exv10w1






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




 









 






	 	 	 	“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




9









 












	 	 	 	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




10









 






	 	 	 	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.




11









 






	 	(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.




12









 






	 	(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.




13









 






	 	(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




14









 












	 	 	 	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.






15











 






	 	(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



16









 






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




17









 






	 	 	 	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





18









 






	 	 	 	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.




19









 






	 	(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




20









 






	 	 	 	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.




21









 






	 	(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


22









 






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





23









 







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




24









 






	 	 	 	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.




25









 







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












 





     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









 





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









 





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






 









 





Schedule II to Placement Agency Agreement




Permitted Free Writing Prospectus




NONE




 









 





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




 









 






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









 






	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









 






	 	(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









 






	 	 	 	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











 





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




 









 





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)




 









 






	 	 	 	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 









 






	 	 	 	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 









 






	 	 	 	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




I-4 









 






	 	 	 	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




I-5 









 






	 	 	 	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




I-6 









 






	 	 	 	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.




I-7 









 






	 	(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




I-8 









 






	 	 	 	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




I-9 









 






	 	 	 	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




I-10 









 






	 	 	 	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




I-11 









 






	 	 	 	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 









 






	 	 	 	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 









 








Exhibit B to Placement Agency Agreement




Legal Opinion of Counsel to the Company




[to be provided]





 









 








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.