Document:

EX 10.9

    EXHIBIT
      10.9

    SUBSCRIPTION
      AGREEMENT

    

    THIS
      SUBSCRIPTION AGREEMENT (this “Agreement”) made as of the date set forth on the
      signature page hereof between VioQuest Pharmaceuticals, Inc., a Minnesota
      corporation having a place of business at 7 Deer Park Drive, Suite E, Monmouth
      Junction, New Jersey 08852 (the “Company”), and the undersigned (the
“Subscriber”).

    

    W
      I T N E
      S S E T H:

    

    WHEREAS,
      the Company is offering (the “Offering”) to a limited number of “accredited
      investors,” as that term is defined by Rule 501(a) of Regulation D (“Regulation
      D”) of the Securities Act of 1933, as amended (the “Securities Act”), shares
      (the “Shares”) of its common stock, par value $.01 per share (“Common Stock”)
      and warrants to purchase shares of Common Stock (the “Warrants” and collectively
      with the Shares, the “Securities”) on 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 $5,000,000
      (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 $10,000,000 (the “Maximum Offering Amount”) with an option in favor
      of the Company and the Placement Agent (as defined below) to offer additional
      shares of Common Stock with aggregate gross proceeds of up to $1,000,000 to
      cover over-allotments (the “Over Allotment”). 

    

    WHEREAS,
      Paramount BioCapital, Inc., is acting as exclusive placement agent (the
“Placement Agent”) 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 Shares and Warrants.

    

    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 to a limited number of “accredited investors,” as that term
      is defined by Rule 501(a) of Regulation D of the Securities Act, the Securities
      on terms and conditions described in this Agreement. The Minimum Offering Amount
      will be offered on a “all or none, best efforts" basis. The Maximum Offering
      Amount and the Over-allotment, if exercised, will be offered on a “best efforts”
basis. The Subscriber understands, however, that this purchase of the Securities
      is contingent upon the Company making aggregate sales equal to or exceeding
      the
“Minimum Offering.” The per Share price shall be the lower of (i) a 20% discount
      to the volume weighted average price of the Company’s Common Stock as reported
      on the OTC Bulletin Board® for the five (5) trading days immediately prior to
      the closing date of the Offering; and (ii) $0.75 (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 Agent to accept subscriptions for lesser amounts.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    1.2 Closing.
      At each
      closing (each a “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 (a) 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 Agent (the
“Aggregate Purchase Price” as further defined below) by (b) the Purchase Price
      (the “Subscription Amount”). In addition to the Shares, each Subscriber shall
      receive a number of Warrants equal to 40% of the number of Shares purchased
      in
      the Offering by such Subscriber. The Warrants shall have an exercise price
      equal
      to 133% 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 Agent prior to 11:59 p.m. Eastern Standard Time on August 31, 2005
      (subject to extension at the discretion of the Company and the Placement Agent
      without notice to the Subscriber of up to 60 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 the Placement Agent, located at 787 Seventh
      Avenue, New York, New York 10019. Upon
      satisfaction or waiver of all conditions to the Closing, the Placement Agent
      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 Agent. 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 by 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 Agent’s 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
      Agent.

     

    US
      Bank Trust National Association

    ABA
      Routing Number: 091000022

    US
      Bank and Trust Corp. Account Number: [omitted]

    For:
      VioQuest/Paramount BioCapital

    SEI
      Number: [omitted]

    Reference:
      [Investor Name]

    

    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 the
      Placement Agent at the Placement Agent’s address indicated in the Memorandum (as
      defined below) on or before the date indicated to the Subscriber by the
      Placement Agent to be eligible to participate in the Offering. The Company
      and
      the Placement Agent 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.

     

    
      
         

      

      
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    1.5 Delivery
      of Certificates.
      The
      Company shall deliver, or cause to be delivered, the certificates representing
      the Shares and Warrants purchased by the Subscriber hereunder as soon as
      practical after the Closing 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 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 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 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.

     

    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 investment in securities which are non-listed,
      unregistered and/or not traded on the New York Stock Exchange, AMEX, the
      National Market or SmallCap 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; 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 June 27, 2005 (together with all
      exhibits, appendices, supplements or amendments thereto, the “Memorandum),
      including the following documents filed by the Company with the Securities
      and
      Exchange Commission (the “SEC”, and such documents, the “SEC Filings”) and
      included as exhibits to the Memorandum: SEC Form 10-KSB for the fiscal year
      ended December 31, 2005; SEC Form 10-QSB for the quarter ended March 31, 2005;
      and SEC Forms 8-K filed on January 12, 2005 and February 7, 2005, respectively.
      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.

     

    
      
         

      

      
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    2.5 (a) The
      Subscriber has relied solely upon the 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 of the Company other than as set forth in the Memorandum,
      in this Agreement or resulting from the results of 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. 

    

    (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: (A) 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 (B) 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 of 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, 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 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. 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.

     

    
      
         

      

      
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    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 promul-gated 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.
      The Subscriber agrees to hold the Company and its directors, officers,
      employees, controlling Persons and agents and their respective heirs,
      representatives, successors and assigns harmless and to indemnify them against
      all liabilities, costs and expenses incurred by them as a result of any untrue
      statement of a material fact made by the Subscriber and contained herein
      (including the Confidential Investor Questionnaire and the Registration
      Questionnaire) or omission of a material fact asked for by such questionnaires
      necessary to make such statements made by the Subscriber and contained herein
      (including the Confidential Investor Questionnaire and the Registration
      Questionnaire), in light of the circumstances in which they are made, not
      misleading, provided, however, that the aggregate amount of such indemnity
      shall
      not exceed the proceeds received by the Company in this Offering.

    

    2.10 The
      Subscriber consents to the placement of a legend on any certificate or other
      document evidencing the Securities substantially as set forth below, that such
      Securities have not been registered under the Securities Act or any state
      securities or “blue sky” laws and setting forth or referring to the restrictions
      on transferability and sale thereof contained in this Agreement. The Subscriber
      is aware that the Company will make a notation in its appropriate records with
      respect to the restrictions on the transferability of the Securities.

    

    THE
      SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
      ACT
      OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE SECURITIES LAWS OF ANY
      STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
      RESALE AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
      EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT
      AND
      APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE
      AND SCOPE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
      REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT AND APPLICABLE STATE
      SECURITIES LAWS.

     

    2.11 The
      Subscriber agrees to supply
      the Company, within five (5) days after the Subscriber receives the request
      therefor from the Company, with such additional information concerning the
      Subscriber as the Company deems necessary or advisable in order to establish
      or
      verify the Subscriber’s representations contained herein.

     

    
      
         

      

      
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    2.12 The
      address of the Subscriber furnished by 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 (a) 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 (b) 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 Agent, 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 Agent.

     

    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, 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 is 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 than 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.

     

    
      
         

      

      
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    2.20 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 until the Registration Statement (as
      defined in Article VI) is declared effective, will not sell "short" or "short
      against the box" any equity security of the Company or take any action with
      respect to any equity security of the Company which would violate the Securities
      Act or the rules and regulations promulgated thereunder and from the First
      Date
      through the Closing Date has not and will not take any action the intent or
      reasonably foreseeable effect of which is to reduce the trading price of the
      Common Stock.

    

    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) or (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).

    

    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. Upon request of the Company, the Subscriber will provide
      true,
      complete and correct copies of all relevant documents creating the Subscriber,
      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.

    

    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 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 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 Agent
      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 Agent.

     

    
      
         

      

      
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    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,
      and
      further agrees to comply with reasonable requests of the Company or its transfer
      agent to provide additional information and representations concerning such
      sale.

    

    2.26 (a)
      The
      Subscriber agrees, acknowledges and understands that the Placement Agent is
      acting as 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 the 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
      (iv)
      reimbursement of its reasonable, documented expenses (including reasonable
      legal
      fees) incurred in connection with the Offering (which reimbursement shall not
      exceed $50,000). The Placement Warrants shall have an exercise price per share
      equal to the Warrant Exercise Price. 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 Placement Agent 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
      Agent
      in connection with this Offering. 

    

    3.    REPRESENTATIONS
      BY AND COVENANTS OF THE COMPANY.

    

    The
      Company hereby represents and warrants to the Subscriber as of the date hereof
      and the 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, a material
      adverse effect on the business, operations, conditions (financial or otherwise),
      assets or results of operations of the Company and its Subsidiaries (as defined
      below) as a whole (a “Material Adverse Effect”).

     

    
      
         

      

      
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    3.2 Capitalization.
      (a) The
      authorized capital stock of the Company consists of 50,000,000 shares of capital
      stock, provided, that the Company may increase the number of shares of
      authorized capital stock in connection with the proposed Reincorporation
      described in the Memorandum. As of the date hereof, there were 17,827,924 shares
      of Common Stock issued and outstanding, all of which are duly authorized,
      validly issued, fully paid and non-assessable. In addition, there are 5,626,817
      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. Except as set forth in the Memorandum, 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 by agreement or otherwise. Except as set forth in
      the Memorandum, 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 has made available to the Placement
      Agent true, correct and complete copies of the Company’s Certificate of
      Incorporation and By-laws.

     

    (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 selling stockholders listed in
      the
      Company’s currently effective registration statements on [Form SB-2 (SEC File
      Nos. 333-113980], 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. Except as set forth in the Memorandum, 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.

    

    3.3 Authorization;
      Enforceability.
      The
      Company has all power and authority (corporate or otherwise) to enter into
      this
      Agreement and to consummate the transactions contemplated hereby. Assuming
      receipt of the consents, approvals, authorizations or other orders set forth
      in
      Section 4.1 hereof, 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 has been
      duly executed and delivered by the Company and constitutes a legal, valid and
      binding obligation of the Company, enforceable against the Company 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. Except as set forth in the Memorandum, the issuance and sale
      of the Securities contemplated hereby will not give rise to any preemptive
      rights or rights of first refusal on behalf of any Person pursuant to any
      agreement, contract or understanding to which the Company is a
      party.

    

    3.4 No
      Conflict; Governmental and Other Consents.
      (a) 
      The
      execution and delivery by the Company of this Agreement and the consummation
      of
      the transactions contemplated hereby 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 or any Subsidiary
      thereof 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 or any Subsidiary thereof 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
      or
      any Subsidiary thereof where such violation, breach, default or imposition
      would
      reasonably be likely to result in a Material Adverse Effect.

     

    
      
         

      

      
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    (b) Other
      than the consents, approvals, authorizations or other orders set forth in
      Section 4.1 hereof, no material consent, approval, authorization or other order
      of any governmental authority or other third-party is required to be obtained
      by
      the Company or any Subsidiary 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, AMEX and with any state or foreign blue sky or securities
      regulatory authority.

    

    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 two years prior to the date
      of this Agreement under the Exchange Act (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. 

    

    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 described in the Memorandum (the “Proprietary Rights”). Except as
      described in the Memorandum, to the Company’s knowledge, 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 any infringement, misappropriation or violation
      by
      the Company or any of its employees of any Proprietary Rights of third
      parties

    

    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 they are obligated to withhold from amounts owing to any employee,
      creditor or third party. Except as set forth on Schedule
      3.9
      hereto,
      the tax returns of the Company have never been audited by any state, local
      or
      Federal authorities.

     

    
      
         

      

      
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    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 debt it has incurred in the ordinary course of business).
      

    

    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 or any Subsidiary which
      could reasonably be expected to result in a Material Adverse
      Effect.

    

    3.13. Compliance.
      Neither
      the Company nor any Subsidiary (i) is 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 or any Subsidiary under),
      nor has the Company or any Subsidiary 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 in violation of any order of any court,
      arbitrator or governmental body, or (iii) is or has 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 and the Subsidiaries possess 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 and the Subsidiaries have good and marketable title in all real and
      personal property owned by them that is material to the business of the Company
      and the Subsidiaries, in each case free and clear of any liens, encumbrances
      or
      other restrictions. Any real property and facilities held under lease by the
      Company and the Subsidiaries are held by them under valid, subsisting and
      enforceable leases of which the Company and the Subsidiaries are in
      compliance.

    

    3.16 Insurance.
      The
      Company and the Subsidiaries are 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 and the Subsidiaries are
      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 or any Subsidiary (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.

     

    
      
         

      

      
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    3.18 Internal
      Accounting Controls.
      Each of the Company and the Subsidiaries is in material compliance with all
      provisions of the Sarbanes Oxley Act of 2002 which are presently applicable
      to
      it. 

    

    3.19 Application
      of Takeover Protections.
      The
      Company and its Board of Directors has taken, or will take prior to the initial
      Closing all necessary action, if any, in order 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 is or could become applicable
      to
      the Subscribers as a result of the Subscribers and the Company fulfilling their
      obligations or exercising their rights under this Agreement, including without
      limitation as a result of 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 Units by any form of general solicitation or general advertising.
      The
      Company has offered the Units for sale only to each Subscriber in the Offering
      and certain other “accredited investors” within the meaning of Rule 501 under
      the Act.

    

    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.

    

    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.

    

    3.23 Indebtedness.
      As of
      the date of the Memorandum, the Company has not materially increased its
      indebtedness, except in the ordinary course of business.

    

    3.24 Additional
      Covenants of the Company.
      Until
      the earlier of the 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; and (ii) pursuant to the
      terms of previously granted employee stock options and previously issued
      warrants, options and convertible securities.

     

    
      
         

      

      
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    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) are 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 or employs any
      member of a union.  The Company believes that its relations with its
      employees are good.  No executive officer of the Company (as defined in
      Rule 501(f) of the 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.

    

    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 the Closing is subject
      to
      the fulfillment on or prior to the 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 (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 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.

     

    
      
         

      

      
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    (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 the 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 the Closing and shall be
      satisfactory to the Placement Agent and the Company, each in their sole
      discretion.

    

    (g) Minimum
      Offering.
      The
      Company shall have received duly executed subscriptions and corresponding
      readily available funds in the Escrow Account from Subscribers equal to or
      in
      excess of the Minimum Offering.

    

    (h) Satisfaction
      of Closing Conditions to the Merger.
      On or
      before the Offering Termination Date, each condition to closing of the Merger
      contained in the Merger Agreement (each as defined in the Memorandum) shall
      have
      been satisfied.

    

    4.2 The
      Subscriber’s obligation to purchase the Securities at the Closing is subject to
      the fulfillment on or prior to the 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.

    

    (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 in the Escrow Account from Subscribers equal to or
      in
      excess of the Minimum Offering Amount.

     

    
      
         

      

      
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    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 5.9 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.

    

    (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
      securities shall only be treated as Registrable Securities if and only for
      so
      long as they (i) have not been sold (A) pursuant to a registration statement;
      (B) to or through a broker, dealer or underwriter in a public distribution
      or a
      public securities transaction; and/or (C) in a transaction exempt from the
      registration and prospectus delivery requirements of the Securities Act under
      Section 4(1) thereof so that all transfer restrictions and restrictive legends
      with respect thereto, if any, are removed upon the consummation of such sale;
      (ii) are not held by a Holder or a permitted transferee; and (iii) are not
      eligible for sale 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 and, except to the extent set forth in the definition
      of Registration Expenses, all fees and expenses of legal counsel for any
      Holder.

    

    (i) “Subsidiary”
shall
      mean, with respect to any Person, any other Person of which more than fifty
      percent (50%) of the shares of stock or other interests entitled to vote in
      the
      election of directors or comparable Persons performing similar functions
      (excluding shares or other interests entitled to vote only upon the failure
      to
      pay dividends thereon or other contingencies) are at the time owned or
      controlled, directly or indirectly through one or more Subsidiaries, by such
      Person.

     

    
      
         

      

      
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    5.2 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
      final Closing Date (the “Filing Date”) to allow the resale of the Registrable
      Securities under the Securities Act, and use its best efforts to have such
      Registration Statement declared effective by the SEC prior to the date which
      is
      120 days after the final Closing Date (the “Registration Effective Date”); and
      (b) cause such Registration Statement to remain effective (the “Registration
      Period”) until the earlier of (i) the second anniversary of the Closing Date;
      (ii) the date on which the Subscriber may sell the Shares and the shares of
      Common Stock issued upon exercise of the Warrants then held by the Subscriber
      pursuant to Rule 144(k) of the Securities Act; (iii) such time as all Securities
      held by the Subscriber and registered under the Registration Statement have
      been
      sold (A) pursuant to a registration statement; (B) to or through a broker,
      dealer or underwriter in a public distribution or a public securities
      transaction; and/or (C) in a transaction exempt from the registration and
      prospectus delivery requirements of the Securities Act under Section 4(1)
      thereof 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. In the event (x) the Company has not filed the Registration
      Statement by the Filing Date, or (y) such Registration Statement has not been
      declared effective by the Registration Effective Date, then in either case
      the
      Company shall make compensatory payments to the Holder in an amount equal to
      one
      percent (1%) of the aggregate Purchase Price paid by the Subscriber for each
      monthly period (or prorated portion thereof) in which the Company is in default
      of its obligations under clause (a) of this Section 5.2.

    

    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 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
      any
      request by the SEC for amendments or supplements to the Registration Statement
      or the prospectus included therein or for additional information;

     

    
      
         

      

      
        -16-

        
          

        

      

      
         

      

    

    

    (iii) 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);

    

    (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) 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;

    

    (e) 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.

    

    (f) 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;

    

    (g) 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;

     

    
      
         

      

      
        -17-

        
          

        

      

      
         

      

    

    

    (h) 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; and

    

    (i) 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.

    

    Notwithstanding
      the foregoing, it shall be a condition precedent to the obligations of the
      Company to take any action pursuant to paragraphs (a) through (i) 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
      which 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, or (ii) any viola-tion 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; 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 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 actions 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.

     

    
      
         

      

      
        -18-

        
          

        

      

      
         

      

    

    

    (b) Each
      Holder will severally, 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), 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 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, 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.

    

    (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.

     

    
      
         

      

      
        -19-

        
          

        

      

      
         

      

    

    

    5.7 (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 attached hereto as
Appendix
      A.

    

    (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.

     

    
      
         

      

      
        -20-

        
          

        

      

      
         

      

    

    

    (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.

    

    (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.

    

    5.8 With
      a
      view to making available to the Holders the benefits of certain rules and
      regulations of the SEC which 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.

    

    5.9 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, 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 of Regulation D; and (v) such
      transfer is otherwise in compliance with this Agreement. Except as specifically
      permitted by this Section 5.9, 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.

     

    
      
         

      

      
        -21-

        
          

        

      

      
         

      

    

    

    5.10 The
      Company shall use commercially reasonable efforts to 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.

    

    5.11 With
      the
      written consent of the Company and the Holders holding at least a majority
      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 reserves the right to reject the subscription made hereby in its sole
      discretion. Unless terminated earlier in the Placement Agent’s or the Company’s
      sole discretion, the Offering will expire on July 31, 2005, (as such date may
      be
      extended by agreement of the Placement and the Company in their sole discretion
      without notice to the Subscribers for an additional 60 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: 

    

    If
      to the
      Company:

    VioQuest
      Pharmaceuticals, Inc.

    7
      Deer
      Park Drive, Suite E

    Monmouth
      Junction, New Jersey 08852

    Facsimile:
      (732) 274-0402

    Attn:
      Chief Financial Officer

    Email:
      brian.lenz@vioquestpharm.com

    

    With
      a
      copy to:

    Maslon
      Edelman Borman & Brand, LLP

    3300
      Wells Fargo Center

    90
      South
      7th Street

    Minneapolis,
      Minnesota 55402

    Facsimile:
      (612) 642-8343

    Attn:
      Christopher J. Melsha, Esq.

    Email:
      chris.melsha@maslon.com

    

    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 5.11 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.

     

    
      
         

      

      
        -22-

        
          

        

      

      
         

      

    

    

    6.5 Subject
      to the provisions of Section 5.9, this Agreement shall be binding upon and
      inure
      to the benefit of the parties hereto and to their respective heirs, legal
      representatives, successors and 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 among 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 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.

    

    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 not 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 Agent).
      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 Agent) acting on behalf of the Subscriber
      hereunder.

     

    
      
         

      

      
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    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).

    

    

    [REMAINDER
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    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)

            

      	 	 

    

    _________________________________________________________________________________________________________________
      

    _________________________________________________________________________________________________________________
      

     

    
      	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) 

            

      	 	 

    

    _________________________________________________________________________________________________________________
      

    
      _________________________________________________________________________________________________________________

     

    
      
         

      

      
        -25-

        
          

        

      

      
         

      

    

     

    
      	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:

     

    _________________________________________________________________________________________________________________
      

    _________________________________________________________________________________________________________________
      

    _________________________________________________________________________________________________________________
      

    

    (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_______

     

    
      
         

      

      
        -26-

        
          

        

      

      
         

      

    

    

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

        

    
      
        	 	 	
                Public

              	 	
                Private

              	 	
                Public
                  or Private

              
	 	 	
                Companies

              	 	
                Companies

              	 	
                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_______

    

    (i) 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) Company*

    (g) Trust*

    (h) Other

    

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

     

    
      
         

      

      
        -27-

        
          

        

      

      
         

      

    

    

    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.

    

    _________________________________

    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.

    

    

    

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGE TO FOLLOW]

     

    
      
         

      

      
        -28-

        
          

        

      

      
         

      

    

    

    [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:
                  __________________, 2005

              	 	 
	 	 	 

      

    INVESTORS:
       PLEASE
      COMPLETE THE REGISTRATION QUESTIONNAIRE ATTACHED HERETO AS APPENDIX
      A.

    

    This
      Subscription Agreement is agreed to and accepted by the Company as of
      _____________, 2005.  

    

    VIOQUEST
      PHARMACEUTICALS, INC.

     

    By: 
      __________________________________

    Name:
       
      Daniel
      Greenleaf

    Title:
       President
      and Chief Executive Officer

     

    
      
         

      

        -29-Exhibit 4.2

NEITHER THIS SERIES A DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS
CONVERTIBLE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR APPLICABLE STATE SECURITIES LAWS. THESE
SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT FOR DISTRIBUTION OR RESALE.
THEY MAY NOT BE OFFERED FOR SALE, SOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR
OTHERWISE TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR APPLICABLE STATE
SECURITIES LAWS, OR AN OPINION OF A COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY, WHICH OPINION SHALL BE IN FORM, SUBSTANCE, AND SCOPE CUSTOMARY FOR
OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION IS NOT
REQUIRED..

                               DIALOG GROUP, INC.

                         SERIES A CONVERTIBLE DEBENTURE

U.S. $250,000                                               New York, New York
No.                                                         March 21, 2006

            FOR VALUE RECEIVED, the undersigned, Dialog Group, Inc., a Delaware
corporation (the "Company"), hereby promises to pay to the order of
_______________________________________ or any future permitted holder of this
promissory Debenture (the "Payee"), at the principal office of the Payee set
forth herein, or at such other place as the Payee may designate in writing to
the Company, the principal sum of _____________________________ Dollars (U.S.
$______________), or such other amount as may be outstanding hereunder, together
with any accrued but unpaid interest, in such coin or currency of the United
States of America as at the time shall be legal tender for the payment of public
and private debts and in immediately available funds, as provided in this Series
A Convertible Debenture (the "Debenture").

            1. Principal Payment; Interest Payment; Subordination.

                  (a) The Company shall repay in full the entire principal
balance then outstanding under this Debenture plus any accrued but unpaid
interest on the first to occur (the "Maturity Date") of: (i) March 17, 2008, or
as it may be extended pursuant to the terms hereof, or (ii) the acceleration of
the obligations as contemplated by this Debenture.

                  (b) The Debenture shall bear interest at a rate of one percent
per month. Interest shall be payable monthly in arrears in cash commencing on
May 1, 2006 on the first business day of the each month thereafter. On the first
of May, the amount due shall be Four Thousand One Hundred Sixty Six Dollars and
66 cents ($4,166 Dollars and 66 cents.)

                                      E-1
<PAGE>

                  (c) The Principal amount of the Debenture plus any accrued but
unpaid interest will be automatically converted on the Maturity Date. Conversion
may occur prior to the Maturity Date, at the option of the holder pursuant to
Rule 144 (the "Conversion Date").

            2. Conversion Option; Issuance of Certificates.

                  (a) At any time prior to the Maturity Date the outstanding
principal amount of this Debenture plus any accrued but unpaid interest as may
be, at the Payee's sole option, converted into the number of shares of Common
Stock of the Company, par value $.001 per share (the "Common Stock") determined
as follows. The automatic conversion on the Maturity Date shall also be in
accordance with the following. The number of shares of Common Stock to be issued
shall be equal to the principal amount of this Debenture plus any accrued but
unpaid interest being converted divided by the Conversion Price. For purposes of
this Debenture, "Conversion Price" shall mean $0.01. The Conversion Price shall
be subject to adjustment pursuant to Section 4 hereof. Upon conversion of this
Debenture into shares of Common Stock, the outstanding principal amount of this
Debenture, together with any accrued but unpaid interest, shall be deemed to be
the consideration for the Payee's interest in these shares of Common Stock.

                  (b) Upon any conversion in accordance with the foregoing, the
Company shall, not later than five (5) days after the conversion of this
Debenture, issue and deliver to the Payee by express courier a certificate or
certificates representing the number of shares of Common Stock being acquired
upon the conversion of this Debenture.

            3. Ownership Cap and Certain Exercise Restrictions.

                  (a) Notwithstanding anything to the contrary set forth in this
Debenture, at no time may a Holder of this Debenture convert this Debenture if
the number of shares of Common Stock to be issued pursuant to such conversion
would exceed, when aggregated with all other shares of Common Stock owned by
such Holder at such time, the number of shares of Common Stock which would
result in such Holder owning more than 4.999% of all of the Common Stock
outstanding at such time; provided, however, that upon a holder of this
Debenture providing the Company with sixty-one (61) days notice (pursuant to
Section 13 hereof) (the "Waiver Notice") that such Holder would like to waive
this Section 3(a) with regard to any or all shares of Common Stock issuable upon
exercise of this Debenture, this Section 3(a) will be of no force or effect with
regard to all or a portion of the Debenture referenced in the Waiver Notice;
provided, further, that this provision shall be of no further force or effect
during the sixty-one (61) days immediately preceding the expiration of the term
of this Debenture.

                  (b) The Holder may not convert this Debenture hereunder to the
extent such conversion would result in the Holder beneficially owning (as
determined in accordance with Section 13(d) of the Exchange Act and the rules
there under) in excess of 9.999% of the then issued and outstanding shares of
Common Stock, including shares issuable upon conversion of the Debenture held by
the Holder after application of this Section; provided, however, that upon a
holder of this Debenture providing the Company with a Waiver Notice that such
holder would like to waive this Section 3(b) with regard to any or all shares of
Common Stock issuable upon conversion of this Debenture, this Section 3(b) shall
be of no force or effect with regard to those shares of Common Stock referenced
in the Waiver Notice; provided, further, that this provision shall be of no
further force or effect during the sixty-one (61) days immediately preceding the
expiration of the term of this Debenture.

                                      E-2
<PAGE>

            4. Adjustment of Conversion Price.

                  (a) The Conversion Price shall be subject to adjustment from
time to time as follows:

                        (i) Adjustments for Stock Splits and Combinations.
If the Company shall at any time or from time to time after the date hereof,
effect a stock split of the outstanding Common Stock, the applicable Conversion
Price in effect immediately prior to the stock split shall be proportionately
decreased. If the Company shall at any time or from time to time after the date
hereof, combine the outstanding shares of Common Stock, the applicable
Conversion Price in effect immediately prior to the combination shall be
proportionately increased. Any adjustments under this Section 4(a)(i) shall be
effective at the close of business on the date the stock split or combination
occurs.

                        (ii)  Adjustments   for   Certain   Dividends   and
Distributions. If the Company shall at any time or from time to time after the
date hereof, make or issue or set a record date for the determination of holders
of Common Stock entitled to receive a dividend or other distribution payable in
shares of Common Stock, then, and in each event, the applicable Conversion Price
in effect immediately prior to such event shall be decreased as of the time of
such issuance or, in the event such record date shall have been fixed, as of the
close of business on such record date, by multiplying, as applicable, the
applicable Conversion Price then in effect by a fraction:

                              (1) the numerator of which shall be the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date; and

                              (2) the denominator of which shall be the
total number of shares of Common Stock issued and outstanding immediately prior
to the time of such issuance or the close of business on such record date plus
the number of shares of Common Stock issuable in payment of such dividend or
distribution.

                        (iii) Adjustment    for   Other    Dividends    and
Distributions. If the Company shall at any time or from time to time after the
date hereof, make or issue or set a record date for the determination of holders
of Common Stock entitled to receive a dividend or other distribution payable in
other than shares of Common Stock, then, and in each event, an appropriate
revision to the applicable Conversion Price shall be made and provision shall be
made (by adjustments of the Conversion Price or otherwise) so that the holder of
this Debenture shall receive upon conversions thereof, in addition to the number
of shares of Common Stock receivable thereon, the number of securities of the
Company which they would have received had this Debenture been converted into
Common Stock on the date of such event and had thereafter, during the period
from the date of such event to and including the conversion date, retained such
securities (together with any distributions payable thereon during such period),
giving application to all adjustments called for during such period under this
section with respect to the rights of the holder of this Debenture.

                                      E-3
<PAGE>

                   (b) Issue Taxes. The Company shall pay any and all issue and
other taxes, excluding federal, state or local income taxes, that may be payable
in respect of any issue or delivery of shares of Common Stock on conversion of
this Debenture pursuant thereto; provided, however, that the Company shall not
be obligated to pay any transfer taxes resulting from any transfer requested by
any holder in connection with any such conversion.

                  (c) Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of this Debenture. In lieu of any fractional
shares to which the Payee would otherwise be entitled, the Company shall pay
cash equal to the product of such fraction multiplied by the average of the
closing bid prices of its Common Stock for the five (5) consecutive trading days
immediately preceding the date of conversion of this Debenture.

                  (d) Reservation of Common Stock. The Company shall at all
times after its 2006 Annual Meeting when this Debenture shall be outstanding,
reserve and keep available out of its authorized but unissued shares of Common
Stock, such number of shares of Common Stock as shall from time to time be
sufficient to effect the conversion of this Debenture.

            5. Common Stock Purchase Warrants.

                  (a) Series A Warrants: The Holder shall be issued Series A
Common Stock Purchase Warrants (the "Series A Warrants") in an amount equal to
30% of the number of Common Shares underlying the Debenture based on the Fixed
Conversion Price. The Series A Warrants shall have a term of ten (10) years from
the effective date and shall have an exercise price equal to one hundred percent
(100%) of the Fixed Conversion Price.

            6. No Rights as Shareholder. Nothing contained in this Debenture
shall be construed as conferring upon the Payee, prior to the conversion of this
Debenture, the right to vote or to receive dividends or to consent or to receive
notice as a shareholder in respect of any meeting of shareholders for the
election of directors of the Company or of any other matter, or any other rights
as a shareholder of the Company.

            7. Right of Offer. The Holder shall have the right of offer to
purchase all or part of the private financing. The Holder shall have ten (10)
trading days to respond. A carve out of this provision will be granted to the
Company for the issuance of stock for situations involving strategic
partnerships, acquisition candidates and public offerings.

            8. Most Favored Nations Exchange. For the twelve (12) month period
after the Closing, if the Company consummates a private equity or equity-linked
financing (the "New Financing"), the Holder may exchange the Debenture at its
Stated Value for the securities in the New Financing at a thirty percent
discount to such New Financing.

            9. Change of Control. In the event of a change of control
transaction, (third party acquiring greater than 50% in voting rights in one or
a series of related transaction) the Holder may elect to have the Debenture
redeemed by the Company at its Face Value plus all accrued interest. The Company
shall satisfy the redemption request in cash or common shares at the Company's
option.

            10. Investment Banking Fee. At Closing, the Investment Banking Firm
of Midtown Partners & Co. LLC will be entitled to an investment banking fee of $
27,777.78 plus a $2,000 non-accountable expense allowance and the issuance of
5,009,002 ten-year Common Stock Purchase Warrants with an exercise price of $.01
per share.

                                      E-4
<PAGE>

            14. Payment on Non-Business Days. Whenever any payment to be made
shall be due on a Saturday, Sunday or a public holiday under the laws of the
State of Delaware, such payment may be due on the next succeeding business day.

            15. Representations and Warranties of the Company. The Company
represents and warrants to the Payee as follows:

                  (a) The Company has been duly incorporated and validly exists
and is in good standing under the laws of the State of Delaware, with full
corporate power and authority to own, lease and operate its properties and to
conduct its business as currently conducted.

                  (b) This Debenture has been duly authorized, validly executed
and delivered on behalf of the Company and is a valid and binding obligation of
the Company enforceable against the Company in accordance with its terms,
subject only to the effect of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, and other similar laws relating to or
affecting creditors' rights generally and court decisions with respect thereto,
and the award by courts of money damages rather than specific performance of
contractual provisions involving matters other than the payment of money.

                  (c) The execution, delivery and performance of this Debenture
will not (i) conflict with or result in a breach of or a default under any of
the terms or provisions of, (A) the Company's certificate of incorporation or
by-laws, or (B) any material provision of any indenture, mortgage, deed of trust
or other material agreement or instrument to which the Company is a party or by
which it or any of its material properties or assets is bound, (ii) result in a
violation of any material provision of any law, statute, rule, regulation, or
any existing applicable decree, judgment or order by any court, Federal or state
regulatory body, administrative agency, or other governmental body having
jurisdiction over the Company, or any of its material properties or assets or
(iii) result in the creation or imposition of any material lien, charge or
encumbrance upon any material property or assets of the Company or any of its
subsidiaries pursuant to the terms of any agreement or instrument to which any
of them is a party or by which any of them may be bound or to which any of their
property or any of them is subject.

                  (d) No consent, approval or authorization of or designation,
declaration or filing with any governmental authority on the part of the Company
is required in connection with the valid execution and delivery of this
Debenture.

            16. Events of Default. The occurrence of any of the following events
shall be an "Event of Default" under this Debenture:

                  (a) the Company shall fail to make the payment of any amount
of any principal outstanding on the date such payment shall become due and
payable hereunder; or

                  (b) the Company shall fail, after five business days notice,
to make interest payments on the date such payments shall become due and payable
hereunder; or

                                      E-5
<PAGE>

                  (c) any representation, warranty or certification made by the
Company herein, or in any certificate or financial statement shall prove to have
been false or incorrect or breached in a material respect on the date as of
which made; or

                  (d) the holder of any indebtedness of the Company or any of
its subsidiaries shall accelerate any payment of any amount or amounts of
principal or interest on any indebtedness (the "Indebtedness") (other than the
Indebtedness hereunder) prior to its stated maturity or payment date the
aggregate principal amount of which Indebtedness of all such persons is in
excess of $100,000, whether such Indebtedness now exists or shall hereinafter be
created, and such accelerated payment entitles the holder thereof to immediate
payment of such Indebtedness which is due and owing and such indebtedness has
not been discharged in full or such acceleration has not been stayed, rescinded
or annulled within ten (10) business days of such acceleration; or

                  (e) A judgment or order for the payment of money shall be
rendered against the Company or any of its subsidiaries in favor of any
plaintiff in excess of $100,000 (net of any applicable insurance coverage) for
all such judgments or orders against all such persons (treating any deductibles,
self insurance or retention as not so covered) that shall not be discharged, and
all such judgments and orders remain outstanding, and there shall be any period
of sixty (60) consecutive days following entry of the judgment or order in
excess of $500,000 or the judgment or order which causes the aggregate amount
described above to exceed $500,000 during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect; or

                  (f) the Company shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of all or a substantial part of its property or
assets, (ii) admit in writing its inability to pay its debts as such debts
become due, (iii) make a general assignment for the benefit of its creditors,
(iv) commence a voluntary case under the Bankruptcy Code or under the comparable
laws of any jurisdiction (foreign or domestic), (v) file a petition seeking to
take advantage of any bankruptcy, insolvency, moratorium, reorganization or
other similar law affecting the enforcement of creditors' rights generally, (vi)
acquiesce in writing to any petition filed against it in an involuntary case
under the Bankruptcy Code or under the comparable laws of any jurisdiction
(foreign or domestic), or (vii) take any action under the laws of any
jurisdiction (foreign or domestic) analogous to any of the foregoing; or

                  (g) a proceeding or case shall be commenced in respect of the
Company or any of its subsidiaries without its application or consent, in any
court of competent jurisdiction, seeking (i) the liquidation, reorganization,
moratorium, dissolution, winding up, or composition or readjustment of its
debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the
like of it or of all or any substantial part of its assets or (iii) similar
relief in respect of it under any law providing for the relief of debtors, and
such proceeding or case described in clause (i), (ii) or (iii) shall continue
undismissed, or unstayed and in effect, for a period of thirty (30) consecutive
days or any order for relief shall be entered in an involuntary case under the
Bankruptcy Code or under the comparable laws of any jurisdiction (foreign or
domestic) against the Company or any of its subsidiaries or action under the
laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing
shall be taken with respect to the Company or any of its subsidiaries and shall
continue undismissed, or unstayed and in effect for a period of thirty (30)
consecutive days; or

                                      E-6
<PAGE>

                  (h) failure by the Company to issue the Conversion Shares or
notice from the Company to the Payee, including by way of public announcement,
at any time, of its inability to comply or its intention not to comply with
proper requests for conversion of this Debenture into shares of Common Stock.

            17. Remedies Upon An Event of Default. If an Event of Default shall
have occurred and shall be continuing, the Payee of this Debenture may at any
time at its sole option, after five (5) business days notice, (a) declare the
entire unpaid principal balance of this Debenture, together with all accrued but
unpaid interest, due and payable, and thereupon, the same shall be accelerated
and so due and payable; provided, however, that upon the occurrence of an Event
of Default described in Sections 16(f) and (g), without presentment, demand,
protest, or notice, all of which are hereby expressly unconditionally and
irrevocably waived by the Company, the outstanding principal balance and any
accrued but unpaid interest shall be automatically due and payable; or (b)
exercise or otherwise enforce any one or more of the Payee's rights, powers,
privileges, remedies and interests under this Debenture or applicable law. No
course of delay on the part of the Payee shall operate as a waiver thereof or
otherwise prejudice the right of the Payee. No remedy conferred hereby shall be
exclusive of any other remedy referred to herein or now or hereafter available
at law, in equity, by statute or otherwise. Notwithstanding the foregoing, Payee
agrees that its rights and remedies hereunder are limited to receipt of cash or
shares of Common Stock in the amounts described herein.

            18. Replacement. Upon receipt of a duly executed, notarized and
unsecured written statement from the Payee with respect to the loss, theft or
destruction of this Debenture (or any replacement hereof), and without requiring
an indemnity bond or other security, or, in the case of a mutilation of this
Debenture, upon surrender and cancellation of such Debenture, the Company shall
issue a new Debenture, of like tenor and amount, in lieu of such lost, stolen,
destroyed or mutilated Debenture.

            19. Parties in Interest, Transferability. This Debenture shall be
binding upon the Company and its successors and assigns and the terms hereof
shall inure to the benefit of the Payee and its successors and permitted
assigns. This Debenture may be transferred or sold, subject to the provisions of
Section 28 of this Debenture, or pledged, hypothecated or otherwise granted as
security by the Payee.

            20. Amendments. This Debenture may not be modified or amended in any
manner except in writing executed by the Company and the Payee.

            21. Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery by telecopy or facsimile at the
address or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the second
business day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The Company will give written notice to the Payee
at least thirty (30) days prior to the date on which the Company closes its
books and in no event shall such notice be provided to such holder prior to such
information being made known to the public. The Company will also give written
notice to the Payee at least twenty (20) days prior to the date on which
dissolution, liquidation or winding-up will take place and in no event shall
such notice be provided to the Payee prior to such information being made known
to the public.

                                      E-7
<PAGE>

                        Address of the Payee:

                        Address of the Company:
                        Dialog Group, Inc.
                        Attn: Vincent DeCrescenzo, Sr.
                        Twelfth floor
                        257 Park Avenue South
                        New York, NY 10010

                        Tel. No.: (646)-230-1011 Fax No.: (212) -254-1913

      with a copy to:   Mark Alan Siegel, Esq.
                        Suite 400 E
                        1900 Corporate Boulevard
                        Boca Raton, Florida 33431

                        Telephone:  561,988.6835
                        Facsimile:  561.862.0714

            22. Governing Law. This Debenture shall be governed by and construed
in accordance with the internal laws of the State of New York, without giving
effect to the choice of law provisions. This Debenture shall not be interpreted
or construed with any presumption against the party causing this Debenture to be
drafted.

            23. Headings. Article and section headings in this Debenture are
included herein for purposes of convenience of reference only and shall not
constitute a part of this Debenture for any other purpose.

            24. Remedies, Characterizations, Other Obligations, Breaches and
Injunctive Relief. The remedies provided in this Debenture shall be cumulative
and in addition to all other remedies available under this Debenture, at law or
in equity (including, without limitation, a decree of specific performance
and/or other injunctive relief), no remedy contained herein shall be deemed a
waiver of compliance with the provisions giving rise to such remedy and nothing
herein shall limit a Payee's right to pursue actual damages for any failure by
the Company to comply with the terms of this Debenture. Amounts set forth or
provided for herein with respect to payments and the like (and the computation
thereof) shall be the amounts to be received by the Payee and shall not, except
as expressly provided herein, be subject to any other obligation of the Company
(or the performance thereof). The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable and material harm to the Payee
and that the remedy at law for any such breach may be inadequate. Therefore the
Company agrees that, in the event of any such breach or threatened breach, the
Payee shall be entitled, in addition to all other available rights and remedies,
at law or in equity, to seek and obtain such equitable relief, including but not
limited to an injunction restraining any such breach or threatened breach,
without the necessity of showing economic loss and without any bond or other
security being required.

                                      E-8
<PAGE>

            25. Failure or Indulgence Not Waiver. No failure or delay on the
part of the Payee in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege.

            26. Enforcement Expenses. The Company agrees to pay all costs and
expenses of enforcement of this Debenture, including, without limitation,
reasonable attorneys' fees and expenses.

            27. Binding Effect. The obligations of the Company and the Payee set
forth herein shall be binding upon the successors and assigns of each such
party, whether or not such successors or assigns are permitted by the terms
hereof.

            28. Compliance with Securities Laws. The Payee of this Debenture
acknowledges that this Debenture is being acquired solely for the Payee's own
account and not as a nominee for any other party, and for investment, and that
the Payee shall not offer, sell or otherwise dispose of this Debenture other
than in compliance with the laws of the United States of America and as guided
by the rules of the Securities and Exchange Commission. This Debenture and any
Debenture issued in substitution or replacement therefore shall be stamped or
imprinted with a legend in substantially the following form:

            "NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE
            IS CONVERTIBLE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
            1933, AS AMENDED (THE "SECURITIES ACT"), OR APPLICABLE STATE
            SECURITIES LAWS. THESE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND
            NOT FOR DISTRIBUTION OR RESALE. THEY MAY NOT BE OFFERED FOR SALE,
            SOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR
            ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
            THE SECURITIES UNDER THE SECURITIES ACT OR APPLICABLE STATE
            SECURITIES LAWS, OR AN OPINION OF A COUNSEL REASONABLY SATISFACTORY
            TO THE COMPANY, WHICH OPINION SHALL BE IN FORM, SUBSTANCE, AND SCOPE
            CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT
            REGISTRATION IS NOT REQUIRED."

            29. Severability. The provisions of this Debenture are severable,
and if any provision shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall not in any
manner affect such provision in any other jurisdiction or any other provision of
this Debenture in any jurisdiction.

            30. Consent to Jurisdiction. Each of the Company and the Payee (i)
hereby irrevocably submits to the jurisdiction of the United States District
Court sitting in Manhattan, New York and the courts of the State of New York
located in New York County for the purposes of any suit, action or proceeding
arising out of or relating to this Debenture and (ii) hereby waives, and agrees
not to assert in any such suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of the suit,
action or proceeding is improper. Each of the Company and the Payee consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address set forth herein and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing in this Section 30 shall affect or limit any right to serve
process in any other manner permitted by law.

                                      E-9
<PAGE>

            31. Company Waivers. Except as otherwise specifically provided
herein, the Company and all others that may become liable for all or any part of
the obligations evidenced by this Debenture, hereby waive presentment, demand,
notice of nonpayment, protest and all other demands and notices in connection
with the delivery, acceptance, performance and enforcement of this Debenture,
and do hereby consent to any number of renewals of extensions of the time or
payment hereof and agree that any such renewals or extensions may be made
without notice to any such persons and without affecting their liability herein
and do further consent to the release of any person liable hereon, all without
affecting the liability of the other persons, firms or Company liable for the
payment of this Debenture, AND DO HEREBY WAIVE TRIAL BY JURY.

                  (a) No delay or omission on the part of the Payee in
exercising its rights under this Debenture, or course of conduct relating
hereto, shall operate as a waiver of such rights or any other right of the
Payee, nor shall any waiver by the Payee of any such right or rights on any one
occasion be deemed a waiver of the same right or rights on any future occasion.

            IN ORDER TO INDICATE ITS INTENTION TO BE LEGALLY BOUND HEREBY, the
Company has caused this instrument to be executed and delivered as of the date
first written above.

                                    DIALOG GROUP, INC.

                                    By:
                                        --------------------------------------
                                        Peter V.  DeCrescenzo,  President  and
                                        CEO

                                      E-10

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