities  that  cannot be  publicly  sold  except in  certain
prescribed situations. Holder is aware of the provisions of Rule 144 promulgated
under the Act and of the  conditions  under which sales may be made  thereunder.
Holder  has  received  such  information  about  the  Company  as  Holder  deems
reasonable,  has had the  opportunity to ask questions and receive  answers from
the Company  with  respect to its  business,  assets,  prospects  and  financial
condition and has verified any answers Holder has received from the Company with
independent  third parties to the extent Holder deems necessary.  The Holder, by
acceptance  hereof,  acknowledges  that  the  Restricted  Securities  are  being
acquired  solely for the Holder's own account and not as a nominee for any other
party, and for investment, and that the Holder will not offer, sell or otherwise
dispose  of this  Warrant  or any Shares to be issued  upon  exercise  hereof or
conversion  thereof  except  under  circumstances  that  will  not  result  in a
violation of the Act or any state securities laws.

                           (b)  Securities  Laws.  This  Warrant  and the Shares
issuable  upon  exercise of this Warrant may not be  transferred  or assigned in
whole or in part without compliance with applicable federal and state securities
laws by the transferor and the transferee  (including,  without limitation,  the
delivery of  investment  representation  letters and legal  opinions  reasonably
satisfactory to the Company, as provided in this Warrant).

                [Remainder of this page intentionally left blank]

                                       17
<PAGE>

                  IN WITNESS WHEREOF,  the parties have executed this Warrant as
of the date first written above.

Dated:   March 21, 2000

                                  CELLEGY PHARMACEUTICALS INC.

                                  By: /s/ K. Michael Forrest
                                      ---------------------------------------
                                      Name:  K. Michael Forrest
                                      Title: Chief Executive Officer

Attest
/s/ A. Richard Juelis
-------------------------------
A. Richard Juelis
Secretary

                                  Acknowledged and Accepted by:

                                  GRUNTAL & CO., LLC

                                  By: /s/ Roger C. Kahn
                                      ---------------------------------------
                                      Name: Roger C. Kahn
                                      Title: Senior Manageing Director

                  [Counterpart Signature Page to Warrant No. 1]

                                       18

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00016-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00016-of-00352.parquet"}]]