SUBSCRIPTION AGREEMENT

THIS SUBSCRIPTION AGREEMENT (this “Agreement”) made as of the date set forth on
the signature page hereof between ZIOPHARM Oncology, Inc., a Delaware
corporation having a place of business at 1180 Avenue of the Americas, 19th
Floor, New York, New York 10036 (the “Company”), and the undersigned (the
“Subscriber”).

WITNESSETH:

WHEREAS, the Company is offering (the “Offering”) to a limited number of persons
who qualify as “accredited investors” as defined in Rule 501(a) of Regulation D
(“Regulation D”) promulgated under the Securities Act of 1933, as amended (the
“Securities Act”), shares (the “Shares”) of its common stock, par value $0.001
per share (“Common Stock”), and warrants to purchase shares of Common Stock (the
“Warrants” and collectively with the Shares, the “Securities”) on the terms and
conditions described in this Agreement;

WHEREAS, the Offering is contingent upon the Company making sales of a number of
shares of Common Stock which would provide the Company with aggregate gross
proceeds of at least $15,000,000 (the “Minimum Offering Amount”). The Company
will sell a maximum number of shares of Common Stock which would provide the
Company with aggregate gross proceeds of $37,000,000 (the “Maximum Offering
Amount”).

WHEREAS, Paramount BioCapital, Inc. (“Paramount”) and Griffin Securities, Inc.
(“Griffin”), are acting as co-exclusive placement agents (the “Placement
Agents”) for the Offering; and

WHEREAS, on the terms and conditions hereinafter set forth, the Subscriber
desires to purchase from the Company, and the Company desires to sell to the
Subscriber, a number of Securities.

NOW, THEREFORE, in consideration of the promises and the mutual representations
and covenants hereinafter set forth, the parties hereto do hereby agree as
follows:

1.            
PURCHASE AND SALE OF SECURITIES.

 
1.1  Offering. The Company is offering the Securities to a limited number of
persons who qualify as “accredited investors,” as defined in Rule 501(a) of
Regulation D of the Securities Act, on the terms and conditions described in
this Agreement. The Minimum Offering Amount will be offered on an “all or none,
best efforts" basis. Amounts in excess of the Minimum Offering Amount up to the
Maximum Offering Amount will be offered on a “best efforts” basis. The
Subscriber understands, however, that this purchase and sale of the Securities
is contingent upon the Company making aggregate sales equal to or exceeding the
Minimum Offering Amount. The per Share price shall be equal to the lesser of (i)
$4.63; and (ii) the volume weighted average price of the Company’s Common Stock
as reported on the OTC Bulletin Board® (or, if applicable, the national
securities exchange on which such Common Stock is listed, the Nasdaq National
Market, the Nasdaq Capital Market, or other nationally recognized trading
system) for the five (5) trading days immediately prior to the applicable
Closing Date (as defined below) (the “Purchase Price”). The minimum number of
Shares purchasable by any single investor shall be equal to $100,000 divided by
the Purchase Price, subject to the discretion of the Company and the Placement
Agents to accept subscriptions for lesser amounts.
 

--------------------------------------------------------------------------------

 
1.2  Closing. At the closing (the “Closing,” and the date thereof, the “Closing
Date”), provided the Company has received the Minimum Offering Amount, the
Company shall issue and sell to the Subscriber and the Subscriber shall purchase
from the Company, a number of Shares equal to the quotient resulting from
dividing (i) the total dollar amount of the Subscriber’s subscription as set
forth on the signature page hereof that is accepted by the Company and the
Placement Agents (the “Aggregate Purchase Price,” as further defined below) by
(ii) the Purchase Price, rounded to the nearest whole Share (the “Subscription
Amount”). In addition to the Shares, each Subscriber shall receive a number of
Warrants equal to 30% of the number of Shares purchased in the Offering by such
Subscriber, rounded to the nearest whole share. The Warrants shall be in
substantially the form attached to the Memorandum (as defined below) and shall
have an exercise price equal to 120% of the Purchase Price (the “Warrant
Exercise Price”) and shall be exercisable at any time prior to the fifth
anniversary of the date of issuance.
 
1.3  Closing Mechanics. The Closing shall be held at a date and time designated
by the Company and the Placement Agents prior to 11:59 p.m. Eastern Standard
Time on April 30, 2006 (subject to extension at the discretion of the Company
and the Placement Agents without notice to the Subscriber of up to 30 days),
which date shall be no later than five (5) Business Days (as defined in Article
5) after satisfaction or waiver of the closing conditions set forth in Article 4
hereof. The Closing shall occur at the offices of Paramount, located at 787
Seventh Avenue, New York, New York 10019. Upon satisfaction or waiver of all
conditions to the Closing, the Placement Agents and the Company shall instruct
an escrow agent (the “Escrow Agent”) to release the proceeds of the Offering to
the Company, less fees and expenses due to the Placement Agents. Interest, if
any, that has accrued with respect to the Aggregate Purchase Price while in
escrow shall also be distributed to the Company at the Closing and the
Subscriber will have no right to such interest, even if there is no Closing.
 
1.4  Payment of Aggregate Purchase Price. Upon, or prior to, the execution of
this Agreement by the Subscriber, the Subscriber shall deposit the amount of
readily available funds equal to the Aggregate Purchase Price in a segregated
escrow account with the Escrow Agent (the “Escrow Account”) by check or wire
transfer of immediately available funds pursuant to the instructions provided
below. Subject to the terms and conditions of this Agreement (including, without
limitation, the Company’s and the Placement Agents’ option, each at its sole
discretion, to refuse to accept subscriptions, in whole or in part, from any
Subscriber), the Subscriber hereby subscribes for and agrees to purchase from
the Company such number of Securities and the Company agrees to sell such number
of Securities to the Subscriber as is set forth upon the signature page hereof
at the Aggregate Purchase Price as accepted by the Company and the Placement
Agents.

2

--------------------------------------------------------------------------------

 
US Bank Trust National Association
ABA Routing Number: 091000022
US Bank and Trust Corp. Account Number: 180121167365
For: Paramount – ZIOPHARM & Griffin Escrow
SEI Number: 791749000
Reference: [Investor Name]
Attn: Angela Rieger

The Subscriber must complete and return a duly executed, unaltered copy of this
Agreement (including the completed Confidential Investor Questionnaire included
in Article 7 hereof (the “Confidential Investor Questionnaire”)) to either
Placement Agent at such Placement Agent’s address indicated in the Memorandum on
or before the date indicated to the Subscriber by the Placement Agents to be
eligible to participate in the Offering. The Company and the Placement Agents
retain complete discretion to accept or reject any subscription unless and until
the Company executes a counterpart to this Agreement that includes such
Subscriber’s signature.

1.5  Delivery of Certificates. The Company shall deliver, or cause to be
delivered, the certificates representing the Securities purchased by the
Subscriber hereunder as soon as practical after the Closing, and in any event
within five business days, to the Subscriber’s residential or business address
indicated on the signature page hereto.
 

2.  
REPRESENTATIONS AND WARRANTIES OF SUBSCRIBER.

The Subscriber hereby represents and warrants to the Company as of the date
hereof and the relevant Closing Date as follows:

2.1       The Subscriber understands, acknowledges and agrees that the purchase
of the Securities involves a high degree of risk including, but not limited to,
the following: (i) an investment in the Company is highly speculative, and only
investors who can afford the loss of their entire investment should consider
investing in the Company and the Securities; (ii) the Subscriber may not be able
to liquidate its investment; (iii) transferability of the Securities is
extremely limited; (iv) in the event of a disposition of the Securities, the
Subscriber could sustain the loss of its entire investment; and (v) since the
Company has been a publicly-traded company, the Company has not paid any
dividends on its Common Stock and does not anticipate the payment of dividends
in the foreseeable future.

2.2       The Subscriber is an “accredited investor” as such term is defined in
Rule 501(a) of Regulation D promulgated under the Securities Act, as indicated
by the Subscriber’s responses to the questions contained in the Confidential
Investor Questionnaire, which are true and correct as of the date hereof and
shall be true and correct as of the relevant Closing Date, and that the
Subscriber is able to bear the economic risk of an investment in the Company. If
the Subscriber is a natural person, the Subscriber has reached the age of
majority in the state or other jurisdiction in which the Subscriber resides, has
adequate means of providing for the Subscriber’s current financial needs and
contingencies, is able to bear the substantial economic risks of an investment
in the Securities for an indefinite period of time, has no need for liquidity in
such investment and, at the present time, could afford a complete loss of such
investment.
 
3

--------------------------------------------------------------------------------

 
2.3  The Subscriber understands, acknowledges and agrees that: (i) the
Subscriber is knowledgeable, sophisticated and has experience in making, and is
qualified to make, decisions with respect to investments representing an
investment decision like that involved in the purchase of the Securities and has
prior investment experience, including investments in securities which are
non-listed, unregistered and/or not traded on the New York Stock Exchange, AMEX,
the National Market or Capital Market of the National Association of Securities
Dealers, Inc. (“NASD”) Automated Quotation System or any other national stock
exchange; (ii) the investment in the Securities is of a highly speculative
nature and involves a significant degree of risk, that the market price of the
Common Stock has been and continues to be volatile and that Subscriber has
carefully evaluated the risks of an investment in the Securities, including
without limitation those set forth in the Memorandum; and (iii) the Subscriber
is able to bear the economic risk of an investment in the Securities and the
potential loss of such investment, which risk the Subscriber hereby assumes.

2.4  The Subscriber has received and carefully reviewed this Agreement, the
Company’s Confidential Offering Memorandum dated March 21, 2006 (together with
all exhibits, appendices, supplements or amendments thereto, the “Memorandum”)
(exhibits and appendices to the Memorandum, including any supplements or
amendments thereto, that have been filed with the Securities and Exchange
Commission (the “SEC”) are collectively referred to herein as the “SEC
Filings”). For purposes of this representation, the parties agree that any
information that that Company subsequently files with the SEC under Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”) that is delivered to the Subscriber prior to the Closing
will automatically update and supersede any previous information that is part of
the Memorandum. The Subscriber further represents that the Subscriber has been
furnished by the Company during the course of this transaction with all
information regarding the Company which the Subscriber, its investment advisor,
attorney and/or accountant has requested or desired to know or which is
otherwise relevant to an investment decision, has been afforded the opportunity
to ask questions of and receive answers from duly authorized officers or other
representatives of the Company concerning the terms and conditions of the
Offering, and has received any additional information which the Subscriber or
its advisors or agents has requested.

2.5       (a) The Subscriber has relied solely upon its own due diligence
investigations and information provided by the Company in making the decision to
invest in the Securities. The Subscriber is familiar with and understands the
terms of the Offering, including the rights to which the Subscriber is entitled
under this Agreement. In evaluating the suitability of an investment in the
Company, the Subscriber has not relied upon any representation or other
information (whether oral or written) from the Company, or any agent, employee
or Affiliate (as defined in Article 5) of the Company other than as set forth in
the Memorandum, in this Agreement or resulting from the Subscriber’s own
independent investigation. The Subscriber understands and acknowledges that
nothing in this Agreement, the Memorandum or any other materials provided to the
Subscriber in connection with the subscription for the Securities or sale of the
Securities constitutes investment, tax or legal advice. To the extent deemed
necessary or advisable by the Subscriber in its sole discretion, the Subscriber
has retained, at its sole expense, and relied upon appropriate professional
advice regarding the investment, tax and legal merits and consequences of this
Agreement and its purchase of the Securities hereunder.
 
4

--------------------------------------------------------------------------------

 
(b) No Securities were offered or sold to the Subscriber by means of any form of
general solicitation or general advertising, and in connection therewith the
Subscriber did not: (i) receive or review any advertisement, article, notice or
other communication published in a newspaper or magazine or similar media or
broadcast over television or radio whether closed circuit, or generally
available; or (ii) attend any seminar meeting or industry investor conference
whose attendees were invited by any general solicitation or general advertising.

2.6       The Subscriber, either by reason of the Subscriber’s business or
financial experience or the business or financial experience of the Subscriber’s
professional advisors, has the capacity to protect the Subscriber’s own
interests in connection with the transaction contemplated hereby.

2.7       The Subscriber understands, acknowledges and agrees that the Offering
has not been reviewed, recommended or endorsed by the SEC or any state
securities regulatory authority or other governmental body or agency, since the
Offering is intended to be exempt from the registration requirements of Section
5 of the Securities Act pursuant to Regulation D promulgated under the
Securities Act. The Subscriber shall not sell or otherwise transfer the
Securities unless such transfer is registered under the Securities Act or unless
an exemption from such registration is available. The Subscriber understands
that if required by the laws or regulations or any applicable jurisdictions, the
Offering contemplated hereby will be submitted to the appropriate authorities of
such state(s) for registration or exemption therefrom.

2.8       The Subscriber understands, acknowledges and agrees that the
Securities have not been registered under the Securities Act in reliance upon a
claimed exemption under the provisions of the Securities Act which depends, in
part, upon the Subscriber’s investment intention and the truth and accuracy of,
and Subscriber’s compliance with, the representations, warranties,
acknowledgments and covenants of Subscriber set forth herein. In this
connection, the Subscriber hereby represents that the representations,
warranties, acknowledgments and covenants of Subscriber set forth herein are
true and correct, the Subscriber will comply with the covenants set forth
herein, and the Subscriber is purchasing the Securities for the Subscriber’s own
account for investment purposes only and not with a present view toward the
resale or distribution to others and has no contract, undertaking, agreement or
other arrangement, in existence or contemplated, to sell, pledge, assign or
otherwise transfer the Securities to any other Person (as defined in Article 5).
The Subscriber, if an entity, also represents that it was not formed for the
purpose of purchasing the Securities. As of the date of this Agreement, the
Subscriber has no current plans to effect a “change of control” of the Company,
as such term is understood in Rule 13d of the Exchange Act.
 
5

--------------------------------------------------------------------------------

 
2.9       The Subscriber understands that the Securities will not be registered
or available for sale in the public markets except as specifically provided
herein, and Rule 144 promulgated under the Securities Act (“Rule 144”) requires,
among other conditions, a one-year holding period prior to the resale (in
limited amounts) of securities acquired in a non-public offering (and a two-year
holding period for unlimited sales by non-Affiliates of the Company) without
having to satisfy the registration requirements under the Securities Act. The
Subscriber understands and hereby acknowledges that the Company is under no
obligation to register any of the Securities under the Securities Act or any
state securities or “blue sky” laws or assist the Subscriber in obtaining an
exemption from various registration requirements, other than as set forth in
Article 5 herein.

2.10    The Subscriber acknowledges that the certificates representing the
Shares, the Warrants and, upon the exercise of the Warrants, the shares of
Common Stock issuable upon exercise of the Warrants (the “Warrant Shares”), be
stamped or otherwise imprinted with a legend substantially in the following
form:

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND NEITHER THE SECURITIES
NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT OR AN
EXEMPTION FROM REGISTRATION, WHICH, IN THE OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THIS CORPORATION, IS AVAILABLE.

Certificates evidencing the Shares and the Warrant Shares shall not be required
to contain such legend or any other legend (i) following any sale of such Shares
or Warrant Shares pursuant to Rule 144, or (ii) if such Shares or Warrant Shares
are eligible for sale under Rule 144(k) or have been sold pursuant to the
Registration Statement (as hereafter defined) and in compliance with the
obligations set forth in Section 5.7, below, or (iii) such legend is not
required under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the Securities and
Exchange Commission), in each such case of (iii) to the extent reasonably
determined by the Company’s legal counsel. Notwithstanding the foregoing,
following the effective date of the Registration Statement, the legend set forth
above shall, at the request of the Subscriber, be removed from the certificates
evidencing such Shares and Warrant Shares prior to the resale thereof and the
Company will rescind any stop transfer orders with respect to such shares given
to the Company’s transfer agent, provided that such Subscriber represents and
covenants to the Company in writing (in a form reasonably acceptable to the
Company and its counsel) that (1) the Subscriber will sell such shares only
pursuant to and in the manner contemplated by the Registration Statement,
including the Plan of Distribution section contained therein, and otherwise in
compliance with the Securities Act, including the prospectus delivery
requirements of such act, (2) the Subscriber will indemnify the Company for any
damages or losses resulting to the Company for the Subscriber’s breach of its
representation and covenant described in the foregoing clause (1), and (3) such
other agreements or covenants as the Company or its counsel may reasonably
request. Subject to the foregoing, at such time and to the extent a legend is no
longer required for the Shares or Warrant Shares, the Company will use its best
efforts to no later than three (3) trading days following the delivery by a
Subscriber to the Company or the Company’s transfer agent of a legended
certificate representing such Shares or Warrant Shares (together with such
accompanying documentation or representations as reasonably required by counsel
to the Company), to cause the transfer agent of the Company to credit the
account of the holder’s prime broker with Depositary Trust Company System with,
or at the request of such holder, to deliver or cause to be delivered a
certificate representing such Shares or Warrant Shares that is free from the
foregoing legend.
 
6

--------------------------------------------------------------------------------

 
2.11    The Subscriber agrees to supply the Company, within a reasonable period
after receiving a request therefor from the Company, with such additional
information concerning the Subscriber as the Company reasonably deems necessary
or advisable in order to establish or verify the Subscriber’s representations
contained herein.

2.12     The address of the Subscriber furnished by the Subscriber on the
signature page hereof is the Subscriber’s principal residence if Subscriber is
an individual or its principal business address if it is a corporation or other
entity.

2.13     The Subscriber has full power and authority (corporate or otherwise) to
execute, deliver, and perform this Agreement and to purchase the Securities and
has taken all action necessary to authorize the execution, delivery and
performance of this Agreement. This Agreement constitutes the legal, valid and
binding obligation of the Subscriber, enforceable against the Subscriber in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies, and to
limitations of public policy.

2.14     If the Subscriber is a corporation, partnership, limited liability
company, trust, employee benefit plan, individual retirement account, Keogh
Plan, or other entity (i) it is authorized and qualified to become an investor
in the Company and the Person signing this Agreement on behalf of such entity
has been duly authorized by such entity to do so and (ii) it is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization.

2.15     The Subscriber acknowledges that if he or she is a “Registered
Representative” of an NASD member firm, he or she must give such firm the notice
required by the NASD Rules of Fair Practice, receipt of which must be
acknowledged by such firm in Section 7.4 below in accordance with such rules.

2.16     The Subscriber understands, acknowledges and agrees that this
subscription may be rejected, in whole or in part, by the Company or the
Placement Agents, in each of their sole and absolute discretion, at any time
before any Closing Date notwithstanding prior receipt by the Subscriber of
notice of acceptance of the Subscriber’s subscription. The Subscriber hereby
authorizes and directs the Company to return, without interest, any funds for
unaccepted subscriptions to the same account from which the funds were drawn,
including any customer account maintained by the Subscriber with the Placement
Agents.
 
7

--------------------------------------------------------------------------------

 
2.17     The Subscriber understands, acknowledges and agrees with the Company
that except as otherwise set forth herein, the subscription hereunder is
irrevocable by the Subscriber, that, except as required by law or as otherwise
set forth herein, the Subscriber is not entitled to cancel, terminate or revoke
this Agreement or any agreements of the Subscriber hereunder and that this
Agreement and such other agreements shall survive the death or disability of the
Subscriber and shall be binding upon and inure to the benefit of the parties and
their heirs, executors, administrators, successors, legal representatives and
permitted assigns. If the Subscriber is more than one Person, the obligations of
the Subscriber hereunder shall be joint and several and the agreements,
representations, warranties and acknowledgments herein contained shall be deemed
to be made by and be binding upon each such Person and its heirs, executors,
administrators, successors, legal representatives and permitted assigns.

2.18     The Subscriber understands, acknowledges and agrees with the Company
that, the Offering is intended to be exempt from registration under the
Securities Act by virtue of Section 4(2) of the Securities Act and the
provisions of Regulation D, and/or the provisions of Regulation S which are in
part dependent upon the truth, completeness and accuracy of the statements made
by the Subscriber.

2.19     The Subscriber understands, acknowledges and agrees that there can be
no assurance that the Subscriber will be able to sell or dispose of the
Securities. It is understood that in order not to jeopardize the Offering’s
exempt status under Section 4(2) of the Securities Act and Regulation D, in
addition to any other restrictions on transfer set forth herein or in the
Warrants, the Company may, at a minimum, require any transferee to fulfill the
Subscriber suitability requirements thereunder and make the representations,
warranties and covenants of Subscriber hereunder.

2.20     (a) The Subscriber represents and warrants that during the period
commencing upon the date that the Subscriber was first contacted with respect to
the Offering (the “First Date”) the Subscriber has not, directly or indirectly,
through related parties, Affiliates or otherwise, sold “short” or “short against
the box” (as such terms are generally understood) and from the First Date
through the relevant Closing Date or termination of this Agreement has not and
will not take any action the intent of which is to reduce the trading price of
the Common Stock. Notwithstanding the foregoing, in the case of a Subscriber
that is a multi-managed investment vehicle whereby separate portfolio managers
manage separate portions of such Subscriber’s assets and the portfolio managers
have no direct knowledge of the investment decisions made by the portfolio
managers managing other portions of such Subscriber’s assets, the representation
set forth above shall only apply with respect to the portion of assets managed
by the portfolio manager that made the investment decision to purchase the
securities covered by this Agreement.
 
8

--------------------------------------------------------------------------------

 
(b) If the Subscriber has previously entered into a subscription agreement with
ZIOPHARM, Inc., the Company’s predecessor, governing ZIOPHARM, Inc.’s offering
of Series A Convertible Preferred Stock (the “Series A Agreement”), which Series
A Agreement prohibits the Subscriber from directly or indirectly, through
related parties, affiliates or otherwise, selling “short” or “short against the
box” (as those terms are generally understood) any equity security of the
Company during the period in which the Subscriber holds any Securities or
Registrable Securities (each as defined in the Series A Agreement), then,
subject to compliance with applicable securities laws, the Company agrees that
nothing contained in the Series A Agreement, including Section 1.18 thereof,
shall prohibit the Subscriber from directly or indirectly, through related
parties, affiliates or otherwise, selling “short” or “short against the box” (as
those terms are generally understood) equity securities of the Company to the
extent that the Subscriber’s “short” position does not exceed the sum of the
number of Shares and Warrant Shares then held by the Subscriber.

2.21     The Subscriber understands, acknowledges and agrees that the
information contained in this Agreement, the Memorandum or otherwise made
available to the Subscriber by the Company (collectively, the “Confidential
Information”) is to be used solely for the purpose of evaluating a possible
investment in the Securities and is confidential and non-public and agrees that
all such Confidential Information shall be kept in confidence by the Subscriber
and neither used by the Subscriber for the Subscriber’s personal benefit (other
than in connection with evaluating a possible investment in the Securities) nor
disclosed to any third party for any reason and in any manner, notwithstanding
that a Subscriber’s subscription may not be accepted by the Company; provided,
however, that this obligation shall not apply to any such Confidential
Information that (i) is part of the public knowledge or literature and readily
accessible at the date hereof (except as a result of a breach of this provision
by any party), (ii) becomes part of the public knowledge or literature and
readily accessible by publication (except as a result of a breach of this
provision by any party), or (iii) is required to be disclosed by the Subscriber
pursuant to applicable law or legal process.

2.22     If the Subscriber is purchasing the Securities in a fiduciary capacity
for another Person, including without limitation a corporation, partnership,
trust or any other entity, the Subscriber has been duly authorized and empowered
to execute this Agreement and all other subscription documents, and such other
Person fulfills all the requirements for purchase of the Securities as such
requirements are set forth herein, concurs in the purchase of the Securities and
agrees to be bound by the obligations, representations, warranties and covenants
contained herein. The Subscriber will provide true, complete and correct copies
of all organizational documents of the Subscriber reasonably requested by the
Company, the Placement Agents or their respective legal counsel authorizing its
investment in the Company and/or evidencing the satisfaction of the foregoing.

2.23     No authorization, approval, consent or license of any Person is
required to be obtained for the purchase of the Securities by the Subscriber,
other than as have been obtained and are in full force and effect. The execution
and delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby will not, result in any violation of or
constitute a default under any material agreement or other instrument to which
the Subscriber is a party or by which the Subscriber or any of its properties
are bound, or to the best of the Subscriber’s knowledge, any permit, franchise,
judgment, order, decree, statute, rule or regulation to which the Subscriber or
any of its businesses or properties is subject.

9

--------------------------------------------------------------------------------

 
2.24     The Subscriber understands, acknowledges and agrees that the
representations, warranties and agreements of the Subscriber contained herein
(including the Confidential Investor Questionnaire), in the Registration
Questionnaire attached hereto as Appendix A (the “Registration Questionnaire”)
and in any other writing delivered in connection with the transactions
contemplated hereby shall be true and correct on the date hereof and as of the
relevant Closing Date as if made on and as of such date (except for
representations, warranties and agreements as of a specific date, which shall be
true and correct as of such date) and shall survive the execution and delivery
of this Agreement and the purchase of the Securities. The Subscriber agrees that
the Placement Agents shall be entitled to rely on the representations,
warranties and agreements of the Subscriber contained herein as if such
representations, warranties and agreements were made or provided directly to the
Placement Agents.

2.25     The Subscriber hereby covenants with the Company not to make any sale
of the Securities under the Registration Statement without effectively causing
the prospectus delivery requirements under the Securities Act to be satisfied
or, if relying on Rule 172 of the Securities Act, without confirming that the
Subscriber is exempt from such prospectus delivery requirements in reliance on
Rule 172, and further agrees to comply with reasonable requests of the Company
or its transfer agent to provide all necessary additional information and
representations concerning such sale.

2.26     (a) The Subscriber agrees, acknowledges and understands that the
Placement Agents are acting as co-exclusive placement agent for the Securities
being offered hereby and will be compensated by the Company for acting in such
capacity, including, but not limited to, by: (i) placement fees in cash equal to
up to seven percent (7%) of the proceeds received by the Company at each
Closing; and (ii) warrants (the “Placement Warrants”) to purchase a number of
shares of Common Stock (the “Placement Warrant Shares”) equal to ten percent
(10%) of the number of Shares actually sold by the Company in connection with
the Offering (not including shares of Common Stock issuable upon exercise or
conversion of warrants or other securities for which no cash consideration was
received upon issuance); and (iii) reimbursement of its reasonable, documented
expenses (including reasonable legal fees) incurred in connection with the
Offering (which reimbursement shall not exceed $100,000 in the aggregate). The
Placement Warrants shall have an exercise price per share equal to 110% of the
Purchase Price per Share. The Subscriber shall not be entitled to reimbursement
of any expenses incurred by the Subscriber in connection with the Offering.

(b) The Subscriber agrees, acknowledges and understands that the Paramount may
engage other Persons, selected by it in its discretion, who are members of the
NASD or who are located outside the United States, to assist the Placement
Agents in connection with this Offering.
 
10

--------------------------------------------------------------------------------

 

3.  
REPRESENTATIONS BY AND COVENANTS OF THE COMPANY.

 
The Company hereby represents and warrants to, and covenants with, the
Subscriber as of the date hereof and each Closing Date that:

3.1 Organization, Good Standing and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization and has full corporate power and authority to
conduct its business as currently conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which such qualification is necessary, except to the extent that the failure
to be so qualified or in good standing would not reasonably be expected to have,
individually or in the aggregate, either a material adverse effect on the
business, operations, conditions (financial or otherwise), assets or results of
operations of the Company as a whole, or prevent the Company from consummating
the Offering and the other transactions contemplated by this Agreement (a
“Material Adverse Effect”).
 
3.2 Capitalization. (a) The authorized capital stock of the Company consists of
280,000,000 shares of capital stock. As of the date of the Memorandum, there
were 7,272,992 shares of Common Stock issued and outstanding, all of which are
duly authorized, validly issued, fully paid and non-assessable. In addition,
there are 1,576,980 shares of Common Stock reserved for issuance pursuant to
outstanding options and warrants. All of the securities issued by the Company
have been issued in accordance with all applicable federal and state securities
laws. Other than as set forth above, there are no other options, warrants,
calls, rights, commitments or agreements of any character to which the Company
is a party or by which the Company is bound or obligating the Company to issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any shares of the capital stock of the Company or
obligating the Company to grant, extend or enter into any such option, warrant,
call, right, commitment or agreement. There are no preemptive rights or rights
of first refusal or similar rights which are binding on the Company permitting
any Person to subscribe for or purchase from the Company shares of its capital
stock pursuant to any provision of law, the Company’s Certificate of
Incorporation as in effect on the date hereof (the “Certificate of
Incorporation”) or the Company’s By-laws, as in effect on the date hereof (the
“By-laws”) or pursuant to any agreement, contract or understanding to which the
Company is a party. There are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities as described in this Agreement. The Company does not own,
directly or indirectly, any stock, partnership interest, joint venture interest
or any other equity interest in, or security issued by, any Person.
 
(b) The Securities have been duly authorized and, when issued, delivered and
paid for in the manner set forth in this Agreement, will be duly authorized,
validly issued, fully paid and non-assessable. Except for the subscribers in the
Offering and selling stockholders listed in the Company’s currently effective
registration statements on Form SB-2 (SEC File Nos. 333-129020 and 333-129680),
no stockholder of the Company has any right to request or require the Company to
register the sale of any shares owned by such stockholder under the Securities
Act. No further approval or authority of the stockholders or the Board of
Directors of the Company will be required for the issuance and sale of the
Securities to be sold by the Company as contemplated herein.

11

--------------------------------------------------------------------------------

 
3.3       Authorization; Enforceability. The Company has full power and
authority (corporate or otherwise) to enter into this Agreement and to
consummate the transactions contemplated hereby. All corporate action on the
part of the Company, its directors and stockholders necessary for the
authorization, execution, delivery and performance of this Agreement by the
Company, the authorization, sale, issuance and delivery of the Securities
contemplated herein and the performance of the Company’s obligations hereunder
has been taken. This Agreement and the Warrants have been duly executed and
delivered by the Company and constitute a legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with their respective
terms, subject to laws of general application relating to bankruptcy, insolvency
and the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies, and to limitations of public
policy.

3.4       No Conflict; Governmental and Other Consents. (a)  The execution and
delivery by the Company of this Agreement and the Warrants and the consummation
of the transactions contemplated hereby and thereby will not result in the
violation of any law, statute, rule, regulation, order, writ, injunction,
judgment or decree of any court or governmental authority to or by which the
Company is bound, or of any provision of the Certificate of Incorporation or
By-Laws of the Company, and will not conflict with, or result in a breach or
violation of, any of the terms or provisions of, or constitute (with due notice
or lapse of time or both) a default under, any lease, loan agreement, mortgage,
security agreement, trust indenture or other agreement or instrument to which
the Company is a party or by which it is bound or to which any of its properties
or assets is subject, nor result in the creation or imposition of any lien upon
any of the properties or assets of the Company where such violation, breach,
default or imposition would reasonably be likely to result in a Material Adverse
Effect.

(b) No material consent, approval, authorization or other order of any
governmental authority or other third-party is required to be obtained by the
Company thereof in connection with the authorization, execution and delivery of
this Agreement or with the authorization, issue and sale of the Securities,
except such filings as may be required to be made with the SEC, the NASD and
with any state or foreign blue sky or securities regulatory authority, which
will be timely made by the Company.

3.5  Litigation. There is no pending, or to the knowledge of the Company,
threatened, legal or governmental proceedings to which the Company is a party
which is reasonably expected to result in a Material Adverse Effect.

3.6  Accuracy of Public Reports. All reports required to be filed by the Company
within three years prior to the date of this Agreement under the Exchange Act
(collectively, the “Public Reports”) have been duly filed with the SEC, complied
at the time of filing in all material respects with the requirements of their
respective forms and the rules and regulations thereunder, except to the extent
updated or superseded by any subsequently filed report, were complete and
correct in all material respects as of the dates at which the information was
furnished, and such reports did not contain (as of their respective dates) any
untrue statements of a material fact nor omitted to state any material fact
necessary in order to make the statements contained therein, in light of the
circumstances under which they were made, not misleading, or if amended, as so
amended. The financial statements of the Company included in the Public Reports
complied in all material respects with applicable accounting requirements and
the rules and regulations of applicable securities laws with respect thereto as
in effect at the time of filing. Such financial statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (“GAAP”), except as may be otherwise specified
in such financial statements or the notes thereto and except that unaudited
financial statements may not contain all footnotes required by GAAP, and fairly
present in all material respects the financial position of the Company as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
 
12

--------------------------------------------------------------------------------

3.7       Investment Company. The Company is not an “investment company” within
the meaning of such term under the Investment Company Act of 1940, as amended,
and the rules and regulations of the SEC thereunder.

3.8       Proprietary Rights. To the Company’s knowledge, the Company owns or
possesses adequate and enforceable rights to use all patents, patent
applications, trademarks, trade names, corporate names, copyrights, trade
secrets, licenses, inventions, formulations, technology and know-how and other
intangible property used in the conduct of its business as presently conducted
and described in the Memorandum (the “Proprietary Rights”). Except as described
in the Memorandum, the Company has not received any notice of, and there are no
facts known to the Company that reasonably indicate the existence of (i) any
infringement or misappropriation by any third party of any of the Proprietary
Rights or (ii) any claim by a third party contesting the validity of any of the
Proprietary Rights. The Company has not received any notice of and there are no
facts known to the Company that indicate any infringement, misappropriation or
violation by the Company or any of its employees of any Proprietary Rights of
third parties. To the Company’s knowledge, all Proprietary Rights used by the
Company are enforceable.

3.9       Taxes. The Company has timely filed (subject to available extensions)
all federal, state, local and foreign tax returns that are required to have been
filed by it and all such returns are true and correct in all material respects.
The Company has paid all taxes pursuant to such returns or pursuant to any
assessments received by it or which it is obligated to withhold from amounts
owing to any employee, creditor or third party. The tax returns of the Company
have never been audited by any state, local or federal authorities. The Company
has no knowledge of a material tax deficiency that has been asserted or
threatened by the Company.

3.10     No Integration. To the Company’s knowledge, there exists no fact or set
of facts which may cause the Offering to be integrated with any other offering
of the Company’s securities or which would cause this Offering to lose its
exemption under Regulation D.

3.11     Use of Proceeds. The Company intends to use the net proceeds in the
Offering as described in the Memorandum. Except as described in the Memorandum,
the Company shall not use any proceeds it receives in the Offering for the
satisfaction of the Company’s debt (other than such trade debt it has incurred
in the ordinary course of business).
 
13

--------------------------------------------------------------------------------

3.12     Labor Relations. No material labor dispute exists or, to the knowledge
of the Company, is imminent with respect to any of the employees of the Company
which could reasonably be expected to result in a Material Adverse Effect.

3.13.    Compliance. The Company (i) is not in default under or in violation of
(and no event has occurred that has not been waived that, with notice or lapse
of time or both, would result in a default by the Company under), nor has the
Company received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is not in
violation of any order of any court, arbitrator or governmental body, or (iii)
is not or has not been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal, state
and local laws applicable to its business except in each case as could not have
a Material Adverse Effect.

3.14     Regulatory Permits. The Company possesses all certificates,
authorizations and permits issued by the appropriate federal, state, local or
foreign regulatory authorities necessary to conduct its business as described in
the Memorandum, except where the failure to possess such permits would not,
individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect (“Material Permits”), and the Company has not received
any notice of proceedings relating to the revocation or modification of any
Material Permit.

3.15     Title to Assets. The Company has good and marketable title to all real
and personal property owned by them that is material to the business of the
Company, in each case free and clear of any liens, encumbrances or other
restrictions. Any real property and facilities held under lease by the Company
is held by it under valid, subsisting and enforceable leases with which the
Company are in compliance.

3.16     Insurance. The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company is engaged, including
directors and officers insurance.

3.17     Transactions with Affiliates and Employees. Except as set forth in the
Memorandum, none of the officers or directors of the Company and, to the
knowledge of the Company, none of the employees of the Company is presently a
party to any transaction with the Company (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner, in each case in excess
of $50,000 other than (i) for payment of salary or consulting fees for services
rendered, (ii) reimbursement for expenses incurred on behalf of the Company and
(iii) for other employee benefits, including stock option agreements under any
stock option plan of the Company.

14

--------------------------------------------------------------------------------

3.18     Sarbanes-Oxley; Internal Controls. Except as expressly set forth in the
Memorandum and the Public Reports, the Company is in material compliance with
all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it as
of each Closing Date. The Company has established disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and l5d-15(e)) for the
Company and designed such disclosure controls and procedures to ensure that
information required to be disclosed by the Company in its periodic reports
under the Exchange Act is accumulated and communicated to the Company’s
management, including the Company’s certifying officers, as appropriate to allow
timely decisions regarding required disclosure. The Company’s management has
evaluated, under the supervision and with the participation of the Company’s
Chief Executive Officer and Treasurer, the effectiveness of the Company’s
disclosure controls and procedures as of the end of the Company’s last fiscal
quarter with respect to which the Company has filed, or was required to have
filed, as of the date hereof, its periodic report under the Exchange Act (such
date, the “Evaluation Date”). The Company presented in its most recently filed
periodic report under the Exchange Act the conclusions of the Company’s Chief
Executive Officer and Treasurer about the effectiveness of the disclosure
controls and procedures based on their evaluations as of the Evaluation Date.
Except as set forth in the Memorandum and the Public Reports, since the
Evaluation Date, there have been no significant changes in the Company’s
internal controls (as such term is defined in Item 307(b) of Regulation S-K
under the Exchange Act) or, to the Company’s knowledge, in other factors that
could significantly affect the Company’s internal controls. The Company
maintains and will continue to maintain a system of accounting established and
administered in accordance with GAAP and the applicable requirements of the
Exchange Act.

3.19     Application of Takeover Protections. The Company and its Board of
Directors have taken, or will take prior to the initial Closing, all action, if
any, necessary to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Company’s Certificate of
Incorporation (or similar charter documents) or the laws of its state of
incorporation that otherwise is or would become applicable to the consummation
of the transactions contemplated by this Agreement, including without limitation
the Company’s issuance of the Securities and the Subscriber’s ownership of the
Securities.

3.20     No General Solicitation. Neither the Company nor any Person acting on
behalf of the Company has offered or sold any of the Securities by any form of
general solicitation or general advertising. The Company has offered the
Securities for sale only to each Subscriber in the Offering and certain other
“accredited investors” within the meaning of Rule 501(a) under the Securities
Act.
 
15

--------------------------------------------------------------------------------

3.21     Foreign Corrupt Practices. Neither the Company, nor to the knowledge of
the Company, any agent or other Person acting on behalf of the Company, has (i)
directly or indirectly, used any corrupt funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any Person acting on its behalf of
which the Company is aware) which is in violation of law, or (iv) violated in
any material respect any provision of the Foreign Corrupt Practices Act of 1977,
as amended. Neither the issuance of the Shares and Warrants to the Subscriber,
nor the use of the respective proceeds thereof, shall cause the Subscribers to
violate the U.S. Bank Secrecy Act, as amended, and any applicable regulations
thereunder or any of the sanctions programs administered by the U.S. Department
of the Treasury’s Office of Foreign Assets Control (“OFAC”) of the United States
Department of Treasury, any regulations promulgated thereunder by OFAC or under
any affiliated or successor governmental or quasi-governmental office, bureau or
agency and any enabling legislation or executive order relating thereto. Without
limiting the foregoing, the Company (i) is not a person whose property or
interests in property are blocked or subject to blocking pursuant to Section 1
of Executive Order 13224 of September 23, 200l Blocking Property and Prohibiting
Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism
(66 Fed. Reg. 49079 (2001)), (ii) does not engage in any dealings or
transactions prohibited by Section 2 of such executive order, or is otherwise
associated with any such person in any manner violative of Section 2, or (iii)
is not a person on the list of Specially Designated Nationals and Blocked
Persons or subject to the limitations or prohibitions under any other OFAC
regulation or executive order. The Company is in compliance, in all material
respects, with the Uniting and Strengthening of America by Providing the
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001.

3.22     Accountants. The Company’s accountants are set forth in the Public
Reports. To the Company’s knowledge, such accountants, who the Company expects
will express their opinion with respect to the financial statements to be
included in the Company’s upcoming annual report, are a registered public
accounting firm as required by the Securities Act. There are no disagreements of
any kind presently existing, or currently reasonably anticipated by the Company
to arise, between the Company and the accountants formerly or presently employed
by the Company that would cause the Company to be required to file a Current
Report on Form 8-K under Items 4.01 or 4.02.

3.23     Indebtedness. The Company has not materially increased its indebtedness
from that described in the Memorandum, except in the ordinary course of
business.

3.24     Additional Covenants of the Company. (a) Until the earlier of the final
Closing Date and the Termination Date (as defined below), the Company will not
issue or sell any securities to any party, other than (i) the issuances and
sales contemplated by this Agreement; (ii) pursuant to the terms of previously
granted employee stock options and previously issued warrants, options and
convertible securities; and (iii) additional issuances of equity incentives that
are currently reserved for issuance under the Company’s 2003 Stock Option Plan
or are reserved in the future based on any amendment to the 2003 Stock Option
Plan that has been approved by the Company’s stockholders.

16

--------------------------------------------------------------------------------

(b) So long as the Subscriber continues to hold Shares or Warrant Shares, the
Company covenants and agrees that neither it nor any other Person acting on its
behalf will provide the Subscriber or, the Subscriber’s agents or counsel on the
Subscriber’s behalf, with information that the Company believes constitutes
material non-public information at the time it is provided, unless prior thereto
the Subscriber shall have entered into an agreement regarding the
confidentiality and use of such information. The Company understands and
acknowledges that the Subscriber will rely on the foregoing covenant in
effecting transactions in securities of the Company.

3.25     Environmental Laws.  The Company (i) is in compliance with any and all
Environmental Laws (as hereinafter defined), (ii) has received all permits,
licenses or other approvals required of it under applicable Environmental Laws
to conduct its business and (iii) is in compliance with all terms and conditions
of any such permit, license or approval where, in each of the foregoing clauses
(i), (ii) and (iii), the failure to so comply would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect.  The term
“Environmental Laws” means all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata), including, without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants, contaminants, or toxic
or hazardous substances or wastes (collectively, “Hazardous Materials”) into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.

3.26     Employee Relations; Employee Benefit Plans. The Company is not a party
to any collective bargaining agreement and does not employ any member of a
union.  The Company believes that its relations with its employees are
satisfactory.  No executive officer of the Company (as defined in Rule 501(f) of
the Securities Act) has notified the Company that such officer intends to leave
the Company or otherwise terminate such officer's employment with the Company.
The Company is in compliance with all federal, state, local and foreign laws and
regulations respecting employment and employment practices, terms and conditions
of employment and wages and hours, except where failure to be in compliance
would not, either individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect.  Except as disclosed in the Memorandum, the
Company does not maintain any compensation or benefit plan, agreement,
arrangement or commitment (including, but not limited to, “employee benefit
plans”, as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended (“ERISA”)) for any present or former employees, officers
or directors of the Company or with respect to which the Company has liability
or makes or has an obligation to make contributions, other than any such plans,
agreements, arrangements or commitments made generally available to the
Company’s employees.

17

--------------------------------------------------------------------------------

3.27     Form of Subscription Agreement. Each Subscriber purchasing Shares and
Warrants in the Offering has or will execute a Subscription Agreement
substantially similar to this Agreement; provided, however, that Warrants to be
issued to certain Subscribers may contain, at the request of such Subscribers, a
provision limiting the number of shares of Common Stock issuable upon exercise
of such Warrants to prevent such Subscribers from acquiring more than a specific
percentage (e.g., 4.99% or 9.99%) of the Company’s Common Stock outstanding
immediately after giving effect to such exercise.

3.28    No Material Adverse Change. Since the date of the latest audited
financial statements included within the current or periodic reports of the
Company filed with the SEC, the “Securities s Law Reports”), except as
specifically disclosed in the Securities Law Reports or the Memorandum: (i)
there has been no event, occurrence or development that has had a Material
Adverse Effect; (ii) the Company has not incurred any liabilities (contingent or
otherwise) other than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice and (B) liabilities
not required to be reflected in the Company’s financial statements pursuant to
GAAP or required to be disclosed in filings made with the regulatory
authorities; (iii) the Company has not altered its method of accounting; (iv)
the Company has not declared or made any dividend or distribution of cash or
other property to its stockholder or purchased, redeemed or made any agreements
to purchase or redeem any shares of its capital stock; and (v) the Company has
not issued any equity securities to any officer, director or Affiliate, except
pursuant to existing Company equity incentive plans. The Company does not have
pending before any regulatory authorities any request for confidential treatment
of information.

3.29    Disclosure. All disclosure provided to the Subscriber regarding the
Company, its business and the transactions contemplated hereby, or furnished by
or on behalf of the Company with respect to the representations and warranties
made herein, are true and correct in all material respects with respect to such
representations and warranties and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, and when taken as a whole, not misleading. The Company acknowledges and
agrees that the Subscriber makes no representations or warranties with respect
to the transactions contemplated hereby other than those specifically set forth
in this Agreement.

4.  
CONDITIONS TO OBLIGATIONS OF EACH PARTY.

4.1     Conditions to Obligations of the Company. The Company’s obligation to
complete the sale and issuance of the Securities and deliver the Shares and
Warrants to the Subscriber at a Closing is subject to the fulfillment on or
prior to such Closing of the following conditions, which conditions may be
waived at the option of the Company to the extent permitted by law:

(a)     Representations and Warranties Correct. The representations and
warranties made by the Subscriber in Article 2 hereof shall be true and correct
when made, and shall be true and correct on and as of the Closing Date as if
made on and as of the Closing Date (except for any representation or warranty
that speaks as of a specific date, which shall be true and correct as of such
date).
 
18

--------------------------------------------------------------------------------

(b)     Covenants. All covenants, agreements and conditions contained in this
Agreement to be performed by the Subscriber on or prior to such sale and
issuance shall have been performed or complied with in all material respects.

(c)     No Legal Order Pending. There shall not then be in effect any legal or
other order enjoining or restraining the transactions contemplated by this
Agreement.

(d)  No Law Prohibiting or Restricting Such Sale. There shall not be in effect
any law, rule or regulation prohibiting or restricting the issuance and sale of
the Securities or requiring any consent or approval of any Person which shall
not have been obtained to issue or sell the Securities, or in either case to
otherwise consummate the transactions contemplated hereby (except as otherwise
provided in this Agreement).

(e)  Payment of Consideration. The Company shall have received the full amount
of the Aggregate Purchase Price for the Securities being purchased hereunder at
such Closing.

(f)  Questionnaires. The Subscriber shall have completed, executed and delivered
to the Company the Confidential Investor Questionnaire and the Registration
Questionnaire, which questionnaires shall be true and correct as of such Closing
and shall be satisfactory to the Placement Agents and the Company, each in their
sole discretion.

(g)  Minimum Offering Amount. The Company shall have received duly executed
subscriptions and corresponding readily available funds concurrently with this
Closing from Subscribers executing Subscription Agreements substantially similar
to this Agreement (except as otherwise contemplated by Section 3.27) equal to or
in excess of the Minimum Offering Amount.

4.2     The Subscriber’s obligation to purchase the Securities at a Closing is
subject to the fulfillment on or prior to such Closing of the following
conditions, which conditions may be waived at the option of each Subscriber to
the extent permitted by law:

(a)     Representations and Warranties Correct. The representations and
warranties made by the Company in Article 3 hereof shall be true and correct
when made, and shall be true and correct on and as of the Closing Date (except
for any representation or warranty that speaks as of a specific date, which
shall be true and correct as of such date).

(b)     Covenants. All covenants, agreements and conditions contained in this
Agreement to be performed by the Company on or prior to such purchase shall have
been performed or complied with in all material respects.

(c)     No Legal Order Pending. There shall not then be in effect any legal or
other order enjoining or restraining the transactions contemplated by this
Agreement.
 
19

--------------------------------------------------------------------------------

(d)  No Law Prohibiting or Restricting Such Sale. There shall not be in effect
any law, rule or regulation prohibiting or restricting the issuance and sale of
the Securities or requiring any consent or approval of any Person which shall
not have been obtained to issue or sell the Securities, or in either case to
otherwise consummate the transactions contemplated hereby (except as otherwise
provided in this Agreement).

(e)  Minimum Offering. The Company shall have received duly executed
subscriptions and corresponding readily available funds concurrently with this
Closing from Subscribers executing Subscription Agreements substantially similar
to this Agreement (except as otherwise contemplated by Section 3.27) equal to or
in excess of the Minimum Offering Amount.

(f)  Legal Opinion. The Placement Agent shall have received, on behalf of the
Subscribers, an opinion of counsel to the Company, in substantially the form
attached hereto as Appendix B.

5.
REGISTRATION RIGHTS.

5.1 As used in this Agreement, the following terms shall have the following
meanings:

(a) “Affiliate” shall mean, with respect to any Person (as defined below), any
other Person controlling, controlled by or under direct or indirect common
control with such Person (for the purposes of this definition “control,” when
used with respect to any specified Person, shall mean the power to direct the
management and policies of such Person, directly or indirectly, whether through
ownership of voting securities, by contract or otherwise; and the terms
“controlling” and “controlled” shall have meanings correlative to the
foregoing).

(b) “Business Day” shall mean a day Monday through Friday on which banks are
generally open for business in New York, New York.

(c) “Holders” shall mean the Subscribers and any Person holding Registrable
Securities or any Person to whom the rights under Article 5 have been
transferred in accordance with Section 5.10 hereof.

(d) “Person” shall mean any person, individual, corporation, limited liability
company, partnership, trust or other nongovernmental entity or any governmental
agency, court, authority or other body (whether foreign, federal, state, local
or otherwise).

(e) The terms “register,” “registered” and “registration” refer to the
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement under the Securities Act.
 
20

--------------------------------------------------------------------------------

(f) “Registrable Securities” shall mean the Shares, the Warrant Shares and the
Placement Warrant Shares and any shares of Common Stock issued as a dividend or
distribution with respect to or in replacement of the Common Stock issued,
directly or indirectly, in connection with this Offering; provided, however,
that such securities shall only be treated as Registrable Securities if and only
for so long as (i) they have not been sold (A) pursuant to a registration
statement; and/or (B) in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act under Section 4(1)
thereof, including without limitation pursuant to Rule 144 (or any successor
thereto) under the Securities Act, so that all transfer restrictions and
restrictive legends with respect thereto, if any, are removed upon the
consummation of such sale; (ii) they are held by a Holder or a permitted
transferee; or (iii) all such securities held by a Holder (or permitted
transferee) may not be sold by such Holder (or permitted transferee) without
regard to volume limitations pursuant to Rule 144(k) (or any successor thereto)
under the Securities Act.

    (g) “Registration Expenses” shall mean all expenses incurred by the Company
in complying with Section 5.2 hereof, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and expenses of counsel for the Company, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration
(but excluding the fees of legal counsel for any Holder).

    (h) “Selling Expenses” shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities, if any, and,
except to the extent set forth in the definition of Registration Expenses, all
fees and expenses of legal counsel for any Holder.

5.2     (a) Subject to the terms, conditions and limitations set forth herein,
the Company will use its best efforts to (a) file a registration statement with
the SEC on the appropriate form (the “Registration Statement”) within 30 days
following the Closing Date (the end of such 30-day period, the “Outside Filing
Date”; and the date such Registration Statement is filed, the “Filing Date”) to
allow the resale of the Registrable Securities under the Securities Act, and use
its reasonable commercial efforts to have such Registration Statement declared
effective by the SEC prior to the date which is 120 days after the Closing Date
(the “Registration Effective Date”); and (b) use its reasonable commercial
efforts to cause such Registration Statement to remain effective (the
“Registration Period”) until the earliest of (i) the date on which the
Subscriber may sell all of the Shares and the Warrant Shares then held by the
Subscriber pursuant to Rule 144(k) of the Securities Act without regard to
volume restrictions; and (ii) such time as all Securities held by the Subscriber
and registered under the Registration Statement have been sold (A) pursuant to a
registration statement; and/or (B) in a transaction exempt from the registration
and prospectus delivery requirements of the Securities Act under Section 4(1)
thereof, including without limitation pursuant to Rule 144 (or any successor
thereto) under the Securities Act, so that all transfer restrictions and
restrictive legends with respect thereto, if any, are removed upon the
consummation of such sale. To the extent permissible, such Registration
Statement also shall include, or subsequently be amended to include, to the
extent allowable under the Securities Act and the rules promulgated thereunder
(including Rule 416 under the Securities Act), such indeterminate number of
additional shares of Common Stock resulting from stock splits, stock dividends
or similar transactions with respect to the Registrable Securities.

21

--------------------------------------------------------------------------------

(b) In the event the Company has not filed the Registration Statement by the
Filing Date, then the Company shall make compensatory payments to the Holder in
an amount equal to one percent (1%) of the aggregate Offering Price paid by the
Holder for the Shares for each monthly period thereafter (or prorated portion
thereof) in which the Registration Statement remains unfiled. The Company shall
make any such payment to the Holder by check or wire transfer within five (5)
business days after the earlier of the end of each monthly period following the
Outside Filing Date or Filing Date, as applicable. Notwithstanding anything to
the contrary contained herein, in no event shall any amount owed by the Company
to any Subscriber pursuant to this Section 5.2(b) exceed ten percent (10%) of
the Aggregate Purchase Price paid by such Subscriber.

5.3     All Registration Expenses incurred in connection with any registration,
qualification, exemption or compliance pursuant to Section 5.2 shall be borne by
the Company. All Selling Expenses relating to the sale of securities registered
by or on behalf of Holders shall be borne by such Holders.

5.4     In the case of the registration, qualification, exemption or compliance
effected by the Company pursuant to this Agreement, the Company shall, upon
reasonable request, inform each Holder as to the status of such registration,
qualification, exemption and compliance. At its expense the Company shall:

(a) use commercially reasonable efforts to keep such registration, and any
qualification, exemption or compliance under state or federal securities laws
which the Company determines to obtain, continuously effective until the
termination of the Registration Period;

(b) advise the Holders as soon as reasonably practicable:

(i) when the Registration Statement or any amendment thereto has been filed with
the SEC and when the Registration Statement or any post-effective amendment
thereto has become effective;

(ii) of the issuance by the SEC of any stop order suspending the effectiveness
of the Registration Statement or the initiation of any proceedings for such
purpose;

(iv) of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Registrable Securities included therein
for sale in any jurisdiction or the initiation or threatening of any proceeding
for such purpose; and

(v) of the happening of any event that requires the making of any changes in the
Registration Statement or the prospectus so that, as of such date, the
statements therein are not misleading and do not omit to state a material fact
required to be stated therein or necessary to make the statements therein (in
the case of the prospectus, in the light of the circumstances under which they
were made) not misleading (which notice will be accompanied by an instruction to
suspend the use of the prospectus until such changes have been made);
 
22

--------------------------------------------------------------------------------

(c) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of any Registration Statement at the earliest
possible time;

(d) notify each Holder promptly of a pending proceeding against the Company
under Section 8A of the Securities Act in connection with the offering of the
Registrable Securities.

(e) furnish to each Holder, without charge, at least one copy of such
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, and, if the Holder so requests in writing,
all exhibits (including those incorporated by reference) in the form filed with
the SEC;

(f) during the Registration Period, deliver to each Holder, without charge, as
many copies of the prospectus included in such Registration Statement and any
amendment or supplement thereto as such Holder may reasonably request; and the
Company consents to the use, consistent with the provisions hereof, of the
prospectus or any amendment or supplement thereto by each of the selling Holders
of Registrable Securities in connection with the offering and sale of the
Registrable Securities covered by the prospectus or any amendment or supplement
thereto;

(g) prior to any public offering of Registrable Securities pursuant to the
Registration Statement, register or qualify or obtain an exemption for offer and
sale under the securities or blue sky laws of such jurisdictions as any such
Holders reasonably request in writing, provided that the Company shall not for
any such purpose be required to qualify generally to transact business as a
foreign corporation in any jurisdiction where it is not so qualified or to
consent to general service of process in any such jurisdiction, and do any and
all other acts or things reasonably necessary or advisable to enable the offer
and sale in such jurisdictions of the Registrable Securities covered by such
Registration Statement in the sole discretion of the Company;

(h) to the extent permitted under applicable rules and regulations promulgated
under the Securities Act, cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold pursuant to any Registration Statement free of any restrictive legends
to the extent not required at such time and in such denominations and registered
in such names as Holders may request at least five (5) Business Days prior to
sales of Registrable Securities pursuant to such Registration Statement;

23

--------------------------------------------------------------------------------

(i) upon the occurrence of any event contemplated by Section 5.4(b)(v) above,
the Company shall promptly prepare a post-effective amendment to the
Registration Statement or a supplement to the related prospectus, or file any
other required document so that, as thereafter promptly delivered to purchasers
of the Registrable Securities included therein, the prospectus will not include
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading;

(j) use commercially reasonable efforts to comply with all applicable rules and
regulations of the SEC, and use commercially reasonable efforts to make
generally available to its security holders not later than 45 days (or 90 days
if the fiscal quarter is the fourth fiscal quarter) after the end of its fiscal
quarter in which the first anniversary date of the effective date of the
Registration Statement occurs, an earnings statement satisfying the provisions
of Section 11(a) of the Securities Act; and

(k) file each Registration Statement and any amendments and/or supplements
thereto electronically on EDGAR.

Notwithstanding the foregoing, it shall be a condition precedent to the
obligations of the Company to take any action pursuant to paragraphs (a) through
(k) of this Section 5.4, that the Holder shall furnish to the Company such
information regarding itself, the Securities to be sold by the Holder and the
intended method of disposition of such Securities as shall be required to effect
the registration of the Securities, all of which information shall be furnished
to the Company in writing specifically for use in the Registration Statement.

5.5     The Holders shall have no right to take any action to restrain, enjoin
or otherwise delay any registration pursuant to Section 5.2 hereof as a result
of any controversy that may arise with respect to the interpretation or
implementation of this Agreement. 

5.6      (a) To the extent permitted by law, the Company shall indemnify each
Holder with respect to (i) any registration, qualification or compliance has
been effected pursuant to this Agreement, against all claims, losses, damages
and liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened (subject to
Section 5.6(c) below), arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in the Registration
Statement, or any amendment or supplement thereof, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in light of the
circumstances in which they were made, (ii) any violation or alleged violation
by the Company of the Securities Act, the Exchange Act, or any rule or
regulation promulgated under the Securities Act, or the Exchange Act, and will
reimburse each Holder for reasonable legal and other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action as incurred, or (iii) claims, losses, damages and
liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened (subject to
Section 5.6(c) below), arising out of or based on a breach by the Company of its
obligations under Section 5.4(b) or 5.4(d) of this Agreement; provided, that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or action arises out of, relates to or is based upon:
(i) any untrue statement or omission or allegation thereof is made in reliance
upon and in strict conformity with written information furnished to the Company
by or on behalf of such Holder and stated to be specifically for use in
preparation of such Registration Statement, prospectus or offering circular; or
(ii) the failure of the Holder to comply with the covenants and agreements
contained in this Agreement respecting sales of Registrable Securities.
Notwithstanding the foregoing, the Company will not be liable in any such case
where the claim, loss, damage, liability or action arises out of or is related
to the failure of the Holder to comply with the covenants and agreements
contained in this Agreement respecting sales of Registrable Securities, and
except that the foregoing indemnity agreement is subject to the condition that,
insofar as it relates primarily to any such untrue statement or alleged untrue
statement or omission or alleged omission made in the preliminary prospectus but
eliminated or remedied in the amended prospectus on file with the SEC at the
time the Registration Statement becomes effective or in the amended prospectus
filed with the Commission pursuant to Rule 424(b) or in the prospectus subject
to completion under Rule 434 promulgated under the Securities Act, which
together meet the requirements of Section 10(a) of the Securities Act (the
“Final Prospectus”), such indemnity agreement shall not inure to the benefit of
any such Holder, any such underwriter or any such controlling Person, if a copy
of the Final Prospectus furnished by the Company to the Holder for delivery was
not furnished by the Holder to the Person or entity asserting the loss,
liability, claim, damage or at or prior to the time such furnishing is required
by the Securities Act and the Final Prospectus would have cured the defect
giving rise to such loss, liability, claim, damage or action.

24

--------------------------------------------------------------------------------

(b) Each Holder will severally, and not jointly, if Registrable Securities held
by such Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter of the Registrable Securities and
each Person who controls the Company within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof), including any of the foregoing incurred in settlement of
any litigation, commenced or threatened (subject to Section 5.6(c) below)
(“Losses”), arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any registration statement,
prospectus or offering circular, or any amendment or supplement thereof,
incident to any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
light of the circumstances in which they were made, and will reimburse the
Company, such directors and officers, each underwriter of the Registrable
Securities and each Person controlling the Company for reasonable legal and any
other expenses reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability or action as incurred, in each case to
the extent, but only to the extent, that such untrue statement or omission or
allegation thereof is made in reliance upon and in strict conformity with
written information furnished to the Company by or on behalf of the Holder and
stated to be specifically for use in preparation of such registration statement,
prospectus or offering circular. Notwithstanding the foregoing, (i) in no event
shall a Holder be liable for any such claims, losses, damages or liabilities in
excess of the net proceeds received by such Holder in the offering, except in
the event of fraud or intentional misrepresentation by such Holder, and (ii)
there shall be no indemnity obligation hereunder to the extent that Losses are
the result of the fraud, bad faith, willful misconduct or gross negligence of
the Company.

25

--------------------------------------------------------------------------------

(c) Each party entitled to indemnification under this Section 5.6 (the
“Indemnified Party”) shall give notice to the party required to provide
indemnification (the “Indemnifying Party”) promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
Indemnified Party’s expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement, unless such failure
is materially prejudicial to the Indemnifying Party in defending such claim or
litigation. An Indemnifying Party shall not be liable for any settlement of an
action or claim effected without its written consent (which consent will not be
unreasonably withheld).

(d) If the indemnification provided for in this Section 5.6 is held by a court
of competent jurisdiction to be unavailable to an Indemnified Party with respect
to any loss, liability, claim, damage or expense referred to therein, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party thereunder,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such loss, liability, claim, damage or expense in such proportion as
is appropriate to reflect the relative fault of the Indemnifying Party on the
one hand and of the Indemnified Party on the other in connection with the
statements or omissions which resulted in such loss, liability, claim, damage or
expense as well as any other relevant equitable considerations. The relative
fault of the Indemnifying Party and of the Indemnified Party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the Indemnifying Party or by the Indemnified Party and
the parties’ relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company and the Holders
agree that it would not be just and equitable if contribution pursuant to this
Section 5.6(d) was based solely upon the number of entities from whom
contribution was requested or by any other method of allocation which does not
take account of the equitable considerations referred to above in this Section
5.6(d). The amount paid or payable by an Indemnified Party as a result of the
losses, claims, damages and liabilities (or actions in respect thereof) referred
to above in this Section 5.6(d) shall be deemed to include any legal or other
expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any such action or claim, subject to the provisions
of Section 5.6(d) hereof. The parties agree that it would not be just and
equitable if contributions pursuant to this Section 5.6 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations as set forth in this Section 5.6.
Notwithstanding the provisions of this Section 5.6(d), in no event shall a
Holder be required to contribute any amount or make any other payments under
this Agreement which in the aggregate exceed the net proceeds received by such
Holder from the sale of Registrable Securities covered by such Registration
Statement. No Person guilty of fraudulent misrepresentation (within the meaning
of the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.

26

--------------------------------------------------------------------------------

5.7     Each Subscriber agrees that it will comply with the prospectus delivery
requirements of the Securities Act as applicable to it in connection with sales
of Registrable Securities pursuant to the Registration Statement. Each
Subscriber further agrees that, upon receipt of a notice from the Company of the
occurrence of any event of the kind described in Section 5.4(b), such Subscriber
will discontinue disposition of such Registrable Securities under the
Registration Statement until such Subscriber’s receipt of the copies of the
supplemented prospectus and/or amended Registration Statement contemplated by
Section 5.4(i), or until it is advised in writing by the Company that the use of
the applicable prospectus may be resumed, and, in either case, has received
copies of any additional or supplemental filings that are incorporated or deemed
to be incorporated by reference in such prospectus or Registration Statement.
The Company may provide appropriate stop orders to enforce the provisions of
this paragraph.

5.8      (a) Each Holder agrees that, upon receipt of any notice from the
Company of (i) the need for an amendment or supplement to the Registration
Statement or the prospectus forming a part thereof, (ii) that the Board of
Directors has determined in good faith that offers and sales pursuant to the
prospectus forming part of the Registration Statement should not be made by
reason of the presence of material undisclosed circumstances or developments
with respect to which the disclosure that would be required in the Registration
Statement would be premature or would have a Material Adverse Effect or (iii) in
connection with a primary underwritten offering of equity securities of the
Company, each Holder will forthwith discontinue disposition of Registrable
Securities pursuant to the Registration Statement contemplated by Section 5.2
until its receipt of copies of the supplemented or amended prospectus from the
Company or confirmation of the filing of such report with the SEC by the
Company, any such prospectus to be forwarded promptly to the Holder by the
Company, and, if so directed by the Company, each Holder shall deliver to the
Company all copies, other than permanent file copies then in such Holder’s
possession, of the prospectus covering such Registrable Securities current at
the time of receipt of such notice; provided, that the Company, may suspend the
disposition of Registrable Securities pursuant to the Registration Statement
pursuant to clause (ii) above not more than one time (not to exceed 30 days)
during any three month period, nor more than two times (not to exceed 30 days
each) in any twelve-month period.

(b) As a condition to the inclusion of its Registrable Securities, each Holder
shall furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing or as shall be required in connection with any registration,
qualification or compliance referred to in this Article 5, including the
information required by the Registration Questionnaire.

27

--------------------------------------------------------------------------------

(c) Each Holder hereby covenants with the Company not to make any sale of the
Registrable Securities without effectively causing the prospectus delivery
requirements under the Securities Act to be satisfied.

(d) Each Holder acknowledges and agrees that the Registrable Securities sold
pursuant to the Registration Statement described in this Section are not
transferable on the books of the Company unless the stock certificate submitted
to the transfer agent evidencing such Registrable Securities is accompanied by a
certificate reasonably satisfactory to the Company to the effect that (i) the
Registrable Securities have been sold in accordance with such Registration
Statement and (ii) the requirement of delivering a current prospectus has been
satisfied, or, if relying on Rule 172 of the Securities Act, that the Holder has
confirmed the availability of the exemption from the prospectus delivery
requirement provided by Rule 172 of the Securities Act.

(e) Each Holder agrees not to take any action with respect to any distribution
deemed to be made pursuant to such registration statement which would constitute
a violation of Regulation M under the Exchange Act or any other applicable rule,
regulation or law.

(f) At the end of the period during which the Company is obligated to keep the
Registration Statement current and effective as described above, the Holders of
Registrable Securities included in the Registration Statement shall discontinue
sales of shares pursuant to such Registration Statement upon receipt of notice
from the Company of its intention to remove from registration the shares covered
by such Registration Statement which remain unsold, and such Holders shall
notify the Company of the number of shares registered which remain unsold
immediately upon receipt of such notice from the Company.

5.9      With a view to making available to the Holders the benefits of certain
rules and regulations of the SEC that at any time permit the sale of the
Registrable Securities to the public without registration, the Company shall use
commercially reasonable efforts to:

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

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

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

28

--------------------------------------------------------------------------------

5.10    The right to cause the Company to register Registrable Securities
granted to the Holders by the Company under Section 5.2 may be assigned in full
by a Holder in connection with a transfer by such Holder of its Registrable
Securities (including, without limitation, an assignment in connection with the
distribution of Registrable Securities to a Holder’s partners, members and other
beneficial owners), but only if: (i) such transfer may otherwise be effected in
accordance with applicable securities laws; (ii) such Holder gives prior written
notice of the proposed transfer to the Company including the name and address of
such transferee and a copy of the transfer documents and agreements; (iii) such
transferee agrees in writing with the Company to be bound by and comply with the
terms and provisions of this Agreement; (iv) the transferee is an “accredited
investor” as that term is defined in Rule 501(a) of Regulation D; and (v) such
transfer is otherwise in compliance with this Agreement. Except as specifically
permitted by this Section 5.10, the rights of a Holder with respect to
Registrable Securities as set out herein shall not be transferable to any other
Person, the Company may impose stop transfer orders with respect to any such
transfer or attempted transfer, and any such transfer or attempted transfer
shall be null and void.

5.11    The Company shall cause all Registrable Securities covered by a
Registration Statement to be listed on each securities exchange, interdealer
quotation system or other market on which similar securities issued by the
Company are then listed.

5.12    With the written consent of the Company and the Holders holding at least
two-thirds of the Registrable Securities that are then outstanding, any
provision of this Article 5 may be waived (either generally or in a particular
instance, either retroactively or prospectively and either for a specified
period of time or indefinitely) or amended. Upon the effectuation of each such
waiver or amendment, the Company shall promptly give written notice thereof to
the Holders, if any, who have not previously received notice thereof or
consented thereto in writing.

6.
MISCELLANEOUS.

6.1      The Company and the Placement Agents reserve the right to reject the
subscription made hereby in whole or in part in each of their sole discretion.
Unless terminated earlier in the Placement Agents’ or the Company’s sole
discretion, the Offering will expire on April 30, 2006, (as such date may be
extended by agreement of the Placement Agents and the Company in their sole
discretion without notice to the Subscribers for an additional 30 days the
“Termination Date”), if the conditions to Closing set forth in Article 4 have
not been satisfied or waived by such time.

6.2      The Company’s agreement with each Subscriber is a separate agreement
and each sale of the Securities to each Subscriber is a separate sale.

6.3      All notices, requests and other communications under this Agreement
shall be in writing, and shall be sufficiently given if delivered to the
addressees in person or by recognized overnight courier, mailed by certified or
registered mail, return receipt requested, or by facsimile or e-mail
transmission, as follows:
 
 
29

--------------------------------------------------------------------------------

If to the Company:
ZIOPHARM Oncology, Inc.
1180 Avenue of the Americas
19th Floor
New York, New York 10036
Facsimile: (617) 241-2855
Attn: Chief Executive Officer
   
With a copy to:
Maslon Edelman Borman & Brand, LLP
3300 Wells Fargo Center
90 South 7th Street
Minneapolis, Minnesota 55402
Facsimile: (612) 642-8381
Attn: Alan M. Gilbert, Esq.

 
If to a Subscriber, at such address as such Subscriber shall have provided in
writing to the Company or such other addresses as such Subscriber furnishes by
notice given in accordance with this Section 7.1 or such other address as may be
designated in writing hereafter, in the same manner, by such Person.

6.4     Except as provided in Section 5.12 above, this Agreement shall not be
changed, modified or amended except by a writing signed by the parties to be
charged, and this Agreement may not be discharged except by performance in
accordance with its terms or by a writing signed by the party to be charged.

6.5      Subject to the provisions of Section 5.10, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and to their
respective heirs, legal representatives, successors and permitted assigns. This
Agreement sets forth the entire agreement and understanding between the parties
as to the subject matter hereof and merges and supersedes all prior discussions,
agreements and understandings of any and every nature between them.

6.6     Upon the execution and delivery of this Agreement by the Subscriber,
this Agreement shall become a binding obligation of the Subscriber with respect
to the purchase of the Securities as herein provided; subject, however, to the
right hereby reserved to the Company and the Placement Agents to reject this
subscription in accordance with Section 2.16, enter into the same agreements
with other subscribers and to add and/or delete other Persons as subscribers.

6.7     Notwithstanding the place where this Agreement may be executed by any of
the parties hereto, the parties expressly agree that all the terms and
provisions hereof shall be construed in accordance with and governed by the laws
of the State of New York without regard to principles of conflicts of law.

6.8     The holding of any provision of this Agreement to be invalid or
unenforceable by a court of competent jurisdiction shall not affect any other
provision of this Agreement, which shall remain in full force and effect. If any
provision of this Agreement shall be declared by a court of competent
jurisdiction to be invalid, illegal or incapable of being enforced in whole or
in part, such provision shall be interpreted so as to remain enforceable to the
maximum extent permissible consistent with applicable law and the remaining
conditions and provisions or portions thereof shall nevertheless remain in full
force and effect and enforceable to the extent they are valid, legal and
enforceable, and no provisions shall be deemed dependent upon any other covenant
or provision unless so expressed herein.

30

--------------------------------------------------------------------------------

6.9     It is agreed that a waiver by either party of a breach of any provision
of this Agreement shall not operate, or be construed, as a waiver of any
subsequent breach by that same party.

6.10       The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.

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

6.12    (a) The Subscriber agrees not to issue any public statement with respect
to the Subscriber’s investment or proposed investment in the Company or the
terms of any agreement or covenant between them and the Company without the
Company’s prior written consent, except such disclosures as may be required
under applicable law or under any applicable order, rule or regulation.

(b) The Company agrees not to disclose the names, addresses or any other
information about the Subscriber, except as required by law or court order and
to satisfy its obligations under Article 5.

6.13    The Subscriber represents and warrants that it has neither engaged,
consented to nor authorized any broker, finder or intermediary to act on its
behalf, directly or indirectly, as a broker, finder or intermediary in
connection with the transactions contemplated by this Agreement (other than the
Placement Agents). The Subscriber hereby agrees to indemnify and hold harmless
the Company from and against all fees, commissions or other payments owing to
any such Person (other than the Placement Agents) acting on behalf of the
Subscriber hereunder.

6.14    This Agreement (including all exhibits, schedules and amendments hereto)
(i) constitutes the entire Agreement and understandings of the parties hereto
and supersedes all prior agreements and understandings, both written and oral,
between the parties hereto with respect to the subject matter hereof and (ii) is
not intended to confer upon any other Person other than the parties hereto any
rights or remedies hereunder (except for the holders of Registrable Securities
as set forth in Article 5).

31

--------------------------------------------------------------------------------

6.15    The obligations of each Subscriber under any Transaction Document are
several and not joint with the obligations of any other Subscriber, and no
Subscriber shall be responsible in any way for the performance of the
obligations of any other Subscriber under any Transaction Document. Nothing
contained herein or in any Transaction Document, and no action taken by any
Subscriber pursuant thereto, shall be deemed to constitute the Subscribers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Subscribers are in any way acting in concert or as
a group with respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Subscriber shall be entitled to independently
protect and enforce its rights, including without limitation the rights arising
out of this Agreement or out of the other Transaction Documents, and it shall
not be necessary for any other Subscriber to be joined as an additional party in
any Proceeding for such purpose. Each Subscriber has been represented by its own
separate legal counsel in their review and negotiation of the Transaction
Documents.

[REMAINDER OF PAGE LEFT BLANK - ARTICLE 7 FOLLOWS]

32

--------------------------------------------------------------------------------

7.  CONFIDENTIAL INVESTOR QUESTIONNAIRE.

7.1 The Subscriber represents and warrants that he, she or it comes within one
category marked below, and that for any category marked, he, she or it has
truthfully set forth, where applicable, the factual basis or reason the
Subscriber comes within that category. ALL INFORMATION IN RESPONSE TO THIS
SECTION WILL BE KEPT STRICTLY CONFIDENTIAL except as otherwise required by law
or as necessary for inclusion in the Registration Statement. The undersigned
agrees to furnish any additional information which the Company deems necessary
in order to verify the answers set forth below.

Category A ____
 
The undersigned is an individual (not a partnership, corporation, etc.) whose
individual net worth, or joint net worth with his or her spouse, presently
exceeds $1,000,000.
         
Explanation: In calculating net worth you may include equity in personal
property and real estate, including your principal residence, cash, short-term
investments, stock and securities. Equity in personal property and real estate
should be based on the fair market value of such property less debt secured by
such property.
     
Category B ____
 
The undersigned is an individual (not a partnership, corporation, etc.) who had
an income in excess of $200,000 in each of the two most recent years, or joint
income with his or her spouse in excess of $300,000 in each of those years (in
each case including foreign income, tax exempt income and full amount of capital
gains and losses but excluding any income of other family members and any
unrealized capital appreciation) and has a reasonable expectation of reaching
the same income level in the current year.
     
Category C ____
 
The undersigned is a director or executive officer of the Company which is
issuing and selling the Securities.
     
Category D ____
 
The undersigned is a bank; a savings and loan association; insurance company;
registered investment company; registered business development company; licensed
small business investment company (“SBIC”); or employee benefit plan within the
meaning of Title 1 of ERISA and (a) the investment decision is made by a plan
fiduciary which is either a bank, savings and loan association, insurance
company or registered investment advisor, or (b) the plan has total assets in
excess of $5,000,000 or (c) is a self directed plan with investment decisions
made solely by persons that are accredited investors. (describe entity)
           

33

--------------------------------------------------------------------------------

Category E ____
 
The undersigned is a private business development company as defined in section
202(a)(22) of the Investment Advisors Act of 1940. (describe entity)
                       
Category F ____
 
The undersigned is either a corporation, partnership, Massachusetts business
trust, or non-profit organization within the meaning of Section 501(c)(3) of the
Internal Revenue Code, in each case not formed for the specific purpose of
acquiring the Securities and with total assets in excess of $5,000,000.(describe
entity)
     
Category G ____
 
The undersigned is a trust with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the Securities, where the purchase is
directed by a “sophisticated investor“ as defined in Regulation 506(b)(2)(ii)
under the Securities Act.
     
Category H ____
 
The undersigned is an entity (other than a trust) in which all of the equity
owners are “accredited investors” within one or more of the above categories. If
relying upon this Category alone, each equity owner must complete a separate
copy of this Agreement. (describe entity)
           
Category I ____
 
The undersigned is not within any of the categories above and is therefore not
an accredited investor.

The undersigned agrees that the undersigned will notify the Company at any time
on or prior to the Closing Date in the event that the representations and
warranties in this Agreement shall cease to be true, accurate and complete.

7.2  SUITABILITY (please answer each question)

(a) For an individual Subscriber, please describe your current employment,
including the company by which you are employed and its principal business:

               

34

--------------------------------------------------------------------------------

(b) For an individual Subscriber, please describe any college or graduate
degrees held by you:

           

(c) For all Subscribers, please state whether you have you participated in other
private placements before:

YES_______  NO_______

(d) If your answer to question (d) above was “YES”, please indicate frequency of
such prior participation in private placements of:

   
Public
Companies
 
Private
Companies
 
Public or Private
Biopharmaceutical Companies
             
Frequently
           
Occasionally
           
Never
           

(e) For individual Subscribers, do you expect your current level of income to
significantly decrease in the foreseeable future:

YES_______  NO_______

(f) For trust, corporate, partnership and other institutional Subscribers, do
you expect your total assets to significantly decrease in the foreseeable
future:

YES_______  NO_______

(g) For all Subscribers, do you have any other investments or contingent
liabilities which you reasonably anticipate could cause you to need sudden cash
requirements in excess of cash readily available to you:

YES_______  NO_______

(h) For all Subscribers, are you familiar with the risk aspects and the
non-liquidity of investments such as the securities for which you seek to
subscribe?

YES_______  NO_______

35

--------------------------------------------------------------------------------

(h)  For all Subscribers, do you understand that there is no guarantee of
financial return on this investment, that an investment in the Securities is
highly speculative and risky and that you run the risk of losing your entire
investment?

YES_______  NO_______

(j)  For all Subscribers, will you have sufficient readily available cash to
fund your obligation to purchase Securities at the Closing pursuant to your
subscription if and when the Closing occurs?

YES_______  NO_______

7.3  MANNER IN WHICH TITLE IS TO BE HELD. (circle one)

(a)
Individual Ownership
(b)
Community Property
(c)
Joint Tenant with Right of
 
Survivorship (both parties
 
must sign)
(d)
Partnership*
(e)
Tenants in Common
(f)
Corporation*
(g)
Limited Liability Company*
(h)
Trust*
(i)
Other

*If Securities are being subscribed for by an entity, the attached Certificate
of Signatory must also be completed.

7.4  NASD AFFILIATION.

Are you affiliated or associated with an NASD member firm (please check one):

Yes _________ No __________

If Yes, please describe:

           

*If Subscriber is a Registered Representative with an NASD member firm, have the
following acknowledgment signed by the appropriate party:

The undersigned NASD member firm acknowledges receipt of the notice required by
Article 3, Sections 28(a) and (b) of the Rules of Fair Practice.

36

--------------------------------------------------------------------------------

_________________________________
Name of NASD Member Firm

By: ______________________________
Authorized Officer

Date: ____________________________

7.5 The undersigned is informed of the significance to the Company of the
foregoing representations and answers contained in the Confidential Investor
Questionnaire contained in this Section 7 and such answers have been provided
under the assumption that the Company will rely on them.

Signature:
__________________________________
     
__________________________________
 
(If purchased jointly)
   
Print:
__________________________________
     
__________________________________
 
(If purchased jointly)
   
Date:
__________________________________

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE TO FOLLOW]

37

--------------------------------------------------------------------------------

[Signature Page]

$_____________________ / Purchase Price = ______________________ Shares 

     
Signature
 
Signature (if purchasing jointly)

     
Name Typed or Printed
 
Name Typed or Printed

     
Entity Name
 
Entity Name

     
Address
 
Address

     
City, State and Zip Code
 
City, State and Zip Code

     
Telephone-Business
 
Telephone—Business

     
Telephone-Residence
 
Telephone—Residence

     
Facsimile-Business
 
Facsimile—Business

     
Facsimile-Residence
 
Facsimile—Residence

     
Email Address
 
Email Address

     
Tax ID # or Social Security #
 
Tax ID # or Social Security #

Name in which securities should be issued:
   

Dated:
 
, 2006

--------------------------------------------------------------------------------

This Subscription Agreement is agreed to and accepted by the Company as of May
2, 2006.

 

        ZIOPHARM ONCOLOGY, INC.  
   
   
    By:      

--------------------------------------------------------------------------------

Name: _____________________________   Title: _____________________________

 
39

--------------------------------------------------------------------------------

CERTIFICATE OF SIGNATORY

(To be completed if Securities are
being subscribed for by an entity)

I,____________________________, am the____________________________ of
__________________________________________ (the “Entity”).

I certify that I am empowered and duly authorized by the Entity to execute and
carry out the terms of the Subscription Agreement and to purchase and hold the
Securities, and certify further that the Subscription Agreement has been duly
and validly executed on behalf of the Entity and constitutes a legal and binding
obligation of the Entity.

IN WITNESS WHEREOF, I have set my hand this ______ day of _________________,
2006.

              

--------------------------------------------------------------------------------

(Signature)    

 
 

--------------------------------------------------------------------------------