Exhibit 10.1
BMP SUNSTONE CORPORATION
12.5% Subordinated Convertible Notes due July 1, 2011
PLACEMENT AGENCY AGREEMENT
March 13, 2009
Philadelphia Brokerage Corporation
Radnor Corporate Center
Building Two, Suite 111
100 Matsonford Road
Radnor, Pennsylvania 19087
Ladies and Gentlemen:
     BMP Sunstone Corporation, a Delaware corporation (the “Company”), proposes,
subject to the terms and conditions stated in this Placement Agency Agreement
(this “Agreement”) and the Subscription Agreements in the form of Exhibit A
attached hereto (the “Subscription Agreements”) entered into with the investors
identified therein (each, an “Investor” and collectively, the “Investors”), to
issue and sell for an aggregate minimum gross consideration of $6,000,000 and an
aggregate maximum gross consideration of $8,000,000, 12.5% Subordinated
Convertible Notes due July 1, 2011 (the “Notes”). The Notes are more fully
described in the Prospectus (as defined herein). This is to confirm the
agreement between the Company and Philadelphia Brokerage Corporation (the
“Placement Agent”) concerning the offering, issuance and sale of the Notes.
1. Agreement to Act as Placement Agent; Delivery and Payment. On the basis of
the representations, warranties and agreements of the Company herein contained,
and subject to the terms and conditions set forth in this Agreement:

  (a)   The Company hereby authorizes the Placement Agent to act as its
exclusive agent in connection with the issuance and sale by the Company of the
Notes (the “Offering”) to the Investors, and the Placement Agent hereby agrees,
as agent of the Company, to use its commercially reasonable efforts to solicit
offers to purchase all or part of the Notes from the Company upon the terms and
conditions set forth in the Prospectus (as defined below). The Placement Agent
shall make commercially reasonable efforts to assist the Company in obtaining
performance by each Investor whose offer to purchase Notes has been solicited by
the Placement Agent and accepted by the Company, but the Placement Agent shall
not, except as otherwise provided in this Agreement, have any liability to the
Company in the event any such purchase is not consummated for any reason. Under
no circumstances shall the Placement Agent or any of its affiliates be obligated
to underwrite or purchase any of the Notes for their own accounts or otherwise
provide any financing. The Placement Agent shall act solely as the Company’s
agent and not as principal. The Placement Agent shall have no authority to bind
the Company with respect to any prospective offer to purchase Notes and the
Company shall have the sole right to accept offers to purchase Notes and may
reject any such offer, in whole or in part. Notwithstanding the foregoing, it is
understood and agreed that the Placement Agent and its affiliates may, solely at
their discretion and without any obligation to do so, purchase Notes as
principals; provided, however, that any such purchase by the Placement Agent (or
its affiliates) shall be fully disclosed to the Company and approved by the
Company in accordance with the preceding sentence.     (b)   As compensation for
services rendered, on the Closing Date, the Company shall pay or cause to be
paid to the Placement Agent an aggregate amount equal to six percent (6%) of the
gross proceeds received by the Company from its sale of the Notes on such
Closing Date (the

 

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      “Agency Fee”). The Agency Fee shall be payable as follows: (i) two-sixths
(2/6) of the fee shall be payable in shares of our common stock valued at $3.00
per share, which equals 53,333 shares of our common stock (assuming the purchase
of all of the Notes we are offering) and (ii) four-sixths (4/6) of the fee shall
be payable by wire transfer of immediately available funds to an account or
accounts designated by the placement agent. If the Offering contemplated hereby
is completed, the Placement Agent agrees that the foregoing compensation
constitutes all of the compensation that the Placement Agent shall be entitled
to receive in connection with the Offering contemplated hereby.

  (c)   The purchases of Notes by the Investors shall be evidenced by the
execution of the Subscription Agreements by each of the parties thereto.     (d)
  Prior to the earlier of (i) the date on which this Agreement is terminated and
(ii) the Closing Date, the Company shall not, without the prior written consent
of the Placement Agent, solicit or accept offers to purchase Notes of the
Company otherwise than through the Placement Agent in accordance herewith.    
(e)   No Notes that the Company has agreed to sell pursuant to this Agreement
shall be deemed to have been purchased and paid for, or sold by the Company,
until such Notes shall have been delivered to the Investor purchasing such Notes
against payment therefor by such Investor. If the Company shall default in its
obligations to deliver Notes to an Investor whose offer it has accepted, the
Company shall indemnify and hold the Placement Agent harmless against any loss,
claim, damage or liability directly or indirectly arising from or as a result of
such default by the Company.     (f)   Payment of the purchase price for, and
delivery of, the Notes shall be made at a closing (the “Closing”) at the offices
of Morgan, Lewis & Bockius LLP, counsel for the Company, located at 1701 Market
Street, Philadelphia, Pennsylvania, at 10:00 a.m., local time, on March 16, 2009
or at such other time and date as the Placement Agent and the Company determine
pursuant to Rule 15c6-1(a) under the Exchange Act (such date of payment and
delivery being herein referred to as the “Closing Date”). The Company, the
Placement Agent and The Bank of New York Mellon, as escrow agent (the “Escrow
Agent”), has entered into an escrow agreement, dated as of October 9, 2008, as
amended on March 12, 2009 (the “Escrow Agreement”) pursuant to which an escrow
account will be established, at the Company’s expense, for the benefit of the
Company and the Investors (the “Escrow Account”). Subject to the terms hereof
and of the Escrow Agreement, payment of the purchase price for the Notes shall
be made to the Company in the manner set forth below by Federal Funds wire
transfer against delivery of the Notes to such persons, and the Notes shall be
registered in the name or names and shall be in such denominations as the
Placement Agent may request at least one business day before the Closing Date.
Payment of the purchase price for the Notes to be purchased by Investors shall
be made by such Investors directly to the Escrow Agent by depositing such amount
into the Escrow Account and the Escrow Agent shall hold such purchase price in
escrow in accordance with the Escrow Agreement. The Company shall cause the
Trustee under the Company’s subordinated indenture, The Bank of New York Mellon
(the “Trustee”), to deliver the Notes to be issued to each such Investor.
Subject to the terms and conditions hereof and of the Subscription Agreements
and the Escrow Agreement, the Escrow Agent shall, on the Closing Date, deliver
to the Company, by Federal Funds wire transfer, the aggregate purchase price so
held in escrow, reduced by an amount equal to the sum of the aggregate Agency
Fee payable in cash to the Placement Agent, and to each of the Investors the
Notes purchased by such Investor. Each of the Company and the Placement Agent
hereby agree to deliver to the Escrow Agent joint instructions as contemplated
by the Escrow Agreement at least one day prior to the Closing Date.

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  (g)   With respect to any Investor that is a registered investment company and
is not settling its purchase of Notes pursuant to Section 1(f) above, on or
before the Closing Date, the Company shall cause the Trustee to deliver the
Notes purchased by such Investor to the account and/or at the address designated
by such Investor, and upon receipt by such Investor of such Notes, such Investor
shall wire, in immediately available funds, the Purchase Amount for such Notes
to an account designated by the Company.

2. Representations and Warranties of the Company. The Company represents and
warrants to the Placement Agent as of the date hereof and as of the Closing
Date, and agrees with the Placement Agent, as follows:

  (a)   Filing and Effectiveness of Registration Statement. The Company has
filed, in conformity with the requirements of the Securities Act of 1933, as
amended (the “Securities Act”), and the published rules and regulations
thereunder (the “Securities Act Rules and Regulations”) adopted by the
Securities and Exchange Commission (the “Commission”), a registration statement
on Form S-3 (No. 333-156958), relating to the Notes and the offering thereof
from time to time in accordance with Rule 415(a)(1)(x) of the Securities Act
Rules and Regulations, and such amendments thereof as may have been required to
date.     (b)   Registration Statement and Prospectus; Certain Defined Terms.
The Company meets the requirements for use of Form S-3 under the Securities Act
and has complied with the requirements of Rule 415 with respect to the
Registration Statement (as hereafter defined). The Registration Statement has
heretofore become effective under the Securities Act or, with respect to any
registration statement to be filed to register the offer and sale of Notes
pursuant to Rule 462(b) under the Securities Act, will be filed with the
Commission and become effective under the Securities Act no later than
10:00 p.m. New York City time on the date of determination of the public
offering price for the Notes. No stop order preventing or suspending the
effectiveness of the Registration Statement has been issued by the Commission,
and no proceedings for such purpose pursuant to Section 8A of the Securities Act
against the Company or related to the Offering have been instituted or are
pending or, to the Company’s knowledge, are contemplated or threatened by the
Commission, and any request received by the Company on the part of the
Commission for additional information has been complied with. As used in this
paragraph and elsewhere in this Agreement:

  (i)   “Registration Statement” means the registration statement, as amended at
the time of such registration statement’s effectiveness (the “Effective Time”),
including (i) all documents filed as a part thereof or incorporated or deemed to
be incorporated by reference therein, (ii) any information in the corresponding
Base Prospectus or a prospectus supplement filed with the Commission pursuant to
Rule 424(b) under the Securities Act, to the extent such information is deemed
pursuant to Rule 430B (“Rule 430B”) or Rule 430C (“Rule 430C”) under the
Securities Act to be a part thereof at the Effective Time. If the Company has
filed an abbreviated registration statement to register additional Notes
pursuant to Rule 462(b) under the Securities Act Rules and Regulations (the
“Rule 462(b) Registration Statement”), then any reference herein to the term
“Registration Statement” shall also be deemed to include such Rule 462(b)
Registration Statement.     (ii)   “Base Prospectus” means the Base Prospectus
included in the Registration Statement at the Effective Time.     (iii)   “Final
Prospectus Supplement” means the final prospectus supplement, relating to the
Notes, filed by the Company with the Commission pursuant to Rule 424(b) under
the Securities Act on or before the second business day after the date hereof
(or such earlier time as may be required under the Securities Act) for use in
connection with

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      the offering and sale of the Notes that discloses the public offering
price and other final terms of the Notes.

  (iv)   “Prospectus” means the Final Prospectus Supplement together with the
Base Prospectus attached to or used with the Final Prospectus Supplement.    
(v)   “Time of Sale” with respect to any Investor, means the time of receipt and
acceptance (evidenced by execution by the Company) of an executed Subscription
Agreement (as defined below) from such Investor.     (vi)   “General Disclosure
Package” means the Base Prospectus, each “free-writing prospectus” (as defined
pursuant to Rule 405 under the Securities Act) listed on Schedule II hereto and
the pricing and other information as set forth on Exhibit C hereto (the “Pricing
Information”), all considered together.

  (c)   Compliance with Securities Act Requirements. The Registration Statement
complied when it became effective, complies as of the date hereof and, as
amended or supplemented, at the Time of Sale and at all times during which a
prospectus is required by the Securities Act to be delivered (whether physically
or through compliance with Rule 172 under the Securities Act or any similar
rule) in connection with any sale of Notes (the “Prospectus Delivery Period”),
will comply, in all material respects, with the requirements of the Securities
Act and the Securities Act Rules and Regulations; the Registration Statement did
not, as of the Effective Time, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, provided, that the Company makes no
representations or warranty in this paragraph with respect to statements in or
omissions from the Registration Statement in reliance upon, and in conformity
with, written information furnished to the Company by or on behalf of the
Placement Agent specifically for inclusion therein, which information the
parties hereto agree is limited to the Placement Agent’s Information (as defined
in Section 8).     (d)   Contents of Prospectus. Each of the General Disclosure
Package, if any, and the Prospectus will comply, as of the date that it is filed
with the Commission, the date of its delivery to Investors, the Time of Sale and
at all times during the Prospectus Delivery Period, in all material respects,
with the requirements of the Securities Act (in the case of the Prospectus,
including, without limitation, Section 10(a) of the Securities Act); at no time
during the period that begins on the earlier of the date of the General
Disclosure Package, if any, and the date the Prospectus is filed with the
Commission and ends at the later of the Time of Sale and the end of the
Prospectus Delivery Period did or will any General Disclosure Package or the
Prospectus, as then amended or supplemented, include an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, provided that the Company makes no representation or
warranty with respect to the Placement Agent’s Information.     (e)  
Incorporated Documents. Each of the documents incorporated or deemed to be
incorporated by reference in the Registration Statement, at the time such
document was filed with the Commission or at the time such document became
effective, as applicable, complied, in all material respects, with the
requirements of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and did not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.     (f)  
General Disclosure Package. The General Disclosure Package as of the Time of
Sale did not, and as of the Closing Date will not, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements

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      therein, in the light of the circumstances under which they were made, not
misleading; provided, that the Company makes no representations or warranty in
this paragraph with respect to the Placement Agent’s Information. No statement
of material fact included in the Prospectus has been omitted from the General
Disclosure Package and no statement of material fact included in the General
Disclosure Package that is required to be included in the Prospectus has been
omitted therefrom.

  (g)   Distributed Materials; Conflict with Registration Statement. Other than
the Base Prospectus, any Preliminary Prospectus and the Prospectus, the Company
has not made, used, prepared, authorized, approved or referred to and will not
make, use, prepare, authorize, approve or refer to any “written communication”
(as defined in Rule 405 under the Securities Act) that constitutes an offer to
sell or a solicitation of an offer to buy the Notes (each such communication by
the Company or its agents and the Placement Agent (other than a communication
referred to in clause (i) below) an “Issuer Free Writing Prospectus”) other than
(i) any document not constituting a prospectus pursuant to Section 2(a)(10)(a)
of the Securities Act or Rule 134 under the Securities Act or (ii) the documents
listed on Schedule II hereto and other written communications approved in
advance by the Placement Agent. Each such Issuer Free Writing Prospectus, if
any, conformed or will conform in all material respects to the requirements of
the Securities Act and the Securities Act Rules and Regulations on the date of
first use, and the Company has complied or will comply with any filing
requirements applicable to such Issuer Free Writing Prospectus pursuant to the
Securities Act Rules and Regulations. Each Issuer Free Writing Prospectus, if
any, as of its issue date and at all subsequent times through the completion of
the offering and sale of the Notes did not, does not and will not include any
information that conflicted, conflicts or will conflict with the information
contained in the Registration Statement or the Prospectus, including any
document incorporated by reference therein and any prospectus supplement deemed
to be a part thereof that has not been superseded or modified.     (h)   Not an
Ineligible Issuer. (i) At the earliest time after the filing of the Registration
Statement that the Company or another offering participant made a bona fide
offer (within the meaning of Rule 164(h)(2) under the Securities Act) of the
Notes and (ii) at the date hereof, the Company was not and is not an “ineligible
issuer,” as defined in Rule 405 (“Rule 405”) under the Securities Act.     (i)  
Due Incorporation. The Company has been duly organized and is validly existing
as a corporation or other legal entity in good standing (or the foreign
equivalent thereof) under the laws of its jurisdiction of organization, with the
corporate power and authority to own its properties and to conduct its business
as currently being conducted and as described in the Registration Statement, the
Prospectus and the General Disclosure Package and is duly qualified to transact
business and is in good standing as a foreign corporation or other legal entity
in each other jurisdiction in which its ownership or leasing of property or the
conduct of its business requires such qualification, except where the failure to
be so qualified and in good standing or have such power or authority (i) would
not have, individually or in the aggregate, a material adverse effect upon, the
general affairs, business, operations, properties, financial condition or
results of operations of the Company and its Subsidiaries (as defined below),
taken as a whole, or (ii) impair in any material respect the power or ability of
the Company to perform its obligations under this Agreement or to consummate any
transactions contemplated by the Agreement and the Subscription Agreements,
including the issuance and sale of the Notes (any such effect as described in
clauses (i) or (ii), a “Material Adverse Effect”).     (j)   Subsidiaries. The
Company has no significant subsidiaries (as such term is defined in Rule 1-02 of
Regulation S-X promulgated by the Commission) other than as set forth on
Schedule I hereto (each, a “Subsidiary” and collectively, the “Subsidiaries”).
Each Subsidiary has been

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      duly organized and is validly existing as a corporation or other legal
entity in good standing (or the foreign equivalent thereof) under the laws of
its jurisdiction of organization, with the corporate power and authority to own
its properties and to conduct its business as currently being conducted and as
described in the Registration Statement, the Prospectus and the General
Disclosure Package. All of the issued and outstanding capital stock (or similar
equity interests) of each Subsidiary has been duly authorized and validly issued
and is fully paid and nonassessable and, except as described in the General
Disclosure Package, is owned by the Company, directly or through subsidiaries,
free from liens, encumbrances and defects.

  (k)   Due Authorization and Enforceability. The Company has the full right,
power and authority to enter into this Agreement, each of the Subscription
Agreements and the Escrow Agreement, and to perform and discharge its
obligations hereunder and thereunder; and each of this Agreement, the Escrow
Agreement and each Subscription Agreement has been duly authorized, executed and
delivered by the Company, and constitutes a valid, legal and binding obligation
of the Company, enforceable against the Company in accordance with its terms,
except as rights to indemnity hereunder may be limited by federal or state
securities laws and except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or similar laws affecting the rights of
creditors generally and subject to general principles of equity.     (l)   The
Notes. The issuance of the Notes has been duly and validly authorized by the
Company and, when issued, delivered and paid for in accordance with the terms of
this Agreement and the Subscription Agreements, the Notes will constitute a
legal, valid and binding obligation of the Company enforceable against the
Company in accordance with their terms, except as the enforceability thereof may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors’ rights generally and by
general equitable principles. The Notes will conform in all material respects to
the description thereof contained in the General Disclosure Package and the
Prospectus.     (m)   Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of (i) 75,000,000 shares of Common Stock
of which 41,364,534 shares are issued and outstanding, 3,184,183 shares are
reserved for issuance upon exercise of stock options outstanding under the
Company’s employee and director stock option plans, 1,429,589 shares are
reserved for grants of rights to purchase under the Company’s stock option
plans, and 1,792,693 shares are reserved for issuance under warrants; and
(ii) 20,000,000 shares of preferred stock, par value $.001 per share, none of
which are issued and outstanding. The authorized capital stock of the Company
conforms as to legal matters to the description thereof contained in the
Prospectus under the caption “Description of common stock” (and any similar
sections or information, if any, contained in the General Disclosure Package).
The issued and outstanding shares of capital stock of the Company have been duly
authorized and validly issued, are fully paid and nonassessable, and have been
issued in compliance with all federal and state securities laws. None of the
outstanding shares of capital stock was issued in violation of any preemptive
rights, rights of first refusal or other similar rights to subscribe for or
purchase or acquire any securities of the Company. There are no authorized or
outstanding shares of capital stock, options, warrants, preemptive rights,
rights of first refusal or other rights to purchase, or equity or debt
securities convertible into or exchangeable for, any capital stock of the
Company or any of its Subsidiaries other than those described in the Prospectus
and the General Disclosure Package. The description of the Company’s stock
option, stock bonus and other stock plans or arrangements, and the options or
other rights granted thereunder, as described in the Prospectus and the General
Disclosure Package, accurately and fairly present the information required to be
shown with respect to such plans, arrangements, options and rights. All shares
of Common Stock which may be issued upon the conversion of the Notes (the
“Conversion Shares”), upon issuance in accordance with the terms of the

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      Notes, will be duly authorized, validly issued, fully paid and
non-assessable. The Company has taken and shall continue to take all such
actions as may be required to ensure that the Company shall at all times have
authorized and reserved a sufficient number of shares of Common Stock to provide
for the conversion of the Notes into Conversion Shares.

  (n)   No Conflict. The execution, delivery and performance by the Company of
this Agreement, the Subscription Agreements and the Escrow Agreement and the
consummation of the transactions contemplated hereby and thereby, including the
issuance and sale by the Company of the Notes, will not (i) conflict with or
result in a breach or violation of, or constitute a default under (nor
constitute any event which with notice, lapse of time or both would result in
any breach or violation of or constitute a default under), give rise to any
right of termination or other right or the cancellation or acceleration of any
right or obligation or loss of a benefit under, or give rise to the creation or
imposition of any lien, encumbrance, security interest, claim or charge upon any
property or assets of the Company or any Subsidiary pursuant to any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company or any Subsidiary is a party or by which any of them or any of
their respective properties may be bound or to which any of the property or
assets of the Company or any of its Subsidiaries is subject, (ii) result in any
violation of the provisions of the charter or by-laws (or analogous governing
instrument, as applicable) of the Company or any Subsidiary, or (iii) result in
any violation of any law, statute, rule, regulation, judgment, order or decree
of any court or governmental agency or body, domestic or foreign, having
jurisdiction over the Company or its Subsidiaries or any of their properties or
assets, except, in the case of each of clauses (i) and (iii) above, for any such
conflict, breach, violation, default, lien, charge or encumbrance that would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.     (o)   No Consents Required. No approval, authorization,
consent or order of or filing, qualification or registration with, any court or
governmental agency or body, foreign or domestic, which has not been made,
obtained or taken and is not in full force and effect, is required in connection
with the execution, delivery and performance of this Agreement, the Subscription
Agreements and the Escrow Agreement by the Company, the issuance and sale of the
Notes or the consummation by the Company of the transactions contemplated hereby
or thereby other than (i) as may be required under the Securities Act or the
Exchange Act, (ii) any necessary qualification of the Notes under the securities
or blue sky laws of the various jurisdictions in which the Notes are being
offered by the Placement Agent, (iii) under the rules and regulations of the
Financial Industry Regulatory Authority (“FINRA”) or (iv) The Nasdaq Global
Market in connection with the distribution of the Notes by the Placement Agent.
    (p)   Registration Rights. Except as described in the due diligence
materials provided by the Company to the Placement Agent or as otherwise
described in the Registration Statement, the Prospectus and the General
Disclosure Package, there are no contracts, agreements or understandings between
the Company and any person granting such person the right (other than rights
which have been waived in writing in connection with the transactions
contemplated by this Agreement or otherwise satisfied) to require the Company to
register any securities with the Commission.     (q)   [Intentionally Omitted].
    (r)   Independent Accountants. Grant Thornton, Hong Kong, whose reports on
the audited consolidated financial statements of the Company and the
Subsidiaries are incorporated by reference in the Registration Statement, the
Prospectus and the General Disclosure Package, are independent public
accountants with respect to the Company as required by the Securities

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      Act, and the applicable published Securities Act Rules and Regulations
thereunder and Rule 3600T of the Public Company Accounting Oversight Board
(“PCAOB”).

  (s)   Commission Reports. Since December 31, 2006, the Company has timely
filed all reports, schedules, forms, statements and other documents required to
be filed by it with the Commission pursuant to the reporting requirements of the
Exchange Act (all of the foregoing filed prior to the date hereof and all
exhibits included therein and financial statements and schedules thereto and
documents (other than exhibits) incorporated by reference therein, being
hereinafter referred to herein as the “Exchange Act Filings”). As of their
respective dates, the Exchange Act Filings complied in all material respects
with the requirements of the Exchange Act or the Securities Act, as the case may
be, and the Securities Act Rules and Regulations or rules and regulations of the
Commission promulgated under the Exchange Act (the “Exchange Act Rules and
Regulations”), as the case may be, applicable to the Exchange Act Filings.    
(t)   Financial Statements. The consolidated financial statements of the
Company, together with the related schedules and notes thereto, set forth or
incorporated by reference in the Registration Statement, the Prospectus and the
General Disclosure Package, comply in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as applicable, and
present fairly in all material respects (i) the financial condition of the
Company and the Subsidiaries, taken as a whole, as of the dates indicated and
(ii) the consolidated results of operations, stockholders’ equity and changes in
cash flows of the Company and the Subsidiaries, taken as a whole, for the
periods therein specified; and such financial statements and related schedules
and notes thereto have been prepared in conformity with United States generally
accepted accounting principles, consistently applied throughout the periods
involved (except as otherwise stated therein and subject, in the case of
unaudited financial statements, to the absence of footnotes and normal year-end
adjustments). There are no other financial statements (historical or pro forma)
that are required to be included or incorporated by reference in the
Registration Statement, the Prospectus or the General Disclosure Package.    
(u)   Absence of Material Changes. Subsequent to the respective dates as of
which information is given in the Registration Statement, the Prospectus and the
General Disclosure Package, and except as may be otherwise stated or
incorporated by reference in the Registration Statement, the Prospectus and the
General Disclosure Package, (i) there has not been any change in the capital
stock of the Company (except for changes in the number of outstanding shares of
Common Stock of the Company due to the issuance of shares upon the exercise or
conversion of securities exercisable for, or convertible into, shares of Common
Stock outstanding on the date hereof) or long-term debt of the Company or any of
its Subsidiaries or any dividend or distribution of any kind declared, set aside
for payment, paid or made by the Company on any class of capital stock;
(ii) there has not been any material adverse change or development that would
result in a Material Adverse Effect; and (iii) neither the Company nor any of
its Subsidiaries have entered or will enter into any transaction or agreement,
not in the ordinary course of business, that is material to the Company and its
Subsidiaries taken as a whole or incurred or will incur any liability or
obligation, direct or contingent, not in the ordinary course of business, that
is material to the Company and its Subsidiaries taken as a whole.     (v)  
Legal Proceedings. There are no legal or governmental actions, suits, claims or
proceedings pending to which the Company or any Subsidiary is or would be a
party or of which any of their respective properties is or would be subject at
law or in equity, which are required to be described in the Registration
Statement, the General Disclosure Package or the Prospectus or a document
incorporated by reference therein and are not so described therein, or which,
singularly or in the aggregate, if resolved adversely to the Company or any
Subsidiary, would

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      reasonably be likely to result in a Material Adverse Effect. To the
Company’s knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others.   (w)   No Violation. Neither
the Company nor any Subsidiary is in breach or violation of or in default (nor
has any event occurred which with notice, lapse of time or both would result in
any breach or violation of, or constitute a default) (i) under the provisions of
its charter or bylaws (or analogous governing instrument, as applicable) or
(ii) in the performance or observance of any term, covenant, obligation,
agreement or condition contained in any indenture, mortgage, deed of trust, bank
loan or credit agreement or other evidence of indebtedness, or any license,
lease, contract or other agreement or instrument to which the Company or any
Subsidiary is a party or by which any of them or any of their properties may be
bound or affected, or (iii) in the performance or observance of any statute,
law, rule, regulation, ordinance, judgment, order or decree of any court,
regulatory body, administrative agency, governmental body, arbitrator or other
authority having jurisdiction over the Company, the Subsidiaries or any of their
respective properties, as applicable, except, with respect to clauses (ii) and
(iii) above, to the extent any such contravention has been waived or would not
result in a Material Adverse Effect.     (x)   Permits. The Company and each
Subsidiary has made all filings, applications and submissions required by, and
owns or possesses all approvals, licenses, certificates, certifications,
clearances, consents, exemptions, marks, notifications, orders, permits and
other authorizations issued by, the appropriate federal, state or foreign
regulatory authorities necessary to conduct its business as described in the
General Disclosure Package (collectively, “Permits”), except for such Permits
which the failure to obtain would not have a Material Adverse Effect (the
“Immaterial Permits”), and is in compliance with the terms and conditions of all
such Permits other than the Immaterial Permits (the “Required Permits”) except
for such failure to comply that would not have a Material Adverse Effect.
Neither the Company nor any Subsidiary has received notice of any proceedings
relating to revocation or modification of, any such Required Permit, which,
individually or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would have a Material Adverse Effect.     (y)   Not an
Investment Company. Neither the Company nor any Subsidiary is an “investment
company” or an “affiliated person” of, or “promoter” or “principal underwriter”
for, an “investment company,” as such terms are defined in the Investment
Company Act of 1940, as amended (the “Investment Company Act”), and, after
giving effect to the offering and sale of the Notes and the application of the
proceeds thereof as described in the General Disclosure Package and the
Prospectus, neither the Company nor any Subsidiary will an “investment company”
or an “affiliated person” of, or “promoter” or “principal underwriter” for, an
“investment company,” as such terms are defined in the Investment Company Act.  
  (z)   No Price Stabilization. Neither the Company nor any Subsidiary nor, to
the Company’s knowledge, any of their respective officers, directors, affiliates
or controlling persons has taken or will take, directly or indirectly, any
action designed to or that might be reasonably expected to cause or result in,
or which has constituted or which might reasonably be expected to constitute the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Notes.     (aa)   Good Title to Property.
The Company and each Subsidiary has good and valid title to all property
(whether real or personal) described in the General Disclosure Package as being
owned by each of them, in each case free and clear of all liens, claims,
security interests, other encumbrances or defects (collectively, “Liens”),
except such as are described in the Prospectus and the General Disclosure
Package or those that would not have a Material

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      Adverse Effect. All of the property described in the General Disclosure
Package as being held under lease by the Company or any Subsidiary is held
thereby under valid, subsisting and enforceable leases, without any liens,
restrictions, encumbrances or claims, except those that would not have a
Material Adverse Effect or do not materially interfere with the use made and
proposed to be made of such property by the Company and the Subsidiaries.

  (bb)   Intellectual Property Rights. Except as set forth in the Registration
Statement, the Prospectus and the General Disclosure Package, the Company and
the Subsidiaries own or possess the right to use all patents, trademarks,
trademark registrations, service marks, service mark registrations, trade names,
copyrights, licenses, inventions, software, databases, know-how, Internet domain
names, trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures, and other intellectual property
(collectively, “Intellectual Property”) necessary to carry on their respective
businesses as currently conducted, and as proposed to be conducted and described
in the General Disclosure Package and the Prospectus except where the failure to
own or possess the right to use would not have a Material Adverse Effect, and
the Company is not aware of any claim to the contrary or any challenge by any
other person to the rights of the Company and the Subsidiaries with respect to
the foregoing except for those that would not have a Material Adverse Effect.
The Intellectual Property licenses described in the General Disclosure Package
and the Prospectus are valid, binding upon, and enforceable by or against the
parties thereto in accordance to its terms. The Company and each Subsidiary has
complied in all material respects with, and is not in breach nor has received
any asserted or threatened claim of breach of, any Intellectual Property license
described in the General Disclosure Package and the Prospectus except for such
breaches or asserted or threatened claims of breach that would not have a
Material Adverse Effect, and the Company has no knowledge of any breach or
anticipated breach by any other person to any Intellectual Property license. To
the knowledge of the Company, the Company’s and each Subsidiary’s businesses as
now conducted and as proposed to be conducted as set forth in the Registration
Statement, the Prospectus and the General Disclosure Package do not and will not
infringe or conflict with any patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses or other Intellectual Property or franchise
right of any person. The Company has not received written notice of any material
claim against the Company or any Subsidiary alleging the infringement by the
Company or any of its Subsidiary of any patent, trademark, service mark, trade
name, copyright, trade secret, license in or other intellectual property right
or franchise right of any person. The Company and each Subsidiary has taken all
reasonable steps to protect, maintain and safeguard its rights in all
Intellectual Property. The consummation of the transactions contemplated by this
Agreement will not result in the loss or impairment of or payment of any
additional amounts with respect to, nor require the consent of any other person
in respect of, the Company’s or any of Subsidiary’s right to own, use, or hold
for use any of the Intellectual Property as owned, used or held for use in the
conduct of the businesses as currently conducted. The Company and each
Subsidiary has duly and properly filed or caused to be filed with the United
States Patent and Trademark Office (the “PTO”) and applicable foreign and
international patent authorities all patent applications owned by the Company
and the Subsidiaries (the “Company Patent Applications”). To the knowledge of
the Company, the Company and each Subsidiary has complied with the PTO’s duty of
candor and disclosure for the Company Patent Applications and has made no
material misrepresentation in the Company Patent Applications. The Company is
not aware of any information material to a determination of patentability
regarding the Company Patent Applications not called to the attention of the PTO
or similar foreign authority. The Company is not aware of any information not
called to the attention of the PTO or similar foreign authority that would
preclude the grant of a patent for the Company Patent Applications. The Company
has no

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      knowledge of any information that would preclude the Company, or as
applicable, any Subsidiary, from having clear title to the Company Patent
Applications.

  (cc)   No Labor Disputes. No labor problem or dispute with the employees of
the Company exists, or, to the Company’s knowledge, is threatened or imminent,
which would reasonably be expected to result in a Material Adverse Effect. The
Company is not aware that any key employee or significant group of employees of
the Company plans to terminate employment with the Company.     (dd)   Taxes.
The Company and each Subsidiary (i) has timely filed all necessary federal,
state, local and foreign income and franchise tax returns (or timely filed
applicable extensions therefore) that have been required to be filed and (ii) is
not in default in the payment of any taxes which were payable pursuant to said
returns or any assessments with respect thereto, other than any which the
Company or any Subsidiary is contesting in good faith and for which adequate
reserves have been provided.     (ee)   ERISA. The Company has fulfilled its
obligations, if any, under the minimum funding standards of Section 302 of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and the
regulations and published interpretations thereunder with respect to each “plan”
(as defined in Section 3(3) of ERISA and such regulations and published
interpretations) in which employees of the Company are eligible to participate
and each such plan is in compliance in all material respects with the presently
applicable provisions of ERISA and such regulations and published
interpretations. No “prohibited transaction” (as defined in Section 406 of
ERISA, or Section 4975 of the Internal Revenue Code of 1986, as amended from
time to time (the “Code”)) or “accumulated funding deficiency” (as defined in
Section 302 of ERISA) or any of the events set forth in Section 4043(b) of ERISA
(other than events with respect to which the thirty (30)-day notice requirements
under Section 4043 of ERISA has been waived) has occurred or could reasonably be
expected to occur with respect to any employee benefit plan of the Company or
any Subsidiary, which could, singularly or in the aggregate, have a Material
Adverse Effect.     (ff)   Compliance with Environmental Laws. The Company and
its Subsidiaries (i) are in compliance with any and all applicable foreign,
federal, state and local laws, orders, rules, regulations, directives, decrees
and judgments relating to the use, treatment, storage and disposal of hazardous
or toxic substances or waste and protection of the environment which are
applicable to their businesses (“Environmental Laws”), (ii) have received and
are in compliance with all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct its business; and (iii) have not
received notice of any actual or potential liability for the investigation or
remediation of any disposal or release of hazardous or toxic substances or
wastes, pollutants or contaminants, except in the case of subsections (i),
(ii) and (iii) of this subsection (ff) as would not, individually or in the
aggregate, have a Material Adverse Effect.     (gg)   Insurance. The Company and
each Subsidiary maintains or is covered by insurance provided by recognized,
financially sound and reputable institutions with policies in such amounts and
covering such risks as is adequate for the conduct of its business and the value
of its properties and as is customary for companies engaged in similar
businesses in similar industries. All such insurance is fully in force on the
date hereof and will be fully in force as of the Closing Date. Neither the
Company nor any Subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not have a Material Adverse Effect.

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  (hh)   Accounting Controls. The Company and each Subsidiary maintains a system
of internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management’s general or
specific authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. Except as set forth in the General Disclosure
Package or the Prospectus, since January 1, 2008, (i) Grant Thornton, Hong Kong
has not identified any material weakness in the Company’s internal control over
financial reporting (whether or not remediated), and (ii) there has been no
change in the Company’s internal control over financial reporting that has
materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting. The Company is not aware of any
fraud, whether or not material, that involves management or other employees who
have a role in the Company’s internal controls.     (ii)   Disclosure Controls.
The Company has established, maintains and evaluates “disclosure controls and
procedures” (as such term is defined in Rule 13a-15e and 15d-15e under the
Exchange Act) that (i) are designed to ensure that material information relating
to the Company is made known to the Company’s principal executive officer and
its principal financial officer by others within those entities, particularly
during the periods in which the periodic reports required under the Exchange Act
are being prepared; (ii) have been evaluated for effectiveness as of the end of
the last fiscal period covered by the Registration Statement; and (iii) are
effective to perform the functions for which they were established. Since the
date of the most recent evaluation of such disclosure controls and procedures,
there have been no significant changes in internal controls or in other factors
that could significantly affect internal controls, including any corrective
actions with regard to significant deficiencies and material weakness.     (jj)
  Contracts; Off-Balance Sheet Interests. There is no document, contract, permit
or instrument, or off-balance sheet transaction (including without limitation,
any “variable interests” in “variable interest entities,” as such terms are
defined in Financial Accounting Standards Board Interpretation No. 46) of a
character required by the Securities Act or the Securities Act Rules and
Regulations to be described in the Registration Statement or the General
Disclosure Package or to be filed as an exhibit to the Registration Statement or
document incorporated by reference therein, which is not described or filed as
required. The contracts described in the immediately preceding sentence to which
the Company is a party have been duly authorized, executed and delivered by the
Company, constitute valid and binding agreements of the Company, are enforceable
against and by the Company in accordance with the terms thereof and are in full
force and effect on the date hereof.     (kk)   No Undisclosed Relationships. No
relationship, direct or indirect, exists between or among the Company and any of
its Subsidiaries on the one hand and the directors, officers, stockholders,
customers or suppliers of the Company or any of its Subsidiaries or any of their
affiliates on the other hand, which is required to be described in the General
Disclosure Package and the Prospectus or a document incorporated by reference
therein and which has not been so described.     (ll)   Brokers Fees. Except as
disclosed in the General Disclosure Package, there are no contracts, agreements
or understandings between the Company and any person (other than this Agreement)
that would give rise to a valid claim against the Company, the Subsidiaries or
the Placement Agent for a brokerage commission, finder’s fee or other like
payment in connection with the offering and sale of the Notes.

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  (mm)   Forward-Looking Statements. No forward-looking statements (within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act) contained in either the General Disclosure Package or the Prospectus has
been made or reaffirmed without a reasonable basis or has been disclosed other
than in good faith.     (nn)   Nasdaq; Exchange Act Registration. The Common
Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act and
is listed on The Nasdaq Global Market, and the Company has taken no action
designed to terminate, or any action reasonably likely to have the effect of
terminating, the registration of the Common Stock under the Exchange Act or
delisting the Common Stock from The Nasdaq Global Market, nor has the Company
received any notification that the Commission or Nasdaq is contemplating
terminating such registration or listing. The Company has complied in all
material respects with the applicable requirements of Nasdaq for the maintenance
of inclusion of the Common Stock on The Nasdaq Global Market. The Company has
filed an application to include the Notes on The Nasdaq Global Market.     (oo)
  Sarbanes-Oxley Act. The Company is, and to its knowledge all of the Company’s
directors or officers in their capacities as such are, in compliance in all
material respects with all applicable effective provisions of the Sarbanes-Oxley
Act of 2002, as amended and any related rules and regulations promulgated by the
Commission. Each of the principal executive officer and the principal financial
officer of the Company (or each former principal executive officer of the
Company and each former principal financial officer of the Company as
applicable) has made all certifications required by Sections 302 and 906 of the
Sarbanes-Oxley Act with respect to all reports, schedules, forms, statements and
other documents required to be filed by it with the Commission. For purposes of
the preceding sentence, “principal executive officer” and “principal financial
officer” shall have the meanings given to such terms in the Sarbanes-Oxley Act.
    (pp)   Foreign Corrupt Practices. Neither the Company nor, to the Company’s
knowledge, any other person associated with or acting on behalf of the Company,
including without limitation any director, officer, agent or employee of the
Company or its Subsidiaries has, directly or indirectly, during the last five
years, while acting on behalf of the Company or on behalf of the Company’s
Subsidiaries after the Subsidiary was acquired by the Company (i) used any
corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity or failed to disclose fully any
contribution in violation of law, (ii) made any payment to any federal or state
governmental officer or official, or other person charged with similar public or
quasi-public duties, other than payments required or permitted by the laws of
the United States or any jurisdiction thereof, (iii) violated or is in violation
of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended
or (iv) made any bribe, rebate, payoff, influence payment, kickback or other
unlawful payment.     (qq)   Currency and Foreign Transactions. The operations
of the Company and its Subsidiaries are and have been conducted at all times in
compliance with applicable financial recordkeeping and reporting requirements of
the Currency and Foreign Transactions Reporting Act of 1970, as amended, the
money laundering statutes of all jurisdictions, the rules and regulations
thereunder and any related or similar rules, regulations or guidelines, issued,
administered or enforced by any governmental agency (collectively, the “Money
Laundering Laws”), except where a failure to comply with such requirements,
statutes, rules, regulations or guidelines could not reasonably be expected to
have a Material Adverse Effect, and no action, suit or proceeding by or before
any court or governmental agency, authority or body or any arbitrator involving
the Company or any of its Subsidiaries with respect to the Money Laundering Laws
is pending or, to the Company’s knowledge, threatened.

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  (rr)   No Sanctioned Employees. Neither the Company nor any Subsidiary nor, to
the Company’s knowledge, any director, officer, agent, employee or affiliate of
the Company or its Subsidiaries is currently subject to any U.S. sanctions
administered by the Office of Foreign Assets Control of the U.S. Treasury
Department (“OFAC”); and the Company will not directly or indirectly use the
proceeds of the offering, or lend, contribute or otherwise make available such
proceeds to any subsidiary, joint venture partner or other person or entity, for
the purpose of financing the activities of any person currently subject to any
U.S. sanctions administered by OFAC.     (ss)   FINRA Affiliations. Except as
described in the due diligence materials provided by the Company to the
Placement Agent, neither the Company nor any Subsidiary nor any of their
affiliates (within the meaning of FINRA Rule 2720(b)(1)(a)) directly or
indirectly controls, is controlled by, or is under common control with, or is an
associated person (within the meaning of Article I, Section 1(e)(e) of the
By-laws of FINRA) of, any member firm of FINRA.     (tt)   Trading Market.
Assuming the accuracy of the representations of the Investors in the
Subscription Agreements, no approval of the shareholders of the Company under
the rules and regulations of any trading market (including Rule 4350 of The
Nasdaq Global Marketplace Rules) is required for the Company to issue and
deliver to the Investors the Notes.

     Any certificate signed by any officer of the Company or any Subsidiary and
delivered to the Placement Agent or to counsel for the Placement Agent in
connection with the offering of the Notes shall be deemed a representation and
warranty by the Company to the Placement Agent and the Investors as to the
matters covered thereby.
3. Covenants. The Company covenants and agrees with the Placement Agent as
follows:

  (a)   Filing of Prospectuses. The Company will file: (i) each Preliminary
Prospectus and the Prospectus with the Commission within the time periods
specified by Rule 424(b) and Rules 430B or 430C under the Securities Act,
(ii) any Issuer Free Writing Prospectus to the extent required by Rule 433 under
the Securities Act, if applicable, and (iii) all reports and any definitive
proxy or information statements required to be filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of the Prospectus and during the Prospectus Delivery
Period.     (b)   Filing of Amendments. The Company will promptly advise the
Placement Agent of any proposal to amend or supplement the Registration
Statement, the Prospectus or the General Disclosure Package until the completion
of the purchase and sale of the Notes contemplated herein and will afford the
Placement Agent a reasonable opportunity to comment on any such proposed
amendment or supplement and to file no such amendment or supplement to which the
Placement Agent shall object in writing, which objection shall not be
unreasonable; and the Company will also advise the Placement Agent promptly of
(i) the filing of any such amendment or supplement, (ii) any request by the
Commission or its staff for any amendment to the Registration Statement, for any
supplement to the Prospectus or for any additional information, (iii) the time
and date when any post-effective amendment to the Registration Statement becomes
effective, but only during the Prospectus Delivery Period; (iv) receipt by the
Company of any notification with respect to any suspension of the approval of
the Notes or the Conversion Shares from any securities exchange upon which they
are listed for trading or included or designated for quotation, or the
initiation or threatening of any proceeding for such purpose, (v) the
institution by the Commission of any stop order proceedings in respect of the
Registration Statement or the threatening of any proceeding for that purpose,
and (vi) the receipt by the Company of any notification with respect to the
suspension of the

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      qualification of the Notes or the Conversion Shares in any jurisdiction or
the institution or threatening of any proceedings for such purpose. The Company
will use its reasonable commercial efforts to prevent the issuance of any such
stop order or the suspension of any such qualification and, if issued, to obtain
as soon as possible the withdrawal thereof.     (c)   Continued Compliance with
Securities Law. If, during the Prospectus Delivery Period, any event occurs as a
result of which the Prospectus as then amended or supplemented would include an
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, or if it is necessary at any time to amend the
Registration Statement or supplement the Prospectus to comply with the
Securities Act, the Company will promptly notify the Placement Agent of such
event and will promptly prepare and file with the Commission and furnish, at its
own expense, to the Placement Agent and, to the extent applicable, the dealers
and any other dealers upon request of the Placement Agent, an amendment or
supplement which will correct such statement or omission or an amendment which
will effect such compliance.     (d)   Free Writing Prospectuses. The Company
will (i) not make any offer relating to the Notes that would constitute an
Issuer Free Writing Prospectus or that would otherwise constitute a “free
writing prospectus” (as defined in Rule 405 under the Securities Act) required
to be filed by the Company with the Commission under Rule 433 under the
Securities Act unless the Placement Agent approves its use in writing prior to
first use; provided that the prior written consent of the Placement Agent hereto
shall be deemed to have been given in respect of the Issuer Free Writing
Prospectus(es) included in Schedule II hereto, (ii) comply with the requirements
of Rules 164 and 433 under the Securities Act applicable to any Issuer Free
Writing Prospectus, including the requirements relating to timely filing with
the Commission, legending and record keeping and (iii) not take any action that
would result in the Placement Agent or the Company being required to file with
the Commission pursuant to Rule 433(d) under the Securities Act a free writing
prospectus prepared by or on behalf of the Placement Agent that the Placement
Agent otherwise would not have been required to file thereunder. The Company
will satisfy the conditions in Rule 433 under the Securities Act to avoid a
requirement to file with the Commission any electronic road show. The Placement
Agent will (x) not make any offer relating to the Notes that would constitute a
“free writing prospectus” (as defined in Rule 405 under the Securities Act)
required to be filed by the Company with the Commission under Rule 433 under the
Securities Act unless the Company approves its use in writing prior to first
use; and (y) not take any action that would result in the Company being required
to file with the Commission pursuant to Rule 433(d) under the Securities Act a
free writing prospectus prepared by or on behalf of the Placement Agent that the
Placement Agent otherwise would not have been required to file thereunder.    
(e)   Conflicting Issuer Free Writing Prospectus. If at any time following
issuance of an Issuer Free Writing Prospectus there occurred or occurs an event
or development as a result of which such Issuer Free Writing Prospectus
conflicted or would conflict with the information contained in the Registration
Statement relating to the Notes or included or would include an untrue statement
of a material fact or omitted or would omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances
prevailing at that subsequent time, not misleading, the Company promptly will
notify the Placement Agent and will promptly amend or supplement, at its own
expense, such Issuer Free Writing Prospectus to eliminate or correct such
conflict, untrue statement or omission. The foregoing sentence does not apply to
statements in or omissions from any Issuer Free Writing Prospectus in reliance
upon, and in conformity with the Placement Agent’s Information.

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  (f)   Delivery of Copies. The Company will deliver promptly to the Placement
Agent and its counsel such number of the following documents as the Placement
Agent shall reasonably request: (i) conformed copies of the Registration
Statement as originally filed with the Commission and each amendment thereto (in
each case excluding exhibits), (ii) copies of any Preliminary Prospectus related
to the Notes; (iii) any Issuer Free Writing Prospectus, (iv) during the
Prospectus Delivery Period, copies of the Prospectus (or any amendments or
supplements thereto); (v) any document incorporated by reference in the
Prospectus (other than any such document, other than those documents described
in clauses (i), (ii), (iii), (iv) and (v) above) that is filed with the
Commission electronically via EDGAR or any successor system; and (vi) all
correspondence to and from, and all documents issued to and by, the Commission
in connection with the registration of the Notes under the Securities Act.    
(g)   Blue Sky Laws. The Company will promptly take or cause to be taken, from
time to time, such actions as the Placement Agent may reasonably request to
qualify the Notes for offering and sale under the state securities, or blue sky,
laws of such states or other jurisdictions as the Placement Agent may reasonably
request and to maintain such qualifications in effect so long as the Placement
Agent may request for the distribution of the Notes, provided, that in no event
shall the Company be obligated to qualify as a foreign corporation in any
jurisdiction in which it is not so qualified or to file a general consent to
service of process in any jurisdiction or subject itself to taxation as doing
business in any jurisdiction.     (h)   Earnings Statement. As soon as
practicable, but in any event not later than 16 months after the date of this
Agreement, the Company will make generally available to holders of its
securities, an earnings statement of the Company and its subsidiaries (which
need not be audited) that will satisfy the provisions of Section 11(a) of the
Securities Act and the Securities Act Rules and Regulations (including
Rule 158). Any document or information filed with the Commission and available
on EDGAR shall be deemed to be delivered for purposes of this section.     (i)  
Use of Proceeds. The Company will apply the net proceeds from the sale of the
Notes in the manner set forth in the General Disclosure Package and the
Prospectus under the heading “Use of Proceeds.”     (j)   [Intentionally
Omitted].     (k)   [Intentionally Omitted].     (l)   Stabilization. The
Company will not, and will cause the Subsidiaries not to, take directly or
indirectly any action designed, or that might reasonably be expected to cause or
result in, or that will constitute, stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of any of the
Notes.     (m)   Trustee. The Company shall engage and maintain, at its expense,
a trustee for the Notes.     (n)   Listing. The Company shall use its best
efforts to cause the Conversion Shares to be listed for quotation on The Nasdaq
Global Market as of the date the Notes are permitted to be converted into
Conversion Shares and to maintain such listing until the earlier of the date the
Notes are paid in full or all of the Notes are converted into Common Shares.    
(o)   Undertakings. The Company will comply with all the provisions of any
undertakings contained in the Registration Statement.

4. Costs and Expenses. The Company will pay or reimburse if paid by the
Placement Agent all costs and expenses incident to the performance of the
obligations of the Company under this Agreement and in connection with the
transactions contemplated hereby, including but not limited to costs and
expenses of or

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relating to (a) the preparation, printing, filing, delivery and shipping of the
Registration Statement, any Issuer Free Writing Prospectus, each Preliminary
Prospectus, the General Disclosure Package and the Prospectus, and any amendment
or supplement to any of the foregoing (including costs of mailing and shipment),
(b) the registration, issue, sale and delivery of the Notes including any stock
or transfer taxes and stamp or similar duties payable upon the sale, issuance or
delivery of the Notes and the printing, delivery, and shipping of the
certificates representing the Notes, (c) the registration or qualification of
the Notes for offer and sale under the securities or Blue Sky laws of such
jurisdictions designated pursuant to Section 3(g), (including, in the event that
the transactions contemplated hereby are not consummated, the reasonable legal
fees not to exceed $5,000, filing fees and other disbursements of counsel to the
Placement Agent in connection therewith), and, if reasonably requested by the
Placement Agent, the preparation and printing and furnishing of copies of any
blue sky surveys to the Placement Agent, (d) the fees and expenses of any
transfer agent or registrar for the Notes, (e) any filings required to be made
by the Placement Agent or the Company with FINRA, (f) listing fees, if any, for
the listing or quotation of the Common Stock resulting from any conversion of
Notes on The Nasdaq Global Market, (g) fees and disbursements of the Company’s
auditor incurred in delivering the letter(s) described in Section 5(i) of this
Agreement, (h) fees of the Escrow Agent, and (i) the costs and expenses of the
Company and the Placement Agent in connection with the marketing of the offering
and the sale of the Notes to prospective investors including, but not limited
to, those related to any presentations or meetings undertaken in connection
therewith including, without limitation, expenses associated with the production
of road show slides and graphics, fees and expenses of any consultants engaged
with the written consent of the Company in connection with the road show
presentations, travel, lodging and other expenses incurred by the officers of
the Company and any such consultants, and the cost of any aircraft or other
transportation chartered in connection with the road show; provided, however,
that the costs and expenses of the Placement Agent pursuant to this Section 4(i)
shall be paid by the Company only in the event that the transactions
contemplated hereby are not consummated. If this Agreement shall be terminated
by the Placement Agent pursuant to Section 9 hereof, the Company will, in
addition to paying the amounts described in Section 4 hereof, reimburse the
Placement Agent for all of its out-of-pocket disbursements including, but not
limited to, the fees and disbursements of its counsel.
5. Conditions of Placement Agent’s Obligations. The respective obligations of
the Placement Agent hereunder and the Investors under the Subscription
Agreements are subject to the following conditions:

  (a)   Filings with the Commission. The Prospectus (including the Final
Prospectus Supplement) shall have been filed with the Commission pursuant to
Rule 424(b), in the manner and within the time period so required.     (b)  
Abbreviated Registration Statement. If the Company has elected to rely upon
Rule 462(b), the registration statement filed under Rule 462(b) shall have
become effective under the Securities Act by 8:00 a.m., Washington, D.C. time,
on the business day next succeeding the date of this Agreement.     (c)   No
Stop Orders; Negative Assurance. Prior to the Closing: (i) no stop order
suspending the effectiveness of the Registration Statement or any part thereof,
preventing or suspending the use of the Prospectus or any Issuer Free Writing
Prospectus or any part thereof shall have been issued under the Securities Act
and no proceedings for that purpose or pursuant to Section 8A under the
Securities Act shall have been initiated or threatened by the Commission,
(ii) no order suspending the qualification or registration of the Notes under
the securities or blue sky laws of any jurisdiction shall be in effect and
(iii) all requests for additional information on the part of the Commission (to
be included or incorporated by reference in the Registration Statement, the
General Disclosure Package, the Prospectus or any Issuer Free Writing Prospectus
or otherwise) shall have been complied with to the satisfaction of the Staff of
the Commission. The Placement Agent shall not have discovered and disclosed to
the Company on or prior to the Closing Date that (x) the Registration Statement
or any amendment or supplement thereto contains an untrue statement of a fact
which, in the opinion of the

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      Placement Agent, is material, or omits to state any fact which, in the
opinion of the Placement Agent, is material and is required to be stated therein
or is necessary to make the statements therein not misleading, or (y) the
General Disclosure Package or the Prospectus, or any amendment or supplement
thereto, or any Issuer Free Writing Prospectus, contains an untrue statement of
a fact which, in the opinion of the Placement Agent, is material, or omits to
state any fact which, in the opinion of the Placement Agent, is material and is
required to be stated therein or is necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.     (d)  
Action Preventing Issuance. No action shall have been taken and no statute,
rule, regulation or order shall have been enacted, adopted or issued by any
governmental agency or body which would, as of the Closing Date, prevent the
issuance or sale of the Notes; and no injunction, restraining order or order of
any other nature by any federal or state court of competent jurisdiction shall
have been issued as of the Closing Date which would prevent the issuance or sale
of the Notes.     (e)   Objection of Placement Agent. No Prospectus or amendment
or supplement to the Registration Statement shall have been filed to which the
Placement Agent shall have objected in writing, which objection shall not be
unreasonable.     (f)   Material Adverse Change. Subsequent to the date of the
latest audited financial statements included or incorporated by reference in the
General Disclosure Package, (i) neither the Company nor any of its Subsidiaries
has sustained any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree, otherwise
than as set forth in the General Disclosure Package, and (ii) there has not been
any change in the capital stock (other than a change in the number of
outstanding shares of Common Stock due to the issuance of shares upon the
exercise of outstanding options or warrants or the conversion of convertible
indebtedness), or material change in the short-term debt or long-term debt of
the Company or any Subsidiary (other than upon conversion of convertible
indebtedness) or any Material Adverse Effect otherwise than as set forth in the
General Disclosure Package.     (g)   Representations and Warranties. Each of
the representations and warranties of the Company contained herein shall be true
and correct when made and on and as of the Closing Date, as if made on such date
(except that those representations and warranties that address matters only as
of a particular date shall remain true and correct as of such date), and all
covenants and agreements herein contained to be performed on the part of the
Company and all conditions herein contained to be fulfilled or complied with by
the Company at or prior to the Closing Date shall have been duly performed,
fulfilled or complied with.     (h)   Opinion of Counsel to the Company. The
Placement Agent shall have received from Morgan, Lewis & Bockius LLP, counsel to
the Company, such counsel’s written opinion, addressed to the Placement Agent
and the Investors and dated the Closing Date, in the form provided on Exhibit B
hereto.     (i)   [Intentionally Omitted].     (j)   [Intentionally Omitted].  
  (k)   [Intentionally Omitted].     (l)   Officer’s Certificate. The Placement
Agent shall have received on the Closing Date a certificate, addressed to the
Placement Agent and dated the Closing Date, of the chief

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      executive or chief operating officer and the chief financial officer or
chief accounting officer of the Company to the effect that:

  (i)   each of the representations, warranties and agreements of the Company in
this Agreement were true and correct in all material respects when originally
made and are true and correct in all material respects as of the Closing Date;
and the Company has complied in all material respects with all agreements and
satisfied all the conditions on its part required under this Agreement to be
performed or satisfied at or prior to the Closing Date;     (ii)   subsequent to
the date of the latest audited financial statements included or incorporated by
reference in the General Disclosure Package, (A) neither the Company nor any of
its Subsidiaries has sustained any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth in the General Disclosure Package, and
(B) there has been no material change in the financial position or results of
operation of the Company, otherwise than as set forth in the General Disclosure
Package;     (iii)   no stop order suspending the effectiveness of the
Registration Statement or any part thereof or any amendment thereof or the
qualification of the Notes for offering or sale, nor suspending or preventing
the use of the General Disclosure Package, the Prospectus or any Issuer Free
Writing Prospectus shall have been issued, and no proceedings for that purpose
or pursuant to Section 8A under the Securities Act shall be pending or to their
knowledge, threatened by the Commission or any state or regulatory body; and    
(iv)   (A) as of the date of such certificate, (x) the Registration Statement
does not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading and (y) neither the Prospectus nor the General Disclosure
Package contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading and (B) no event has occurred as a result of which it is necessary to
amend or supplement the Registration Statement, the Prospectus or the General
Disclosure Package in order to make the statements therein not untrue or
misleading in any material respect.

  (m)   Secretary’s Certificate. On the Closing Date, the Company shall have
furnished to the Placement Agent a Secretary’s Certificate of the Company.    
(n)   [Intentionally Omitted].     (o)   [Intentionally Omitted].     (p)  
Other Filings with the Commission. The Company shall have prepared and filed
with the Commission a Current Report on Form 8-K with respect to the
transactions contemplated hereby, including as an exhibit thereto this Agreement
and any other documents relating thereto.     (q)   No FINRA Objection. The
Placement Agent shall not have received any objection from FINRA as to the
fairness and reasonableness of the amount of compensation allowable or payable
to the Placement Agent in connection with the issuance and sale of the Notes.

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  (r)   Subscription Agreements. The Company shall have entered into the
Subscription Agreements with each of the Investors, and such agreements shall be
in full force and effect on the Closing Date.     (s)   Escrow Agreement. The
Company shall have entered into the Escrow Agreement, and such agreement shall
be in full force and effect on the Closing Date.     (t)   Security Agreements.
The Company shall have entered into amendments to the Share Escrow Agreement,
dated January 19, 2009, the Interest Escrow Agreement, dated January 19, 2009
and the Pledge Agreement, dated January 20, 2009, in form and substance
reasonably satisfactory to the Placement Agent, and such amendments shall be in
full force and effect on the Closing Date.     (u)   Additional Documents. Prior
to the Closing Date, the Company shall have furnished to the Placement Agent
such further information, certificates or documents as the Placement Agent shall
have reasonably requested.

     All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Placement Agent.
6. Indemnification and Contribution.

  (a)   Indemnification of the Placement Agent. The Company agrees to indemnify
and hold the Placement Agent harmless against any losses, claims, damages or
liabilities (“Losses”) to which the Placement Agent may become subject, under
the Securities Act or otherwise (including in settlement of any litigation if
such settlement is effected with the written consent of the Company), insofar as
such Losses (or actions in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, the General Disclosure Package or the
Prospectus, or any amendment or supplement thereto, or in any Issuer Free
Writing Prospectus, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading or (iii) any breach of the representations, warranties
and agreements of the Company contained herein, and will reimburse the Placement
Agent for any legal or other expenses incurred by then in connection with
investigating or defending against such Losses (or actions in respect thereof);
provided, however, that the Company shall not be liable in any such case to the
extent that any such Losses (or actions in respect thereof) arise out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, the General Disclosure
Package or the Prospectus, or any amendment or supplement thereto, or in any
Issuer Free Writing Prospectus in reliance upon and in conformity with the
Placement Agent’s Information.

     In addition to its other obligations under this Section 6(a), the Company
agrees that it will reimburse the Placement Agent for all legal fees or other
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, described in this
Section 6(a), as such fees and expenses are incurred.

  (b)   Indemnification of the Company. The Placement Agent will indemnify and
hold harmless the Company against any Losses to which the Company may become
subject, under the Securities Act or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Placement Agent), insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement, the

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      General Disclosure Package, the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the 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 each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in the Registration Statement, the General
Disclosure Package, the Prospectus, or any such amendment or supplement, in
reliance upon and in conformity with written information furnished to the
Company by the Placement Agent, specifically for use in the preparation thereof,
and will reimburse the Company for any legal or other expenses reasonably
incurred by the Company in connection with investigating or defending against
any such loss, claim, damage, liability or action, it being understood and
agreed that the only such information furnished by the Placement Agent consists
of the Placement Agent’s Information.     (c)   Notice and Procedures. Promptly
after receipt by an indemnified party under subsection (a) or (b) above of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party under such
subsection, notify the indemnifying party in writing of the commencement
thereof; provided, that the omission so to notify the indemnifying party shall
not relieve the indemnifying party from any liability that it may have to any
indemnified party except to the extent such indemnifying party has been
materially prejudiced by such failure. In case any such action shall be brought
against any indemnified party, and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
in, and, to the extent that it shall wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of the indemnifying party’s election so to
assume the defense thereof, the indemnifying party shall not be liable to such
indemnified party under such subsection for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
if, in the sole judgment of the indemnified party, it is advisable for the
indemnified party to be represented by separate counsel, the indemnified party
shall have the right to employ a separate counsel to represent it, in which
event the reasonable fees and expenses of such separate counsel shall be borne
by the indemnified party or parties except to the extent that (i) the employment
thereof has been specifically authorized by the indemnifying party in writing,
(ii) the indemnifying party has failed after a reasonable period of time to
assume such defense and to employ counsel or (iii) in such action there is, in
the reasonable opinion of such separate counsel, a material conflict on any
material issue between the position of the indemnifying party and the position
of the indemnified party, in which case, if such indemnified party notifies the
indemnifying party in writing that it elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such action on behalf of such indemnified party,
it being understood, however, that the indemnifying party shall not, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys at any time for all such indemnified
parties. An indemnifying party shall not be obligated under any settlement
agreement relating to any action under this Section 6 to which it has not agreed
in writing. In addition, no indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened proceeding unless such settlement includes an unconditional release
of such indemnified party for all liability on claims that are the subject
matter of the proceeding.

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  (d)   Contribution; Limitation on Liability. If the indemnification provided
for in this Section 6 is unavailable or insufficient to hold harmless an
indemnified party under subsection (a) or (b) above, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above,
(i) in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the Placement Agent on the other
from the offering of the Notes or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the one hand and the
Placement Agent on the other in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by the Company
on the one hand and the Placement Agent on the other shall be deemed to be in
the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bears to the total compensation
received by the Placement Agent. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Placement Agent and the
parties’ relevant intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The Company and the
Placement Agent agree that it would not be just and equitable if contributions
pursuant to this subsection (d) were to be determined by pro rata allocation or
by any other method of allocation which does not take account of the equitable
considerations referred to in the first sentence of this subsection (d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities referred to in the first sentence of this
subsection (d) shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
(and not reimbursed by the indemnifying party) in connection with investigating
or defending against any action or claim which is the subject of this subsection
(d). Notwithstanding the provisions of this subsection, the Placement Agent
shall not be required to contribute any amount in excess of the total
commissions received by the Placement Agent in accordance with Section 1(b) less
the amount of any damages which the Placement Agent has otherwise paid or become
liable to pay by reason of any untrue or alleged untrue statement, omission or
alleged omission, act or alleged act or failure to act or alleged failure to
act. No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.     (e)  
Non-Exclusive Remedies. The obligations of the Company under this Section 6
shall be in addition to any liability which the Company may otherwise have and
shall extend, upon the same terms and conditions, to each person, if any, who
controls the Placement Agent within the meaning of the Securities Act; and the
Placement Agent’s obligations under this Section 6 shall be in addition to any
liability that the Placement Agent may otherwise have and shall extend, upon the
same terms and conditions, to each director of the Company (including any person
who, with his consent, is named in the Registration Statement as about to become
a director of the Company), to each officer of the Company who has signed the
Registration Statement and to each person, if any, who controls the Company
within the meaning of the Securities Act.

7. Representations and Agreements to Survive Delivery. All representations,
warranties, and agreements of the Company herein or in certificates delivered
pursuant hereto, and the agreements of the Placement Agent and the Company
contained in Section 6 hereof, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of the Placement
Agent or any controlling person

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thereof, or the Company or any of its officers, directors, or controlling
persons and shall survive delivery of, and payment for, the Notes. The
respective agreements, covenants, indemnities and other statements set forth in
Sections 4, 6 and 12 hereof shall remain in full force and effect, regardless of
any termination of this Agreement.
8. Information Furnished by Placement Agent. The Company acknowledges that the
statements set forth in the “Plan of Distribution” section in the Prospectus
(the “Placement Agent’s Information”), constitute the only information relating
to the Placement Agent furnished in writing to the Company by the Placement
Agent as such information is referred to in Sections 2 and 6 hereof.
9. Termination. The Placement Agent shall have the right to terminate this
Agreement by giving notice as hereinafter specified at any time at or prior to
the Closing Date, without liability on the part of the Placement Agent to the
Company, if (a) prior to delivery and payment for the Notes (i) trading in
securities generally shall have been suspended on or by The Nasdaq Global
Market, (ii) trading in the Common Stock of the Company shall have been
suspended on The Nasdaq Global Market or by the Commission, (iii) a general
moratorium on commercial banking activities shall have been declared by federal
or New York state authorities or a material disruption shall have occurred in
commercial banking or securities settlement or clearance services in the United
States, (iv) there shall have occurred any outbreak or material escalation of
hostilities or acts of terrorism involving the United States or there shall have
been a declaration by the United States of a national emergency or war, or
(v) there shall have occurred any other calamity or crisis or any material
change in general economic, political or financial conditions in the United
States or elsewhere, if the effect of any such event specified in clause (iv) or
(v), in the judgment of the Placement Agent, is material and adverse and makes
it impractical or inadvisable to proceed with the completion of the sale of and
payment for the Notes on the Closing Date on the terms and in the manner
contemplated by this Agreement, the General Disclosure Package and the
Prospectus, (b) since the time of execution of this Agreement or the earlier
respective dates as of which information is given in the General Disclosure
Package or incorporated by reference therein, there has been any Material
Adverse Effect, if the effect of any such event specified in this clause (b), in
the judgment of the Placement Agent, makes it impractical or inadvisable to
proceed with the completion of the sale of and payment for the Notes on the
Closing Date on the terms and in the manner contemplated by this Agreement, the
General Disclosure Package and the Prospectus, (c) the Company shall have
failed, refused or been unable to comply with the terms or perform any agreement
or obligation of this Agreement or any Subscription Agreement, other than by
reason of a default by the Placement Agent, or (d) any condition of the
Placement Agent’s obligations hereunder is not fulfilled. Any such termination
shall be without liability of any party to any other party except that the
provisions of Section 4, Section 6, and Section 12 hereof shall at all times be
effective notwithstanding such termination.
10. Notices. All statements, requests, notices and agreements hereunder shall be
in writing shall be delivered or sent by mail, telex or facsimile transmission,
as follows:

  (a)   if to the Placement Agent, to:

Philadelphia Brokerage Corporation
Radnor Corporate Center
Building Two, Suite 111
100 Matsonford Road
Radnor, PA 19087
Attention: Robert Fisk
Facsimile: (610) 975-9993
with a copy (which shall not constitute notice) to:
Duane Morris LLP
30 South 17th Street
Philadelphia, PA 19103-4196

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Attention: John M. Coogan, Jr., Esq.
Facsimile: (215) 689-1990

  (b)   if to the Company, to

BMP Sunstone Corporation
600 West Germantown Pike
Plymouth Meeting, Pennsylvania 19462
Attention: Fred M. Powell
Facsimile: (610) 940-1676
with a copy (which shall not constitute notice) to:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, Pennsylvania 19103
Attention: Joanne R. Soslow, Esq.
Facsimile: (215) 963-5001
11. Persons Entitled to Benefit of Agreement. This Agreement shall inure to the
benefit of and shall be binding upon the Placement Agent, the Company, and their
respective successors and assigns. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person other than the
persons mentioned in the preceding sentence any legal or equitable right, remedy
or claim under or in respect of this Agreement, or any provisions herein
contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person, except that (i) the representations,
warranties, covenants, agreements and indemnities of the Company contained in
this Agreement shall also be for the benefit of the controlling persons,
officers and directors referred to in Section 6(a) and the indemnities of the
Placement Agent shall also be for the benefit of the controlling persons,
officers and directors referred to in Section 6(b) and (ii) the Investors are
relying on the representations made by the Company under, and are intended third
party beneficiaries of, this Agreement. The term “successors and assigns” as
herein used shall not include any purchaser of the Notes by reason merely of
such purchase.
12. Governing Law; Submission to Jurisdiction. This Agreement shall be governed
by, and construed in accordance with, the laws of the Commonwealth of
Pennsylvania, without giving effect to the conflicts of laws provisions thereof.
Except as set forth below, no proceeding may be commenced, prosecuted or
continued in any court other than the courts of the Commonwealth of Pennsylvania
located in the County of Chester or in the United States District Court for the
Eastern District of Pennsylvania, which courts shall have jurisdiction over the
adjudication of such matters, and the Company hereby consents to the
jurisdiction of such courts and personal service with respect thereto. The
Company hereby consents to personal jurisdiction, service and venue in any court
in which any proceeding arising out of or in any way relating to this Agreement
is brought by any third party against the Placement Agent. The Company hereby
waives all right to trial by jury in any proceeding (whether based upon
contract, tort or otherwise) in any way arising out of or relating to this
Agreement. The Company agrees that a final judgment in any such proceeding
brought in any such court shall be conclusive and binding upon the Company and
may be enforced in any other courts in the jurisdiction of which the Company is
or may be subject, by suit upon such judgment.
13. No Fiduciary Relationship. The Company hereby acknowledges and agrees that:

  (a)   No Other Relationship. The Placement Agent has been retained solely to
act as Placement Agent in connection with the Offering of the Company’s
securities. The Company further acknowledges that the Placement Agent is acting
pursuant to a contractual relationship created solely by this Agreement and
entered into on an arm’s length basis and in no event do the parties intend that
the Placement Agent act or be responsible as a fiduciary to the Company, its

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      management, stockholders, creditors or any other person in connection with
any activity that the Placement Agent may undertake or have undertaken in
furtherance of the Offering of the Company’s securities, either before or after
the date hereof. The Placement Agent hereby expressly disclaims any fiduciary or
similar obligations to the Company, either in connection with the transactions
contemplated by this Agreement or any matters leading up to such transactions,
and the Company hereby confirms its understanding and agreement to that effect.
    (b)   Absence of Obligation to Disclose. The Company has been advised that
the Placement Agent and its affiliates are engaged in a broad range of
transactions which may involve interests that differ from those of the Company
and that the Placement Agent has no obligation to disclose such interests and
transactions to the Company by virtue of any fiduciary, advisory or agency
relationship.     (c)   Waiver. The Company hereby waives and releases, to the
fullest extent permitted by law, any claims that the Company may have against
the Placement Agent with respect to any breach or alleged breach of any
fiduciary or similar duty to the Company in connection with the transactions
contemplated by this Agreement and agrees that the Placement Agent shall have no
liability (whether direct or indirect) to the Company in respect of such a
fiduciary duty claim to any person asserting a fiduciary duty claim on behalf of
the Company, including stockholders, employees or creditors of the Company.

14. Headings. The Section headings in this Agreement have been inserted as a
matter of convenience of reference and are not a part of this Agreement.
15. Amendments and Waivers. No supplement, modification or waiver of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. The failure of a party to exercise any right or remedy shall not be
deemed or constitute a waiver of such right or remedy in the future. No waiver
of any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provision hereof (regardless of whether similar), nor shall
any such waiver constitute a continuing waiver unless otherwise expressly
provided.
16. Counterparts. This Agreement may be executed in one or more counterparts
and, if executed in more than one counterpart, the executed counterparts shall
each be deemed to be an original and all such counterparts shall together
constitute one and the same instrument. Delivery of an executed counterpart by
facsimile transmission or by electronic mail as an attachment in “PDF” or
similar format shall be effective as delivery of a manually executed counterpart
thereof.
17. Research Analyst Independence. The Company acknowledges that the Placement
Agent’s research analysts and research departments are required to be
independent (“Analyst Independence”) from its investment banking division and
are subject to certain regulations and internal policies, and that the Placement
Agent’s research analysts may hold views and make statements or investment
recommendations and/or publish research reports with respect to the Company
and/or the Offering that differ from the views of its investment banking
division. The Company hereby waives and releases, to the fullest extent
permitted by law, any claims that the Company may have against the Placement
Agent with respect to any conflict of interest that may arise from the fact that
the views expressed by its independent research analysts and research department
may be different from or inconsistent with the views or advice communicated to
the Company by the Placement Agent’s investment banking division; provided,
however, that it is understood by the Placement Agent that the Company does not
waive any claims it may have against the Placement Agent in the event that the
Placement Agent fails to maintain Analyst Independence. The Company acknowledges
that the Placement Agent is a full service securities firm and as such from time
to time, subject to applicable securities laws, rules and regulations, may
effect transactions for its own account or the account of its customers and hold
long or short positions in debt or equity securities of the Company; provided,
however, that nothing in this Section 17 shall relieve the Placement Agent of
any responsibility or liability they may otherwise bear in connection with
activities in violation of applicable securities laws, rules and regulations.

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18. Entire Agreement. This Agreement constitutes the entire agreement of the
parties to this Agreement and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof.
19. Partial Unenforceability. The invalidity or unenforceability of any section,
paragraph, clause or provision of this Agreement shall not affect the validity
or enforceability of any other section, paragraph, clause or provision hereof.
If any section, paragraph, clause or provision of this Agreement is for any
reason determined to be invalid or unenforceable, there shall be deemed to be
made such minor changes (and only such minor changes) as are necessary to make
it valid and enforceable.
20. Effectiveness. This Agreement shall become effective upon the execution and
delivery hereof by the parties hereto.
[Signature Page Follows]

26

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     If the foregoing is in accordance with your understanding of the agreement
between the Company and the Placement Agent, kindly indicate your acceptance in
the space provided for that purpose below.

            Very truly yours,

BMP SUNSTONE CORPORATION
      By:   /s/ Fred M. Powell       Name:   Fred M. Powell       Title:   CFO  
 

          Accepted as of the date first above written:    
 
        PHILADELPHIA BROKERAGE CORPORATION    
 
       
By:
  /s/ Robert Fisk    
 
 
 
Name: Robert Fisk    
 
  Title: Senior Partner    

27

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Schedules and Exhibits

     
Schedule I:
  Subsidiaries
 
   
Schedule II:
  Permitted Free Writing Prospectuses
 
   
Exhibit A:
  Form of Subscription Agreement
 
   
Exhibit B:
  Form of Legal Opinion
 
   
Exhibit C:
  Pricing Information

28

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Schedule I to Placement Agency Agreement
Subsidiaries

              Name   Percent Owned   Jurisdiction of Incorporation
Beijing Medpharm Co. Ltd.
    100 %   Beijing, China
 
           
Beijing Wanwei Pharmaceutical Co., Ltd.
    100 %   Beijing, China
 
           
Beijing Med-Pharm Hong Kong Company Ltd.
    100 %   Hong Kong, China
 
           
Hong Kong Fly International Health Care Limited
    100 %   Hong Kong, China
Sunstone (Tangshan) Pharmaceutical Co., Ltd.
    100 %   Tangshan, Hebei Province, China
 
           
Sunstone Shengda (Zhangjiakou)
    50 %   Hebei Province, China
Pharmaceutical Co., Ltd.
           
Shanghai Rongheng Pharmaceutical Company
    63.3 %   Shanghai, China
 
           
Alliance BMP Limited
    20 %   UK

 

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Schedule II to Placement Agency Agreement
Permitted Free Writing Prospectus
NONE

 

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Exhibit A to Placement Agency Agreement
Form of Subscription Agreement
BMP Sunstone Corporation
600 W. Germantown Pike
Suite 400
Plymouth Meeting, Pennsylvania 19462
Ladies and Gentlemen:
The undersigned (the “Investor”) hereby confirms and agrees with you as follows:

1.   The subscription terms set forth herein (this “Subscription”) are made as
of the date set forth below between BMP Sunstone Corporation, a Delaware
corporation (the “Company”), and the Investor.

2.   As of the Closing (as defined below) and subject to the terms and
conditions hereof, the Company and the Investor agree that the Investor will
purchase from the Company and the Company will issue and sell to the Investor
such principal amount of 12.5% Subordinated Convertible Notes due July 1, 2011
(the “Notes”) of the Company as is set forth on the signature page hereto (the
“Signature Page”). The Investor acknowledges that the offering is not a firm
commitment underwriting and that the Closing will not occur unless the Company
has received Subscriptions for Notes with an aggregate principal amount for all
such Notes of at least $6,000,000.

3.   The completion of the purchase and sale of the Notes shall occur at a
closing (the “Closing”) which, in accordance with Rule 15c6-1 promulgated under
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is
expected to occur on or about March 16, 2009. At the Closing, subject to the
requirements in paragraph 3(c) below, the Company shall cause The Bank of New
York Mellon, the trustee under the Company’s subordinated indenture (the
“Trustee”), to release to the Investor the principal amount of Notes being
purchased by the Investor and the aggregate purchase price for the Notes being
purchased by the Investor will be delivered by the Escrow Agent to the Company.

  (a)   Delivery of Funds. No later than one (1) business day after the
execution of this Agreement by the Investor and the Company, the Investor shall
remit by wire transfer the amount of funds equal to the aggregate purchase price
for the Notes being purchased by the Investor to the following account (the
“Escrow Account”) designated by the Company and the Placement Agent pursuant to
the terms of that certain Escrow Agreement (the “Escrow Agreement”) dated as of
October 9, 2008, as amended on March 12, 2009, by and among the Company, the
Placement Agent and the Escrow Agent”:

The Bank of New York
ABA #021-000-018
Beneficiary: GLA-111/565
Cust A/C #208878
Acct Name: BMP SUNSTONE SUBSCRIPTION ESC
ATTN: Odell Romeo/Sharon Chut-Khan

 

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Such funds shall be held in an escrow account until the Closing and delivered by
the Escrow Agent on behalf of the Investors to the Company upon the
satisfaction, in the sole judgment of the Placement Agent, of the Company
closing conditions set forth in the Placement Agreement (as defined below). The
Placement Agent shall have no rights in or to any of the escrowed funds, unless
the Placement Agent and the Escrow Agent are notified in writing by the Company
in connection with the Closing that a portion of the escrowed funds shall be
applied to the Placement Fee (as defined below). The Company and the Investor
agree to indemnify and hold the Escrow Agent harmless from and against any and
all losses, costs, damages, expenses and claims (including, without limitation,
court costs and reasonable attorneys fees) (“Losses”) arising under this
Section 3 or otherwise with respect to the funds held in escrow pursuant hereto
or arising under the Escrow Agreement, unless such Losses resulted directly from
the willful misconduct or gross negligence of the Escrow Agent.

  (b)   Delivery of Notes. At least one (1) business day prior to the Closing,
the Company shall cause the Trustee to deliver the Notes (the “Certificates”)
issued in the name of the Investor or its nominee. Simultaneously with the
delivery to the Company by the Escrow Agent of the funds held in escrow pursuant
to Section 3(a) above, the Company shall direct the Trustee to deliver the Notes
to the Investor or its nominee.     (c)   Registered Investment Companies. If
the Investor is a registered investment company and is not settling its purchase
of Notes pursuant to Section 3(a) and (b) above, on or before the Closing Date,
the Company shall cause the Trustee to deliver the Notes purchased by such
Investor to the account and/or at the address designated by such Investor, and
upon receipt by such Investor of such Notes, such Investor shall wire, in
immediately available funds, the Purchase Amount for such Notes to an account
designated by the Company.

4.   The offering and sale of the Notes are being made pursuant to the
Registration Statement and the Prospectus (as such terms are defined below). The
Investor acknowledges that the Company intends to enter into subscriptions,
which the Company represents will be in substantially the same form as this
Subscription, with certain other investors and intends to offer and sell (the
“Offering”) Notes with an aggregate offering price of up to $8,000,000 pursuant
to the Registration Statement and Prospectus. The Company may accept or reject
this Subscription or any one or more other subscriptions with other investors in
its sole discretion.

5.   The Company has filed or shall file with the Securities and Exchange
Commission (the “Commission”) a prospectus (the “Base Prospectus”) and a final
prospectus supplement (the “Prospectus Supplement” and together with the Base
Prospectus, the “Prospectus”) with respect to the registration statement (File
No. 333-156958) reflecting the Offering, including all amendments thereto, the
exhibits and any schedules thereto, the documents otherwise deemed to be a part
thereof or included therein by the rules and regulations of the Commission (the
“Rules and Regulations”), and any registration statement relating to the
Offering and filed pursuant to Rule 462(b) under the Rules and Regulations
(collectively, the “Registration Statement”), in conformity with the Securities
Act of 1933, as amended (the “Securities Act”), including Rule 424(b)
thereunder. The Investor hereby confirms that it has had full access to the term
sheet summarizing the terms and conditions of the offering (including this form
of Subscription) (the “Free Writing Prospectus”), the Base Prospectus and the
Company’s periodic reports and other information incorporated by reference
therein, and was able to read, review, download and print such materials.

A-2

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6.   The Company has entered into a Placement Agency Agreement (the “Placement
Agreement”), dated March 13, 2009 with Philadelphia Brokerage Corporation (the
“Placement Agent”), which will act as the Company’s Placement Agent with respect
to the Offering and receive a fee (the “Placement Fee”) in connection with the
sale of the Notes. The Placement Agreement contains the representations and
warranties of the Company set forth in Exhibit I hereto. The Company
acknowledges and agrees that the Investor may rely on the representations and
warranties made by it to the Placement Agent in Section 2 of the Placement
Agreement to the same extent as if such representations and warranties had been
incorporated in full herein and made directly to the Investor. Capitalized terms
used, but not otherwise defined, herein shall have the meanings ascribed to such
terms in the Placement Agreement.

7.   The obligations of the Company and the Investor to complete the
transactions contemplated by this Subscription shall be subject to the
following:

  (a)   The Company’s obligation to issue and sell the Notes to the Investor
shall be subject to: (i) the acceptance by the Company of this Subscription (as
may be indicated by the Company’s execution of the Signature Page hereto),
(ii) the receipt by the Company of the purchase price for the Notes being
purchased hereunder as set forth on the Signature Page and (iii) the accuracy of
the representations and warranties made by the Investor and the fulfillment of
those undertakings of the Investor to be fulfilled prior to the Closing Date.  
  (b)   The Investor’s obligation to purchase the Notes will be subject (i) the
Placement Agent not having terminated the Placement Agreement pursuant to the
terms thereof, (ii) the representations and warranties set forth in Exhibit I
hereto being true and correct and (iii) the conditions to closing in the
Placement Agreement having been satisfied or waived.

8.   The Company hereby makes the following representations, warranties and
covenants to the Investor:

  (a)   The Company has the requisite corporate power and authority to enter
into and to consummate the transactions contemplated by this Subscription and
otherwise to carry out its obligations hereunder. The execution and delivery of
this Subscription by the Company and the consummation by it of the transactions
contemplated hereunder have been duly authorized by all necessary action on the
part of the Company. This Subscription has been duly executed by the Company
and, when delivered in accordance with the terms hereof, will constitute the
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as may be limited by any bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other similar
laws affecting the enforcement of creditors’ rights generally or by general
principles of equity, regardless of whether such enforceability is considered in
a proceeding in equity or at law.     (b)   The Company shall make such filings
and notices in the manner and time required by the Commission with respect to
the transactions contemplated hereby. The Company shall not identify the
Investor by name in any press release or public filing, or otherwise publicly
disclose the Investor’s name, without the Investor’s prior written consent,
unless required by law or the rules and regulations of any self-regulatory
organization which the Company or its securities are subject.

A-3

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  (c)   The Company shall reimburse the Investor an amount equal to $15,000 for
costs incurred in the Investor’s supplemental and follow-up due diligence
efforts related to the purchase of the Notes. Further, the Company shall
reimburse the Investor for the first $15,000 of those legal fees incurred by the
Investor solely related to the purchase of the Notes.

9.   The Investor hereby makes the following representations, warranties and
covenants to the Company:

  (a)   The Investor represents that (i) it has had full access to the Base
Prospectus and the Issuer Free Writing Prospectus, as well as the Company’s
periodic reports and other information incorporated by reference therein, prior
to or in connection with its receipt of this Subscription, (ii) it is
knowledgeable, sophisticated and experienced in making, and is qualified to
make, decisions with respect to investments in securities representing an
investment decision like that involved in the purchase of the Notes, and
(iii) it does not have any agreement or understanding, directly or indirectly,
with any person or entity to distribute any of the Notes.     (b)   The Investor
has the requisite power and authority to enter into this Subscription and to
consummate the transactions contemplated hereby. The execution and delivery of
this Subscription by the Investor and the consummation by it of the transactions
contemplated hereunder have been duly authorized by all necessary action on the
part of the Investor. This Subscription has been executed by the Investor and,
when delivered in accordance with the terms hereof, will constitute a valid and
binding obligation of the Investor enforceable against the Investor in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors’ and contracting parties’ rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
    (c)   The Investor understands that nothing in this Subscription or any
other materials presented to the Investor in connection with the purchase and
sale of the Notes constitutes legal, tax or investment advice. The Investor has
consulted such legal, tax and investment advisors as it, in its sole discretion,
has deemed necessary or appropriate in connection with its purchase of Notes.  
  (d)   Neither the Investor nor any Person acting on behalf of, or pursuant to
any understanding with or based upon any information received from, the Investor
has, directly or indirectly, engaged in any transactions in the securities of
the Company (including without limitation, any Short Sales involving the
Company’s securities) since the earlier to occur of (i) the time that the
Investor was first contacted by the Placement Agent or the Company with respect
to the transactions contemplated hereby and (ii) the date that is the tenth
(10th) trading day prior to the date the Investor executes this Subscription.
“Short Sales” include, without limitation, all “short sales” as defined in
Rule 200 promulgated under Regulation SHO under the Exchange Act, whether or not
against the box, and all types of direct and indirect stock pledges, forward
sale contracts, options, puts, calls, short sales, swaps, “put equivalent
positions” (as defined in Rule 16a-1(h) under the Exchange Act) and similar
arrangements (including on a total return basis), and sales and other
transactions through non-U.S. broker dealers or foreign regulated brokers. The
Investor covenants that neither it, nor any Person acting on behalf of, or
pursuant to any understanding with or based upon any information received from,
the Investor will engage in any transactions in the securities of the Company
(including without limitation,

A-4

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      any Short Sales involving the Company’s securities) prior to the time that
the transactions contemplated by this Subscription are publicly disclosed.    
(e)   The Investor represents that, except as set forth below, (i) it has had no
position, office or other material relationship within the past three years with
the Company or persons known to it to be affiliates of the Company, (ii) it is
not, and it has no direct or indirect affiliation or association with, any FINRA
member or an Associated Person (as such term is defined under the FINRA
Membership and Registration Rules Section 1011) as of the date the Investor
executes this Subscription, and (iii) neither it nor any group of investors (as
identified in a public filing made with the Commission) of which it is a member,
acquired, or obtained the right to acquire, 20% or more of the Common Stock (or
securities convertible or exercisable for Common Stock) or the voting power of
the Company on a post-transaction basis. Exceptions:       (If no exceptions,
write “none.” If left blank, response will be deemed to be “none.”)     (f)  
The Investor, if outside the United States, will comply with all applicable laws
and regulations in each foreign jurisdiction in which it purchases, offers,
sells or delivers Notes or has in its possession or distributes any offering
material, in all cases at its own expense.

10.   Notwithstanding any investigation made by any party to this Subscription,
all covenants, agreements, representations and warranties made by the Company
and the Investor herein will survive the execution of this Subscription, the
delivery to the Investor of the Notes being purchased and the payment therefor.

11.   This Subscription may not be modified or amended except pursuant to an
instrument in writing signed by the Company and the Investor and acknowledged by
the Placement Agent.

12.   In case any provision contained in this Subscription should be invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein will not in any way
be affected or impaired thereby.

13.   This Subscription will be governed by, and construed in accordance with,
the internal laws of the Commonwealth of Pennsylvania, without giving effect to
the principles of conflicts of law that would require the application of the
laws of any other jurisdiction.

14.   This Subscription may be executed in one or more counterparts (delivery of
which may be by facsimile or as “pdf” or similar attachments to an electronic
transmission), each of which will constitute an original, but all of which, when
taken together, will constitute but one instrument, and will become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties.

15.   The Investor acknowledges and agrees that such Investor’s receipt of the
Company’s counterpart to this Subscription shall constitute written confirmation
of the Company’s sale of Notes to such Investor.

16.   In the event that the Placement Agreement is terminated by the Placement
Agent pursuant to the terms thereof, this Subscription shall terminate without
any further action on the part of the parties hereto.

A-5

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INVESTOR SIGNATURE PAGE
Subscription for Principal Amount of
12.5% Subordinated Convertible Notes due July 1, 2011:
$                                        
Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.
Dated as of: March      , 2009
INVESTOR

By:  
 

Print Name:  
 

Title:  
 

Name in which Notes are to be registered:  
 

Mailing Address:  
 

Taxpayer Identification Number:  
 

Manner of Settlement: As described in Section 3 of this Subscription
Agreed and Accepted this                      day of March 2009:
BMP SUNSTONE CORPORATION

By:  
 

Title:  
 

Acknowledged this                      day of March 2009:
PHILADELPHIA BROKERAGE CORPORATION

By:  
 

Title:  
 

The sale of the Notes purchased hereunder was made pursuant to a registration
statement or in a transaction in which a final prospectus would have been
required to have been delivered in the absence of Rule 172 promulgated under the
Securities Act.
A-6

 

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Exhibit I to Subscription Agreement
[Representations and Warranties of Company from Placement Agency Agreement]
Unless otherwise defined herein, capitalized terms shall have the meanings
assigned to such terms in the Placement Agency Agreement, dated as of March 13,
2009, between the Company and the Placement Agent.

  (a)   Filing and Effectiveness of Registration Statement. The Company has
filed, in conformity with the requirements of the Securities Act of 1933, as
amended (the “Securities Act”), and the published rules and regulations
thereunder (the “Securities Act Rules and Regulations”) adopted by the
Securities and Exchange Commission (the “Commission”), a registration statement
on Form S-3 (No. 333-156958), relating to the Notes and the offering thereof
from time to time in accordance with Rule 415(a)(1)(x) of the Securities Act
Rules and Regulations, and such amendments thereof as may have been required to
date.     (b)   Registration Statement and Prospectus; Certain Defined Terms.
The Company meets the requirements for use of Form S-3 under the Securities Act
and has complied with the requirements of Rule 415 with respect to the
Registration Statement (as hereafter defined). The Registration Statement has
heretofore become effective under the Securities Act or, with respect to any
registration statement to be filed to register the offer and sale of Notes
pursuant to Rule 462(b) under the Securities Act, will be filed with the
Commission and become effective under the Securities Act no later than
10:00 p.m. New York City time on the date of determination of the public
offering price for the Notes. No stop order preventing or suspending the
effectiveness of the Registration Statement has been issued by the Commission,
and no proceedings for such purpose pursuant to Section 8A of the Securities Act
against the Company or related to the Offering have been instituted or are
pending or, to the Company’s knowledge, are contemplated or threatened by the
Commission, and any request received by the Company on the part of the
Commission for additional information has been complied with. As used in this
paragraph and elsewhere in this Agreement:

  (i)   “Registration Statement” means the registration statement, as amended at
the time of such registration statement’s effectiveness (the “Effective Time”),
including (i) all documents filed as a part thereof or incorporated or deemed to
be incorporated by reference therein, (ii) any information in the corresponding
Base Prospectus or a prospectus supplement filed with the Commission pursuant to
Rule 424(b) under the Securities Act, to the extent such information is deemed
pursuant to Rule 430B (“Rule 430B”) or Rule 430C (“Rule 430C”) under the
Securities Act to be a part thereof at the Effective Time. If the Company has
filed an abbreviated registration statement to register additional Notes
pursuant to Rule 462(b) under the Securities Act Rules and Regulations (the
“Rule 462(b) Registration Statement”), then any reference herein to the term
“Registration Statement” shall also be deemed to include such Rule 462(b)
Registration Statement.     (ii)   “Base Prospectus” means the Base Prospectus
included in the Registration Statement at the Effective Time.     (iii)   “Final
Prospectus Supplement” means the final prospectus supplement, relating to the
Notes, filed by the Company with the Commission pursuant to Rule 424(b)

 

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      under the Securities Act on or before the second business day after the
date hereof (or such earlier time as may be required under the Securities Act)
for use in connection with the offering and sale of the Notes that discloses the
public offering price and other final terms of the Notes.     (iv)  
“Prospectus” means the Final Prospectus Supplement together with the Base
Prospectus attached to or used with the Final Prospectus Supplement.     (v)  
“Time of Sale” with respect to any Investor, means the time of receipt and
acceptance (evidenced by execution by the Company) of an executed Subscription
Agreement (as defined below) from such Investor.     (vi)   “General Disclosure
Package” means the Base Prospectus, each “free-writing prospectus” (as defined
pursuant to Rule 405 under the Securities Act) listed on Schedule II hereto and
the pricing and other information as set forth on Exhibit C hereto (the “Pricing
Information”), all considered together.

  (c)   Compliance with Securities Act Requirements. The Registration Statement
complied when it became effective, complies as of the date hereof and, as
amended or supplemented, at the Time of Sale and at all times during which a
prospectus is required by the Securities Act to be delivered (whether physically
or through compliance with Rule 172 under the Securities Act or any similar
rule) in connection with any sale of Notes (the “Prospectus Delivery Period”),
will comply, in all material respects, with the requirements of the Securities
Act and the Securities Act Rules and Regulations; the Registration Statement did
not, as of the Effective Time, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, provided, that the Company makes no
representations or warranty in this paragraph with respect to statements in or
omissions from the Registration Statement in reliance upon, and in conformity
with, written information furnished to the Company by or on behalf of the
Placement Agent specifically for inclusion therein, which information the
parties hereto agree is limited to the Placement Agent’s Information (as defined
in Section 8).     (d)   Contents of Prospectus. Each of the General Disclosure
Package, if any, and the Prospectus will comply, as of the date that it is filed
with the Commission, the date of its delivery to Investors, the Time of Sale and
at all times during the Prospectus Delivery Period, in all material respects,
with the requirements of the Securities Act (in the case of the Prospectus,
including, without limitation, Section 10(a) of the Securities Act); at no time
during the period that begins on the earlier of the date of the General
Disclosure Package, if any, and the date the Prospectus is filed with the
Commission and ends at the later of the Time of Sale and the end of the
Prospectus Delivery Period did or will any General Disclosure Package or the
Prospectus, as then amended or supplemented, include an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, provided that the Company makes no representation or
warranty with respect to the Placement Agent’s Information.     (e)  
Incorporated Documents. Each of the documents incorporated or deemed to be
incorporated by reference in the Registration Statement, at the time such
document was filed with the Commission or at the time such document became
effective, as applicable, complied, in all material respects, with the
requirements of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and did not include an untrue statement of a

I-2

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      material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading.     (f)   General Disclosure Package. The General
Disclosure Package as of the Time of Sale did not, and as of the Closing Date
will not, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, that the Company makes no representations or warranty in
this paragraph with respect to the Placement Agent’s Information. No statement
of material fact included in the Prospectus has been omitted from the General
Disclosure Package and no statement of material fact included in the General
Disclosure Package that is required to be included in the Prospectus has been
omitted therefrom.     (g)   Distributed Materials; Conflict with Registration
Statement. Other than the Base Prospectus, any Preliminary Prospectus and the
Prospectus, the Company has not made, used, prepared, authorized, approved or
referred to and will not make, use, prepare, authorize, approve or refer to any
“written communication” (as defined in Rule 405 under the Securities Act) that
constitutes an offer to sell or a solicitation of an offer to buy the Notes
(each such communication by the Company or its agents and the Placement Agent
(other than a communication referred to in clause (i) below) an “Issuer Free
Writing Prospectus”) other than (i) any document not constituting a prospectus
pursuant to Section 2(a)(10)(a) of the Securities Act or Rule 134 under the
Securities Act or (ii) the documents listed on Schedule II hereto and other
written communications approved in advance by the Placement Agent. Each such
Issuer Free Writing Prospectus, if any, conformed or will conform in all
material respects to the requirements of the Securities Act and the Securities
Act Rules and Regulations on the date of first use, and the Company has complied
or will comply with any filing requirements applicable to such Issuer Free
Writing Prospectus pursuant to the Securities Act Rules and Regulations. Each
Issuer Free Writing Prospectus, if any, as of its issue date and at all
subsequent times through the completion of the offering and sale of the Notes
did not, does not and will not include any information that conflicted,
conflicts or will conflict with the information contained in the Registration
Statement or the Prospectus, including any document incorporated by reference
therein and any prospectus supplement deemed to be a part thereof that has not
been superseded or modified.     (h)   Not an Ineligible Issuer. (i) At the
earliest time after the filing of the Registration Statement that the Company or
another offering participant made a bona fide offer (within the meaning of
Rule 164(h)(2) under the Securities Act) of the Notes and (ii) at the date
hereof, the Company was not and is not an “ineligible issuer,” as defined in
Rule 405 (“Rule 405”) under the Securities Act.     (i)   Due Incorporation. The
Company has been duly organized and is validly existing as a corporation or
other legal entity in good standing (or the foreign equivalent thereof) under
the laws of its jurisdiction of organization, with the corporate power and
authority to own its properties and to conduct its business as currently being
conducted and as described in the Registration Statement, the Prospectus and the
General Disclosure Package and is duly qualified to transact business and is in
good standing as a foreign corporation or other legal entity in each other
jurisdiction in which its ownership or leasing of property or the conduct of its
business requires such qualification, except where the failure to be so
qualified and in good standing or have such power or authority (i) would not
have, individually or in the aggregate, a material adverse effect upon, the
general affairs, business, operations, properties, financial condition or
results of

I-3

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      operations of the Company and its Subsidiaries (as defined below), taken
as a whole, or (ii) impair in any material respect the power or ability of the
Company to perform its obligations under this Agreement or to consummate any
transactions contemplated by the Agreement and the Subscription Agreements,
including the issuance and sale of the Notes (any such effect as described in
clauses (i) or (ii), a “Material Adverse Effect”).     (j)   Subsidiaries. The
Company has no significant subsidiaries (as such term is defined in Rule 1-02 of
Regulation S-X promulgated by the Commission) other than as set forth on
Schedule I hereto (each, a “Subsidiary” and collectively, the “Subsidiaries”).
Each Subsidiary has been duly organized and is validly existing as a corporation
or other legal entity in good standing (or the foreign equivalent thereof) under
the laws of its jurisdiction of organization, with the corporate power and
authority to own its properties and to conduct its business as currently being
conducted and as described in the Registration Statement, the Prospectus and the
General Disclosure Package. All of the issued and outstanding capital stock (or
similar equity interests) of each Subsidiary has been duly authorized and
validly issued and is fully paid and nonassessable and, except as described in
the General Disclosure Package, is owned by the Company, directly or through
subsidiaries, free from liens, encumbrances and defects.     (k)   Due
Authorization and Enforceability. The Company has the full right, power and
authority to enter into this Agreement, each of the Subscription Agreements and
the Escrow Agreement, and to perform and discharge its obligations hereunder and
thereunder; and each of this Agreement, the Escrow Agreement and each
Subscription Agreement has been duly authorized, executed and delivered by the
Company, and constitutes a valid, legal and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as rights
to indemnity hereunder may be limited by federal or state securities laws and
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or similar laws affecting the rights of creditors
generally and subject to general principles of equity.     (l)   The Notes. The
issuance of the Notes has been duly and validly authorized by the Company and,
when issued, delivered and paid for in accordance with the terms of this
Agreement and the Subscription Agreements, the Notes will constitute a legal,
valid and binding obligation of the Company enforceable against the Company in
accordance with their terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors’ rights generally and by general
equitable principles. The Notes will conform in all material respects to the
description thereof contained in the General Disclosure Package and the
Prospectus.     (m)   Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of (i) 75,000,000 shares of Common Stock
of which 41,364,534 shares are issued and outstanding, 3,184,183 shares are
reserved for issuance upon exercise of stock options outstanding under the
Company’s employee and director stock option plans, 1,429,589 shares are
reserved for grants of rights to purchase under the Company’s stock option
plans, and 1,792,693 shares are reserved for issuance under warrants; and
(ii) 20,000,000 shares of preferred stock, par value $.001 per share, none of
which are issued and outstanding. The authorized capital stock of the Company
conforms as to legal matters to the description thereof contained in the
Prospectus under the caption “Description of common stock” (and any similar
sections or information, if any, contained in the General Disclosure Package).
The issued and outstanding shares of capital stock of the Company have been duly
authorized and validly issued, are fully paid

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      and nonassessable, and have been issued in compliance with all federal and
state securities laws. None of the outstanding shares of capital stock was
issued in violation of any preemptive rights, rights of first refusal or other
similar rights to subscribe for or purchase or acquire any securities of the
Company. There are no authorized or outstanding shares of capital stock,
options, warrants, preemptive rights, rights of first refusal or other rights to
purchase, or equity or debt securities convertible into or exchangeable for, any
capital stock of the Company or any of its Subsidiaries other than those
described in the Prospectus and the General Disclosure Package. The description
of the Company’s stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted thereunder, as described
in the Prospectus and the General Disclosure Package, accurately and fairly
present the information required to be shown with respect to such plans,
arrangements, options and rights. All shares of Common Stock which may be issued
upon the conversion of the Notes (the “Conversion Shares”), upon issuance in
accordance with the terms of the Notes, will be duly authorized, validly issued,
fully paid and non-assessable. The Company has taken and shall continue to take
all such actions as may be required to ensure that the Company shall at all
times have authorized and reserved a sufficient number of shares of Common Stock
to provide for the conversion of the Notes into Conversion Shares.     (n)   No
Conflict. The execution, delivery and performance by the Company of this
Agreement, the Subscription Agreements and the Escrow Agreement and the
consummation of the transactions contemplated hereby and thereby, including the
issuance and sale by the Company of the Notes, will not (i) conflict with or
result in a breach or violation of, or constitute a default under (nor
constitute any event which with notice, lapse of time or both would result in
any breach or violation of or constitute a default under), give rise to any
right of termination or other right or the cancellation or acceleration of any
right or obligation or loss of a benefit under, or give rise to the creation or
imposition of any lien, encumbrance, security interest, claim or charge upon any
property or assets of the Company or any Subsidiary pursuant to any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company or any Subsidiary is a party or by which any of them or any of
their respective properties may be bound or to which any of the property or
assets of the Company or any of its Subsidiaries is subject, (ii) result in any
violation of the provisions of the charter or by-laws (or analogous governing
instrument, as applicable) of the Company or any Subsidiary, or (iii) result in
any violation of any law, statute, rule, regulation, judgment, order or decree
of any court or governmental agency or body, domestic or foreign, having
jurisdiction over the Company or its Subsidiaries or any of their properties or
assets, except, in the case of each of clauses (i) and (iii) above, for any such
conflict, breach, violation, default, lien, charge or encumbrance that would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.     (o)   No Consents Required. No approval, authorization,
consent or order of or filing, qualification or registration with, any court or
governmental agency or body, foreign or domestic, which has not been made,
obtained or taken and is not in full force and effect, is required in connection
with the execution, delivery and performance of this Agreement, the Subscription
Agreements and the Escrow Agreement by the Company, the issuance and sale of the
Notes or the consummation by the Company of the transactions contemplated hereby
or thereby other than (i) as may be required under the Securities Act or the
Exchange Act, (ii) any necessary qualification of the Notes under the securities
or blue sky laws of the various jurisdictions in which the Notes are being
offered by the Placement Agent, (iii) under the rules and regulations of the
Financial

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      Industry Regulatory Authority (“FINRA”) or (iv) The Nasdaq Global Market
in connection with the distribution of the Notes by the Placement Agent.     (p)
  Registration Rights. Except as described in the due diligence materials
provided by the Company to the Placement Agent or as otherwise described in the
Registration Statement, the Prospectus and the General Disclosure Package, there
are no contracts, agreements or understandings between the Company and any
person granting such person the right (other than rights which have been waived
in writing in connection with the transactions contemplated by this Agreement or
otherwise satisfied) to require the Company to register any securities with the
Commission.     (q)   [Intentionally Omitted].     (r)   Independent
Accountants. Grant Thornton, Hong Kong, whose reports on the audited
consolidated financial statements of the Company and the Subsidiaries are
incorporated by reference in the Registration Statement, the Prospectus and the
General Disclosure Package, are independent public accountants with respect to
the Company as required by the Securities Act, and the applicable published
Securities Act Rules and Regulations thereunder and Rule 3600T of the Public
Company Accounting Oversight Board (“PCAOB”).     (s)   Commission Reports.
Since December 31, 2006, the Company has timely filed all reports, schedules,
forms, statements and other documents required to be filed by it with the
Commission pursuant to the reporting requirements of the Exchange Act (all of
the foregoing filed prior to the date hereof and all exhibits included therein
and financial statements and schedules thereto and documents (other than
exhibits) incorporated by reference therein, being hereinafter referred to
herein as the “Exchange Act Filings”). As of their respective dates, the
Exchange Act Filings complied in all material respects with the requirements of
the Exchange Act or the Securities Act, as the case may be, and the Securities
Act Rules and Regulations or rules and regulations of the Commission promulgated
under the Exchange Act (the “Exchange Act Rules and Regulations”), as the case
may be, applicable to the Exchange Act Filings.     (t)   Financial Statements.
The consolidated financial statements of the Company, together with the related
schedules and notes thereto, set forth or incorporated by reference in the
Registration Statement, the Prospectus and the General Disclosure Package,
comply in all material respects with the applicable requirements of the
Securities Act and the Exchange Act, as applicable, and present fairly in all
material respects (i) the financial condition of the Company and the
Subsidiaries, taken as a whole, as of the dates indicated and (ii) the
consolidated results of operations, stockholders’ equity and changes in cash
flows of the Company and the Subsidiaries, taken as a whole, for the periods
therein specified; and such financial statements and related schedules and notes
thereto have been prepared in conformity with United States generally accepted
accounting principles, consistently applied throughout the periods involved
(except as otherwise stated therein and subject, in the case of unaudited
financial statements, to the absence of footnotes and normal year-end
adjustments). There are no other financial statements (historical or pro forma)
that are required to be included or incorporated by reference in the
Registration Statement, the Prospectus or the General Disclosure Package.    
(u)   Absence of Material Changes. Subsequent to the respective dates as of
which information is given in the Registration Statement, the Prospectus and the
General Disclosure Package, and except as may be otherwise stated or
incorporated by reference

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      in the Registration Statement, the Prospectus and the General Disclosure
Package, (i) there has not been any change in the capital stock of the Company
(except for changes in the number of outstanding shares of Common Stock of the
Company due to the issuance of shares upon the exercise or conversion of
securities exercisable for, or convertible into, shares of Common Stock
outstanding on the date hereof) or long-term debt of the Company or any of its
Subsidiaries or any dividend or distribution of any kind declared, set aside for
payment, paid or made by the Company on any class of capital stock; (ii) there
has not been any material adverse change or development that would result in a
Material Adverse Effect; and (iii) neither the Company nor any of its
Subsidiaries have entered or will enter into any transaction or agreement, not
in the ordinary course of business, that is material to the Company and its
Subsidiaries taken as a whole or incurred or will incur any liability or
obligation, direct or contingent, not in the ordinary course of business, that
is material to the Company and its Subsidiaries taken as a whole.     (v)  
Legal Proceedings. There are no legal or governmental actions, suits, claims or
proceedings pending to which the Company or any Subsidiary is or would be a
party or of which any of their respective properties is or would be subject at
law or in equity, which are required to be described in the Registration
Statement, the General Disclosure Package or the Prospectus or a document
incorporated by reference therein and are not so described therein, or which,
singularly or in the aggregate, if resolved adversely to the Company or any
Subsidiary, would reasonably be likely to result in a Material Adverse Effect.
To the Company’s knowledge, no such proceedings are threatened or contemplated
by governmental authorities or threatened by others.     (w)   No Violation.
Neither the Company nor any Subsidiary is in breach or violation of or in
default (nor has any event occurred which with notice, lapse of time or both
would result in any breach or violation of, or constitute a default) (i) under
the provisions of its charter or bylaws (or analogous governing instrument, as
applicable) or (ii) in the performance or observance of any term, covenant,
obligation, agreement or condition contained in any indenture, mortgage, deed of
trust, bank loan or credit agreement or other evidence of indebtedness, or any
license, lease, contract or other agreement or instrument to which the Company
or any Subsidiary is a party or by which any of them or any of their properties
may be bound or affected, or (iii) in the performance or observance of any
statute, law, rule, regulation, ordinance, judgment, order or decree of any
court, regulatory body, administrative agency, governmental body, arbitrator or
other authority having jurisdiction over the Company, the Subsidiaries or any of
their respective properties, as applicable, except, with respect to clauses
(ii) and (iii) above, to the extent any such contravention has been waived or
would not result in a Material Adverse Effect.     (x)   Permits. The Company
and each Subsidiary has made all filings, applications and submissions required
by, and owns or possesses all approvals, licenses, certificates, certifications,
clearances, consents, exemptions, marks, notifications, orders, permits and
other authorizations issued by, the appropriate federal, state or foreign
regulatory authorities necessary to conduct its business as described in the
General Disclosure Package (collectively, “Permits”), except for such Permits
which the failure to obtain would not have a Material Adverse Effect (the
“Immaterial Permits”), and is in compliance with the terms and conditions of all
such Permits other than the Immaterial Permits (the “Required Permits”) except
for such failure to comply that would not have a Material Adverse Effect.
Neither the Company nor any Subsidiary has received notice of any proceedings
relating to revocation or modification of, any such Required Permit, which,
individually or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would have a Material Adverse Effect.

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  (y)   Not an Investment Company. Neither the Company nor any Subsidiary is an
“investment company” or an “affiliated person” of, or “promoter” or “principal
underwriter” for, an “investment company,” as such terms are defined in the
Investment Company Act of 1940, as amended (the “Investment Company Act”), and,
after giving effect to the offering and sale of the Notes and the application of
the proceeds thereof as described in the General Disclosure Package and the
Prospectus, neither the Company nor any Subsidiary will an “investment company”
or an “affiliated person” of, or “promoter” or “principal underwriter” for, an
“investment company,” as such terms are defined in the Investment Company Act.  
  (z)   No Price Stabilization. Neither the Company nor any Subsidiary nor, to
the Company’s knowledge, any of their respective officers, directors, affiliates
or controlling persons has taken or will take, directly or indirectly, any
action designed to or that might be reasonably expected to cause or result in,
or which has constituted or which might reasonably be expected to constitute the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Notes.     (aa)   Good Title to Property.
The Company and each Subsidiary has good and valid title to all property
(whether real or personal) described in the General Disclosure Package as being
owned by each of them, in each case free and clear of all liens, claims,
security interests, other encumbrances or defects (collectively, “Liens”),
except such as are described in the Prospectus and the General Disclosure
Package or those that would not have a Material Adverse Effect. All of the
property described in the General Disclosure Package as being held under lease
by the Company or any Subsidiary is held thereby under valid, subsisting and
enforceable leases, without any liens, restrictions, encumbrances or claims,
except those that would not have a Material Adverse Effect or do not materially
interfere with the use made and proposed to be made of such property by the
Company and the Subsidiaries.     (bb)   Intellectual Property Rights. Except as
set forth in the Registration Statement, the Prospectus and the General
Disclosure Package, the Company and the Subsidiaries own or possess the right to
use all patents, trademarks, trademark registrations, service marks, service
mark registrations, trade names, copyrights, licenses, inventions, software,
databases, know-how, Internet domain names, trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures, and other intellectual property (collectively, “Intellectual
Property”) necessary to carry on their respective businesses as currently
conducted, and as proposed to be conducted and described in the General
Disclosure Package and the Prospectus except where the failure to own or possess
the right to use would not have a Material Adverse Effect, and the Company is
not aware of any claim to the contrary or any challenge by any other person to
the rights of the Company and the Subsidiaries with respect to the foregoing
except for those that would not have a Material Adverse Effect. The Intellectual
Property licenses described in the General Disclosure Package and the Prospectus
are valid, binding upon, and enforceable by or against the parties thereto in
accordance to its terms. The Company and each Subsidiary has complied in all
material respects with, and is not in breach nor has received any asserted or
threatened claim of breach of, any Intellectual Property license described in
the General Disclosure Package and the Prospectus except for such breaches or
asserted or threatened claims of breach that would not have a Material Adverse
Effect, and the Company has no knowledge of any breach or anticipated breach by
any other person to any Intellectual Property license. To the knowledge of the
Company, the Company’s and each Subsidiary’s businesses as now conducted and as
proposed to be conducted as set forth in the Registration Statement, the

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      Prospectus and the General Disclosure Package do not and will not infringe
or conflict with any patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses or other Intellectual Property or franchise
right of any person. The Company has not received written notice of any material
claim against the Company or any Subsidiary alleging the infringement by the
Company or any of its Subsidiary of any patent, trademark, service mark, trade
name, copyright, trade secret, license in or other intellectual property right
or franchise right of any person. The Company and each Subsidiary has taken all
reasonable steps to protect, maintain and safeguard its rights in all
Intellectual Property. The consummation of the transactions contemplated by this
Agreement will not result in the loss or impairment of or payment of any
additional amounts with respect to, nor require the consent of any other person
in respect of, the Company’s or any of Subsidiary’s right to own, use, or hold
for use any of the Intellectual Property as owned, used or held for use in the
conduct of the businesses as currently conducted. The Company and each
Subsidiary has duly and properly filed or caused to be filed with the United
States Patent and Trademark Office (the “PTO”) and applicable foreign and
international patent authorities all patent applications owned by the Company
and the Subsidiaries (the “Company Patent Applications”). To the knowledge of
the Company, the Company and each Subsidiary has complied with the PTO’s duty of
candor and disclosure for the Company Patent Applications and has made no
material misrepresentation in the Company Patent Applications. The Company is
not aware of any information material to a determination of patentability
regarding the Company Patent Applications not called to the attention of the PTO
or similar foreign authority. The Company is not aware of any information not
called to the attention of the PTO or similar foreign authority that would
preclude the grant of a patent for the Company Patent Applications. The Company
has no knowledge of any information that would preclude the Company, or as
applicable, any Subsidiary, from having clear title to the Company Patent
Applications.     (cc)   No Labor Disputes. No labor problem or dispute with the
employees of the Company exists, or, to the Company’s knowledge, is threatened
or imminent, which would reasonably be expected to result in a Material Adverse
Effect. The Company is not aware that any key employee or significant group of
employees of the Company plans to terminate employment with the Company.    
(dd)   Taxes. The Company and each Subsidiary (i) has timely filed all necessary
federal, state, local and foreign income and franchise tax returns (or timely
filed applicable extensions therefore) that have been required to be filed and
(ii) is not in default in the payment of any taxes which were payable pursuant
to said returns or any assessments with respect thereto, other than any which
the Company or any Subsidiary is contesting in good faith and for which adequate
reserves have been provided.     (ee)   ERISA. The Company has fulfilled its
obligations, if any, under the minimum funding standards of Section 302 of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and the
regulations and published interpretations thereunder with respect to each “plan”
(as defined in Section 3(3) of ERISA and such regulations and published
interpretations) in which employees of the Company are eligible to participate
and each such plan is in compliance in all material respects with the presently
applicable provisions of ERISA and such regulations and published
interpretations. No “prohibited transaction” (as defined in Section 406 of
ERISA, or Section 4975 of the Internal Revenue Code of 1986, as amended from
time to time (the “Code”)) or “accumulated funding deficiency” (as defined in
Section 302 of ERISA) or any of the events set forth in Section 4043(b) of ERISA
(other than events with respect to which the thirty (30)-day

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      notice requirements under Section 4043 of ERISA has been waived) has
occurred or could reasonably be expected to occur with respect to any employee
benefit plan of the Company or any Subsidiary, which could, singularly or in the
aggregate, have a Material Adverse Effect.     (ff)   Compliance with
Environmental Laws. The Company and its Subsidiaries (i) are in compliance with
any and all applicable foreign, federal, state and local laws, orders, rules,
regulations, directives, decrees and judgments relating to the use, treatment,
storage and disposal of hazardous or toxic substances or waste and protection of
the environment which are applicable to their businesses (“Environmental Laws”),
(ii) have received and are in compliance with all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct its
business; and (iii) have not received notice of any actual or potential
liability for the investigation or remediation of any disposal or release of
hazardous or toxic substances or wastes, pollutants or contaminants, except in
the case of subsections (i), (ii) and (iii) of this subsection (ff) as would
not, individually or in the aggregate, have a Material Adverse Effect.     (gg)
  Insurance. The Company and each Subsidiary maintains or is covered by
insurance provided by recognized, financially sound and reputable institutions
with policies in such amounts and covering such risks as is adequate for the
conduct of its business and the value of its properties and as is customary for
companies engaged in similar businesses in similar industries. All such
insurance is fully in force on the date hereof and will be fully in force as of
the Closing Date. Neither the Company nor any Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not have a
Material Adverse Effect.     (hh)   Accounting Controls. The Company and each
Subsidiary maintains a system of internal accounting controls sufficient to
provide reasonable assurances that (i) transactions are executed in accordance
with management’s general or specific authorization; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. Except as set forth in the General Disclosure Package or the
Prospectus, since January 1, 2008, (i) Grant Thornton, Hong Kong has not
identified any material weakness in the Company’s internal control over
financial reporting (whether or not remediated), and (ii) there has been no
change in the Company’s internal control over financial reporting that has
materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting. The Company is not aware of any
fraud, whether or not material, that involves management or other employees who
have a role in the Company’s internal controls.     (ii)   Disclosure Controls.
The Company has established, maintains and evaluates “disclosure controls and
procedures” (as such term is defined in Rule 13a-15e and 15d-15e under the
Exchange Act) that (i) are designed to ensure that material information relating
to the Company is made known to the Company’s principal executive officer and
its principal financial officer by others within those entities, particularly
during the periods in which the periodic reports required under the Exchange Act
are being prepared; (ii) have been evaluated for effectiveness as of the end of
the last fiscal period covered by the Registration Statement; and (iii) are
effective to perform the functions for which they

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      were established. Since the date of the most recent evaluation of such
disclosure controls and procedures, there have been no significant changes in
internal controls or in other factors that could significantly affect internal
controls, including any corrective actions with regard to significant
deficiencies and material weakness.     (jj)   Contracts; Off-Balance Sheet
Interests. There is no document, contract, permit or instrument, or off-balance
sheet transaction (including without limitation, any “variable interests” in
“variable interest entities,” as such terms are defined in Financial Accounting
Standards Board Interpretation No. 46) of a character required by the Securities
Act or the Securities Act Rules and Regulations to be described in the
Registration Statement or the General Disclosure Package or to be filed as an
exhibit to the Registration Statement or document incorporated by reference
therein, which is not described or filed as required. The contracts described in
the immediately preceding sentence to which the Company is a party have been
duly authorized, executed and delivered by the Company, constitute valid and
binding agreements of the Company, are enforceable against and by the Company in
accordance with the terms thereof and are in full force and effect on the date
hereof.     (kk)   No Undisclosed Relationships. No relationship, direct or
indirect, exists between or among the Company and any of its Subsidiaries on the
one hand and the directors, officers, stockholders, customers or suppliers of
the Company or any of its Subsidiaries or any of their affiliates on the other
hand, which is required to be described in the General Disclosure Package and
the Prospectus or a document incorporated by reference therein and which has not
been so described.     (ll)   Brokers Fees. Except as disclosed in the General
Disclosure Package, there are no contracts, agreements or understandings between
the Company and any person (other than this Agreement) that would give rise to a
valid claim against the Company, the Subsidiaries or the Placement Agent for a
brokerage commission, finder’s fee or other like payment in connection with the
offering and sale of the Notes.     (mm)   Forward-Looking Statements. No
forward-looking statements (within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act) contained in either the General
Disclosure Package or the Prospectus has been made or reaffirmed without a
reasonable basis or has been disclosed other than in good faith.     (nn)  
Nasdaq; Exchange Act Registration. The Common Stock is registered pursuant to
Section 12(b) or 12(g) of the Exchange Act and is listed on The Nasdaq Global
Market, and the Company has taken no action designed to terminate, or any action
reasonably likely to have the effect of terminating, the registration of the
Common Stock under the Exchange Act or delisting the Common Stock from The
Nasdaq Global Market, nor has the Company received any notification that the
Commission or Nasdaq is contemplating terminating such registration or listing.
The Company has complied in all material respects with the applicable
requirements of Nasdaq for the maintenance of inclusion of the Common Stock on
The Nasdaq Global Market. The Company has filed an application to include the
Notes on The Nasdaq Global Market.     (oo)   Sarbanes-Oxley Act. The Company
is, and to its knowledge all of the Company’s directors or officers in their
capacities as such are, in compliance in all material respects with all
applicable effective provisions of the Sarbanes-Oxley Act of 2002, as amended
and any related rules and regulations promulgated by the Commission. Each of the
principal executive officer and the principal financial officer of the Company
(or each

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      former principal executive officer of the Company and each former
principal financial officer of the Company as applicable) has made all
certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act with
respect to all reports, schedules, forms, statements and other documents
required to be filed by it with the Commission. For purposes of the preceding
sentence, “principal executive officer” and “principal financial officer” shall
have the meanings given to such terms in the Sarbanes-Oxley Act.     (pp)  
Foreign Corrupt Practices. Neither the Company nor, to the Company’s knowledge,
any other person associated with or acting on behalf of the Company, including
without limitation any director, officer, agent or employee of the Company or
its Subsidiaries has, directly or indirectly, during the last five years, while
acting on behalf of the Company or on behalf of the Company’s Subsidiaries after
the Subsidiary was acquired by the Company (i) used any corporate funds for
unlawful contributions, gifts, entertainment or other unlawful expenses relating
to political activity or failed to disclose fully any contribution in violation
of law, (ii) made any payment to any federal or state governmental officer or
official, or other person charged with similar public or quasi-public duties,
other than payments required or permitted by the laws of the United States or
any jurisdiction thereof, (iii) violated or is in violation of any provision of
the U.S. Foreign Corrupt Practices Act of 1977, as amended or (iv) made any
bribe, rebate, payoff, influence payment, kickback or other unlawful payment.  
  (qq)   Currency and Foreign Transactions. The operations of the Company and
its Subsidiaries are and have been conducted at all times in compliance with
applicable financial recordkeeping and reporting requirements of the Currency
and Foreign Transactions Reporting Act of 1970, as amended, the money laundering
statutes of all jurisdictions, the rules and regulations thereunder and any
related or similar rules, regulations or guidelines, issued, administered or
enforced by any governmental agency (collectively, the “Money Laundering Laws”),
except where a failure to comply with such requirements, statutes, rules,
regulations or guidelines could not reasonably be expected to have a Material
Adverse Effect, and no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the Company
or any of its Subsidiaries with respect to the Money Laundering Laws is pending
or, to the Company’s knowledge, threatened.     (rr)   No Sanctioned Employees.
Neither the Company nor any Subsidiary nor, to the Company’s knowledge, any
director, officer, agent, employee or affiliate of the Company or its
Subsidiaries is currently subject to any U.S. sanctions administered by the
Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and
the Company will not directly or indirectly use the proceeds of the offering, or
lend, contribute or otherwise make available such proceeds to any subsidiary,
joint venture partner or other person or entity, for the purpose of financing
the activities of any person currently subject to any U.S. sanctions
administered by OFAC.     (ss)   FINRA Affiliations. Except as described in the
due diligence materials provided by the Company to the Placement Agent, neither
the Company nor any Subsidiary nor any of their affiliates (within the meaning
of FINRA Rule 2720(b)(1)(a)) directly or indirectly controls, is controlled by,
or is under common control with, or is an associated person (within the meaning
of Article I, Section 1(e)(e) of the By-laws of FINRA) of, any member firm of
FINRA.     (tt)   Trading Market. Assuming the accuracy of the representations
of the Investors in the Subscription Agreements, no approval of the shareholders
of the Company under the

I-12

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      rules and regulations of any trading market (including Rule 4350 of The
Nasdaq Global Marketplace Rules) is required for the Company to issue and
deliver to the Investors the Notes.

I-13

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Exhibit B to Placement Agency Agreement
Legal Opinion of Counsel to the Company
[to be provided]

 

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Exhibit C to Placement Agency Agreement
Pricing Information
Aggregate Principal Amount of 12.5% Subordinated Convertible Notes due July 1,
2011 to be Issued: $7,000,000
Placement Agency Fee: The Placement Agent will receive a fee equal to six
percent (6%) of the gross proceeds received by the Company from its sale of the
12.5% Subordinated Convertible Notes due July 1, 2011 (the “Agency Fee”). The
Agency Fee shall be payable as follows: (i) two-sixths (2/6) of the Agency Fee
shall be payable in shares of common stock, par value $.001 per share (“Common
Stock”), of the Company, valued at $3.00 per share of Common Stock and
(ii) four-sixths (4/6) of the Agency Fee shall be payable by wire transfer of
immediately available funds to an account or accounts designated by the
Placement Agent.
Estimated Net Proceeds to the Company (exclusive of estimated expenses of the
Company): $6,720,000.