Document:

AGREEMENT CONCERNING

ALLOCATION OF THE STOCK ACQUISITION RIGHTS 

OF SONY CORPORATION

FOR THE FISCAL YEAR 2004

 

 

SONY CORPORATION (hereinafter referred to as the “Corporation”) and ___________________ (hereinafter referred to as the “Qualified Person”) enter into this Agreement as follows in connection with the allocation of the stock acquisition rights (hereinafter referred to as the “Options”) to be issued by the Corporation pursuant to the provisions of the terms and conditions of the Options (hereinafter referred to as the “Terms and Conditions”) set forth in Exhibit 1 attached hereto and pursuant to the special resolution adopted at the 87th Ordinary General Meeting of Shareholders held on June 22, 2004 and the resolution adopted at the meeting of the Board of Directors held on March 30, 2005:

 

 

	
            Article 1
 	
            (Purpose and Administration)
 

The primary purpose of allocating the Options to the Qualified Person is to enhance the willingness of the Qualified Person to contribute towards the advancement of the Sony Group’s business performance and thereby advance such business performance by making the economic interest, which the Qualified Person will receive, correspond to the business performance of the Corporation.  This Agreement and the Terms and Conditions shall be administered by the Corporation, and such representative corporate executive officers or other persons as the Corporation may designate from time to time who represent the Corporation in respect of this Agreement, the Terms and Conditions and the Options.

 

	
            Article 2
 	
            (Restrictions under the Terms and Conditions and this Agreement)
 

The Options shall be subject to (1) the Terms and Conditions, which are attached to this Agreement as Exhibit 1 and form an integral part of this Agreement, and (2) the conditions and restrictions provided for in this Agreement.  The Qualified Person agrees to be bound by the conditions and restrictions set forth in the Terms and Conditions and this Agreement.  Notwithstanding the provisions of the Terms and Conditions, the exercise of the Options is further subject to such additional conditions as set forth herein.  In particular, the exercise of the Options is subject to the restrictions under Articles 5 and 7.

 

	
            Article 3
 	
            (Allocation of the Options)
 

Pursuant to this Agreement, the Corporation allocates the following Options to the Qualified Person in accordance with the following terms on the execution date of this Agreement.

	
      (1)
 	
            Number of the Options allocated to the Qualified Person:

      

______________  (________ shares may be issued or transferred upon the exercise by the Qualified Person of all Options allocated to the Qualified Person pursuant to this Agreement.)

 

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            (2)
 	
Class and number of shares to be issued or transferred upon exercise of each Option:

 

100 shares of common stock of the Corporation

	(3)	Amount to be paid per share to be issued or transferred upon exercise of the Options (hereinafter referred to as the “Exercise Price”) is initially:

      US$ 40.34

	(4)	Period during which the Options may be exercised:

      From and including April 1, 2005, to and including March 31, 2015 (the “Term”), however, exercise of the Options is subject to the restrictions provided for in Article 5.

 

 

The number of shares to be issued or transferred upon exercise of each Option and the Exercise Price may be adjusted pursuant to the provisions of the Terms and Conditions.

 

	
            Article 4 
 	
            (Information on Corporation and its Shares)
 

Basic information on the Corporation and its shares is as set forth in Exhibit 2 attached hereto.

 

	
            Article 5             (Vesting, Conditions for Exercise of the Options and Prohibition of Disposition)

            
	
             
	
            (1)
 	
            Vesting and exercise of the Options are further subject to the restrictions as set forth in Exhibit 3 attached hereto.
 
	
             
	
            (2)
 	
            Except as provided in Article 7, the Options, whether vested or unvested, are nontransferable by the Qualified Person.
 
	
             
	
            (3)
 	
            Exercise of the Options are further subject to any restriction on trading set forth under Sony Corporation of America’s Policy Regarding Securities Trading, as in effect from time to time.
 
				

 

	
            Article 6
 	
            (Procedures for Exercising the Options)
 

Procedures for exercising the Options shall be provided for in the Terms and Conditions, and in addition, detailed matters concerning such procedures shall be provided for in a “Guide to the Sony Stock Option Program” separately provided and delivered by the Corporation or one of its subsidiaries to the Qualified Person no later than the date on which the Options held by the Qualified Person first become exercisable pursuant to Article 5.

 

 

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            Article 7
 	
            (Inheritance of the Options)
 

Upon the death of the Qualified Person, outstanding Options that are vested and exercisable and granted to such Qualified Person may be exercised only by the executors or administrators of the Qualified Person’s estate or by any person or persons who shall have acquired such right to exercise by will or by the laws of descent and distribution, provided that no transfer by will or the laws of descent and distribution of any Option, or the right to exercise any Option, shall be effective to bind the Corporation unless the Corporation shall have been furnished with (a) a written notice thereof and a copy of the will and/or such evidence as the Corporation may deem necessary to establish the validity of the transfer and (b) an agreement by the transferee to comply with all the terms and conditions of the Options that are or would have been applicable to the Qualified Person (other than
any terms and conditions relating to employment with the Corporation or one of its subsidiaries) and to be bound by the acknowledgements made by the Qualified Person in connection with the grant of the Options.  Options that are not vested and exercisable at the death of the Qualified Person will terminate.

 

	
            Article 8
 	
            (Issue of Certificate for the Options) 
 

The Qualified Person shall not request the Corporation to issue certificates for the Options.

 

	
            Article 9
 	
            (Issuance of ADRs)
 

The Corporation currently maintains an American Depositary Receipt program in the United States pursuant to which American Depositary Receipts or “ADRs” represent shares of common stock of the Corporation.  During the time the Corporation maintains an American Depositary Receipt program in the United States, the Qualified Persons who exercise the Options will generally receive ADRs in lieu of shares of common stock of the Corporation as follows.  Upon exercise of an Option, certificates for shares of common stock of the Corporation acquired upon the exercise of such Option shall be issued in the name of the depositary under the Sony American Depositary Receipt Program for the benefit of the Qualified Person.  Upon receipt of shares of common stock of the Corporation upon the exercise of an Option, the depositary under the Sony American Depositary Receipt Program shall
immediately and automatically issue ADRs representing such shares of common stock of the Corporation in the name of the applicable Qualified Person and shall deliver such ADRs to such Qualified Person (or to an account held for the benefit of such Qualified Person) as soon as practicable following the effective date on which such issuance occurs.  For simplicity, all references in this Agreement and the Terms and Conditions to shares of common stock of the Corporation will be deemed to also refer to ADRs.

 

	
            Article 10
 	
            (Treatment in Events of Merger and Consolidation)
 

1.    In the event of (a) any consolidation or amalgamation of the Corporation with, or merger of the Corporation into, any other corporation (other than a consolidation, amalgamation or merger in which the Corporation is the continuing corporation) or (b) any other corporate transaction (excluding any transaction described in (a) above, a share 

 

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exchange or a share transfer) involving the Corporation, including a dissolution or liquidation of the Corporation, a sale of all or substantially all of the Corporation’s assets, corporate split, or any other similar transaction, the Corporation may (x) cause the entity resulting from such transaction to execute an agreement providing that a holder of the Options shall have the right during the Term to exercise the Options and upon such exercise of the Options to receive the class and amount of shares and other securities and property receivable upon such transaction by a holder of the number of shares in respect of which the Options could have been exercised immediately prior to such transaction or (y) prevent from being exercised, effective immediately upon the occurrence of such transaction, each Option outstanding immediately prior to such transaction (whether or not then exercisable). 

2.    In the event that the Corporation enters into a definitive agreement or makes a decision by board resolution or approval of shareholders’ meeting to effectuate one or more of the transactions or events described in (a) or (b) in the immediately preceding paragraph (in this paragraph 2, including a share exchange and a share transfer), the Corporation may provide not less than twenty days advance notice to the Qualified Person from the consummation of such transaction or event and give the Qualified Person the opportunity to exercise their Options (whether or not such Options are then vested or exercisable), immediately prior to, and subject to, the consummation of such transaction or event.

 

	Article 11
	 (Withholding by the Corporation)

In connection with Condition 14(2), the Corporation or its designee is authorized to withhold from any payment relating to an Option or from any payroll or other payment to the Qualified Person, amounts of withholding and other taxes or fees due in connection with the Option, and to take any other action as the Corporation may deem advisable to enable the Corporation and the Qualified Person to satisfy obligations for the payment of withholding taxes, other tax obligations and other costs and fees relating to the Options.  This authority shall include, either on a mandatory or elective basis in the discretion of the Corporation, authority (a) to withhold or receive shares of common stock of the Corporation or other property and (b) to make cash payments in respect thereof in satisfaction of the Qualified Person’s tax obligations and other costs and fees relating to the Options.

 

	
            Article 12
 	
            (Compliance with the Applicable Securities Law, Etc.)
 

The Qualified Person shall, in selling the shares of common stock of the Corporation acquired upon exercise of the Options, confirm in advance with the Corporation that such proposed sale is permissible under any and all applicable policies, programs, arrangements or other provisions relating to insider trading maintained by the Corporation or any of its subsidiaries and shall comply with any and all applicable laws and regulations, including but not limited to U.S. and Japanese laws.

 

 

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            Article 13
 	
            (Amendment to this Agreement and Treatment of Matters Not Provided for in this Agreement)
 

1.    This Agreement (including any Exhibit to this Agreement) cannot be modified or amended in any manner except by a further agreement expressly stating the intention to modify this Agreement and which is signed by both parties to this Agreement.

2.     Notwithstanding the immediately preceding paragraph, if it is found out that this Agreement is not in compliance with the Commercial Code, the Securities and Exchange Law, the Income Tax Law, the Corporation Tax Law or any other related laws or regulations of Japan or any applicable laws of any other jurisdiction, or if this Agreement becomes not in compliance therewith as a result of amendments thereto which become effective after the conclusion of this Agreement, the Corporation may, with notice to the Qualified Person, adequately establish, amend or eliminate the subject provisions.

3.      With respect to matters not provided for in this Agreement or the “Guide to the Sony Stock Option Program”, such matters shall be determined by consultation in good faith between the Corporation and the Qualified Person.  In the event that the Qualified Person rejects such consultation, or in the event that such consultation fails to bring an agreement, such matters shall be decided by the Corporation and such representative corporate executive officers or other persons as the Corporation may designate from time to time to represent the Corporation in respect of the Terms and Conditions, the Options and this Agreement.  Decisions of the Corporation or such representative corporate executive officers or other persons as the Corporation may designate from time to time to represent the Corporation in respect of the Terms and
Conditions, the Options and this Agreement shall be final and binding on all parties.  None of the Corporation or such representative corporate executive officers or other persons as the Corporation may designate from time to time to represent the Corporation in respect of the Terms and Conditions, the Options or this Agreement shall be liable to any Qualified Person for any action, omission or determination relating to the Terms and Conditions, the Options or this Agreement.

 

	
            Article 14
 	
            (Manner of Notice)
 

Notices by the Corporation to the Qualified Person under the Terms and Conditions and this Agreement shall be made in any of the following manners: 

	
            (1)
 	
            delivering (including mailing) a written notice to the address of the Qualified Person set forth in the register of the Options;
 
	
            (2)
 	
            sending documents to the Qualified Person at his/her department in the Corporation (including any Sony Group Company) or sending electronic data to the e-mail address of the Qualified Person at the Corporation (including any Sony Group Company); or
 
	
            (3)
 	
            giving notice on the web site of the Corporation (including any Sony Group Company).
 

 

	
            Article 15
 	
            (Construction)
 

Nothing herein shall be construed to give the Qualified Person any right or entitlement to receive options to purchase common stock of the Corporation in the future from the 

 

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Corporation or any of its subsidiaries.  Nothing contained herein shall confer upon the Qualified Person any right to continue in the employment of the Corporation or any of its subsidiaries or constitute any contract or agreement of employment or interfere in any way with the right of the Corporation or its subsidiaries to reduce or modify a Qualified Person’s compensation in existence at the time of the granting of any Option or otherwise, or to terminate a Qualified Person’s employment or change the Qualified Person’s position or the terms of employment with or without cause.  Nothing contained herein shall prevent the Corporation from, and the Corporation expressly reserves the right to, modify the terms and conditions of options to purchase common stock of the Corporation, if any, that are or may be granted in the future.

 

	
            Article 16
 	
            (Governing Law and Jurisdiction)
 

This Agreement shall be governed by and construed in accordance with the laws of Japan.  The Tokyo District Court shall have the exclusive jurisdiction for settling any and all disputes that arises under or in connection with this Agreement.

 

 

IN WITNESS WHEREOF, this Agreement and the grant of the Options provided for herein shall be effective as of the date that two (2) originals of this Agreement have been prepared and executed by seal impressions or signatures by the Corporation and the Qualified Person, each party retaining one (1) original.

 

	 	SONY CORPORATION
	 	 7-35, Kitashinagawa 6-chome, Shinagawa-ku, Tokyo
	 	By: 	/s/ Nobuyuki Idei                                                                                               
	 	 	 	Nobuyuki Idei

Chairman and Group Chief Executive Officer,

Representative Corporate Executive Officer

Date: March 31, 2005
	 	 	 
	 	QUALIFIED PERSON
	 	 	 
	 	By: 	_______________________________________________
	 	 	 	Name: 

Address: 

Date: March 31, 2005

 

 

 

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Exhibit 1

 

TERMS AND CONDITIONS OF THE NINTH SERIES OF

STOCK ACQUISITION RIGHTS

FOR SHARES OF COMMON STOCK OF SONY CORPORATION

 

These terms and conditions of the stock acquisition rights shall apply to the Ninth Series of Stock Acquisition Rights for Shares of Common Stock (hereinafter referred to as the “Options”) of Sony Corporation (hereinafter referred to as the “Corporation”) issued on March 31, 2005 by the Corporation in accordance with the special resolution adopted at the 87th Ordinary General Meeting of Shareholders held on June 22, 2004 and the resolution adopted at the meeting of the Board of Directors held on March 30, 2005:

 

	
            1.
 	
            Aggregate Number of Options
 

 

10,094

 

	
            2.
 	
            Class and Number of Shares to be Issued or Transferred upon Exercise of Each Option
 

 

100 shares of common stock of the Corporation (hereinafter referred to as “Common Stock”)

 

	
            3.
 	
            Adjustment of Number of Shares to be Issued or Transferred upon Exercise of Each Option
 

 

	
            (1)
 	
            In the case that the Corporation splits or consolidates Common Stock, the number of shares to be issued or transferred upon exercise of each Option (hereinafter referred to as the “Number of Granted Shares per Option”) shall be adjusted in accordance with the following formula:
 

 

	
            Number of Granted Shares per Option after adjustment
 	
            =
 	
            Number of Granted Shares per Option before adjustment
 	
            X
 	
            Ratio of split or consolidation
 

 

	
            (2)
 	
      An adjustment to the Number of Granted Shares per Option under the immediately preceding item shall be made only with respect to the Number of Granted Shares per Option for the Options which have not been exercised at the time of the adjustment.  Any fraction less than one (1) share resulting from the adjustment shall be disregarded
 

 

 

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.

 

	
            (3)
 	
            The effective date of the Number of Granted Shares per Option after adjustment shall be the same day as the date on which the Exercise Price after adjustment becomes effective as provided for in item (2) of Condition 7 with regard to the adjustment of the Exercise Price pursuant to Condition 7 for the same reason as the adjustment of the Number of Granted Shares per Option.
 

 

	
            (4)
 	
            When the Number of Granted Shares per Option is adjusted, the Corporation shall give notice of necessary matters to each holder of the Options registered in the register of Options, no later than the day immediately preceding the effective date of the Number of Granted Shares per Option after adjustment; provided, however, that if the Corporation is unable to give such notice no later than the day immediately preceding such effective date, the Corporation shall promptly give such notice on or after such effective date.
 

 

	
            4.
 	
            Issue Price of Options
 

 

The Options are issued without the payment to the Corporation of any consideration.

 

	
            5.
 	
            Issue Date of Options
 

 

March 31, 2005

 

	
            6.
 	
            Exercise Price of Options
 

 

The amount to be paid in per share to be issued or transferred upon exercise of the Options (the “Exercise Price”) is initially US$40.34.

 

	
            7.
 	
            Adjustment of Exercise Price
 

 

	
            (1)
 	
            In the case that the Corporation splits or consolidates Common Stock after the issue date of the Options, the Exercise Price shall be adjusted in accordance with the following formula, and any fraction less than one (1) cent resulting from the adjustment shall be rounded up to the nearest one (1) cent:
 

 

 

	Exercise Price 

        after adjustment
	=
	Exercise Price before 

        adjustment
	X	1

	Ratio of split or consolidation

 

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            (2)
 	
            In the case that the Exercise Price is adjusted pursuant to the immediately preceding item, the effective date of the Exercise Price after adjustment shall be as set forth below:
 

 

The Exercise Price after adjustment shall become effective, in the case of a stock split, on and after the day immediately following the allocation date for such stock split, and in the case of a stock consolidation, on and after the day immediately following the expiration date of the period provided for in paragraph 1 of Article 215 of the Commercial Code of Japan; provided, however, that in the case that the Corporation splits Common Stock on condition that an agenda on transferring profits available for dividends to stated capital is approved by an Ordinary General Meeting of Shareholders of the Corporation and the allocation date for such stock split falls on any day prior to the conclusion date of such General Meeting of Shareholders, the Exercise Price after adjustment shall, on the date immediately after the conclusion date of such General Meeting of
Shareholders, become effective retroactively from the date immediately after the allocation date.

 

In the case provided for in the proviso above, Common Stock in such number as calculated in accordance with the following formula shall be issued or transferred to the holders of the Options who exercise the Options from the day immediately following the allocation date for the stock split up to the conclusion date of the relevant General Meeting of Shareholders.  (The number of shares to be initially issued or transferred upon such exercise of the Options shall be hereinafter referred to as the “Number of Initial Shares before Approval”.)    In this case, any fraction less than one (1) share resulting from such calculation shall be disregarded.

 

 

	
              Number of shares to be additionally issued or transferred
 	
              =
 	 
	 Exercise Price 

    before adjustment
	—
	Exercise Price after adjustment
		X
	Number of Initial Shares 

              before Approval

	
      Exercise Price after adjustment

 

	
            (3)
 	
      In addition to the cases in item (1) of this Condition where the Exercise Price is required to be adjusted, the Exercise Price shall be adjusted in a manner deemed to be appropriate by the Corporation in the following cases.
 

 

 

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            (i)
 	
            When the Exercise Price is required to be adjusted due to a merger, capital reduction, or corporate split (split by new incorporation or by absorption) of the Corporation.
 

 

	
            (ii)
 	
            In addition to item (i) above, when the Exercise Price is required to be adjusted due to the occurrence of an event that cause or may cause a change in the total number of the issued Common Stock.
 

 

	
            (4)
 	
            When the Exercise Price is adjusted, the Corporation shall give notice of necessary matters to each holder of the Options registered in the register of Options, no later than the day immediately preceding the effective date of the Exercise Price after adjustment; provided, however, that if the Corporation is unable to give such notice no later than the day immediately preceding such effective date, the Corporation shall promptly give such notice on or after such effective date.
 

 

	
            8.
 	
            Period during which Options May be Exercised
 

 

From and including April 1, 2005, up to and including March 31, 2015.  If the last day of such period falls on a holiday of the Corporation, the immediately preceding business day shall be the last day of such period.

 

	
            9.
 	
            Conditions for Exercise of Options
 

 

	
            (1)
 	
            Each Option may not be exercised in part. 
 	
             

	
            (2)
 	
            If a share exchange or share transfer by which the Corporation becomes a wholly-owned subsidiary of another company is approved at the General Meeting of Shareholders of the Corporation, the holders of the Options may not exercise the Options on and after the effective date of such share exchange or share transfer.
 
				

 

	
            10.
 	
            Restrictions under the U.S. Securities Act and Other Matters
 

 

The Corporation shall not be obligated to effect the registration pursuant to the U.S. Securities Act of 1933, as amended, of any Common Stock to be issued or transferred upon exercise of the Options or to effect similar compliance under any state laws.  Notwithstanding anything herein to the contrary, the Corporation shall not be obligated to issue or cause to be issued or delivered any certificates evidencing or representing 

 

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Common Stock pursuant to these terms and conditions unless and until the Corporation is advised by its legal counsel that the issuance and delivery of such certificates is in compliance with all applicable laws, regulations of governmental authorities and the requirements of any securities exchange on which Common Stock is traded.  The Corporation may require, as a condition to the issuance and transfer of Common Stock pursuant to these Terms and Conditions, that the recipient of such Common Stock make such covenants, agreements and representations, and that such certificates bear such legends, as the Corporation deems necessary or desirable.

 

The exercise of any Option granted hereunder shall only become effective at such time as counsel to the Corporation shall have determined that the issuance and transfer of Common Stock pursuant to such exercise is in compliance with all applicable laws, regulations of governmental authorities and the requirements of any securities exchange on which Common Stock is traded.  The Corporation may, in its sole discretion, defer the effectiveness of the exercise of an Option granted hereunder to allow the issuance and transfer of Common Stock upon such exercise to be made pursuant to registration or an exemption from registration or other methods for compliance available under federal or state securities laws.  The Corporation shall inform the holder of such Option in writing of the decision to defer the effectiveness of the exercise of such Option granted hereunder.  During the period that
the effectiveness of the exercise of an Option has been deferred, the holder of such Option may, by a written notice, withdraw such exercise and obtain the refund of any amounts paid in connection with such exercise.

 

	
            11.
 	
            Mandatory Cancellation of Options
 

 

Not applicable.

 

	
            12.
 	
            Purchase and Cancellation of Options
 

 

The Corporation may acquire the Options from a holder of the Options without any payment therefor when the holder agrees to return the Options to the Corporation and the Corporation may cancel them.

 

	
            13.
 	
            Restrictions on Transfer of Options
 

 

The Options are non-transferable (other than any transfer of Options that are vested and exercisable upon the death of a holder of the Options to such holder’s estate or beneficiaries), unless such transfer is expressly approved by the Board of Directors of the Corporation.

 

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            14.
 	
            Application for Exercise of Options and Manner of Payment
 

 

	
            (1)
 	
            In the case of exercise of the Options, the holder of the Options shall fill in necessary matters on the “Application Form for Exercise of the Options” in the form designated by the Corporation, and shall submit such application form (including application for exercise of the Options in an electromagnetic manner) to the place where applications for exercise of the Options are made as provided for in Condition 15, after affixing his or her name and seal or signature (including electronic signature) thereon.  If certificates for the Options to be exercised are issued, the certificates shall be submitted together with the Application Form for Exercise of the Options.  The Application Form for Exercise of the Options shall be accepted at the place where applications for exercise of the Options are made only on a business day at such place.
 

 

	
            (2)
 	
            The entire amount of the Exercise Price to be paid in upon exercise of the Options, including any applicable taxes and all other costs or fees associated with the exercise (hereinafter referred to as the “Amount of Payment”) shall be paid in cash to an account designated by the Corporation (hereinafter referred to as the “Designated Account”) at the payment handling place provided for in Condition 16 at or before the date and time designated by the Corporation.  The entitlement of a holder of the Options to the receipt of Common Stock upon exercise of an Option is subject to the payment in full of any federal, state, local and foreign taxes of any kind required to be withheld with respect to the exercise of such Option, as well as the payment in full of any costs or fees (such as brokerage fees) associated with the exercise of such Option.

 

 

	
            (3)
 	
            Except as provided for in Condition 10, any holder of the Options who has submitted the documents required for exercise of the Options to the place where applications for exercise of the Options are made, may not cancel such exercise thereafter.
 

 

	
            15.
 	
            Place where Applications for Exercise of Options are Made
 

 

Sony Corporation of America, Human Resources, or its duly authorized designee

 

	
            16.
 	
            Payment Handling Place on Exercise of Options
 

  Sumitomo Mitsui Banking Corporation, Head Office (or any successor bank of such bank from time to time and/or any successor office of such office)

 

 

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            17.
 	
            Effective Date and Time of Exercise of Options
 

 

	
            (1)
 	
            Except as provided for in Condition 10, the exercise of the Options shall become effective when an Application Form for Exercise of the Options referred to in item (1) of Condition 14 and the certificates for the Options to be exercised (if issued) that are accepted at the place where applications for exercise of the Options are made are delivered to the payment handling place provided for in Condition 16 and the Amount of Payment provided for in Condition 14 is duly paid to the Designated Account.
 

 

	
            (2)
 	
            The Corporation shall deliver the share certificates without delay after the procedure for exercise of the Options is completed; provided, however, that the Corporation shall not deliver share certificates for shares constituting less than one (1) full unit of shares.
 

 

	
            18.
 	
            Calculation of Dividend on Shares
 

 

With respect to the initial payment of annual dividends or cash distribution as provided for in Article 293-5 of the Commercial Code of Japan (interim dividends) on Common Stock issued or transferred upon exercise of the Options, such shares shall be deemed to have been issued or transferred, in the case that the Options are exercised during the period from April 1 to September 30 in any year, on April 1 of that year, and in the case that the Options are exercised during the period from October 1 in any year to March 31 of the following year, on October 1 of that year.

 

	
            19.
 	
            Portion of Issue Price of a Share which Will not be Accounted for as Stated Capital in Case a Share is Issued upon Exercise of Options
 

 

The portion of the issue price of a share which will not be accounted for as stated capital shall be the amount obtained by reducing the amount which will be accounted for as stated capital from the Exercise Price (if the Exercise Price is adjusted under Condition 7, the Exercise Price after adjustment).  The amount to be accounted for as stated capital shall be the amount obtained by multiplying the Exercise Price (if the Exercise Price is adjusted under Condition 7, the Exercise Price after adjustment) by 0.5, and any fraction less than one (1) cent resulting from such calculation shall be rounded up to the nearest one (1) cent.

 

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            20.
 	
            Issue of Certificates for Options
 

 

Certificates for the Options shall be issued only when a holder of the Options requests the Corporation to issue such certificates of Options.

 

	
            21.
 	
            Loss of Certificates for Options
 

 

	
            (1)
 	
            In the case that any holder of the Options that has lost a certificate for any Options notifies the Corporation of its certificate number and the reason for such loss and other matters and requests the issue and delivery of a replacement certificate for such Options together with a certified copy of the final judgment of nullification of the subject lost certificate, the Corporation may issue and deliver a replacement certificate for such Options.
 

 

	
            (2)
 	
            In the case of destruction or defacement of a certificate for any Options, the holder of such destroyed or defaced certificate for such Option shall request the issue and delivery of a replacement certificate for such Options by submitting such destroyed or defaced certificate to the Corporation.  In such case, the Corporation shall issue and deliver a replacement certificate for such Options in exchange for such destroyed or defaced certificate for such Options; provided, however, that the provision above for loss of a certificate for such Options shall apply mutatis mutandis when it is difficult to determine whether such destroyed or defaced certificate for such Option is genuine or not.
 

 

	
            22.
 	
            Expenses of Delivery of Replacement Certificates for Options
 

 

In the case of the issue and delivery of a replacement certificate for an Option, the Corporation shall collect the actual expenses required therefor from the person who so requested, unless such expenses are paid for by another entity, which may include the Corporation or its subsidiaries or affiliates.

 

 

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            23.
 	
            Handling of Matters Relating to Abolition of Unit Share System
 

 

In the case that the Corporation abolishes the unit share system after the issue date of the Options, the Corporation may take necessary measures for handling the related matters thereto in a manner deemed as appropriate by the Corporation in accordance with the provisions of the Commercial Code of Japan and consistent with these terms and conditions.

 

	
            24.
 	
            Handling of Matters Relating to Amendments to Laws and Regulations
 

 

In the case that provisions of the Commercial Code of Japan and/or other Japanese laws and regulations relating to the issuance of share certificates or other certificates or stock acquisition rights are amended after the issue date of the Options, the Corporation may take necessary measures for handling the matters relating thereto in a manner deemed as appropriate by the Corporation in accordance with the provisions of the Commercial Code of Japan and/or other Japanese laws and regulations then in effect and consistent with these terms and conditions.

 

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Exhibit 2

 

Information on the Corporation and its Shares

 

	
            1.
 	
            Trade name of the Corporation:

            
	 	SONY CORPORATION
	2.	Classes of shares issued by the Corporation:

      
	 	Shares of Common Stock1
	 	Shares of Subsidiary Tracking Stock (details as set forth below)
	3.	Number of shares issued by the Corporation:
	 	Shares of Common Stock 	3,500,000,000 shares
	 	Shares of Subsidiary Tracking Stock 	100,000,000 shares
	4.	Number of shares constituting one full unit of stock:	          100 shares

 

Details of the Shares of Subsidiary Tracking Stock are as follows:

 

	
            (1)
 	
            In the event that the Board of Directors of Sony Communication Network Corporation (hereinafter referred to as “SCN”) resolves to submit to its ordinary general meeting of shareholders a proposed appropriation of retained earnings including the payment of dividends for the accounting period of SCN ending on or immediately prior to the last day of an accounting period of the Corporation (or, in a case where SCN is a corporation having committees as provided for in the Law for Special Exceptions to the Commercial Code concerning Audit, etc. of Kabushiki-Kaisha (hereinafter referred to as the “Audit Special Exceptions Law”), in the event that SCN’s Board of Directors approves such proposed appropriation of retained earnings), the Corporation, for such accounting period of the Corporation, shall pay to the holders and/or the registered pledgees
of the shares of Subsidiary Tracking Stock (hereinafter referred to as the “Shares of Subsidiary Tracking Stock”) whose names appear on the register of shareholders as of the close of the last day of each accounting period, the smaller amount of the following (i) or (ii) as dividends per share of Subsidiary Tracking Stock (hereinafter referred to as the “Dividends for Subsidiary Tracking Stock”) with priority to the payment of dividends to the holders and/or the registered pledgees of shares of
 

 

_________________________

1Note that the Options pertain only to the Common Stock.  Details regarding the Subsidiary Tracking Stock are provided for informational purposes only.

 

 

- 17 -

	
             
 	
             
 	
             
 

 

 

 

Common Stock of the Corporation whose names appear on the register of shareholders as of the close of the last day of each accounting period:

 

	
            (i)
 	
            The amount obtained by multiplying the amount of dividends per share of Common Stock of SCN (hereinafter referred to as the “Shares of Common Stock of SCN”) under the relevant proposed appropriation of retained earnings by the Standard Ratio (initially 0.01, which Ratio shall be subject to adjustment pursuant to (13) below) as of the end of the relevant accounting period; provided, however, that if the amount of the Interim Dividends for Subsidiary Tracking Stock (as defined below) paid for the relevant accounting period is less than the amount provided for in the principal provision of (2) below, the amount of such shortfall shall be added thereto.  
 

 

	
            (ii)
 	
            The amount obtained by multiplying one hundred thousand yen (100,000 yen) by the Standard Ratio mentioned above; provided, however, that if the Interim Dividends for Subsidiary Tracking Stock are paid for the relevant accounting period, the amount of such payment shall be deducted therefrom (hereinafter referred to as the “Maximum Dividend Amount of Subsidiary Tracking Stock”).
 

 

	
            (2)
 	
            In the event that SCN’s Board of Directors resolves to pay interim dividends with respect to the most recent record date for payment of SCN’s interim dividends on or before September 30 every year (hereinafter referred to as the “Record Date for Interim Dividends”), the Corporation shall pay to the holders and/or the registered pledgees of the Shares of Subsidiary Tracking Stock, whose names appear on the register of shareholders as of the close of such Record Date for Interim Dividends, a cash distribution (referred to as the “Interim Dividends for Subsidiary Tracking Stock”) per share of Subsidiary Tracking Stock in an amount obtained by multiplying the amount of the interim dividends per share of the Common Stock of SCN resolved by SCN’s Board of Directors by the Standard Ratio as of such Record Date for Interim Dividends, with
priority to the holders and/or the registered pledgees of Common Stock of the Corporation whose names appear on the register of shareholders as of the close of such Record Date for Interim Dividends; provided, however, that the amount of such Interim Dividends for Subsidiary Tracking Stock to be paid shall not exceed the amount obtained by multiplying one hundred thousand yen (100,000 yen) by the Standard Ratio as of the relevant Record Date for Interim Dividends.
 

 

	
            (3)
 	
            Although the Dividends for Subsidiary Tracking Stock are not paid for a certain accounting period because SCN’s Board of Directors has not resolved to submit a 
 

 

 

- 18 -

	
             
 	
             
 	
             
 

 

 

 

 

 

	 	proposed appropriation of retained earnings including the payment of dividends to its ordinary general meeting of shareholders (or, in a case where SCN is a corporation having committees as provided for in the Audit Special Exceptions Law, because SCN’s Board of Directors has not approved such proposed appropriation of retained earnings), the Corporation may pay dividends to the holders and/or the registered pledgees of the Common Stock of the Corporation.
	 	 
	
            (4)
 	
            If the amount of the Dividends for Subsidiary Tracking Stock paid with respect to a certain accounting period is less than the amount determined pursuant to (i) of (1) above, such shortfall shall be cumulated as dividends for subsequent periods (hereinafter referred to as the “Cumulative Unpaid Dividends”) and the Corporation shall pay to the holders and/or the registered pledgees of Subsidiary Tracking Stock the Cumulative Unpaid Dividends subject to the Maximum Dividend Amount of Subsidiary Tracking Stock as its maximum amount, with priority to the payment of the Dividends for Subsidiary Tracking Stock and dividends to the holders and/or the registered pledgees of Common Stock for each subsequent accounting period.  Any unpaid amount of the Cumulative Unpaid Dividends shall be cumulated as the Cumulative Unpaid Dividends for subsequent periods.  In case
of the new issuance of the Shares of Subsidiary Tracking Stock, the amount equivalent to the Cumulative Unpaid Dividends shall be regarded as the Cumulative Unpaid Dividends to such newly issued Shares of Subsidiary Tracking Stock.  If any Cumulative Unpaid Dividends are paid for a certain accounting period, the Dividends for Subsidiary Tracking Stock shall be determined subject to the amount obtained by deducting such paid Cumulative Unpaid Dividends from the Maximum Dividend Amount of Subsidiary Tracking Stock as the Maximum Dividend Amount of Subsidiary Tracking Stock as provided for in (ii) of (1) above.
 

 

	
            (5)
 	
            No additional dividends other than the Dividends for Subsidiary Tracking Stock shall be paid with respect to the Shares of Subsidiary Tracking Stock.
 

 

	
            6)
 	
            In distributing the residual assets, as long as they include the Shares of Common Stock of SCN, the Corporation shall distribute to the holders and/or the registered pledgees of Subsidiary Tracking Stock, per share of the Subsidiary Tracking Stock, the number of Shares of Common Stock of SCN obtained by multiplying one (1) by the Standard Ratio as of the distribution date of the residual assets, or the amount obtained by way of disposition of such Shares of Common Stock of SCN (the costs required for the disposition shall be deducted therefrom), with priority to the distribution of any residual assets to the holders and/or the registered pledgees of Common Stock of the Corporation.  No additional distribution of residual assets other than those prescribed above shall be made with respect to the Shares of Subsidiary Tracking
Stock.
 

 

 

- 19 -

	
             
 	
             
 	
             
 

 

 

 

 

	
            (7)
 	
            The Corporation may, at any time, purchase the Shares of Subsidiary Tracking Stock and retire them at the purchase price of such shares with the profit distributable as dividends to shareholders.
 

 

	
            (8)
 	
            The Corporation may compulsorily retire all the Shares of Subsidiary Tracking Stock on any date following the third anniversary of June 20, 2001 and determined by the Board of Directors of the Corporation or the Corporate Executive Officer to whom the determination has been delegated by a resolution of the Board of Directors of the Corporation by paying per share of the Subsidiary Tracking Stock, the amount equivalent to the Standard Market Price (as defined below) of the Shares of Subsidiary Tracking Stock to the holders and/or the registered pledgees of the Subsidiary Tracking Stock, with its profit distributable as dividends to shareholders or in accordance with provisions concerning capital reduction.
 

 

	
            (9) 
 	
            The Corporation may compulsorily convert, on any date following the third anniversary of June 20, 2001 and determined by the Board of Directors of the Corporation or the Corporate Executive Officer to whom the determination has been delegated by a resolution of the Board of Directors of the Corporation, each Share of Subsidiary Tracking Stock into the shares of Common Stock of the Corporation in the number obtained by dividing the number obtained by multiplying the Standard Market Price (as defined below) of the Shares of Subsidiary Tracking Stock by 1.1 by the Standard Market Price (as defined below) of the shares of Common Stock of the Corporation; provided, however, that such conversion shall be implemented only in cases where the Common Stock of the Corporation is listed on or registered at the stock exchange or over-the-counter market as prescribed in the
Articles of Incorporation of the Corporation (hereinafter referred to as the “Stock Exchange”). 
 

 

	
            (10)
 	
            The “Standard Market Price” shall mean the average of the closing prices of the relevant shares on the Stock Exchange determined in the method prescribed in the Articles of Incorporation.
 

 

	
            (11)
 	
      The Corporation shall, without delay, compulsorily retire all the Shares of Subsidiary Tracking Stock or compulsorily convert them into the shares of Common Stock of the Corporation pursuant to (8) and (9) above if any of the following events occur; provided, however, that such compulsory retirement or compulsory conversion shall be made without delay on any day after the occurrence of any of the following events and determined by the Board of Directors of the Corporation to resolve such compulsory retirement or compulsory conversion or the Corporate Executive Officer to whom the determination has been delegated by a resolution of the Board of Directors of the Corporation notwithstanding (8) and (9) above:
 

 

 

- 20 -

	
             
 	
             
 	
             
 

 

 

 

 

	
            (i)
 	
            SCN disposes of, by way of transfer or otherwise, those assets with value not less than eighty percent (80%) of the consolidated total assets on SCN’s consolidated balance sheet (or the total assets on SCN’s balance sheet if SCN does not prepare a consolidated balance sheet) for the most recent accounting period or those businesses where the consolidated net sales on SCN’s consolidated income statement (or the net sales on SCN’s income statement if SCN does not prepare a consolidated income statement) for the most recent accounting period is anticipated to decrease not less than eighty percent (80%); provided, however, that the disposition of such assets or businesses to a company whose issued shares are all, directly or indirectly, owned by SCN are excluded;
 

 

	
            (ii)
 	
            SCN ceases to be a subsidiary of the Corporation;
 

 

	
            (iii)
 	
            a situation continues for at least three (3) months where the total number of the Shares of Common Stock of SCN directly owned by the Corporation are less than the number obtained by multiplying the total number of the Shares of Subsidiary Tracking Stock by the Standard Ratio;
 

 

	
            (iv)
 	
            SCN makes a resolution to dissolve;
 

 

	
            (v)
 	
            SCN files a petition in bankruptcy or other similar procedure, or a declaration of bankruptcy or other similar court decision is made with respect to SCN; or
 

 

	
            (vi)
 	
            an event that falls within the requirements for the delisting or the cancellation of registration of the Shares of Subsidiary Tracking Stock occurs at all the Stock Exchanges where the Shares of Subsidiary Tracking Stock are listed or registered.
 

 

	
            (12)
 	
            The Corporation shall, without delay, compulsorily retire all the Shares of Subsidiary Tracking Stock or compulsorily convert them into the Shares of Common Stock of the Corporation pursuant to (8) and (9) above if the listing or registration of the shares of Common Stock of SCN on a Stock Exchange is approved; provided, however, that such compulsory retirement or compulsory conversion shall be made on the day immediately preceding the day of such listing or registration or on any prior day determined by the Board of Directors of the Corporation or the Corporate Executive Officer to whom the 
 

 

 

- 21 -

	
             
 	
             
 	
             
 

 

 

 

determination has been delegated by a resolution of the Board of Directors of the Corporation notwithstanding (8) and (9) above.  The Corporation may compulsorily retire all the Shares of the Subsidiary Tracking Stock on the day of such listing or registration or on any prior day determined by the Board of Directors of the Corporation or the Corporate Executive Officer to whom the determination has been delegated by a resolution of the Board of Directors of the Corporation by delivering per share of the Subsidiary Tracking Stock, the Shares of Common Stock of SCN in the number obtained by multiplying one (1) by the Standard Ratio as of such day or determined day, with its profit distributable as dividends to the shareholders or in accordance with the provisions concerning capital reduction.

 

	
            (13)
 	
            The Standard Ratio shall be adjusted in accordance with the method prescribed in the Articles of Incorporation of the Corporation in cases where the Shares of the Subsidiary Tracking Stock are to be issued at a price less than the market price, the Shares of the Common Stock of SCN are to be issued at a price less than the market price, or otherwise prescribed in the Articles of Incorporation.
 

 

	
            (14)
 	
            The Corporation may consolidate or split the shares of Common Stock of the Corporation and/or the Shares of Subsidiary Tracking Stock.  The Corporation may grant the shareholders of Common Stock the right to subscribe for shares of Common Stock and/or the shareholders of Subsidiary Tracking Stock the right to subscribe for Shares of Subsidiary Tracking Stock.  The Corporation may make stock splits with respect to the shares of Common Stock and the Shares of Subsidiary Tracking Stock at the same time in different split ratios.  In addition, the Corporation may grant the shareholders of Common Stock the right to subscribe for shares of Common Stock and the shareholders of Subsidiary Tracking Stock the right to subscribe for Shares of Subsidiary Tracking Stock at the same time on different terms.
 

 

	
            (15)
 	
            Details with respect to the Shares of Subsidiary Tracking Stock shall be subject to the details prescribed in the Articles of Incorporation of the Corporation.
 

 

 

 

 

- 22 -EX-10.10

                              CONSULTING AGREEMENT

       This  Agreement  is made and entered into as of the 27th day of December,
2004  by  and  between   Gabriele  M.   Cerrone   ("Consultant")   and  Callisto
Pharmaceuticals, Inc. (the "Company").

       WHEREAS,  the Consultant is a founder of the Company's  Callisto Research
Laboratories,  LLC  subsidiary  ("CLabs"),  guided  the  Company's  simultaneous
acquisition of CLabs and Synergy Pharmaceuticals, Inc., its recapitalization and
financing  in April 2003,  several  rounds of  financing,  exchange  listing and
advised  management  in  strategic  planning  and the  development  of strategic
relationships; and

       WHEREAS,  the Consultant has served as the Chairman of the Board of since
April, 2003; and

       WHEREAS, the Company's management and Board of Directors wishes to assure
that the Company will continue to have the services of the Consultant  available
to it; and

       WHEREAS, the Company's Board of Directors has determined, in light of the
importance of the Consultant's continued services to the stability and interests
of the Company and its  stockholders to reinforce and encourage the Consultant's
continued attention and dedication to the Company's affairs.

       WHEREAS,  the Company  desires to engage  Consultant  to provide  certain
consulting  services,  and Consultant is willing to be engaged by the Company to
provide such services, on the terms and conditions set forth below;

       NOW,  THEREFORE,  in consideration of the mutual covenants and agreements
contained herein, the receipt and sufficiency of which are hereby  acknowledged,
the parties hereto agree as follows:

       1.     PURPOSE:  The  Company  hereby  engages  Consultant  for the  term
specified  in  Paragraph  2 hereof to render  consulting  advice to the  Company
relating to business development,  corporate finance and capital markets matters
upon the terms and conditions set forth herein.

       2.     EFFECTIVE DATE AND TERM:

       2.1    EFFECTIVE  DATE.  This  Agreement  shall  become  effective  as of
              January 1, 2005 (the "Effective  Date"),  provided that the duties
              of Consultant and the  obligations of the Company  hereunder shall
              not commence until Consultant has notified the Company that he has
              terminated his present employment.  This Agreement shall be deemed
              void if Consultant does not assume his responsibilities  hereunder
              on or prior to February 15, 2005.

       2.2    TERM. Unless earlier terminated pursuant to Section 10 hereof, the
              term  of  this  Agreement   shall  commence  upon  the  date  that
              Consultant assumes his

                                       1
<PAGE>

              responsibilities under this Agreement (the "Start Date") and shall
              continue  from the Start Date to December  31, 2006 (the  "Initial
              Term").  This Agreement shall thereafter be automatically  renewed
              for  successive  one year periods unless either party shall notify
              the other in writing of its intention not to renew this  Agreement
              (a "Non-renewal Notice"),  which notice shall be given at least 90
              days prior to the end of the then  current  term (the  "Expiration
              Date").  The period from the  Commencement  Date to the Expiration
              Date, including the Renewal Term, if any, is referred to herein as
              the "Term."

       3.     DUTIES  OF  CONSULTANT:  During  the term of this  Agreement,  the
Consultant  shall  devote such  portion of his  business  time and  attention to
affairs of the Company  reasonably  necessary  to provide the Company  with such
regular and customary business development,  strategic planning, capital markets
and  corporate  finance  consulting  advice as is  reasonably  requested  by the
Company's management and Board of Directors,  provided that Consultant shall not
be  required  to  undertake  duties  not  reasonably  within  the  scope of this
Agreement.  So long as the Consultant  serves as a member of the Company's Board
of Directors,  Consultant shall serve as Chairman of the Board; PROVIDED, at the
request  of all of the  members  of the Board of  Directors  (not  counting  the
Consultant),  the  Consultant  will  relinquish  his  title as  Chairman  to the
Company's duly appointed chief executive  officer,  and accept the title of Vice
Chairman,.

              3.1.   PERMISSIBLE   SERVICES.   The  Consultant's  services  will
       include  advising the Company's Board of Directors and senior  management
       on the following matters:

                     (i)    in-licensing  and  out-licensing   technologies  and
                            compounds;

                     (ii)   capitalization  and  corporate  organization  of the
                            Company;

                     (iii)  structure  and pricing of offerings of the Company's
                            securities in public and private transactions;

                     (iv)   alternative uses of corporate assets;

                     (v)    structure and use of debt;

                     (vi)   application   and  maintenance  of  listing  of  the
                            Company's  stock in  securities  exchanges and other
                            appropriate markets;

                     (vii)  strategic planning

                     (viii) management recruitment and compensation; and

                     (ix)   presentations  to  institutional   and  professional
                            individual investors in the U.S. and Europe.

              3.2    PROHIBITED  SERVICES.  The  services  to be rendered by the
       Consultant  to the  Corporation  shall  not  (unless  the  Consultant  is
       appropriately  licensed,  registered  or there is an exemption  available
       from such licensing or registration) include, directly or indirectly: any
       activities  which require the  Consultant to register as a  broker-dealer
       under the Securities Exchange Act of 1934.

       4.     COMPENSATION:  In  consideration  for  the  services  rendered  by
Consultant to the Company pursuant to this Agreement,  the Company agrees to pay
Consultant the sum of $205,000 at the rate of $17,083.33 per month commencing on
the Start Date ("Base

                                       2
<PAGE>

Compensation").  The Consultant's  Base  Compensation may be increased,  but not
decreased by the Compensation  Committee of the Company's Board of Directors (or
similar committee serving that function, the "Committee").  Once increased, such
increased amount shall constitute the Consultant's  Base  Compensation and shall
not be decreased. In addition,  Consultant shall be granted an aggregate 375,000
ten year non-qualified stock options pursuant to the Company's Stock Option Plan
(the  "Plan") at an exercise  price per share equal to the fair market  value of
the  Company's  Common  Stock on the date of  execution  of this  Agreement,  as
defined in the Plan. Subject to the provision of the Plan and Section 10 of this
Agreement,  one  half of such  options  shall  vest  on  each of the  first  two
anniversaries of the execution of this Agreement.  Once vested,  the options may
be  exercised  until their  expiration.  The Company  will include the shares of
equity  securities  of the Company  which may be issued upon the exercise of the
options in any  registration  statement  under the  Securities Act of 1933 which
includes securities issuable to any other executive officer of the Company.  The
Consultant  shall  be  eligible  to  earn a  cash  bonus  of up to  15% of  Base
Compensation  for each  twelve-month  period  during  the Term  based on meeting
performance   objectives  and  bonus  criteria  to  be  mutually  identified  by
Consultant and the Company's Board of Directors.

       5.     EXPENSES AND SERVICES:

       5.1    Consultant is authorized to incur reasonable  expenses in carrying
              out  his  duties  and   responsibilities   under  this  Agreement,
              including,  without  limitation,  expenses  for  travel,  cellular
              telephone  (including  access  charges and  business  calls),  and
              business  entertainment.  Additionally,  Consultant  shall,  after
              having  obtaining  the approval of the Company's  Chief  Executive
              Officer,  which shall not be unreasonably  withheld, be authorized
              to incur reasonable  expenses for the attendance of conferences in
              fields relate to oncology,  technology of interest to the Company,
              finance of  biotechnology  ventures,  and similar items related to
              Consultant's  duties  and  responsibilities  as  Consultant  deems
              necessary. Company will reimburse Consultant for all such expenses
              upon presentation by Consultant of appropriately itemized accounts
              of  such  expenditures  or the  Company  will  pay  such  expenses
              directly.

       5.2    During  the Term,  Consultant  shall be  provided  with  computing
              hardware and software  tools,  office  facilities  and  qualified,
              access  to  Company  information  and  financial  records  and  an
              experienced  administrative assistant (which may be shared with no
              more than one senior executive  officer) as is deemed  appropriate
              by the  Consultant and approved by the Company's  Chief  Executive
              Officer.  Such  services  and  facilities  will not be  diminished
              without the Consultant's prior consent.

       6.     LIABILITY  OF  CONSULTANT:   The  Company  acknowledges  that  all
opinions  and advice  (written  or oral) given by  Consultant  to the Company in
connection with Consultant's  engagement are intended solely for the benefit and
use of the Company in considering the transaction to which they relate,  and the
Company agrees that no person or entity other than the Company shall be entitled
to make use of or rely upon the advice of Consultant to be given hereunder,  and
no such  opinion or advice  shall be used for any other  purpose or  reproduced,

                                       3
<PAGE>

disseminated,  quoted  or  referred  to at any  time,  in any  manner or for any
purpose,  nor may the Company make any public  references to Consultant,  or use
Consultant's  name in any annual reports or any other reports or releases of the
Company  without  Consultant's  prior  written  consent.   Consultant's  maximum
liability shall not exceed the cash compensation received from the Company.

       7.     CONSULTANT'S  SERVICES TO OTHERS:  The Company  acknowledges  that
Consultant  and its  affiliates  are in the business of investing  and providing
financial  services and consulting  advice to others.  Nothing herein  contained
shall be construed to limit or restrict  Consultant in conducting  such business
with respect to others, or in rendering such advice to others.

       8.     COMPANY INFORMATION:

              a.     The Company  recognizes  and confirms that, in advising the
Company and in fulfilling it engagement hereunder,  Consultant will use and rely
on data, material and other information  furnished to Consultant by the Company.
The Company  acknowledges  and agrees that in performing its services under this
engagement,  Consultant may rely upon the data,  material and other  information
supplied  by  the  Company   without   independently   verifying  the  accuracy,
completeness  or veracity of same.  The Company  agrees to notify  Consultant in
writing via overnight courier,  facsimile or e-mail of any material event and/or
change with in twenty-four hours of its occurrence.

              b.     Consultant  recognizes and  acknowledges  that by reason of
Consultant's  retention  by and  service to the Company  before,  during and, if
applicable,  after the Term, Consultant will have access to certain confidential
and  proprietary  information  relating  to the  Company's  business,  which may
include,  but is not  limited  to,  trade  secrets,  trade  "know-how,"  product
development  techniques  and  plans,  formulas,  customer  lists and  addresses,
financing services,  funding programs,  cost and pricing information,  marketing
and sales techniques,  strategy and programs, computer programs and software and
financial  information relating to the field of in which the Company is actually
engaged in  research,  development,  collaboration  or sales at the time of such
disclosure (collectively referred to as "Confidential Information").  Consultant
acknowledges that such  Confidential  Information is a valuable and unique asset
of the Company  and  Consultant  covenants  that it will not,  unless  expressly
authorized in writing by the Company, at any time during the Consulting Term use
any Confidential Information or divulge or disclose any Confidential Information
to any person,  firm or corporation except in connection with the performance of
Consultant's  duties  for  the  Company  and in a  manner  consistent  with  the
Company's policies regarding Confidential Information. Consultant also covenants
that  at  any  time  after  the  termination  of  this  Agreement,  directly  or
indirectly,  it will not use any Confidential Information or divulge or disclose
any  Confidential  Information to any person,  firm or corporation,  unless such
information  is in the public  domain  through no fault of  Consultant or except
when  required to do so by a court of law,  by any  governmental  agency  having
supervisory  authority over the business of the Company or by any administrative
or legislative body (including a committee  thereof) with apparent  jurisdiction
to order  Consultant to divulge,  disclose or make accessible such  information.
All written  Confidential  Information  (including,  without limitation,  in any
computer or other electronic  format) which comes into  Consultant's  possession
during the Consulting  Term shall remain the property of the Company.

                                       4
<PAGE>

Except as required in the performance of Consultant's duties for the Company, or
unless  expressly  authorized  in writing by the Company,  Consultant  shall not
remove any written Confidential Information from the Company's premises,  except
in connection with the performance of Consultant's duties for the Company and in
a  manner  consistent  with  the  Company's  policies   regarding   Confidential
Information. Upon termination of this Agreement, the Consultant agrees to return
immediately  to the  Company all written  Confidential  Information  (including,
without limitation,  in any computer or other electronic format) in Consultant's
possession. .

       9.     CONSULTANT AN INDEPENDENT CONTRACTOR: Consultant shall perform its
services  hereunder as an  independent  contractor and not as an employee of the
Company or an affiliate thereof. It is expressly understood and agreed to by the
parties hereto that Consultant shall have no authority to act for,  represent or
bind the Company or any affiliate thereof in any manner, except as may be agreed
to expressly by the Company in writing from time to time.

       10.    TERMINATION:

       10.1   TERMINATION WITHOUT CAUSE OR FOR GOOD REASON.

       (a)    If this  Agreement  is  terminated  by the Company  other than for
              Cause  (as  defined  in  Section  10.4  hereof)  as  a  result  of
              Consultant's death or Permanent  Disability (as defined in Section
              10.2 hereof), or if Consultant  terminates his employment for Good
              Reason  (as  defined  in  Section  10.1 (b)  hereof)  prior to the
              Expiration Date, Consultant shall receive or commence receiving as
              soon  as  practicable  in  accordance   with  the  terms  of  this
              Agreement:

              (i)    a severance payment (the "Severance Payment"), which amount
                     shall be paid in a cash  lump sum  within  ten (10) days of
                     the  date  of  termination,  in  an  amount  equal  to  the
                     aggregate amount of the Consultant's  Base Compensation for
                     the then remaining term of this Agreement;

              (ii)   immediate  vesting of all  unvested  stock  options and the
                     extension  of the  exercise  period of such  options to the
                     later of the  longest  period  permitted  by the  Company's
                     stock option plans or ten years  following the  Termination
                     Date;

              (iii)  payment in respect of compensation  earned but not yet paid
                     (the "Compensation  Payment") which amount shall be paid in
                     a cash  lump  sum  within  ten  (10)  days  of the  date of
                     termination; and

       (b)    For purposes of this  Agreement,  "Good  Reason" shall mean any of
              the  following   (without   Consultant's   express  prior  written
              consent):

              (i)    Any  material  breach by Company of any  provision  of this
                     Agreement,  including any material  reduction by Company of
                     Consultant's   duties  or   responsibilities   (except   in
                     connection with the termination of Consultant's

                                       5
<PAGE>

                     employment for Cause, as a result of Permanent  Disability,
                     as a result of  Consultant's  death or by Consultant  other
                     than for Good Reason);

              (ii)   A   reduction   by  the   Company  in   Consultant's   Base
                     Compensation  or any  failure of the  Company to  reimburse
                     Consultant for material  expenses  described in Section 5.1
                     or provide the  services  described  in Section 5.2 of this
                     Agreement;

              (iii)  The  failure  by  the   Company  to  obtain  the   specific
                     assumption of this  Agreement by any successor or assign of
                     Company as provided for in Section 11 hereof;

              (iv)   Moving  the  principal  offices  of  Company  to a location
                     outside of the Metropolitan New York Area; or

              (v)    Upon a Change  of  Control  of  Company  (as  such  term is
                     hereinafter defined).

       10.2   PERMANENT   DISABILITY.   If   Consultant   becomes   totally  and
permanently  disabled  (as  defined in the  Company's  disability  benefit  plan
applicable  to senior  executive  officers  as in  effect  on the date  thereof)
("Permanent Disability"),  Company or Consultant may terminate this Agreement on
written notice thereof,  and Consultant shall receive or commence receiving,  as
soon as practicable:

              (i)    amounts  payable  pursuant  to the terms of the  disability
                     insurance  policy  or  similar  arrangement  which  Company
                     maintains  for the  Consultant,  if any,  during  the  term
                     hereof;

              (ii)   the Compensation  Payment which shall be paid to Consultant
                     as a cash lump sum within 30 days of such termination; and

              (iii)  immediate vesting of all unvested stock options.

       10.3   DEATH. In the event of  Consultant's  death during the term of his
employment  hereunder,  Consultant's  estate or designated  beneficiaries  shall
receive or commence  receiving,  as soon as practicable  in accordance  with the
terms of this Agreement:

              (i)    compensation  equal to one year's Base  Compensation  which
                     shall be paid within 30 days of such termination;

              (ii)   any death benefits  provided  under the Consultant  benefit
                     programs,  plans and practices in which the  Consultant has
                     an interest, in accordance with their respective terms;

              (iii)  the   Compensation   Payment   which   shall   be  paid  to
                     Consultant's  estate as a cash  lump sum  within 30 days of
                     such termination; and

                                       6
<PAGE>

              (iv)   such other payments under  applicable  plans or programs to
                     which Consultant's  estate or designated  beneficiaries are
                     entitled pursuant to the terms of such plans or programs.

       10.4   VOLUNTARY  TERMINATION  BY  CONSULTANT:  DISCHARGE FOR CAUSE.  The
Company  shall  have  the  right to  terminate  this  Agreement  for  Cause  (as
hereinafter defined). In the event that Consultant's employment is terminated by
Company for Cause, as hereinafter  defined, or by Consultant other than for Good
Reason or other than as a result of the  Consultant's  Permanent  Disability  or
death,  prior to the  Termination  Date,  Consultant  shall be entitled  only to
receive,  as a cash lump sum within 30 days of such termination the Compensation
Payment.  As used  herein,  the term  "Cause"  shall be limited  to (i)  willful
malfeasance or willful  misconduct by Consultant in connection with the services
to the  Company  in a  matter  of  material  importance  to the  conduct  of the
Company's  affairs  which has a material  adverse  affect on the business of the
Company,  (ii) willful  continuing  refusal by  Consultant to perform his duties
hereunder as reasonably  directed by the Board of Directors  after notice of any
such refusal to perform such duties or such  reasonable  direction  was given to
Consultant by the Board of Directors,  or (iii) the conviction of Consultant for
commission of a felony.  For purposes of this  subsection,  no act or failure to
act on the  Consultant's  part shall be  considered  "willful"  unless done,  or
omitted to be done, by the Consultant  not in good faith and without  reasonable
belief that his action or  omission  was in the best  interest  of the  Company.
Termination  of this  Agreement  pursuant to this  Section 10.4 shall be made by
delivery to Consultant of a copy of a resolution duly adopted by the affirmative
vote of all of the  members of the Board of  Directors  called and held for such
purpose  (after 30 days  prior  written  notice  to  Consultant  and  reasonable
opportunity  for  Consultant to be heard before the Board of Directors  prior to
such vote),  finding that in the good faith  business  judgment of such Board of
Directors,  Consultant  was  guilty of conduct  set forth in any of clauses  (i)
through (iii) above and specifying the particulars thereof.

11.    ASSIGNMENT:

       This  Agreement  shall be  binding  upon and inure to the  benefit of the
heirs and  representatives  of  Consultant  and the  assigns and  successors  of
Company,  but neither this  Agreement  nor any rights or  obligations  hereunder
shall be assignable or otherwise subject to hypothecation by Consultant  (except
by will or by  operation of the laws of intestate  succession  or by  Consultant
notifying  the Company  that cash  payment be made to an  affiliated  investment
partnership in which Consultant is a control person) or by Company,  except that
Company may assign this Agreement to any successor (whether by merger,  purchase
or otherwise) to all or substantially all of the stock,  assets or businesses of
Company, if such successor expressly agrees to assume the obligations of Company
hereunder.

12.    CHANGE IN CONTROL:

       12.1   DEFINITION.  For purposes of this Agreement, a "Change in Control"
shall be  deemed to have  occurred  if (i) there  shall be  consummated  (A) any
consolidation  or  merger  of the  Company  in  which  the  Company  is not  the
continuing or surviving corporation or pursuant to which shares of the Company's
Common Stock would be converted into cash,  securities or other property,  other
than a merger of the Company in which the holders of the Company's  Common Stock
immediately  prior to the  merger  have  substantially  the  same  proportionate
ownership of

                                       7
<PAGE>

common stock of the surviving  corporation  immediately after the merger, or (B)
any sale,  lease,  exchange or other transfer (in one transaction or a series of
related  transactions) of all or substantially all the assets of the Company, or
(ii) the  stockholders of the Company shall approve any plan or proposal for the
liquidation or dissolution of the Company,  or (iii) any person (as such term is
used in Sections 13(d) and 14(d)(2) of the Securities  Exchange Act of 1934 (the
"Exchange Act")), other than the Company or any executive benefit plan sponsored
by the  Company,  or such person on the  Effective  Date hereof is a 20% or more
beneficial owner,  shall become the beneficial owner (within the meaning of Rule
13d-3 under the Exchange Act) of securities of the Company  representing  20% or
more of the combined voting power of the Company's then  outstanding  securities
ordinarily (and apart from rights accruing in special  circumstances) having the
right to vote in the election of directors,  as a result of a tender or exchange
offer, open market purchases,  privately negotiated  purchases or otherwise,  or
(iv) at any time during a period of two  consecutive  years,  individuals who at
the beginning of such period,  constituted the Board of Directors of the Company
shall cease for any reason to constitute at least a majority thereof, unless the
election or the  nomination for election by the Company's  stockholders  of each
new  director  during such  two-year  period was  approved by a vote of at least
two-thirds  of the  directors  then still in office,  who were  directors at the
beginning of such two-year period.

       12.2   RIGHTS AND  OBLIGATIONS.  If a Change in  Control  of the  Company
shall have  occurred  while the  Consultant  is  director  of the  Company,  the
Consultant  shall be entitled to the  compensation  provided in Section  10.1 of
this Agreement  upon the subsequent  termination of this Agreement by either the
Company, or the Consultant within two years of the date upon which the Change in
Control  shall have  occurred,  unless such  termination  is a result of (i) the
Consultant's  death;  (ii) the Consultant's  Disability;  (iii) the Consultant's
Retirement; or (iv) the Consultant's termination for Cause.

7.     INDEMNIFICATION:

       Consultant,  as  such  and  as  a  Director  of  the  Company,  shall  be
indemnified by the Company  against all liability  incurred by the Consultant in
connection with any proceeding,  including,  but not necessarily limited to, the
amount of any judgment obtained against Consultant, the amount of any settlement
entered  into by the  Consultant  and any  claimant  with  the  approval  of the
Company, attorneys' fees, actually and necessarily incurred by him in connection
with the defense of any action,  suit,  investigation  or  proceeding or similar
legal  activity,  regardless  of  whether  criminal,  civil,  administrative  or
investigative in nature  ("Claim"),  to which he is made a party or is otherwise
subject to, by reason of his being or having been a director,  officer, agent or
employee of the Company,  to the full extent permitted by applicable law and the
Certificate of Incorporation of the Company.. Such right of indemnification will
not be deemed  exclusive of any other rights to which Consultant may be entitled
under Company's  Certificate of Incorporation or By-laws, as in effect from time
to time, any agreement or otherwise.

                                       8
<PAGE>

14.    MISCELLANEOUS:

              a.     This   Agreement   between  the   Company  and   Consultant
constitutes the entire agreement and  understanding  of the parties hereto,  and
supersedes any and all previous agreements and  understandings,  whether oral or
written, between the parties with respect to the matters set forth herein.

              b.     Any notice or communication permitted or required hereunder
shall be in writing and shall be deemed  sufficiently given if hand-delivered or
sent (i) postage prepaid by registered mail, return receipt  requested,  or (ii)
by facsimile,  to the  respective  parties as set forth below,  or to such other
address as either party may notify the other in writing.

       If to the Company, to:  Callisto Pharmaceuticals, Inc.
                               420 Lexington Avenue, Suite 1609
                               New York, New York 10170
                               Attention: Gary S. Jacob, CEO

       If to Consultant, to:   Gabriel M. Cerrone
                               c/o Panetta Partners Ltd.
                               1275 First Avenue, Suite 296
                               New York, New York 10021
                               Attention: Gabriele M. Cerrone, Managing Partner

                               With a required copy to:

                               Sommer & Schneider LLP
                               595 Stewart Avenue, Suite 710
                               Garden City, NY 11530
                               Attention: Herb Sommer, Partner

              c.     This   Agreement   may  be   executed   in  any  number  of
counterparts,  each of whom together shall  constitute one and the same original
document.

              d.     This  Agreement may not be changed  orally,  but only by an
agreement  in  writing  signed by the party  against  whom any  waiver,  change,
amendment, modification or discharge is sought.

              e.     The  invalidity of all or any part of any provision of this
Agreement  shall not render  invalid  the  remainder  of this  Agreement  or the
remainder of such  provision.  If any provision of this Agreement is so broad as
to be unenforceable,  such provision shall be interpreted to be only so broad as
is enforceable.

              f.     This  Agreement  shall  be  governed  by and  construed  in
accordance  with the law of the State of New York without  giving  effect to the
principles of conflicts of law thereof.  The parties  hereto each hereby submits
herself or itself for the sole  purpose of this  Agreement  and any  controversy
arising hereunder to the exclusive jurisdiction of the state courts in the State
of New York.

                                       9
<PAGE>

              g.     Any amounts due hereunder to Consultant which remain unpaid
after their due date, shall bear interest from the due date until paid at a rate
of the prime rate (in effect on the date thereof for Citibank).

              h.     The Company's obligations to make payments under Section 10
and 12 shall survive termination or expiration of this Agreement.

              i.     Consultant shall not be required to mitigate damages or the
amount of any  payment  provided  for under  this  Agreement  by  seeking  other
employment or otherwise after the termination of this Agreement.

       IN WITNESS  WHEREOF,  the parties hereto have caused this Agreement to be
duly executed, as of the date first above written.

                                         CONSULTANT

                                         /s/ GABRIELE M. CERRONE
                                         ------------------------------
                                         Gabriele M. Cerrone

                                         CALLISTO PHARMACEUTICALS, INC.

                                         By: /s/ GARY S. JACOB
                                             --------------------------
                                             Name: Gary S. Jacob
                                             Title: Chief Executive Officer

                                       10

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