Document:

EX-10.2 CDHP MARKETING PLAN AGREEMENT

 

EXHIBIT 10.2

CDHP Marketing Plan Agreement

     This Marketing Plan Agreement (the “Agreement”) is made as of September 25, 2006, by
and between WebMD Health Corp., with offices at 111 Eighth Avenue, New York, NY 10011 (“WebMD”),
EBS Master LLC (“Master LLC”), Envoy Corporation (“Envoy”), and Advanced Business Fulfillment LLC
(“ABF”).

RECITALS

     WHEREAS, WebMD, Envoy and Master LLC have entered into the Amended and Restated Business
Services Agreement dated as of September 25, 2006 (the “BSA”);

     WHEREAS, ABF provides print EOB services, which include printing, copying and mailing EOBs
directly to participating members and ABF generally charges service fees for such EOB services as
well as pass-through fees for paper, other materials, printing, inserting and postage costs, and is
seeking to provide an EEOB that is intended to replace print EOBs and provide similar capability in
an electronic format;

     WHEREAS, in general the parties contemplate offering customers the opportunity to reduce costs
when they shift participating members from paper EOBs to electronic EOBs;

     WHEREAS, WebMD has developed or licensed certain proprietary interactive online personal
health management products and tools which are hosted on servers and made available by means of the
Internet,

     WHEREAS, ABF is in the business of providing outsourcing of paid-claims communications
services to its Customers, such as printing and mailing of checks and remittance advices to
providers and EOBs to plan members (the “ABF Services”); and

     WHEREAS, the parties contemplate offering certain of WebMD’s online health management services
in connection with electronic EEOBs as provided herein to certain ABF customers and the offering by
ABF of a personal financial record in conjunction with ABF Services to certain other customers as
provided herein, subject to the terms of this Agreement described herein.

     NOW, THEREFORE, in consideration of the covenants contained in this Agreement, the Parties,
intending to be legally bound, agree as follows:

TERMS AND CONDITIONS

Section 1. DEFINITIONS.

Unless otherwise defined in the Glossary, the capitalized terms used in this Agreement shall be
defined in the context in which they are used.

Section 2. OWNERSHIP OF INTELLECTUAL PROPERTY; GRANT OF LICENSES; MARKETING OF TOOLS.

2.1. Subject to the terms of this Agreement, WebMD grants to ABF a non-exclusive,
non-transferable, limited right and license during the term of this Agreement to: (a) access,
display, perform, and use the Tools, the Personal Financial Record Application, Customized Pages
and Promotional Material as expressly set forth in this Agreement; and (b) grant End Users and
Customers the right to access, display, perform and use the Tools, the Personal Record Application
and Customized Pages for personal, non-commercial purposes associated with their use of the WebMD
portal provided for End Users’ access with no right to sublicense (the “Site”). Nothing herein
will be construed as a right to allow ABF to offer the Tools or Personal Financial Record
Application to any third party in any manner other than as provided herein. ABF shall enter into
an agreement with each ABF Customer pursuant to which it provides the Tools to such Customer
pursuant to Section 2.8 and each Third Party pursuant to which it provides the Personal Financial
Record Application pursuant to Section 2.10. Any agreement between ABF and a customer shall
contain terms of use no broader than those set forth herein and shall contain disclaimers and
limitations similar to those disclaimers and limitations as set forth herein. ABF acknowledges
and agrees that WebMD shall not be responsible for any representation or warranties made by ABF to
its customers regarding the Tools or Personal Financial Record Application.

2.2. WebMD grants to ABF a world-wide, royalty-free, non-exclusive, non-transferable
license, with no right to sublicense, during the Term of this Agreement to use the WebMD Marks
solely in connection with the Site and to perform its obligations hereunder, in accordance with the
terms and conditions of this Agreement. Title to and ownership of the WebMD Marks shall remain
with WebMD. ABF shall use the WebMD Marks in conformance with any trademark usage policies of
which it is notified in writing. ABF shall submit all proposed uses the WebMD Marks, the
Promotional Material and all other documentation and materials referencing the Tools to WebMD for
prior written approval and shall not use the WebMD Marks, the

 

 

Promotional Material or the documentation and materials without such approval, which may be
withheld in WebMD’s sole discretion. WebMD reserves the right to review any approved use of the
WebMD Marks, the Promotional Material and the documentation and materials and to require changes
thereto.

2.3. ABF grants to WebMD a non-exclusive right to use, reproduce, copy, transmit,
distribute, publicly perform and/or display the ABF Marks and ABF Content in connection with the
Tools and Customized Pages to perform its obligations hereunder in accordance with the terms of
this Agreement. Title to and ownership of the ABF Marks shall remain with ABF. WebMD shall use
the ABF Marks in conformance with what ABF has approved of in writing. WebMD shall submit all
proposed uses the ABF Marks to ABF for prior written approval and shall not use the ABF Marks
without such approval, which may be withheld in ABF’s sole discretion. ABF reserves the right to
review any approved use of the ABF Marks and to require changes thereto

2.4. ABF shall not (and shall not contractually permit any of its customers to) sell,
rent, lease, lend, sublicense, distribute, or otherwise transfer or provide access to the Tools,
the Personal Financial Record, the Promotional Material and the Customized Pages (or any part
thereof) to any person, firm, or entity except as expressly authorized herein.

2.5. ABF agrees not to (and will require that its customers contractually agree not to)
modify, adapt, alter or create derivative works from the Tools, the Personal Financial Record
Application or the Promotional Materials or any subpart thereof (including proprietary markings),
or to merge the Tools, the Personal Financial Record or any subpart thereof (including proprietary
markings) with other services or software.

2.6. WebMD owns all copyright and other proprietary rights in the Promotional
Materials, the Tools, the Personal Financial Record Application, and any customization and all
other extensions and Enhancements created pursuant to this Agreement or otherwise. ABF
acknowledges and agrees that this is a license agreement and not an agreement for sale. As such,
Licensor assigns no copyrights. As between the parties, all rights, title and interest in and to
the Promotional Materials, the Tools, the Personal Financial Record Application, including all
updates, upgrades, bug fixes, modifications, enhancements and new versions of the Tools and the
Personal Financial Record Application and all worldwide intellectual property rights that are
embodied in, related to, or represented by the Tools, the Personal Financial Record Application and
the Promotional Materials are, and at

all times will be, the sole and exclusive property of WebMD
or its licensors, as the case may be.

2.7. All rights not expressly granted in this Agreement are reserved to WebMD.

2.8 Integrated Product Offering. During the Term of this Agreement, ABF agrees to use
reasonable commercial efforts to market the Tools (including the Personal Financial Record
Application) to its Customers (and potential Customers), with less than 250,000 lives
(collectively, “ABF Customers”), as permitted hereunder in accordance with the marketing and
promotional guidelines provided by WebMD from time to time. ABF will only offer to ABF Customers
the Tools: (i) as an integrated product solution that integrates the Tools with the member-centric
electronic EOB (e.g., electronic explanation of benefit) transaction services for the benefit of
End Users of ABF Customers via the Site (hereinafter, the “Integrated Product”); or (ii) as agreed
to in advance by WebMD in other cases. ABF shall use reasonable best efforts to increase the
pricing for the Tools at the same percentage that ABF increases the price for its other services.
Notwithstanding the foregoing, pricing for ABF Services when integrated with the Integrated Product
shall be comparable and consistent to the pricing for such ABF Services when sold separate from
the Integrated Product.

2.9 The pricing set forth on Schedule A payable by ABF shall apply to the Tools set forth on such
Schedule as part of the Integrated Product for the ABF Customers. In no event shall ABF offer the
Integrated Product (or any online health or benefit management service or product comparable to any
of the Tools or the Personal Financial Record Application, whether or not integrated with an EEOB
(collectively, “Online Health Tools”), to any other third party, including but not limited to,
customers or potential customers with more than 250,000 lives (each a “Third Party”). In the event
ABF so determines to offer the Integrated Product (or any Online Health Tool) to any Third Party,
ABF shall notify WebMD of the opportunity in advance of such proposed offering in order to discuss
how WebMD wishes to proceed. This will be handled by WebMD on a case by case basis and WebMD
retains the sole discretion as to whether ABF may offer the Integrated Product (or such other
Online Health Tool) and pricing for such product to the Third Party and, if so, the pricing and
other terms that ABF may provide to such Third Party. In the event that ABF desires upgrades,
enhancements, modifications or new features to the Tools or Personal Financial Record
(collectively, “Upgrades”) after the date hereof, the parties will meet to discuss the terms under
which Upgrades may be provided by WebMD, however, the provision of Upgrades will require mutual
consent of both parties in writing.

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2.10 Personal Financial Record Application. WebMD shall use good faith efforts to develop,
at its expense, an online Personal Financial Record application as described herein (the “Personal
Financial Record Application”) within twelve (12) months following the date of this Agreement. The
basic features of the Personal Health Record Application are as described in the separate document
agreed to by the parties. ABF agrees that the Personal Financial Record Application may only be
offered and provided by ABF as an integrated part of the ABF Services to Customers or potential
Customers of ABF that exceed 250,000 lives (“ABF Large Customers) and subject to the terms of this
Agreement. ABF shall keep WebMD apprised of its marketing efforts related to the Personal
Financial Record Application as part of the ABF Services as provided in this Section 2.10. In the
event that in connection with the sale of the Personal Financial Record Application by ABF as
provided in this Section 2.10, an ABF Large Customer requests any Online Health Tools, ABF will
advise WebMD and WebMD may determine how or if to proceed in connection with the sale of Online
Health Tools to such customer by WebMD. If WebMD elects to proceed to negotiate the provision of
Online Health Tools to such customer, WebMD will determine the terms under which such Online Health
Tools will be provided by WebMD, and WebMD shall contract directly with such customer for the
Online Health Tools and shall retain all fees it receives from such customer and WebMD shall not be
required to pay any amounts to ABF as it relates to such customer.

2.11 During the term of this Agreement, WebMD will be the exclusive provider to ABF of the Tools,
the Personal Financial Record Application and any other Online Health Tools Except as permitted
by the terms of Section 2.8 or 2.10, ABF agrees that, during the term of this Agreement, ABF shall
not market or provide any online health or benefit management products or services comparable to
any of those included in the Tools or the Personal Financial Record Application to any third party,
regardless of the such customer’s or potential customer’s number of lives. The obligations
applicable to the Purchaser, ABF and Envoy under this Agreement are in addition to the terms of the
BSA. Notwithstanding anything to the contrary in this Section 2.11 or this Agreement, nothing in
this Agreement is intended to restrict or limit the offering or sale by WebMD of any product or
service to any third party.

Section 3. FEES AND PAYMENT.

3.1 ABF shall pay to WebMD a monthly fee per Participating Member for the Tools provided pursuant
to

Section 2.8 above based on the aggregate number of Participating Members (as part of the ABF
Services provided by ABF to ABF Customers and End Users for a subscription, use or other type of
fee) (“PPPM Fee”) in accordance with the Pricing Schedule attached as Schedule A hereto. ABF shall
notify WebMD within ten (10) days of acquiring a new ABF Customer who will be using the WebMD
services, and shall include in such notification the number of Participating Members and End Users
associated with the Customer. The payments terms set forth in Schedule A are exclusive of any
applicable taxes. ABF shall be solely responsible for any applicable sales, use or other like
taxes based upon WebMD’s fees for providing its services hereunder, excluding however taxes based
upon WebMD’s net income.

3.2 ABF shall pay to WebMD a monthly fee per Eligible Member for the Personal Financial Record
Application provided pursuant to Section 2.10 above based on the aggregate number of Eligible
Members (as part of the ABF Services provided by ABF to ABF Large Customers and End Users (“PEPM
Fee”) in accordance with the separate document agreed to by the parties. ABF shall notify WebMD
within ten (10) days of acquiring a new ABF Large Customer who will be using the Personal Financial
Record Application, and shall include in such notification the number of Eligible Members and End
Users associated with the ABF Large Customer. The payments terms set forth in the separate
document are exclusive of any applicable taxes. ABF shall be solely responsible for any applicable
sales, use or other like taxes based upon WebMD’s fees for providing its services hereunder,
excluding however taxes based upon WebMD’s net income.

3.3 ABF shall pay the Initial One-Time Fee as outlined on Schedule A for the integration of the
Tools into the ABF Services pursuant to Section 2.8. Subject to the terms of this Agreement,
WebMD shall develop Customized Pages for ABF. ABF will receive the specific integration services
as described in Schedule C in exchange for the fees set forth in Schedule A. Within thirty (30)
days following the Effective Date of this Agreement, the parties will finalize Schedule C, the
general form of which is attached hereto as Schedule C. In the event that ABF desires additional
integration or customization services beyond those specified in Schedule C, the parties shall
negotiate a mutually agreeable work order, provided, however, the WebMD hourly rate shall be at
WebMD’s standard rates for similarly situated parties. WebMD shall not perform such additional
integration or customization work until the associated work order is executed by both parties.

3.4 If the Parties agree to add a New Product or New Service, the fees set forth in Schedule A may
be revised by

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WebMD. Any fee revision executed after the date of this contract is subject to approval and thirty
(30) day notice by and to ABF.

3.4 ABF will keep accurate records sufficient to verify ABF’s compliance with the terms of this
Agreement, including calculation of all payments due to WebMD and will provide copies of such
records to WebMD on a monthly basis; provided, however, that ABF shall make available to WebMD all
supporting documentation sufficient to calculate such payments within fifteen (15) business days
after receiving written request from WebMD. During the term of this Agreement and for a period of
one year following termination or expiration of this Agreement, WebMD shall have the right to audit
and review the books and records of ABF in order to verify ABF’s compliance with the terms of this
Agreement and verify that it has made all payments required to be made under this Agreement. WebMD
will be responsible for the cost of the audit.

Section 4. TERM; RENEWAL; TERMINATION.

4.1. This Agreement will commence on the Effective Date and continue for five Contract Years (the
“Initial Term”), unless terminated by the parties in accordance with this Section 4 of this
Agreement. This Agreement shall automatically renew for successive twelve (12) month Contract
Years after the fifth anniversary of the Effective Date, unless either party notifies the other
party in writing of its intent to terminate the Agreement as of the end of the Initial Term, or its
then current term after the Initial Term, at least sixty (60) days prior to expiration of Initial
term or the then-current term, as applicable, in accordance with the notification provisions of
this Agreement.

4.2 Commencing twelve (12) months after the date of this Agreement, WebMD may terminate this
Agreement without cause at any time without liability or further financial obligation upon one
hundred eighty (180) days written notice to ABF, Envoy and Master LLC.

4.3. In the event either party materially breaches this Agreement and fails to cure such breach
within 30 days following receipt of written notice concerning the breach, the other party may
terminate this Agreement.

4.4. Upon expiration or termination of this Agreement for any reason, WebMD, with ABF’s reasonable
assistance if necessary, may contact End Users via email or other similar communication to advise
them of their options regarding transfer or disposition of their information.

4.5. Upon expiration or termination of this Agreement

for any reason, all fees and charges set
forth in Section 3 will be immediately due and payable, and ABF shall promptly discontinue all
further use of WebMD Marks and all further use of the Tools.

4.6 Upon termination of this Agreement for any reason (except for termination by WebMD due to a
breach by ABF, Master LLC or Envoy), at ABF’s election, for those customers receiving the Tools or
Personal Financial Record Application as of the effective date of termination as to which ABF has
continuing contractual obligations to deliver the Tools or Personal Financial Record Application,
WebMD shall continue to provide the Tools or Personal Financial Record Application in accordance
with this Agreement for a period of up to one (1) year from the effective date of termination (the
“Transition Period”) in order to facilitate an orderly transition to another provider. During such
Transition Period, ABF shall continue to pay WebMD for all customers that continue to receive
access to the Tools or Personal Financial Record Application during the Transition Period at the
applicable prices for the Tools or Personal Financial Record Application at the time of
termination. The terms of this Agreement applicable to such customers shall remain in full force
and effect during such Transition Period.

Section 5. RESPONSIBILITIES; CHANGE CONTROL PROCEDURES; DELIVERY AND ACCEPTANCE

5.1 WebMD shall: (a) provide service level guarantees to ABF in accordance with the Service Level
Agreement, attached hereto as Schedule D; and (b) provide ABF with maintenance as described on
Schedule C attached hereto; and (c) comply with all the provisions of Section 9, below, for the
protection of End User data.

5.2 ABF shall: (a) provision, secure and maintain the appropriate hardware and software necessary
to implementation and use and access the Tools; (b) collaborate with WebMD to implement placement
and promotion of the Tools as detailed in the final Implementation Plan specified in Schedule C;
and (c) comply with all the provisions of Section 9, below, in protecting End User data.

5.3 ABF shall market the Tools and the Personal Financial Record Application as provided by the
terms of this Agreement, and provide implementation and support services to its Customers and End
Users (“ABF Obligations”). ABF Obligations shall include but not be limited to marketing, rollout
scheduling, project planning, management and other such resources as may be reasonably necessary
for implementation and rollout and comprise those

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other activities set out and described in Schedule G, which is attached hereto and made a part
hereof.

5.4 Upon effectiveness of this Agreement and on an ongoing basis thereafter, ABF and WebMD shall
meet to discuss ABF marketing efforts under the Agreement.

5.5 ABF may request (or WebMD may suggest) that reasonable changes be made to the scope of Schedule
C. WebMD may (at its sole discretion) provide ABF with a written change proposal setting forth the
proposed adjustments to Schedule A and Schedule C (such as price adjustments, schedule impact,
etc.). If ABF is in agreement with the change proposal, ABF will indicate its acceptance of such
proposal by signing such proposal or otherwise entering into a written agreement or amendment with
WebMD. WebMD shall have no responsibility to proceed with any requested or proposed change until
WebMD’s change proposal is accepted in writing by ABF. Upon ABF’s acceptance of a change proposal,
Schedule A and Schedule C shall be deemed to be modified as specified in such change proposal.

5.6 ABF shall provide plan data information relevant to ABF Customers’ health plans and updates
thereto (“Plan Data”) as often as is deemed reasonably necessary by ABF to keep the Plan Data
current and accurate, consistent with the provisions of Schedule C. WebMD agrees to implement
changes to such Plan Data as promptly as practicable. WebMD acknowledges that Plan Data provided
by ABF hereunder has been furnished to ABF by the relevant health plans and/or ABF Customers.
WebMD shall not be responsible for the accuracy of any Plan Data furnished to WebMD.

Section 6. REPRESENTATIONS; WARRANTIES; AND DISCLAIMERS

6.1 Each Party hereby represents and warrants that: (a) it is a corporation duly organized and
validly existing and in good standing under the laws of the state of its incorporation; (b) it has
full power and authority to enter into this Agreement; and (c) it shall use, exchange and forward
PHI in compliance with all applicable laws and regulations.

6.2 WebMD represents and warrants that the Tools will substantially conform in all material
respects to the requirements of Schedule C when used in accordance with the technical requirements
specified by WebMD and that the Personal Financial Record Application will perform in accordance
with the specifications set forth in the document agreed to by the parties. In the event that the
Tools fail to perform in accordance with this warranty, ABF shall

promptly inform WebMD of such
fact, and, as ABF’s sole and exclusive remedy, WebMD shall either (a) repair or replace the Tools
or Personal Financial Record Application to correct any defects in performance without any
additional charge to ABF, or (b) in the event that such repair or replacement cannot be done within
a reasonable time and at a reasonable cost, terminate the Agreement and provide ABF, as ABF’s sole
remedy, with a pro rata refund of the unused, prepaid license fees paid to WebMD hereunder with
respect to such calendar year.

6.3 ABF represents and warrants that: (a) it has all right, title and interest to use any of the
ABF Content it provides to WebMD; (b) is solely responsible to the Customer or the End User for his
or her use of such ABF Content; (c) it will not use (or contractually allow use of) the Tools, the
Personal Financial Record Application and the Customized Pages in a manner that is prohibited by
any law or regulation or any WebMD policy; and (d) it has or will gain contractual assurance from
its customers, prior to use, that the relevant health plan’s privacy notices permit WebMD to use
and transfer data to customer or the relevant health plan in accordance with the WebMD Privacy
Policy.

6.4 THE TOOLS, THE PERSONAL FINANCIAL RECORD APPLICATION AND ALL OTHER DELIVERABLES HEREUNDER ARE
PROVIDED “AS IS.” EXCEPT AS EXPRESSLY SET FORTH IN SECTION 6.2 ABOVE, WEBMD DOES NOT WARRANT AND
SPECIFICALLY DISCLAIMS ANY REPRESENTATION THAT THE TOOLS, THE PERSONAL FINANCIAL RECORD APPLICATION
AND ALL OTHER DELIVERABLES HEREUNDER, THE PROMOTIONAL MATERIAL, ANY DOCUMENTATION, ANY ADDITIONAL
WORK, OR ANY COMPONENT OF ANY OF THE FOREGOING, WILL MEET ABF’S, ENVOY’S OR THE PURCHASER’S
REQUIREMENTS OR THAT ABF’S USE OF THE TOOLS, THE PERSONAL FINANCIAL RECORD APPLICATION OR ANY OTHER
DELIVERABLE HEREUNDER WILL BE UNINTERRUPTED OR ERROR FREE. THE EXPRESS WARRANTIES IN SECTION 6.2
ARE IN LIEU OF ALL OTHER WARRANTIES BETWEEN THE PARTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY,
INCLUDING BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE
AND SUCH WARRANTIES ARE HEREBY DISCLAIMED. ABF ACKNOWLEDGES THAT IT HAS RELIED ON NO WARRANTIES
OTHER THAN THE EXPRESS WARRANTIES IN THIS AGREEMENT AND THAT NO WARRANTIES ARE MADE BY ANY OF
WEBMD’S SUPPLIERS OR AGENTS.

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6.5 ABF EXPRESSLY ACKNOWLEDGES AND AGREES THAT WEBMD IS NOT RESPONSIBLE FOR THE RESULTS OF A USER’S
DECISION RESULTING FROM THE USE OF THE TOOLS, THE PERSONAL FINANCIAL RECORD APPLICATION OR ANY
DELIVERABLE HEREUNDER, INCLUDING, BUT NOT LIMITED TO, A USER CHOOSING TO SEEK OR NOT TO SEEK
PROFESSIONAL MEDICAL CARE, OR A USER CHOOSING OR NOT CHOOSING SPECIFIC TREATMENT BASED ON THE
INFORMATION OBTAINED FROM THE TOOLS OR PERSONAL FINANCIAL RECORD APPLICATION.

6.6 ABF acknowledges that the Tools and the personal financial record application are not intended
to replace professional medical advice and are not tools for diagnosing the existence of a specific
disease in any given individual. ABF further acknowledges that WebMD does not guarantee the
accuracy, timeliness or completeness of the information obtained from the Tools, the Personal
Financial Record Application or any deliverable hereunder, or warrant any results from using the
Tools, the Personal Financial Record Application or any deliverable hereunder. The information may
become unreliable for many reasons including subsequent research, findings and test results.
Except for WebMD’s obligations under Section 6.2, WebMD is under no obligation to update the
information.

6.7 ABF acknowledges that WebMD shall not be responsible for any representation or warranties made
by ABF to its customers regarding the Tools, the Personal Financial Record Application or any other
deliverable hereunder.

6.8 WebMD makes no guarantees as to the amount of revenues relating to the Tools, the Personal
Financial Record Application or any deliverable hereunder, or the number of users of such products.

Section 7. LIMITATION OF LIABILITY.

NO PARTY SHALL HAVE ANY LIABILITY TO THE OTHER PARTY, OR ANY PARTY CLAIMING THROUGH IT, WITH
RESPECT TO ITS OBLIGATIONS UNDER THIS AGREEMENT OR OTHERWISE FOR CONSEQUENTIAL, EXEMPLARY, SPECIAL,
INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES, OR ANY LOSS OF PROFIT, REVENUE, DATA OR GOODWILL, WHETHER
INCURRED OR SUFFERED AS A RESULT OF UNAVAILABILITY OF THE SERVICE OR OTHERWISE, EVEN IF IT HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. EXCEPT FOR

WILFUL BREACH OF THIS AGREEMENT, BREACH OF
CONFIDENTIALITY OR IN CONNECTION WITH AN INDEMNIFICATION OBLIGATION, IN NO EVENT SHALL A PARTY’S
AGGREGATE LIABILITY HEREUNDER ARISING OUT OF THIS AGREEMENT EXCEED AN AMOUNT EQUAL TO THE GREATER
OF (I) THE AGGREGATE FEES PAID TO WEBMD APPLICABLE TO THE CONTRACT YEAR IN WHICH THE CLAIM
OCCURRED, OR (II) THE APPLICABLE TARGET FEES, APPLICABLE TO THE YEAR IN WHICH THE CLAIM OCCURRED.
THIS LIMITATION APPLIES TO ALL CAUSES OF ACTION OR CLAIMS IN THE AGGREGATE INCLUDING WITHOUT
LIMITATION BREACH OF CONTRACT, BREACH OF WARRANTY, NEGLIGENCE, STRICT LIABILITY, MISREPRESENTATION,
INFRINGEMENT, MISAPPROPRIATION AND OTHER TORTS. BOTH PARTIES ACKNOWLEDGE THAT THE FEES SET FORTH
IN THIS AGREEMENT REFLECT THE ALLOCATION OF RISK IN THIS AGREEMENT AND THAT NEITHER PARTY WOULD
ENTER INTO THIS AGREEMENT WITHOUT THESE LIMITATIONS ON LIABILITY.

Section 8. CONFIDENTIALITY AND NON-DISCLOSURE.

The parties agree that, without the express written consent of the other, none of their officers,
directors, employees or agents will use or disclose to any third party (other than agents,
suppliers, service providers, contractors, consultants and advisors, on a need-to-know basis in
connection with such party’s own, proper use) any non-public, proprietary, confidential and/or
competitively sensitive information furnished by or obtained from the other party, which he or she
has reason to believe is to of a proprietary, confidential and/or competitively sensitive nature,
or which the other party designates as confidential at the time of disclosure (“Confidential
Information”). Confidential Information includes, but is not limited to, the specific terms of
this Agreement, but not the fact that ABF is a client of WebMD that uses WebMD’s services, or that
WebMD is a supplier/service provider of ABF. The foregoing obligations of non-use and
non-disclosure shall not apply to, and a party’s proprietary rights as outlined hereunder shall not
apply to, any materials or information (i) that the receiving party can show is in the public
domain through no fault of the receiving party, (ii) that was properly known by the receiving party
without obligations of confidentiality prior to disclosure by the disclosing party, (iii) that was
independently developed by the receiving party without reference to the Confidential Information of
the disclosing party, or (iv) which is publicly disclosed to the receiving

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party by a third party without obligations of confidentiality. ABF specifically agrees not to copy
or distribute the Tools without the prior written consent of WebMD. However, Confidential
Information does not include End Users’ personal information, the confidentiality of which is
governed by Section 9 of this Agreement.

Section 9. PROTECTION OF END USER DATA.

9.1. WebMD shall enter into the subcontractor business associate agreement attached as Schedule E
with ABF prior to WebMD’s receipt of any PHI from an End User. Subject to applicable law, WebMD
shall have access to and use of End User data and shall have the right to use such data on an
individual End User basis solely to fulfill its obligations under this Agreement. WebMD reserves
the right to use Aggregate Data for any purpose, but in no event shall WebMD use such data in a
manner that identifies an End User, Customer or ABF. WebMD shall provide to End Users a privacy
policy, attached hereto as Schedule F, which privacy policy may be amended from time to time by the
WebMD and ABF as required to comply with applicable law, rule or regulation.

9.2. WebMD will provide ABF (or its designated representative) with electronic Reports in WebMD’s
standard format comprised of Aggregate Data that can be accessed online via ABF’s confidential
password on such terms as agreed to by parties, unless otherwise provided for herein.

9.3. Each party shall be responsible for complying with the confidentiality and privacy statements
and other such policies as displayed in connection with the Tools and the Customized Pages and as
agreed to in this Agreement.

Section 10. INDEMNIFICATION.

10.1 WebMD will indemnify, defend and hold harmless, at its own expense, any claims, suits, losses,
damages, liabilities, costs, expenses and actions against ABF and its affiliates and its and their
respective officers, directors, officers, employees, agents, successors and assigns brought by a
third party based upon a claim that the Tools, or the Personal Financial Record Application when
used in accordance with this Agreement, infringe any proprietary right of any third party, and
WebMD will pay those costs and damages finally awarded against ABF (including attorneys’ fees) in
any such action that are specifically attributable to such claim or those costs and damages agreed
to in a monetary settlement of such action; provided, however, that WebMD shall have no obligation
pursuant to the foregoing indemnification provision to the extent that any claim is

based on (a)
any use of the Tools or Personal Financial Record Application in violation of this Agreement, (b)
any use of the Tools or Personal Financial Record Application in conjunction with any third party
product, data, hardware or software not provided by WebMD, or (c) any ABF Content or ABF Marks. If
ABF’s use is enjoined by reason of an infringement claim, WebMD’s sole obligation shall be to
either (i) procure the right for ABF to continue using the Tools, (ii) replace or modify the
components of the Tools subject to the infringement claim with non-infringing components of
substantially equivalent functionality, or (iii) if neither of the above are available, to refund
to ABF a prorata portion, if any, of the unused fees prepaid for access to the Tools or Personal
Financial Record Application. The foregoing states the entire liability of WebMD with respect to
any infringement claims and ABF hereby expressly waives any other such liabilities.

10.2. ABF will indemnify, defend and hold harmless WebMD and its affiliates and its and their
respective officers, directors, officers, employees, agents, successors and assigns with respect to
any claim, suit, loss, liability, demand, cause of action, debt or liability, including reasonable
attorneys’ fees, to the extent that it is based upon: any third party claim that related to or
arising from a breach of any of ABF’s representations, warranties obligations, covenants or
agreements hereunder or the negligence or willful misconduct of ABF.

10.3. A party seeking indemnification hereunder shall give the party from whom indemnification is
sought reasonably prompt notice of the relevant claim; provided, however, that failure to provide
such notice shall not relieve the indemnifying party from its liability or obligation hereunder
except to the extent of any material prejudice directly resulting from such failure. The
indemnified party shall have the right to participate in the proceeding at its own expense.

Section 11. DISPUTE RESOLUTION

11.1 In an effort to resolve informally and amicably any claim or controversy arising out of or
related to this Agreement or the breach, termination, enforcement, interpretation or validity
thereof, each party shall notify the other of any difference or dispute hereunder that requires
resolution. ABF and WebMD shall each designate an executive officer to investigate, discuss and
seek to settle the matter between them. If the two are unable to settle the matter within 30 days
after such notification, or such longer time period as they shall agree upon, either party may
initiate final and binding arbitration, in accordance with Section 11.2 to resolve such matter,
which the parties agree is the sole and

7

 

exclusive procedure for any such dispute, except as otherwise provided therein. All offers,
promises, negotiations, conduct and/or statements, whether oral or written, made in the course of
the settlement discussions contemplated by this Section 11.1 by any of the parties, their agents,
employees, experts and/or attorneys are, and shall be deemed, confidential, and made executed and
delivered solely for the purposes of settlement or compromise, and inadmissible for any purpose,
including, without limitation, impeachment, in any arbitration or other proceeding involving the
parties or any third parties, or in any court or forum whatsoever, provided however that the use of
a statement or information as contemplated in a settlement under this Section 11.1 that would be
admissible or discoverable shall not be rendered inadmissible or non-discoverable solely as a
result of such use.

11.2 The following process shall be followed if, and after, the informal procedures in Section 11.1
above do not result in a resolution of the matter. Any dispute, claim or controversy arising out
of or relating to this Agreement or the breach, termination, enforcement, interpretation or
validity thereof, including the determination of the scope or applicability of this agreement to
arbitrate (collectively, a “Claim”), shall be determined by binding arbitration in New
York, New York before three arbitrators. The arbitration shall be administered (including
selection of the arbitrators) by JAMS (www.jamsadr.com) pursuant to its Comprehensive Arbitration
Rules and Procedures. Judgment on the award may be entered in any court having jurisdiction. This
clause shall not preclude parties from seeking provisional remedies in aid of arbitration from a
court of appropriate jurisdiction permitted under the terms of this Section 11.1. In the event of
any Claim under this Agreement or the enforcement of any right under this Agreement by either
party, regardless of whether WebMD or ABF prevails, each party hereby agrees that it shall be
responsible for all its own costs and expenses relating thereto, including the reasonable attorneys
fees and expenses of attorneys and other professionals it may retain. The parties hereby agree to
submit to the exclusive personal and subject matter jurisdiction and to the venue of the Supreme
Court of the State of New York, County of New York, for all purposes associated with this
Agreement, including the agreement to arbitrate, enforcing the agreement to arbitrate, and seeking
provisional relief pending award and entering judgment upon the award. Nothing contained in this
Section shall preclude the arbitrators from granting, where appropriate, injunctive or other
provisional relief pending a final award. Notwithstanding the provisions of Section 11, either
party may pursue any provisional remedy (including but limited to preliminary injunctive relief) to
either restrain or mandate certain conduct in the courts designated in this

Section. The parties
shall have the right to obtain such provisional injunctive relief from a court of law designated in
this Section pending the determination and award in the arbitration proceeding. If JAMS is no
longer available or is unwilling to accept the designation provided hereunder, the parties shall
mutually agree upon a substitute professional neutral administrator to replace JAMS.

Section 12. MISCELLANEOUS

12.1 Nothing in this Agreement is intended to require either party to terminate existing
contractual relationships with any third party, and such agreements shall remain in effect on the
terms and conditions in existence as of the date hereof.

12.2 The parties hereto agree that irreparable damage would occur in the event any provision of the
Agreement was not performed in accordance with the terms hereof and that the parties hereto shall
be entitled to specific performance of the terms hereof, in addition to any other remedy at law or
in equity.

12.3 This Agreement shall be governed by and construed in accordance with the laws of the State of
New York.

12.4 Amendments to this Agreement shall be in writing and must be signed by both parties to be
effective.

12.5 No failure or delay by any party in exercising any right, power or privilege hereunder (other
than a failure or delay beyond a period of time specified herein) shall operate as a waiver thereof
and no single or partial exercise thereof shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege.

12.6 All notices, requests, claims, demands and other communications hereunder shall be in writing
and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in
person, by courier service, by fax or by registered or certified mail (postage prepaid, return
receipt requested) to the respective parties at the following addresses (or at such other address
for a party as shall be specified by notice given in accordance with this Section 12.6.

If to Envoy/ABF:

Envoy Corporation

699 River Drive Center 2,

Elmwood Park, NJ 07407

Attn: General Counsel

8

 

If to Master LLC:

c/o Envoy Corporation

699 River Drive Center 2,

Elmwood Park, NJ 07407

Attn: General Counsel

If to WebMD:

WebMD Health Corp.

111 Eighth Avenue

New York, NY 10011

Attn: General Counsel

or at such other address as may be substituted by notice given as herein provided.

12.7 No party shall assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of the other parties. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of the parties hereto as hereinafter
provided. In addition, in the event of any sale, transfer, change of control or other disposition,
restructuring or reorganization of ABF, Envoy or Master LLC or their businesses (including by way
of stock sale, by sale of all or substantially all its assets or by any other means or manner or
structure) to a third party, Master LLC, ABF, Envoy and their businesses shall continue to be
subject to the obligations applicable to it and its business under this Agreement. This Agreement
shall remain in effect in accordance with its terms regardless of the percentage ownership, if any,
that Emdeon holds of WebMD, and regardless of any sale, transfer, change of control or other
disposition, restructuring or reorganization of Emdeon or WebMD or any of their respective
businesses (including by way of stock sale, by sale of all or substantially all its assets or by
any other means or manner or structure). The Purchaser agrees to ensure the compliance by ABF with
ABF’s obligations hereunder.

12.8 No person other than the parties hereto and their successors and permitted assigns are
intended or shall be deemed to be a beneficiary of this Agreement.

12.9 The headings and subheadings in this Agreement are included for convenience and identification
only and are in no way intended to describe, interpret, define or limit the scope, extent or intent
of this Agreement or any provision hereof.

12.10 If any term or other provision of this Agreement is held to be invalid, illegal or incapable
of being enforced by any rule of law, or public policy, all other conditions and

provisions of this
Agreement shall nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions is not affected in any manner materially adverse to any party. Upon
a determination that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually acceptable manner in order
that the transactions contemplated hereby be consummated as originally contemplated to the fullest
extent possible.

12.11 This Agreement constitutes the entire agreement among the parties hereto pertaining to the
subject matter hereof and supersedes all prior agreements and understandings pertaining thereto.

12.12 The parties hereto are independent contractors engaged in the operation of their own
respective business. Neither party is, or is to be considered as, the agent or employee of the
other for any purpose whatsoever. Neither party has the authority to enter into contracts or
assume any obligations for the other party or make any warranties or representations on behalf of
the other party. Nothing in this agreement shall be construed to establish a relationship or joint
venturers between the parties.

12.13 The rights and remedies provided by this Agreement are cumulative and the use of any one
right or remedy by any party shall not preclude or waive its right to use any or all other
remedies. Said rights and remedies are given in addition to any other rights the parties may have
by law, statute, ordinance or otherwise.

12.14 Each party will use reasonable best efforts to take or cause to be taken all action, to do or
cause to be done, and to assist and cooperate with the other party in doing, all things necessary,
proper or advisable to consummate the transactions contemplated by this Agreement, including the
execution and delivery of such instruments, and the taking of such other actions as the other party
hereto may reasonably require in order to carry out the intent of this Agreement.

12.15 Each party hereto acknowledges and agrees it has had the opportunity to draft, review and
edit the language of this Agreement and that no presumption for or against any party arising out of
drafting all or any part of this Agreement will be applied in any dispute relating to, in
connection with or involving this Agreement. Accordingly, the parties hereto hereby waive the
benefit of any rule of law or any legal decision that would require, in cases of uncertainty, that
the
language of a contract should be interpreted most strongly against the party who drafted such
language.

9

 

Glossary

“Aggregate Data” will mean a set or compilation of data collected by WebMD from a group of
End Users and that does not include any individual End User’s personally identifiable information.

“Contract Year” will mean, in respect of the first year, the twelve (12) month period commencing on
the first Launch Date, and in respect of the second and successive years, the twelve month period
commencing upon expiration of the preceding Contract Year.

“Customer” will mean any health plan or third party administrator with whom ABF has entered into an
agreement whereby such health plan or third party administrator purchases ABF Services from ABF for
its members and their dependents.

“Customized Page(s)” will mean an Internet site that (i) contains the Tools, (ii) is personalized
and branded to incorporate ABF’s look and feel, including ABF Content and ABF Marks, in accordance
with the specifications set forth in Schedule C, and (iii) is branded on each page with WebMD
Marks.

“Data Interchange” will mean the electronic transmission of data between WebMD and ABF based upon
WebMD’s data interchange specifications.

“End User” will mean an Participating Member and those dependents of any such Participating Member
who have attained the age of eighteen (18).

“Enhancements” will mean updates to the Tools that are automatically added by WebMD to ABF’s
implementation on the release date of the Enhancement for no additional charge to its customers
generally.

“ABF Content” will mean the content and promotional material ABF from time to time provides to
WebMD to use in connection with the Customized Pages, including, but not limited to, editorial and
informational content, and the content specific to the look and feel of ABF’s navigational tool
bars, etc.

“ABF Marks” will mean ABF’s trademarks, service marks, trade names, and logos.

“Launch Date” will mean the date of the closing of the transaction contemplated by the
Agreement and Plan of Merger among Emdeon, Master LLC, EBS Holdco, Inc., MediFax-EDI Holding
Company, EBS Acquisition LLC, GA EBS Merger LLC and EBS Merger Co.

“New Product” or “New Service” will mean modules, functions, products or services that are not
covered under this Agreement on the Effective Date and that are added after the Effective Date.

“Participating Member” will mean an authorized member of Customer, included in the Customer’s
monthly fee calculation, who is permitted to use the Tools through the Site by virtue of electing
to utilize ABF’s electronic member-centric transaction services and any authorized member of a
Customer referred to in Section 2.8(ii) who is eligible to access and permitted to use the Tools.

“PHI” will mean protected health information, which will have the meaning assigned to it in the
Health Insurance Portability and Accountability Act of 1996 and implementing regulations.

“Reports” will mean End User Aggregate Data provided to ABF by WebMD as described herein.

“Tools” will mean those proprietary interactive online personal health management products and
services (including the related databases and content), developed, implemented, and hosted by WebMD
and provided to ABF hereunder to be made available at the Site(s) and for the End Users and more
specifically identified in Section I and Section II of Exhibit A (and more detailed descriptions of
each of the Tools set forth in Section I

10

 

and II are set forth in Exhibit B).

“WebMD Marks” will mean WebMD’s trademarks, service marks, trade names, and logos.

“Promotional Material” will mean any promotional material that WebMD may provide to ABF in
association with this Agreement.

11

 

BY EXECUTING THIS MARKETING PLAN AGREEMENT BELOW, EACH PARTY INDICATES THAT IT HAS READ,
UNDERSTANDS AND AGREES TO BE LEGALLY BOUND BY THIS AGREEMENT, INCLUDING THE ATTACHED TERMS AND
CONDITIONS.

	 	 	 	 	 
	 	WebMD Health Corp:

 	 
	 	By:  	/s/ Douglas W. Wamsley
 	 
	 	 	Douglas W. Wamsley 	 
	 	 	Executive Vice President 	 
	 

EBS Master LLC

By: EBS Holdco, Inc., its sole member

	 	 	 	 	 
	 	 	 
	 	By:  	/s/ Charles A. Mele
 	 
	 	 	Charles A. Mele                                         	 
	 	 	Executive Vice President 	 
	 

	 	 	 	 	 
	 	Advanced Business Fulfillment LLC:

 	 
	 	By:  	/s/ Charles A. Mele
 	 
	 	 	Charles A. Mele 	 
	 	 	Executive Vice President 	 
	 

	 	 	 	 	 
	 	ENVOY Corporation:

 	 
	 	By:  	/s/ Charles A. Mele
 	 
	 	 	Charles A. Mele 	 
	 	 	Executive Vice President 	 
	 

12exv10w38

 

Exhibit 10.38

COMMON STOCK PURCHASE AGREEMENT

Dated September 29, 2006

by and between

ONYX PHARMACEUTICALS, INC.

and

AZIMUTH OPPORTUNITY LTD.

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	Article I PURCHASE AND SALE OF COMMON STOCK	 	 	1	 
	 

	 	Section 1.1
	 	Purchase and Sale of Stock
	 	 	1	 
	 

	 	Section 1.2
	 	Effective Date; Settlement Dates
	 	 	1	 
	 

	 	Section 1.3
	 	The Shares
	 	 	2	 
	 

	 	Section 1.4
	 	Current Report; Prospectus Supplement
	 	 	2	 
	 
	 	 	 	 	 	 	 	 
	Article II FIXED REQUEST TERMS; OPTIONAL AMOUNT	 	 	2	 
	 

	 	Section 2.1
	 	Fixed Request Notice
	 	 	2	 
	 

	 	Section 2.2
	 	Fixed Requests
	 	 	3	 
	 

	 	Section 2.3
	 	Share Calculation
	 	 	4	 
	 

	 	Section 2.4
	 	Limitation of Fixed Requests
	 	 	4	 
	 

	 	Section 2.5
	 	Reduction of Commitment
	 	 	5	 
	 

	 	Section 2.6
	 	Below Threshold Price
	 	 	5	 
	 

	 	Section 2.7
	 	Settlement
	 	 	5	 
	 

	 	Section 2.8
	 	Reduction of Pricing Period
	 	 	5	 
	 

	 	Section 2.9
	 	Optional Amount
	 	 	6	 
	 

	 	Section 2.10
	 	Calculation of Optional Amount Shares
	 	 	7	 
	 

	 	Section 2.11
	 	Exercise of Optional Amount
	 	 	7	 
	 

	 	Section 2.12
	 	Aggregate Limit
	 	 	7	 
	 
	 	 	 	 	 	 	 	 
	Article III REPRESENTATIONS AND WARRANTIES OF THE INVESTOR	 	 	8	 
	 

	 	Section 3.1
	 	Organization and Standing of the Investor
	 	 	8	 
	 

	 	Section 3.2
	 	Authorization and Power
	 	 	8	 
	 

	 	Section 3.3
	 	No Conflicts
	 	 	9	 
	 

	 	Section 3.4
	 	Information
	 	 	9	 
	 
	 	 	 	 	 	 	 	 
	Article IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY	 	 	9	 
	 

	 	Section 4.1
	 	Organization, Good Standing and Power
	 	 	9	 
	 

	 	Section 4.2
	 	Authorization, Enforcement
	 	 	10	 
	 

	 	Section 4.3
	 	Capitalization
	 	 	10	 
	 

	 	Section 4.4
	 	Issuance of Shares
	 	 	11	 
	 

	 	Section 4.5
	 	No Conflicts
	 	 	11	 
	 

	 	Section 4.6
	 	Commission Documents, Financial Statements
	 	 	11	 
	 

	 	Section 4.7
	 	Subsidiaries
	 	 	13	 
	 

	 	Section 4.8
	 	No Material Adverse Effect
	 	 	13	 
	 

	 	Section 4.9
	 	Indebtedness
	 	 	13	 
	 

	 	Section 4.10
	 	Title To Assets
	 	 	13	 
	 

	 	Section 4.11
	 	Actions Pending
	 	 	13	 
	 

	 	Section 4.12
	 	Compliance With Law
	 	 	13	 
	 

	 	Section 4.13
	 	Certain Fees
	 	 	14	 
	 

	 	Section 4.14
	 	Operation of Business
	 	 	14	 

i

 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 

	 	Section 4.15
	 	Environmental Compliance
	 	 	14	 
	 

	 	Section 4.16
	 	Material Agreements
	 	 	15	 
	 

	 	Section 4.17
	 	Transactions With Affiliates
	 	 	15	 
	 

	 	Section 4.18
	 	Securities Act; NASD Conduct Rules
	 	 	16	 
	 

	 	Section 4.19
	 	Employees
	 	 	17	 
	 

	 	Section 4.20
	 	Use of Proceeds
	 	 	18	 
	 

	 	Section 4.21
	 	Public Utility Holding Company Act and Investment Company Act Status
	 	 	18	 
	 

	 	Section 4.22
	 	ERISA
	 	 	18	 
	 

	 	Section 4.23
	 	Taxes
	 	 	18	 
	 

	 	Section 4.24
	 	Insurance
	 	 	18	 
	 

	 	Section 4.25
	 	Acknowledgement Regarding Investor’s Purchase of Shares
	 	 	19	 
	 
	 	 	 	 	 	 	 	 
	Article V COVENANTS	 	 	19	 
	 

	 	Section 5.1
	 	Securities Compliance
	 	 	19	 
	 

	 	Section 5.2
	 	Registration and Listing
	 	 	19	 
	 

	 	Section 5.3
	 	Compliance with Laws
	 	 	19	 
	 

	 	Section 5.4
	 	Keeping of Records and Books of Account; Foreign Corrupt Practices Act
	 	 	20	 
	 

	 	Section 5.5
	 	Limitations on Holdings and Issuances
	 	 	20	 
	 

	 	Section 5.6
	 	Other Agreements and Other Financings
	 	 	21	 
	 

	 	Section 5.7
	 	Stop Orders
	 	 	22	 
	 

	 	Section 5.8
	 	Amendments to the Registration Statement; Prospectus Supplements; Free Writing Prospectuses
	 	 	22	 
	 

	 	Section 5.9
	 	Prospectus Delivery
	 	 	23	 
	 

	 	Section 5.10
	 	Selling Restrictions
	 	 	24	 
	 

	 	Section 5.11
	 	Effective Registration Statement
	 	 	24	 
	 

	 	Section 5.12
	 	Non-Public Information
	 	 	24	 
	 

	 	Section 5.13
	 	Broker/Dealer
	 	 	25	 
	 

	 	Section 5.14
	 	Update of Disclosure Schedule
	 	 	25	 
	 
	 	 	 	 	 	 	 	 
	Article VI OPINION OF COUNSEL AND CERTIFICATE; CONDITIONS TO THE SALE AND PURCHASE OF THE SHARES 	 	 	25	 
	 

	 	Section 6.1
	 	Opinion of Counsel and Certificate
	 	 	25	 
	 

	 	Section 6.2
	 	Conditions Precedent to the Obligation of the Company
	 	 	25	 
	 

	 	Section 6.3
	 	Conditions Precedent to the Obligation of the Investor
	 	 	27	 
	 
	 	 	 	 	 	 	 	 
	Article VII TERMINATION	 	 	29	 
	 

	 	Section 7.1
	 	Term, Termination by Mutual Consent
	 	 	29	 
	 

	 	Section 7.2
	 	Other Termination
	 	 	29	 
	 

	 	Section 7.3
	 	Effect of Termination
	 	 	30	 
	 
	 	 	 	 	 	 	 	 
	Article VIII INDEMNIFICATION	 	 	30	 
	 

	 	Section 8.1
	 	General Indemnity
	 	 	30	 
	 

	 	Section 8.2
	 	Indemnification Procedures
	 	 	31	 
	 
	 	 	 	 	 	 	 	 
	Article IX MISCELLANEOUS	 	 	33	 
	 

	 	Section 9.1
	 	Fees and Expenses
	 	 	33	 
	 

	 	Section 9.2
	 	Specific Enforcement, Consent to Jurisdiction, Waiver of Jury Trial
	 	 	34	 

ii

 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 

	 	Section 9.3
	 	Entire Agreement; Amendment
	 	 	34	 
	 

	 	Section 9.4
	 	Notices
	 	 	34	 
	 

	 	Section 9.5
	 	Waivers
	 	 	35	 
	 

	 	Section 9.6
	 	Headings
	 	 	36	 
	 

	 	Section 9.7
	 	Successors and Assigns
	 	 	36	 
	 

	 	Section 9.8
	 	Governing Law
	 	 	36	 
	 

	 	Section 9.9
	 	Survival
	 	 	36	 
	 

	 	Section 9.10
	 	Counterparts
	 	 	36	 
	 

	 	Section 9.11
	 	Publicity
	 	 	36	 
	 

	 	Section 9.12
	 	Severability
	 	 	36	 
	 

	 	Section 9.13
	 	Further Assurances
	 	 	37	 

	 	 	 
	Annex A.

	 	Definitions

iii

 

COMMON STOCK PURCHASE AGREEMENT

     This COMMON STOCK PURCHASE AGREEMENT, made and entered into on this 29th day of
September 2006 (this “Agreement”), by and between Azimuth Opportunity Ltd., an
international business company incorporated under the laws of the British Virgin Islands (the
“Investor”), and Onyx Pharmaceuticals, Inc., a corporation organized and existing under the
laws of the State of Delaware (the “Company”).

RECITALS

     WHEREAS, the parties desire that, upon the terms and subject to the conditions contained
herein, the Company may issue and sell to the Investor and the Investor shall thereupon purchase
from the Company up to $150,000,000 worth of newly issued shares of the Company’s common stock,
$0.001 par value (“Common Stock”), subject, in all cases, to the Trading Market Limit; and

     WHEREAS, the offer and sale of the shares of Common Stock hereunder have been registered by
the Company in the Registration Statement, which has been declared effective by order of the
Commission under the Securities Act;

     NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:

ARTICLE I

PURCHASE AND SALE OF COMMON STOCK

     Section 1.1 Purchase and Sale of Stock. Upon the terms and subject to the conditions of
this Agreement, during the Investment Period the Company in its discretion may issue and sell to
the Investor up to $150,000,000 (the “Total Commitment”) worth of duly authorized, validly
issued, fully paid and non-assessable shares of Common Stock (subject in all cases to the Trading
Market Limit, the “Aggregate Limit”), by (i) the delivery to the Investor of not more than
24 separate Fixed Request Notices (unless the Investor and the Company mutually agree that a
different number of Fixed Request Notices may be delivered) as provided in Article II hereof and
(ii) the exercise by the Investor of Optional Amounts, which the Company may in its discretion
grant to the Investor and which may be exercised by the Investor, in whole or in part, as provided
in Article II hereof. The aggregate of all Fixed Request Amounts and Optional Amount Dollar
Amounts shall not exceed the Aggregate Limit.

     Section 1.2 Effective Date; Settlement Dates. This Agreement shall become effective and
binding upon delivery of counterpart signature pages of this Agreement executed by each of the
parties hereto, and by delivery of an opinion of counsel and a certificate of the Company as
provided in Section 6.1 hereof, to the offices of Greenberg Traurig, LLP, 200 Park Avenue, New
York, New York 10166, at l0:00 a.m., New York time, on the Effective Date. In consideration of and
in express reliance upon the representations, warranties and covenants, and otherwise upon the
terms and subject to the
conditions, of this Agreement, from and after the Effective Date and during the Investment Period
(i) the Company shall issue and sell to the Investor, and the Investor agrees to purchase from the
Company, the Shares in respect of
each Fixed Request and (ii) the Investor may in its discretion
elect to purchase Shares in respect of

 

 

each Optional Amount. The issuance and sale of Shares to
the Investor pursuant to any Fixed Request or Optional Amount shall occur on the applicable
Settlement Date in accordance with Sections 2.7 and 2.9 (or on such Trading Day in accordance with
Section 2.8, as applicable), provided in each case that all of the conditions precedent thereto set
forth in Article VI theretofore shall have been fulfilled or (to the extent permitted by applicable
law) waived.

     Section 1.3 The Shares. The Company has duly authorized and reserved for issuance,
and covenants to continue to reserve for issuance, free of all preemptive and other similar rights,
at all times during the Investment Period, the requisite aggregate number of authorized but
unissued shares of its Common Stock to timely effect the issuance, sale and delivery in full to the
Investor of all Shares to be issued in respect of all Fixed Requests and Optional Amounts under
this Agreement.

     Section 1.4 Current Report; Prospectus Supplement. As soon as practicable, but in any
event not later than 5:30 p.m. (New York time) on the first Trading Day immediately following the
Effective Date, the Company shall file with the Commission a report on Form 8-K relating to the
transactions contemplated by, and describing the material terms and conditions of, this Agreement
and disclosing all information relating to the transactions contemplated hereby required to be
disclosed in the Registration Statement and the Base Prospectus (but which permissibly has been
omitted therefrom in accordance with the Securities Act), including, without limitation,
information required to be disclosed in the section captioned “Plan of Distribution” in the Base
Prospectus (the “Current Report”). The Current Report shall include a copy of this
Agreement as an exhibit. To the extent applicable, the Current Report shall be incorporated by
reference in the Registration Statement in accordance with the provisions of Rule 430B under the
Securities Act. The Company heretofore has provided the Investor a reasonable opportunity to
comment on a draft of such Current Report and has given due consideration to such comments. If
required under the Securities Act, the Company shall file a final Base Prospectus pursuant to Rule
424(b) under the Securities Act on or prior to the second Trading Day immediately following the
Effective Date. Pursuant to Section 5.9 and subject to the provisions of Section 5.8, on the first
Trading Day immediately following the last Trading Day of each Pricing Period, the Company shall
file with the Commission a Prospectus Supplement pursuant to Rule 424(b) under the Securities Act
disclosing the number of Shares to be issued and sold to the Investor thereunder, the total
purchase price therefor and the net proceeds to be received by the Company therefrom and, to the
extent required by the Securities Act, identifying the Current Report.

ARTICLE II

FIXED REQUEST TERMS; OPTIONAL AMOUNT

     Subject to the satisfaction of the conditions set forth in this Agreement, the parties agree
(unless otherwise mutually agreed upon by the parties in writing) as follows:

     Section 2.1 Fixed Request Notice. Upon one (1) Trading Days’ prior written notice to the
Investor, the Company may, from time to time in its sole discretion, provide a notice to the
Investor of a Fixed Request before 9:30 a.m. (New York time) on the first Trading Day of the
Pricing Period (the “Fixed Request Notice”), substantially in the form attached hereto as
Exhibit A. The Fixed Request Notice shall specify the Fixed Amount Requested, establish
the Threshold

2

 

Price for such Fixed Request, designate the first Trading Day of the Pricing Period
and specify the Optional Amount, if any, that the Company elects to grant to the Investor during
the Pricing Period and the applicable Threshold Price for such Optional Amount (the “Optional
Amount Threshold Price”). The Threshold Price and the Optional Amount Threshold Price
established by the Company in a Fixed Request Notice may be the same or different, in the Company’s
sole discretion. Upon the terms and subject to the conditions of this Agreement, the Investor is
obligated to accept each Fixed Request Notice prepared and delivered in accordance with the
provisions of this Agreement.

     Section 2.2 Fixed Requests. From time to time during the Investment Period, the Company
may in its sole discretion deliver to the Investor a Fixed Request Notice for a specified Fixed
Amount Requested, and the applicable discount price (the “Discount Price”) shall be
determined, in accordance with the price and share amount parameters as set forth below or such
other parameters mutually agreed upon by the Investor and the Company, and upon the terms and
subject to the conditions of this Agreement, the Investor shall purchase from the Company the
Shares subject to such Fixed Request Notice; provided, however, that the Company
may not deliver any single Fixed Request Notice for a Fixed Amount Requested in excess of the
lesser of: (i) the amount in the applicable Fixed Amount Requested column below and (ii) 2.5% of
the Market Capitalization:

	 	 	 	 	 
	Threshold Price	 	Fixed Amount Requested	 	Discount Price
	Equal to or greater than $26.00

	 	Not to exceed $32,000,000
	 	96.70% of the VWAP
	Equal to or greater than $25.00 and less than $26.00

	 	Not to exceed $31,000,000
	 	96.70% of the VWAP
	Equal to or greater than $24.00 and less than $25.00

	 	Not to exceed $29,500,000
	 	96.70% of the VWAP
	Equal to or greater than $23.00 and less than $24.00

	 	Not to exceed $28,000,000
	 	96.45% of the VWAP
	Equal to or greater than $22.00 and less than $23.00

	 	Not to exceed $27,000,000
	 	96.45% of the VWAP
	Equal to or greater than $21.00 and less than $22.00

	 	Not to exceed $26,000,000
	 	96.45% of the VWAP
	Equal to or greater than $20.00 and less than $21.00

	 	Not to exceed $24,500,000
	 	96.45% of the VWAP
	Equal to or greater than $19.00 and less than $20.00

	 	Not to exceed $23,000,000
	 	96.20% of the VWAP
	Equal to or greater than $18.00 and less than $19.00

	 	Not to exceed $22,000,000
	 	96.20% of the VWAP
	Equal to or greater than $17.00 and less than $18.00

	 	Not to exceed $21,000,000
	 	95.95% of the VWAP
	Equal to or greater than $16.00 and less than $17.00

	 	Not to exceed $19,500,000
	 	95.95% of the VWAP
	Equal to or greater than $15.00 and less than $16.00

	 	Not to exceed $18,000,000
	 	95.95% of the VWAP
	Equal to or greater than $14.00 and less than $15.00

	 	Not to exceed $17,000,000
	 	95.95% of the VWAP
	Equal to or greater than $13.00 and less than $14.00

	 	Not to exceed $16,000,000
	 	95.70% of the VWAP

3

 

	 	 	 	 	 
	Threshold Price	 	Fixed Amount Requested	 	Discount Price
	Equal to or greater than $12.00 and less than $13.00

	 	Not to exceed $14,500,000
	 	95.70% of the VWAP
	Equal to or greater than $11.00 and less than $12.00

	 	Not to exceed $13,000,000
	 	95.20% of the VWAP
	Equal to or greater than $10.00 and less than $11.00

	 	Not to exceed $12,000,000
	 	95.20% of the VWAP
	Equal to or greater than $  9.00 and less than $10.00

	 	Not to exceed $11,000,000
	 	94.95% of the VWAP
	Equal to or greater than $  8.00 and less than $  9.00

	 	Not to exceed $  9,500,000
	 	94.95% of the VWAP

     Anything to the contrary in this Agreement notwithstanding, at no time shall the Investor
be required to purchase more than $32,000,000 worth of Common Stock in respect of any Pricing
Period (not including Common Stock subject to any Optional Amount). The date on which the Company
delivers any Fixed Request Notice in accordance with this Section 2.2 hereinafter shall be referred
to as a “Fixed Request Exercise Date”.

     Section 2.3 Share Calculation. Subject to Section 2.6, the number of Shares to be issued
by the Company to the Investor pursuant to a Fixed Request shall equal the aggregate sum of each
quotient (calculated for each Trading Day during the applicable Pricing Period for which the VWAP
equals or exceeds the Threshold Price) determined pursuant to the following equation (rounded to
the nearest whole Share):

	N =	 	(A x B)/C, where:
	N =	 	the number of Shares to be issued by the Company to the Investor in respect of a Trading
Day during the applicable Pricing Period for which the VWAP equals or exceeds the Threshold
Price,
	 
	A =	 	0.10 (the “Multiplier”); provided, however, that if the number of
Trading Days constituting a Pricing Period is decreased as set forth in Section 2.8 hereof,
then the Multiplier correspondingly shall be increased to equal the decimal equivalent (in
10-millionths) of a fraction, the numerator of which is one and the denominator of which
equals the number of Trading Days in the Pricing Period as so decreased,
	 
	B =	 	the Fixed Amount Requested, and
	 
	C =	 	the applicable Discount Price.

     Section 2.4 Limitation of Fixed Requests. The Company shall not make more than one Fixed
Request in each Pricing Period. Not less than three (3) Trading Days shall elapse between the end
of one Pricing Period and the commencement of any other Pricing Period during the Investment
Period. There shall be permitted a maximum of 24 Fixed Requests during the Investment Period.
Each Fixed Request automatically shall expire immediately following the last Trading Day of each
Pricing Period.

4

 

     Section 2.5 Reduction of Commitment. On the last Trading Day of each Pricing Period, the
Investor’s Total Commitment under this Agreement automatically (and without the need for any
amendment to this Agreement) shall be reduced, on a dollar-for-dollar basis, by the total amount of
the Fixed Request Amount of proceeds paid to the Company and the Optional Amount Dollar Amount of
proceeds paid to the Company, if any, for such Pricing Period.

     Section 2.6 Below Threshold Price. If the VWAP on any Trading Day in a Pricing Period is
lower than the Threshold Price, then for each such Trading Day the total amount of the Fixed Amount
Requested shall be reduced, on a dollar-for-dollar basis, by an amount equal to the product of (x)
the Multiplier and (y) the original Fixed Amount Requested, and no Shares shall be purchased or
sold with respect to such Trading Day, except as provided below. If trading in the Common Stock on
NASDAQ (or any national securities exchange on which the Common Stock is then listed) is suspended
for any reason for more than three hours on any Trading Day, the Investor may at its option deem
the price of the Common Stock to be lower than the Threshold Price for such Trading Day and, for
each such Trading Day, the total amount of the Fixed Amount Requested shall be reduced as provided
in the immediately preceding sentence, and no Shares shall be purchased or sold with respect to
such Trading Day, except as provided below. For each Trading Day during a Pricing Period on which
the VWAP is (or is deemed to be) lower than the Threshold Price, the Investor may in its sole
discretion elect to purchase such U.S. dollar amount of Shares equal to the amount by which the
Fixed Amount Requested has been reduced in accordance with this Section 2.6, at the Threshold Price
multiplied by the applicable percentage determined in accordance with the price and share amount
parameters set forth in Section 2.2. The Investor shall inform the Company via facsimile
transmission not later than 8:00 p.m. (New York time) on the last Trading Day of such Pricing
Period as to the number of Shares, if any, the Investor elects to purchase as provided in this
Section 2.6.

     Section 2.7 Settlement. The payment for, against simultaneous delivery of, Shares in
respect of each Fixed Request shall be settled on the second Trading Day next following the last
Trading Day of each Pricing Period, or on such other date as the parties may mutually agree (the
“Settlement Date”). On each Settlement Date, the Company shall deliver the Shares
purchased by the Investor to the Investor or its designees via DTC’s Deposit Withdrawal Agent
Commission (DWAC) system, against simultaneous payment therefor to the Company’s designated account
by wire transfer of immediately available funds, provided that if the Shares are received by the
Investor later than
1:00 p.m. (New York time), payment therefor shall be made with next day funds. As set forth in
Section 9.1(ii), a failure by the Company to deliver such Shares shall result in the payment of
liquidated damages by the Company to the Investor.

     Section 2.8 Reduction of Pricing Period. If during a Pricing Period the Company elects to
reduce the number of Trading Days in such Pricing Period (and thereby amend its previously
delivered Fixed Request Notice), the Company shall so notify the Investor before 9:00 a.m. (New
York time) on any Trading Day during a Pricing Period (a “Reduction Notice”) and the last
Trading Day of such Pricing Period shall be the Trading Day immediately preceding the Trading Day
on which the Investor received such Reduction Notice; provided, however, that if
the Company delivers the Reduction Notice later than 9:00 a.m. (New York time) on a Trading Day
during a Pricing Period, then the last Trading Day of such Pricing Period instead shall be the

5

 

Trading Day on which the Investor received such Reduction Notice. Further, if mutually agreed upon
in writing by the parties, the Pricing Period may be reduced at any time.

     Upon receipt of a Reduction Notice, the Investor (i) shall purchase the Shares in respect of
each Trading Day in such reduced Pricing Period for which the VWAP equals or exceeds the Threshold
Price in accordance with Section 2.3 hereof; (ii) may elect to purchase the Shares in respect of
any Trading Day in such reduced Pricing Period for which the VWAP is (or is deemed to be) lower
than the Threshold Price in accordance with Section 2.6 hereof; and (iii) may elect to exercise all
or any portion of an Optional Amount on any Trading Day during such reduced Pricing Period in
accordance with Sections 2.10 and 2.11 hereof.

     In addition, upon receipt of a Reduction Notice, the Investor may elect to purchase such U.S.
dollar amount of additional Shares equal to the quotient determined pursuant to the following
equation:

	D =	 	A x 1/B x (B – C), where:
	 
	D =	 	the U.S. dollar amount of additional Shares to be purchased,
	 
	A =	 	the Fixed Amount Requested,
	 
	B =	 	10 or, for purposes of this Section 2.8, such lesser number of Trading Days as the parties
may mutually agree to, and
	 
	C =	 	the number of Trading Days in the reduced Pricing Period,

at a per Share price equal to (x) the Fixed Amount Requested attributable to the reduced Pricing
Period divided by (y) the number of Shares to be purchased during such reduced Pricing Period
pursuant to clause (i) of the immediately preceding paragraph.

     The Investor may also elect to exercise any portion of the applicable Optional Amount which
was unexercised during the reduced Pricing Period by issuing an Optional Amount Notice to the
Company not later than 10:00 a.m. (New York time) on the first Trading Day next following the last
Trading Day of the reduced Pricing Period. The number of Shares to be issued
upon exercise of such Optional Amount shall be calculated pursuant to the equation set forth
in Section 2.10 hereof, except that “C” shall equal the greater of (i) the VWAP for the Common
Stock on the last Trading Day of the reduced Pricing Period or (ii) the Optional Amount Threshold
Price.

     The payment for, against simultaneous delivery of, Shares to be purchased and sold in
accordance with this Section 2.8 shall be settled on the second Trading Day next following the
Trading Day on which the Investor receives a Reduction Notice.

     Section 2.9 Optional Amount. With respect to any Pricing Period, the Company may in its
sole discretion grant to the Investor the right to exercise, from time to time during the Pricing
Period (but not more than once on any Trading Day), all or any portion of an Optional Amount. The
maximum Optional Amount Dollar Amount and the Optional Amount Threshold Price shall be set forth in
the Fixed Request Notice. Each daily Optional Amount exercise shall

6

 

be aggregated during the
Pricing Period and settled on the next Settlement Date. The Optional Amount Threshold Price
designated by the Company in its Fixed Request Notice shall apply to each Optional Amount during
the applicable Pricing Period.

     Section 2.10 Calculation of Optional Amount Shares. The number of shares of Common Stock
to be issued in connection with the exercise of an Optional Amount shall be the quotient determined
pursuant to the following equation (rounded to the nearest whole Share):

	O =	 	A/(B x C), where:
	 
	O =	 	the number of shares of Common Stock to be issued in connection with such Optional Amount
exercise,
	 
	A =	 	the Optional Amount Dollar Amount with respect to which the Investor has delivered an
Optional Amount Notice,
	 
	B =	 	the applicable percentage determined in accordance with the price and shares amount
parameters set forth in Section 2.2 (with the Optional Amount Threshold Price serving as the
Threshold Price for such purposes), and
	 
	C =	 	the greater of (i) the VWAP for the Common Stock on the day the Investor delivers the
Optional Amount Notice or (ii) the Optional Amount Threshold Price.

     Section 2.11 Exercise of Optional Amount. If granted by the Company to the Investor with
respect to a Pricing Period, all or any portion of the Optional Amount may be exercised by the
Investor on any Trading Day during the Pricing Period, subject to the limitations set forth in
Section 2.9. As a condition to each exercise of an Optional Amount pursuant to this Section 2.11,
the Investor shall issue an Optional Amount Notice to the Company no later than 8:00 p.m. (New York
time) on the day of such Optional
Amount exercise. If the Investor does not exercise an Optional Amount in full by 8:00 p.m. (New
York time) on the last Trading Day of the applicable Pricing Period, such unexercised portion of
the Investor’s Optional Amount with respect to that Pricing Period automatically shall lapse and
terminate.

     Section 2.12 Aggregate Limit. Notwithstanding anything to the contrary contained in this
Agreement, in no event may the Company issue a Fixed Request Notice or grant an Optional Amount to
the extent that the sale of Shares pursuant thereto and pursuant to all prior Fixed Request
Notices, Optional Amounts and as liquidated damages pursuant to Section 9.1(ii) issued hereunder
would cause the Company to sell or the Investor to purchase Shares which in the aggregate are in
excess of the Aggregate Limit. If the Company issues a Fixed Request Notice or Optional Amount
that otherwise would permit the Investor to purchase shares of Common Stock which would cause the
aggregate purchases by Investor hereunder to exceed the Aggregate Limit, such Fixed Request Notice
or Optional Amount shall be void ab initio to the extent of the amount by which the dollar value of
shares or number of shares, as the case may be, of Common Stock otherwise issuable pursuant to such
Fixed Request Notice or Optional Amount together with the dollar value of shares or number of
shares, as the case may be, of all other Common Stock purchased by the Investor pursuant hereto
would exceed the Aggregate Limit. The Company hereby represents, warrants and covenants that
neither it nor any of its Subsidiaries (i) has effected any transaction or
series of transactions,
(ii) is a party to any pending transaction or

7

 

series of transactions or (iii) shall enter into any
contract, agreement, agreement-in-principle, arrangement or understanding with respect to, or shall
effect, any Other Financing which, in any of such cases, would be integrated with the transactions
contemplated by this Agreement for purposes of determining whether approval of the Company’s
stockholders is required under any bylaw, listed securities maintenance standards or other rules of
the Trading Market; provided, however, that the Company shall be permitted to take
any action referred to in clause (iii) above if the Company has timely provided the Investor with
an Integration Notice as provided in Section 5.6(ii) hereof. Further, at the Company’s sole
discretion, and effective automatically upon delivery of notice by the Company to the Investor,
this Agreement may be amended from time to time to reduce the Aggregate Limit by an amount as shall
be determined by the Company in its sole discretion (such amount to be no greater than is necessary
to meet the Company’s registration obligations in connection with an underwritten public offering
or registered direct offering in order to effect such offering); provided, however,
any such amendment of this Agreement (and any such purported amendment) shall be void and of no
force and effect if the effect thereof would restrict, materially delay, conflict with or impair
the ability or right of the Company to perform its obligations under this Agreement, including,
without limitation, the obligation of the Company to deliver Shares to the Investor in respect of a
Fixed Request on the applicable Settlement Date; provided, further, that at the Company’s
sole discretion, it may increase the Aggregate Limit by such amount as it was reduced pursuant to
this Section 2.12, but in no event may the Company issue a Fixed Request Notice or grant an
Optional Amount to the extent that the sale of Shares pursuant thereto and pursuant to all prior
Fixed Request Notices, Optional Amounts and as liquidated damages pursuant to Section 9.1(ii)
issued hereunder would cause the Company to sell or the Investor to purchase Shares which in the
aggregate are in excess of the Aggregate Limit originally set forth in Section 1.1 hereto.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE INVESTOR

     The Investor hereby makes the following representations and warranties to the Company:

     Section 3.1 Organization and Standing of the Investor. The Investor is an international
business company duly organized, validly existing and in good standing under the laws of the
British Virgin Islands.

     Section 3.2 Authorization and Power. The Investor has the requisite corporate power and
authority to enter into and perform its obligations under this Agreement and to purchase the Shares
in accordance with the terms hereof. The execution, delivery and performance of this Agreement by
the Investor and the consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate action, and no further consent or authorization of the
Investor, its Board of Directors or stockholders is required. This Agreement has been duly
executed and delivered by the Investor. This Agreement constitutes a valid and binding obligation
of the Investor enforceable against it in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership, or similar laws relating to, or affecting generally the enforcement
of, creditor’s rights and remedies or by other equitable principles of general application.

8

 

     Section 3.3 No Conflicts. The execution, delivery and performance by the Investor of this
Agreement and the consummation by the Investor of the transactions contemplated herein do not and
shall not (i) result in a violation of such Investor’s charter documents, bylaws or other
applicable organizational instruments, (ii) conflict with, constitute a default (or an event which,
with notice or lapse of time or both, would become a default) under, or give rise to any rights of
termination, amendment, acceleration or cancellation of, any material agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the
Investor is a party or is bound, (iii) create or impose any lien, charge or encumbrance on any
property of the Investor under any agreement or any commitment to which the Investor is party or
under which the Investor is bound or under which any of its properties or assets are bound, or (iv)
result in a violation of any federal, state, local or foreign statute, rule, or regulation, or any
order, judgment or decree of any court or governmental agency applicable to the Investor or by
which any of its properties or assets are bound or affected, except, in the case of clauses (ii),
(iii) and (iv), for such conflicts, defaults, terminations, amendments, acceleration, cancellations
and violations as would not, individually or in the aggregate, prohibit or otherwise interfere with
the ability of the Investor to enter into and perform its obligations under this Agreement in any
material respect. The Investor is not required under federal, state, local or foreign law, rule or
regulation to obtain any consent, authorization or order of, or make any filing or registration
with, any court or governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement or to purchase the Shares in accordance with the terms hereof.

     Section 3.4 Information. The Investor and its advisors have been afforded the opportunity to ask questions of
representatives of the Company and to receive materials relating to the business, financial
condition, management and operations of the Company and materials relating to the offer and sale of
the Shares. The Investor has sought such accounting, legal and tax advice as it has considered
necessary to make an informed investment decision with respect to its acquisition of the Shares.
The Investor understands that it (and not the Company) shall be responsible for its own tax
liabilities that may arise as a result of this investment or the transactions contemplated by this
Agreement.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     Except as set forth in the disclosure schedule delivered by the Company to the Investor (which
is hereby incorporated by reference in, and constitutes an integral part of, this Agreement) (the
“Disclosure Schedule”), the Company hereby makes the following representations and
warranties to the Investor:

     Section 4.1 Organization, Good Standing and Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of Delaware and has
the requisite corporate power and authority to own, lease and operate its properties and assets and
to conduct its business as it is now being conducted. The Company and each such Subsidiary is duly
qualified as a foreign corporation to do business and is in good standing in every jurisdiction in
which the nature of the business conducted or property owned by it makes such qualification
necessary, except for any jurisdiction in which the failure to be so qualified would not have a
Material Adverse Effect.

9

 

     Section 4.2 Authorization, Enforcement. The Company has the requisite corporate power and
authority to enter into and perform this Agreement and to issue and sell the Shares in accordance
with the terms hereof. Except for approvals of the Company’s Board of Directors or a committee
thereof as may be required in connection with any issuance and sale of Shares to the Investor
hereunder (which approvals shall be obtained prior to the delivery of any Fixed Request Notice),
the execution, delivery and performance by the Company of this Agreement and the consummation by it
of the transactions contemplated hereby have been duly and validly authorized by all necessary
corporate action and no further consent or authorization of the Company or its Board of Directors
or stockholders is required This Agreement has been duly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws
relating to, or affecting generally the enforcement of, creditor’s rights and remedies or by other
equitable principles of general application.

     Section 4.3 Capitalization. The authorized capital stock of the Company and the shares
thereof issued and outstanding as of the dates set forth in the Commission Documents are as set
forth in the Commission
Documents. All of the outstanding shares of Common Stock have been duly authorized and validly
issued, and are fully paid and nonassessable. Except as set forth in the Commission Documents, as
of the Effective Date, no shares of Common Stock were entitled to preemptive rights or registration
rights and there were no outstanding options, warrants, scrip, rights to subscribe to, call or
commitments of any character whatsoever relating to, or securities or rights convertible into or
exchangeable for, any shares of capital stock of the Company. Except as set forth in the
Commission Documents, there were no contracts, commitments, understandings, or arrangements by
which the Company is or may become bound to issue additional shares of the capital stock of the
Company or options, securities or rights convertible into or exchangeable for any shares of capital
stock of the Company. Except for customary transfer restrictions contained in agreements entered
into by the Company to sell restricted securities or as set forth in the Commission Documents, as
of the Effective Date, the Company was not a party to, and it had no knowledge of, any agreement
restricting the voting or transfer of any shares of the capital stock of the Company. Except as
set forth in the Commission Documents, the offer and sale of all capital stock, convertible or
exchangeable securities, rights, warrants or options of the Company issued prior to the Effective
Date complied with all applicable federal and state securities laws, and no stockholder has any
right of rescission or damages or any “put” or similar right with respect thereto which would have
a Material Adverse Effect. The Company has furnished or made available to the Investor via the
Electronic Data Gathering, Analysis, and Retrieval System (“EDGAR”) true and correct copies
of the Company’s Certificate of Incorporation as in effect on the Effective Date (the
“Charter”), and the Company’s Bylaws as in effect on the Effective Date (the
“Bylaws”), and true and correct copies (redacted as appropriate) of all executed
resolutions of the Company’s Board of Directors (and committees thereof) relating to the capital
stock of the Company (and transactions in respect thereof) since December 31, 2005 (except with
respect to issuances of shares of capital stock of the Company to directors or employees of the
Company as fees or compensation that were duly approved by the Company’s Board of Directors or a
committee thereof).

10

 

     Section 4.4 Issuance of Shares. The Shares to be issued under this Agreement have been or
will be duly authorized by all necessary corporate action and, when paid for or issued in
accordance with the terms hereof, the Shares shall be validly issued and outstanding, fully paid
and nonassessable, and the Investor shall be entitled to all rights accorded to a holder and
beneficial owner of Common Stock.

     Section 4.5 No Conflicts. The execution, delivery and performance by the Company of this
Agreement and the consummation by the Company of the transactions contemplated herein do not and
shall not (i) result in a violation of any provision of the Company’s Charter or Bylaws, (ii)
conflict with, constitute a default (or an event which, with notice or lapse of time or both, would
become a default) under, or give rise to any rights of termination, amendment, acceleration or
cancellation of, any material agreement, mortgage, deed of trust, indenture, note, bond, license,
lease agreement, instrument or obligation to which the Company or any of its Significant
Subsidiaries is a party or is bound, (iii) create or impose a lien, charge or encumbrance on any
property of the Company or any of its Significant Subsidiaries under any agreement or any
commitment to which the Company or any of its Significant Subsidiaries is a party or under which
the Company
or any of its Significant Subsidiaries is bound or under which any of their respective properties
or assets are bound, or (iv) result in a violation of any federal, state, local or foreign statute,
rule, regulation, order, judgment or decree applicable to the Company or any of its Subsidiaries or
by which any property or asset of the Company or any of its Subsidiaries are bound or affected,
except, in the case of clauses (ii), (iii) and (iv), for such conflicts, defaults, terminations,
amendments, acceleration, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect. The Company is not required under federal, state, local
or foreign law, rule or regulation to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it to execute, deliver
or perform any of its obligations under this Agreement, or to issue and sell the Shares to the
Investor in accordance with the terms hereof (other than any filings which may be required to be
made by the Company with the Commission or the Trading Market subsequent to the Effective Date,
including but not limited to a Prospectus Supplement under Sections 1.4 and 5.9 of this Agreement,
and any registration statement, prospectus or prospectus supplement which has been or may be filed
pursuant to this Agreement).

     Section 4.6 Commission Documents, Financial Statements. (a) The Common Stock is
registered pursuant to Section 12(b) or 12(g) of the Exchange Act and, except as disclosed in the
Commission Documents, as of the Effective Date the Company had timely filed (giving effect to
permissible extensions in accordance with Rule 12b-25 under the Exchange Act) all Commission
Documents. The Company has delivered or made available to the Investor via EDGAR true and complete
copies of the Commission Documents filed with the Commission prior to the Effective Date
(including, without limitation, the 2005 Form 10-K) and has delivered or made available to the
Investor via EDGAR true and complete copies of all of the Commission Documents heretofore
incorporated by reference in the Registration Statement and the Prospectus. The Company has not
provided to the Investor any information which, according to applicable law, rule or regulation,
should have been disclosed publicly by the Company but which has not been so disclosed, other than
with respect to the transactions contemplated by this Agreement. As of its filing date, each
Commission Document filed with the Commission and incorporated by reference in the Registration
Statement and the Prospectus (including, without limitation, the 2005 Form 10-K) complied in all
material respects with the requirements of the

11

 

Securities Act or the Exchange Act, as applicable,
and other federal, state and local laws, rules and regulations applicable to it, and, as of its
filing date, such Commission Document did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made, not misleading. Each
Commission Document to be filed with the Commission after the Effective Date and incorporated by
reference in the Registration Statement, the Prospectus and any Prospectus Supplement required to
be filed pursuant to Sections 1.4 and 5.9 hereof during the Investment Period (including, without
limitation, the Current Report), when such document becomes effective or is filed with the
Commission, as the case may be, shall comply in all material respects with the requirements of the
Securities Act or the Exchange Act, as applicable, and other federal, state and local laws, rules
and regulations applicable to it, and shall not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made, not misleading.

          (b) The financial statements, together with the related notes and schedules, of the Company
included in the Commission Documents comply as to form in all material respects with all applicable
accounting requirements and the published rules and regulations of the Commission and all other
applicable rules and regulations with respect thereto. Such financial statements, together with
the related notes and schedules, have been prepared in accordance with GAAP applied on a consistent
basis during the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim statements, to the extent
they may not include footnotes or may be condensed or summary statements), and fairly present,
subject to normal year-end adjustments, in all material respects the financial condition of the
Company and its consolidated Subsidiaries as of the dates thereof and the results of operations and
cash flows for the periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments).

          (c) The Company has timely filed with the Commission and made available to the Investor via
EDGAR all certifications and statements required by (x) Rule 13a-14 or Rule 15d-14 under the
Exchange Act or (y) 18 U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002
(“SOXA”)) with respect to all relevant Commission Documents. The Company is in compliance
in all material respects with the provisions of SOXA applicable to it as of the date hereof. The
Company maintains disclosure controls and procedures required by Rule 13a-15 or Rule 15d-15 under
the Exchange Act; except as disclosed in the Commission Documents, such controls and procedures are
effective to ensure that all material information concerning the Company and its Subsidiaries is
made known on a timely basis to the individuals responsible for the timely and accurate preparation
of the Company’s Commission filings and other public disclosure documents. As used in this Section
4.6(c), the term “file” shall be broadly construed to include any manner in which a document or
information is furnished, supplied or otherwise made available to the Commission.

          (d) Ernst & Young LLP, who have expressed their opinions on the audited financial statements
and related schedules included or incorporated by reference in the Registration Statement and the
Base Prospectus is, with respect to the Company, an independent registered public accounting firm
as required by the rules of the Public Company Accounting Oversight Board.

12

 

     Section 4.7 Subsidiaries. The Company does not have any Subsidiaries as of the Effective
Date.

     Section 4.8 No Material Adverse Effect. Since June 30, 2006, the Company has not
experienced or suffered any Material Adverse Effect, and there exists no current state of facts,
condition or event which would have a Material Adverse Effect, except (i) as disclosed in any
Commission Documents filed since June 30, 2006 or (ii) continued losses from operations.

     Section 4.9 Indebtedness. The Company’s Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 2006 sets forth, as of June 30, 2006, all outstanding secured and unsecured
Indebtedness of the Company
or any Subsidiary, or for which the Company or any Subsidiary has commitments through such date.
For the purposes of this Agreement, “Indebtedness” shall mean (a) any liabilities for
borrowed money or amounts owed in excess of $10,000,000 (other than trade accounts payable incurred
in the ordinary course of business), (b) all guaranties, endorsements, indemnities and other
contingent obligations in respect of Indebtedness of others in excess of $10,000,000, whether or
not the same are or should be reflected in the Company’s balance sheet (or the notes thereto),
except guaranties by endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value of any lease payments in
excess of $10,000,000 due under leases required to be capitalized in accordance with GAAP. There
is no existing or continuing default or event of default in respect of any Indebtedness of the
Company or any of its Subsidiaries.

     Section 4.10 Title To Assets. Each of the Company and its Subsidiaries has good and
marketable title to all of their respective real and personal property reflected in the Commission
Documents, free of mortgages, pledges, charges, liens, security interests or other encumbrances,
except for those indicated in the Commission Documents or those that would not have a Material
Adverse Effect. To the Company’s knowledge, all real property leases of the Company are valid and
subsisting and in full force and effect in all material respects.

     Section 4.11 Actions Pending. There is no action, suit, claim, investigation or proceeding
pending, or to the knowledge of the Company threatened in writing, against the Company or any
Subsidiary which questions the validity of this Agreement or the transactions contemplated hereby
or any action taken or to be taken pursuant hereto or thereto. Except as set forth in the
Commission Documents, there is no action, suit, claim, investigation or proceeding pending, or to
the knowledge of the Company threatened in writing, against or involving the Company, any
Subsidiary or any of their respective properties or assets, or involving any officers or directors
of the Company or any of its Subsidiaries, including, without limitation, any securities class
action lawsuit or stockholder derivative lawsuit, in each case which, if determined adversely to
the Company, its Subsidiary or any officer or director of the Company or its Subsidiaries, would
have a Material Adverse Effect.

     Section 4.12 Compliance With Law. The business of the Company and the Subsidiaries has
been and is presently being conducted in compliance with all applicable federal, state, local and
foreign governmental laws, rules, regulations and ordinances, except as set forth in the Commission
Documents and except for such non-compliance which, individually or in the aggregate, would not
have a Material Adverse Effect.

13

 

     Section 4.13 Certain Fees. Except for the placement fee payable by the Company to Reedland
Capital Partners, an Institutional Division of the Financial West Group, Member NASD/SIPC
(“Reedland”), which shall be set forth in a separate placement agency agreement between the Company
and Reedland (a true and complete fully executed copy of which has heretofore been provided to the
Investor),
no brokers, finders or financial advisory fees or commissions shall be payable by the Company or
any Subsidiary (or any of their respective affiliates) with respect to the transactions
contemplated by this Agreement.

     Section 4.14 Operation of Business. (a) The Company or one or more of its Subsidiaries
possesses such permits, licenses, approvals, consents and other authorizations (including licenses,
accreditation and other similar documentation or approvals of any local health departments)
(collectively, “Governmental Licenses”) issued by the appropriate federal, state, local or
foreign regulatory agencies or bodies, including, without limitation, the United States Food and
Drug Administration (“FDA”), necessary to conduct the business now operated by it, except
where the failure to possess such Governmental Licenses, individually or in the aggregate, would
not have a Material Adverse Effect. The Company and its Subsidiaries are in compliance with the
terms and conditions of all such Governmental Licenses and all applicable FDA rules and
regulations, guidelines and policies, except where the failure to so comply, individually or in the
aggregate, would not have a Material Adverse Effect. All of the Governmental Licenses are valid
and in full force and effect, except where the invalidity of such Governmental Licenses or the
failure of such Governmental Licenses to be in full force and effect, individually or in the
aggregate, would not have a Material Adverse Effect. This Section 4.14 does not relate to
environmental matters, such items being the subject of Section 4.15.

          (b) To the Company’s knowledge, the Company or one or more of its Subsidiaries owns or
possesses adequate patents, patent rights, licenses, inventions, copyrights, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks, trade names, trade dress, logos, copyrights and
other intellectual property, including, without limitation, all of the intellectual property
described in the Commission Documents as being owned or licensed by the Company (collectively,
“Intellectual Property”), necessary to carry on the business now operated by it. Except as
set forth in the Commission Documents, there are no actions, suits or judicial proceedings pending,
or to the Company’s knowledge threatened, relating to patents or proprietary information to which
the Company or any of its Subsidiaries is a party or of which any property of the Company or any of
its Subsidiaries is subject, and neither the Company nor any of its Subsidiaries has received any
notice or is otherwise aware of any infringement of or conflict with asserted rights of others with
respect to any Intellectual Property or of any facts or circumstances which could render any
Intellectual Property invalid or inadequate to protect the interest of the Company and its
Subsidiaries therein, and which infringement or conflict (if the subject of any unfavorable
decision, ruling or finding) or invalidity or inadequacy, individually or in the aggregate, would
have a Material Adverse Effect.

     Section 4.15 Environmental Compliance. Except as disclosed in the Commission Documents,
the Company has obtained all material approvals, authorization, certificates, consents, licenses,
orders and permits or other similar authorizations of all governmental authorities, or from any
other person, that are required under any Environmental Laws, except for any approvals,
authorization, certificates, consents, licenses, orders and permits or other

14

 

similar authorizations
the failure of which to obtain does not or
would not have a Material Adverse Effect. “Environmental Laws” shall mean all applicable
laws relating to the protection of the environment including, without limitation, all requirements
pertaining to reporting, licensing, permitting, controlling, investigating or remediating
emissions, discharges, releases or threatened releases of hazardous substances, chemical
substances, pollutants, contaminants or toxic substances, materials or wastes, whether solid,
liquid or gaseous in nature, into the air, surface water, groundwater or land, or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of
hazardous substances, chemical substances, pollutants, contaminants or toxic substances, material
or wastes, whether solid, liquid or gaseous in nature. Except for such instances as would not,
individually or in the aggregate, have a Material Adverse Effect, to the best of the Company’s
knowledge, there are no past or present events, conditions, circumstances, incidents, actions or
omissions relating to or in any way affecting the Company that violate or could reasonably be
expected to violate any Environmental Law after the Effective Date or that could reasonably be
expected to give rise to any environmental liability, or otherwise form the basis of any claim,
action, demand, suit, proceeding, hearing, study or investigation (i) under any Environmental Law,
or (ii) based on or related to the manufacture, processing, distribution, use, treatment, storage
(including without limitation underground storage tanks), disposal, transport or handling, or the
emission, discharge, release or threatened release of any hazardous substance.

     Section 4.16 Material Agreements. Except as set forth in the Commission Documents, neither
the Company nor any Subsidiary of the Company is a party to any written or oral contract,
instrument, agreement commitment, obligation, plan or arrangement, a copy of which would be
required to be filed with the Commission as an exhibit to an annual report on Form 10-K
(collectively, “Material Agreements”). Except as set forth in the Commission Documents,
the Company and each of its Subsidiaries have performed in all material respects all the
obligations required to be performed by them under the Material Agreements, have received no notice
of default or an event of default by the Company or any of its Subsidiaries thereunder and are not
aware of any basis for the assertion thereof, and neither the Company or any of its Subsidiaries
nor, to the knowledge of the Company, any other contracting party thereto are in default under any
Material Agreement now in effect, the result of which would have a Material Adverse Effect. Except
as set forth in the Commission Documents, each of the Material Agreements is in full force and
effect, and constitutes a legal, valid and binding obligation enforceable in accordance with its
terms against the Company except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws
relating to, or affecting generally the enforcement of, creditor’s rights and remedies or by other
equitable principles of general application.

     Section 4.17 Transactions With Affiliates. Except as set forth in the Commission
Documents, there are no loans, leases, agreements, contracts, royalty agreements, management
contracts, service arrangements or other continuing transactions exceeding $120,000 between (a) the
Company or any Subsidiary, on the one hand, and (b) any person or entity who would be covered by
Item 404(a) of Regulation S-K, on the other hand. Except as disclosed in the Commission Documents,
there are no outstanding amounts payable to or receivable from, or advances by the Company or any
of its Subsidiaries to,
and neither the Company nor any of its Subsidiaries is otherwise a creditor of or debtor to,
any beneficial owner of more than 5% of the outstanding shares of Common Stock, or any director,
employee or affiliate of the Company or

15

 

any of its Subsidiaries, other than (i) reimbursement for
reasonable expenses incurred on behalf of the Company or any of its Subsidiaries or (ii) as part of
the normal and customary terms of such persons’ employment or service as a director with the
Company or any of its Subsidiaries.

     Section 4.18 Securities Act; NASD Conduct Rules. The Company has complied with all
applicable federal and state securities laws in connection with the offer, issuance and sale of the
Shares hereunder.

          (i) The Company has prepared and filed with the Commission in accordance with the provisions
of the Securities Act the Registration Statement, including the Base Prospectus, relating to the
Shares. The Registration Statement was declared effective by order of the Commission on June 15,
2006. As of the date hereof, no stop order suspending the effectiveness of the Registration
Statement has been issued by the Commission or is continuing in effect under the Securities Act and
no proceedings therefor are pending before or, to the Company’s knowledge, threatened by the
Commission. No order preventing or suspending the use of the Prospectus or any Permitted Free
Writing Prospectus has been issued by the Commission.

          (ii) The Company meets the requirements for the use of Form S-3 under the Securities Act. The
Commission has not notified the Company of any objection to the use of the form of the Registration
Statement. The Registration Statement complied in all material respects on the date on which it
was declared effective by the Commission and on the Effective Date of this Agreement, and will
comply in all material respects on each applicable Fixed Request Exercise Date and on each
applicable Settlement Date, with the requirements of the Securities Act and the Registration
Statement (including the documents incorporated by reference therein) did not as of the Effective
Date and shall not on each applicable Fixed Request Exercise Date and on each applicable Settlement
Date 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
this representation and warranty does not apply to statements in or omissions from the Registration
Statement made in reliance upon and in conformity with information relating to the Investor
furnished to the Company in writing by or on behalf of the Investor expressly for use therein. The
Registration Statement, as of the Effective Date, meets the requirements set forth in Rule
415(a)(1)(x) under the Securities Act. The Base Prospectus complied in all material respects on
its date and on the Effective Date, and will comply in all material respects on each applicable
Fixed Request Exercise Date and on each applicable Settlement Date, with the requirements of the
Securities Act and did not on its date and on the Effective Date and shall not on each applicable
Fixed Request Exercise Date and on each applicable Settlement Date 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, in the light of the circumstances under which they were made, not
misleading; provided that this representation and warranty does not apply to statements in
or omissions from the Base Prospectus made in reliance upon and in conformity with information
relating to the Investor furnished to the Company in writing by or on behalf of the Investor
expressly for use therein.

          (iii) In accordance with Rule 2710(b)(7)(C)(i) of the Conduct Rules of the National
Association of Securities Dealers, Inc., the offering of the Shares pursuant to this Agreement has
been registered with the Commission on Form S-3 under the Securities Act

16

 

pursuant to the standards
for Form S-3 in effect prior to October 21, 1992, and the Shares are being offered pursuant to Rule
415 promulgated under the Securities Act.

          (iv) Each Prospectus Supplement required to be filed pursuant to Sections 1.4 and 5.9 hereof,
when filed with the Commission under Rule 424(b) under the Securities Act and on the applicable
Settlement Date, shall comply in all material respects with the provisions of the Securities Act
and shall not when filed or on the Settlement Date 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, in the light of the circumstances under which they are made, not misleading, except that
this representation and warranty does not apply to statements in or omissions from any Prospectus
Supplement made in reliance upon and in conformity with information relating to the Investor
furnished to the Company in writing by or on behalf of the Investor expressly for use therein.

          (v) 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) relating to the Shares, the Company was not and is not an Ineligible Issuer (as
defined in Rule 405 under the Securities Act), without taking account of any determination by the
Commission pursuant to Rule 405 that it is not necessary that the Company be considered an
Ineligible Issuer. Each Permitted Free Writing Prospectus (a) shall conform in all material
respects to the requirements of the Securities Act on the date of its first use, (b) when
considered together with the Prospectus on each applicable Fixed Request Exercise Date and on each
applicable Settlement Date, shall not 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, in
the light of the circumstances under which they are made, not misleading, and (c) shall not include
any information that conflicts with the information contained in the Registration Statement,
including any document incorporated by reference therein and any Prospectus Supplement deemed to be
a part thereof that has not been superseded or modified. The immediately preceding sentence does
not apply to statements in or omissions from any Permitted Free Writing Prospectus made in reliance
upon and in conformity with information relating to the Investor furnished to the Company in
writing by or on behalf of the Investor expressly for use therein.

          (vi) Prior to the Effective Date, the Company has not distributed any offering material in
connection with the offering and sale of the Shares. From and after the Effective Date and prior
to the completion of the distribution of the Shares, the Company shall not distribute any offering
material in connection with the offering and sale of the Shares, other than the Registration
Statement, the Base Prospectus as supplemented by any Prospectus Supplement or a Permitted Free
Writing Prospectus.

     Section 4.19 Employees. As of the Effective Date, neither the Company nor any
Subsidiary of the Company has any collective bargaining arrangements or agreements covering any of
its employees, except as
set forth in the Commission Documents. As of the Effective Date, except as disclosed in the
Registration Statement or the Commission Documents, no officer, consultant or key employee of the
Company or any Subsidiary whose termination, either individually or in the aggregate, would
reasonably be expected to have a Material Adverse

17

 

Effect, has terminated or, to the knowledge of
the Company, has any present intention of terminating his or her employment or engagement with the
Company or any Subsidiary.

     Section 4.20 Use of Proceeds. The proceeds from the sale of the Shares shall be used by
the Company and its Subsidiaries as set forth in the Base Prospectus and any Prospectus Supplement
filed pursuant to Sections 1.4 and 5.9.

     Section 4.21 Public Utility Holding Company Act and Investment Company Act Status. The
Company is not a “holding company” or a “public utility company” as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended. The Company is not, and as a result of the
consummation of the transactions contemplated by this Agreement and the application of the proceeds
from the sale of the Shares as set forth in the Base Prospectus and any Prospectus Supplement shall
not be, an “investment company” or a company “controlled” by an “investment company,” within the
meaning of the Investment Company Act of 1940, as amended.

     Section 4.22 ERISA. No liability to the Pension Benefit Guaranty Corporation has been
incurred with respect to any Plan by the Company or any of its Subsidiaries which has had or would
have a Material Adverse Effect. No “prohibited transaction” (as defined in Section 406 of ERISA or
Section 4975 of the Code) or “accumulated funding deficiency” (as defined in Section 203 of ERISA)
or any of the events set forth in Section 4043(b) of ERISA has occurred with respect to any Plan
which has had or would have a Material Adverse Effect, and the execution and delivery of this
Agreement and the issuance and sale of the Shares hereunder shall not result in any of the
foregoing events. Each Plan is in compliance in all material respects with applicable law,
including ERISA and the Code; the Company has not incurred and does not expect to incur liability
under Title IV of ERISA with respect to the termination of, or withdrawal from, any Plan; and each
Plan for which the Company would have any liability that is intended to be qualified under Section
401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by
action or failure to act, which would cause the loss of such qualifications. As used in this
Section 4.22, the term “Plan” shall mean an “employee pension benefit plan” (as
defined in Section 3 of ERISA) which is or has been established or maintained, or to which
contributions are or have been made, by the Company or any Subsidiary or by any trade or business,
whether or not incorporated, which, together with the Company or any Subsidiary, is under common
control, as described in Section 414(b) or (c) of the Code.

     Section 4.23 Taxes. The Company (i) has filed all necessary federal, state and foreign income and franchise tax
returns or has duly requested extensions thereof, except for those the failure of which to file
would not have a Material Adverse Effect, (ii) has paid all federal, state, local and foreign taxes
due and payable for which it is liable, except to the extent that any such taxes are being
contested in good faith and by appropriate proceedings, except for such taxes the failure of which
to pay would not have a Material Adverse Effect, and (iii) does not have any tax deficiency or
claims outstanding or assessed or, to the best of the Company’s knowledge, proposed against it
which would have a Material Adverse Effect.

     Section 4.24 Insurance. The Company carries, or is covered by, insurance in such amounts
and covering such risks as the Company deems adequate for the conduct of its and its

18

 

Subsidiaries’
businesses and the value of their respective properties and as is customary for companies engaged
in similar businesses in similar industries.

     Section 4.25 Acknowledgement Regarding Investor’s Purchase of Shares. The Company
acknowledges and agrees that the Investor is acting solely in the capacity of an arm’s length
purchaser with respect to this Agreement and the transactions contemplated hereunder. The Company
further acknowledges that the Investor is not acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to this Agreement and the transactions
contemplated hereunder, and any advice given by the Investor or any of its representatives or
agents in connection with this Agreement and the transactions contemplated hereunder is merely
incidental to the Investor’s purchase of the Shares.

ARTICLE V

COVENANTS

     The Company covenants with the Investor, and the Investor covenants with the Company, as
follows, which covenants of one party are for the benefit of the other party, during the Investment
Period:

     Section 5.1 Securities Compliance. The Company shall notify the Commission and the Trading
Market, as applicable, in accordance with their respective rules and regulations, of the
transactions contemplated by this Agreement, and shall take all necessary action, undertake all
proceedings and obtain all registrations, permits, consents and approvals for the legal and valid
issuance of the Shares to the Investor in accordance with the terms of this Agreement.

     Section 5.2 Registration and Listing. The Company shall take all action necessary to cause
the Common Stock to continue to be registered as a class of securities under Sections 12(b) or
12(g) of the Exchange Act, shall comply with its reporting and filing obligations under the
Exchange Act, and shall not take any action or file any document (whether or not permitted by the
Securities Act) to terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under the
Exchange Act or Securities Act, except as permitted herein. The Company shall take all action
necessary to continue the listing and trading of its Common Stock and the listing of the Shares
purchased by Investor hereunder on the Trading Market, and shall comply with the Company’s
reporting, filing and other obligations under the bylaws, listed securities maintenance standards
and other rules of the Trading Market.

     Section 5.3 Compliance with Laws.

          (i) The Company shall comply, and cause each Subsidiary to comply, (a) with all laws, rules,
regulations and orders applicable to the business and operations of the Company and its
Subsidiaries except as would not have a Material Adverse Effect and (b) with all applicable
provisions of the Securities Act, the Exchange Act and the listing standards of the Trading Market.
Without limiting the generality of the foregoing, neither the Company nor any of its officers,
directors or affiliates has taken or will take, directly or indirectly, any action designed or
intended to stabilize or manipulate the price of any security of the Company, or which caused or
resulted in, or which would in the future reasonably be expected to cause or result in,
stabilization or manipulation of the price of any security of the Company.

19

 

          (ii) The Investor shall comply with all laws, rules, regulations and orders applicable to the
performance by it of its obligations under this Agreement and its investment in the Shares, except
as would not, individually or in the aggregate, prohibit or otherwise interfere with the ability of
the Investor to enter into and perform its obligations under this Agreement in any material
respect. Without limiting the foregoing, the Investor shall comply with all applicable provisions
of the Securities Act and the Exchange Act.

     Section 5.4 Keeping of Records and Books of Account; Foreign Corrupt Practices Act.

          (i) The Company shall keep and cause each Subsidiary to keep adequate records and books of
account, in which complete entries shall be made in accordance with GAAP consistently applied,
reflecting all financial transactions of the Company and its Subsidiaries, and in which, for each
fiscal year, all proper reserves for depreciation, depletion, obsolescence, amortization, taxes,
bad debts and other purposes in connection with its business shall be made. The Company shall
maintain a system of internal accounting controls which are sufficient to provide reasonable
assurance that (a) transactions are executed with management’s authorization; (b) transactions are
recorded as necessary to permit preparation of the consolidated financial statements of the Company
and to maintain accountability for the Company’s consolidated assets; (c) access to the Company’s
assets is permitted only in accordance with management’s authorization; and (d) the reporting of
the Company’s assets is compared with existing assets at regular intervals.

          (ii) Neither the Company, nor any of its Subsidiaries, nor to the knowledge of the Company,
any of their respective directors, officers, agents, employees or any other persons acting on their
behalf shall, in connection with the operation of their respective businesses, (a) use any
corporate funds for unlawful contributions, payments, gifts or entertainment or to make
any unlawful expenditures relating to political activity to government officials, candidates
or members of political parties or organizations, (b) pay, accept or receive any unlawful
contributions, payments, expenditures or gifts, or (c) violate or operate in noncompliance with any
export restrictions, anti-boycott regulations, embargo regulations or other applicable domestic or
foreign laws and regulations.

          (iii) Subject to the requirements of Section 5.12 hereof, from time to time from and after the
period beginning with the third Trading Day immediately preceding each Fixed Request Exercise Date
through and including the applicable Settlement Date, the Company shall make available for
inspection and review by the Investor, customary documentation allowing the Investor and/or its
appointed counsel or advisors to conduct due diligence.

     Section 5.5 Limitations on Holdings and Issuances. At no time during the term of this
Agreement shall the Investor directly or indirectly own more than 9.9% of the then issued and
outstanding shares of Common Stock. The Company shall not be obligated to issue and the Investor
shall not be obligated to purchase any shares of Common Stock which would result in the issuance
under this Agreement to the Investor at any time of Shares which, when aggregated with all other
shares of Common Stock then owned beneficially by the Investor, would result in the beneficial
ownership by the Investor of more than 9.9% of the then issued and outstanding shares of the Common
Stock.

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     Section 5.6 Other Agreements and Other Financings.

          (i) The Company shall not enter into, announce or recommend to its stockholders any agreement,
plan, arrangement or transaction in or of which the terms thereof would restrict, materially delay,
conflict with or impair the ability or right of the Company or any Subsidiary to deliver Shares to
the Investor in respect of a Fixed Request on the applicable Settlement Date (notwithstanding any
early termination thereof by the Company and/or the Investor in accordance with the terms of this
Agreement).

          (ii) The Company shall notify the Investor, within 48 hours, if it enters into any agreement,
plan, arrangement or transaction with a third party, the principal purpose of which is to obtain
during a Pricing Period an Other Financing not constituting an Acceptable Financing (an “Other
Financing Notice”); provided, however, that the Company shall notify the
Investor as promptly as practicable, but in no event later than 24 hours after (an “Integration
Notice”) if it enters into any agreement, plan, arrangement or transaction with a third party,
the principal purpose of which is to obtain an Other Financing which would be integrated with the
transactions contemplated by this Agreement for purposes of determining whether approval of the
Company’s stockholders, in order for the Company to make Fixed Request Notice(s) hereunder, is
required under any bylaw, listed securities maintenance standards or other rules of the Trading
Market and, if required under applicable law, including, without limitation, Regulation FD
promulgated by the Commission, or under the applicable rules and regulations of the Trading Market,
the Company shall publicly disclose such information in accordance with Regulation FD and the
applicable rules and regulations of the Trading Market. For purposes of this Section 5.6(ii), any
press release issued by, or Commission Document filed by, the Company shall constitute sufficient
notice, provided that it is issued or filed, as the case may be, within the
time requirements set forth in the first sentence of this Section 5.6(ii) for an Other
Financing Notice or an Integration Notice, as applicable. For greater certainty, the entry by the
Company into any agreement, plan, arrangement or transaction with a third party to obtain an Other
Financing outside of a Pricing Period shall not trigger any requirement for the Company to deliver
an Other Financing Notice. During any Pricing Period in which the Company is required to provide
notice pursuant to the first sentence of this Section 5.6(ii), the Investor shall (i) have the
option to purchase the Shares subject to the Fixed Request at (x) the price therefor in accordance
with the terms of this Agreement or (y) the third party’s per share purchase price in connection
with the Other Financing, net of such third party’s discounts, Warrant Value and fees, or (ii) the
Investor may elect to not purchase any Shares subject to the Fixed Request for that Pricing Period.
An “Other Financing” shall mean (x) the issuance of Common Stock for a purchase price less
than, or the issuance of securities convertible into or exchangeable for Common Stock at an
exercise or conversion price (as the case may be) less than, the then Current Market Price of the
Common Stock (in each case, after all fees, discounts, Warrant Value and commissions associated
with the transaction) (a “Below Market Offering”); (y) the implementation by the Company of
any mechanism in respect of any securities convertible into or exchangeable for Common Stock for
the reset of the purchase price of the Common Stock to below the then Current Market Price of the
Common Stock (including, without limitation, any antidilution or similar adjustment provisions in
respect of any Company securities); or (z) the issuance of options, warrants or similar rights of
subscription in each case not constituting an Acceptable Financing. “Acceptable Financing”
shall mean the issuance by the Company of: (1) shares of Common Stock or securities convertible
into or exchangeable for Common Stock other

21

 

than in connection with a Below Market Offering; (2)
shares of Common Stock or securities convertible into or exchangeable for Common Stock in
connection with awards under the Company’s benefit and equity plans and arrangements, stock holder
rights plans or pursuant to consulting or other vendor agreements and the issuance of shares of
Common Stock upon the conversion, exercise or exchange thereof; (3) shares of Common Stock issuable
upon the conversion or exchange of equity awards or convertible or exchangeable securities
outstanding as of the Effective Date; (4) shares of Common Stock and/or warrants or similar rights
to subscribe for the purchase of shares of Common Stock in connection with technology sharing,
licensing, research and joint development agreements (or amendments thereto) with third parties,
and the issuance of shares of Common Stock upon the exercise thereof; and (5) shares of Common
Stock and/or warrants or similar rights to subscribe for the purchase of shares of Common Stock
issued in connection with equipment financings and/or real property leases (or amendments thereto)
and the issuance of shares of Common Stock upon the exercise thereof.

     Section 5.7 Stop Orders. The Company shall advise the Investor immediately and shall
confirm such advice in writing: (i) of the Company’s receipt of notice of any request by the
Commission for amendment of or a supplement to the Registration Statement, the Prospectus, any
Permitted Free Writing Prospectus or for any additional information; (ii) of the Company’s receipt
of notice of the issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the suspension of qualification of the Shares for offering or sale in
any jurisdiction or the initiation of any proceeding for such purpose; and (iii) of the Company
becoming aware of the happening of any event, which makes any statement of a material fact made in
the Prospectus or any Permitted Free Writing Prospectus untrue or which requires the
making of any additions to or changes to the statements then made in the Prospectus or any
Permitted Free Writing Prospectus in order to state a material fact required by the Securities Act
to be stated therein or necessary in order to make the statements then made therein, in light of
the circumstances under which they were made, not misleading, or of the necessity to amend the
Registration Statement or supplement the Prospectus or any Permitted Free Writing Prospectus to
comply with the Securities Act or any other law. If at any time the Commission shall issue any stop
order suspending the effectiveness of the Registration Statement, the Company shall use
commercially reasonable efforts to obtain the withdrawal of such order at the earliest possible
time.

     Section 5.8 Amendments to the Registration Statement; Prospectus Supplements; Free Writing
Prospectuses.

          (i) Except as provided in this Agreement and other than periodic reports required to be filed
pursuant to the Exchange Act, the Company shall not file with the Commission any amendment to the
Registration Statement that relates to the Investor, the Agreement or the transactions contemplated
hereby or file with the Commission any Prospectus Supplement that relates to the Investor, this
Agreement or the transactions contemplated hereby with respect to which (a) the Investor shall not
previously have been advised, (b) the Company shall not have given due consideration to any
comments thereon received from the Investor or its counsel, or (c) the Investor shall reasonably
object after being so advised, unless it is necessary to amend the Registration Statement or make
any supplement to the Prospectus to comply with the Securities Act or any other applicable law or
regulation, in which case the Company shall immediately so inform the Investor, the Investor shall
be provided with a reasonable opportunity

22

 

to review and comment upon any disclosure relating to the
Investor and the Company shall expeditiously furnish to the Investor an electronic copy thereof. In
addition, for so long as, in the reasonable opinion of counsel for the Investor, the Prospectus (or
in lieu thereof, the notice referred to in Rule 173(a) under the Securities Act) is required to be
delivered in connection with any purchase of Shares by the Investor, the Company shall not file any
Prospectus Supplement with respect to the Shares without delivering or making available a copy of
such Prospectus Supplement, together with the Base Prospectus, to the Investor promptly.

          (ii) The Company agrees that, unless it obtains the prior written consent of the Investor, it
has not made and will not make an offer relating to the Shares that would constitute an Issuer Free
Writing Prospectus or that would otherwise constitute a Free Writing Prospectus required to be
filed by the Company or the Investor with the Commission or retained by the Company or the Investor
under Rule 433 under the Securities Act. The Investor agrees that, unless it obtains the prior
written consent of the Company, it has not made and will not make an offer relating to the Shares
that would constitute a Free Writing Prospectus required to be filed by the Company with the
Commission or retained by the Company under Rule 433 under the Securities Act. Any such Issuer
Free Writing Prospectus or other Free Writing Prospectus consented to by the Investor or the
Company is referred to in this Agreement as a “Permitted Free Writing Prospectus.” The
Company agrees that (x) it has treated and will treat, as the case may be, each Permitted Free
Writing Prospectus as an Issuer Free Writing Prospectus and (y) it has complied and will comply, as
the case may be, with the requirements of Rules 164 and 433
under the Securities Act applicable to any Permitted Free Writing Prospectus, including in
respect of timely filing with the Commission, legending and record keeping.

     Section 5.9 Prospectus Delivery. The Company shall file with the Commission a Prospectus
Supplement pursuant to Rule 424(b) under the Securities Act on the first Trading Day immediately
following the last Trading Day of each Pricing Period. The Company shall provide the Investor a
reasonable opportunity to comment on a draft of each such Prospectus Supplement and any Issuer Free
Writing Prospectus, shall give due consideration to all such comments and, subject to the
provisions of Section 5.8 hereof, shall deliver or make available to the Investor, without charge,
an electronic copy of each form of Prospectus Supplement, together with the Base Prospectus, and
any Permitted Free Writing Prospectus on each applicable Settlement Date. The Company consents to
the use of the Prospectus (and of any Prospectus Supplement thereto) in accordance with the
provisions of the Securities Act and with the securities or “blue sky” laws of the jurisdictions in
which the Shares may be sold by the Investor, in connection with the offering and sale of the
Shares and for such period of time thereafter as the Prospectus (or in lieu thereof, the notice
referred to in Rule 173(a) under the Securities Act) is required by the Securities Act to be
delivered in connection with sales of the Shares. If during such period of time any event shall
occur that in the judgment of the Company and its counsel is required to be set forth in the
Prospectus or any Permitted Free Writing Prospectus or should be set forth therein in order to make
the statements made therein, in the light of the circumstances under which they were made, not
misleading, or if it is necessary to supplement or amend the Prospectus or any Permitted Free
Writing Prospectus to comply with the Securities Act or any other applicable law or regulation, the
Company shall forthwith prepare and, subject to Section 5.8 above, file with the Commission an
appropriate Prospectus Supplement to the Prospectus (or supplement to the Permitted Free Writing
Prospectus) and shall expeditiously furnish or make available to the Investor an electronic copy
thereof.

23

 

Section 5.10 Selling Restrictions.

          (i) The Investor covenants that from and after the date hereof through and including the
90th day next following the termination of this Agreement (the “Restricted
Period”), neither the Investor nor any of its affiliates (within the meaning of the Exchange
Act) nor any entity managed by the Investor shall, directly or indirectly, sell any securities of
the Company, except the Shares that it owns or has the right to purchase as provided in a Fixed
Request Notice. During the Restricted Period, neither the Investor or any of its affiliates nor
any entity managed or controlled by the Investor shall sell any shares of Common Stock of the
Company it does not “own” or have the unconditional right to receive under the terms of this
Agreement (within the meaning of Rule 200 of Regulation SHO promulgated by the Commission under the
Exchange Act), including Shares in any account of the Investor or in any account directly or
indirectly managed or controlled by the Investor or any of its affiliates or any entity managed or
controlled by the Investor. Without limiting the generality of the foregoing, prior to and during
the Restricted Period, neither the Investor nor any of its affiliates nor any entity managed or
controlled by the Investor or any of its affiliates shall enter into a short position with respect
to shares of Common Stock of the Company, including in any account of the Investor’s or in any
account directly or indirectly managed or controlled by the Investor or any of its Affiliates or
any entity managed or controlled by the Investor, except that the Investor
may sell Shares that it is obligated to purchase under a pending Fixed Request Notice but has
not yet taken possession of so long as the Investor (or the Broker-Dealer, as applicable) covers
any such sales with the Shares purchased pursuant to such Fixed Request Notice; provided,
however, that the Investor (or the Broker-Dealer, as applicable) shall not be required to
cover any such sales with the Shares purchased pursuant to such Fixed Request Notice if (a) the
Fixed Request is terminated by mutual agreement of the Company and the Investor and, as a result of
such termination, no Shares are delivered to the Investor under this Agreement or (b) the Company
otherwise fails to deliver such Shares to the Investor on the applicable Settlement Date upon the
terms and subject to the provisions of this Agreement. Prior to and during the Restricted Period,
the Investor shall not grant any option to purchase or acquire any right to dispose or otherwise
dispose for value of any shares of Common Stock or any securities convertible into or exercisable
or exchangeable for, or warrants to purchase, any shares of Common Stock, or enter into any swap,
hedge or other agreement that transfers, in whole or in part, the economic risk of ownership of the
Common Stock, except for such sales expressly permitted by this Section 5.10(i).

          (ii) In addition to the foregoing, in connection with any sale of the Company’s securities
(including any sale permitted by paragraph (i) above), the Investor shall comply in all respects
with all applicable laws, rules, regulations and orders, including, without limitation, the
requirements of the Securities Act and the Exchange Act.

     Section 5.11 Effective Registration Statement. During the Investment Period, the Company
shall use its best efforts to maintain the continuous effectiveness of the Registration Statement
under the Securities Act.

     Section 5.12 Non-Public Information. Neither the Company nor any of its directors,
officers or agents shall disclose any material non-public information about the Company to the

24

 

Investor, unless a timely public announcement thereof is made by the Company in the manner
contemplated by Regulation FD.

     Section 5.13 Broker/Dealer. The Investor shall use one or more broker-dealers to
effectuate all sales, if any, of the Shares that it may purchase from the Company pursuant to this
Agreement which (or whom) shall be unaffiliated with the Investor and not then currently engaged or
used by the Company (collectively, the “Broker-Dealer”). The Investor shall provide the
Company with all information regarding the Broker-Dealer reasonably requested by the Company. The
Investor shall be solely responsible for all fees and commissions of the Broker-Dealer.

     Section 5.14 Update of Disclosure Schedule. During the Investment Period, the Company
shall from time to time update the Disclosure Schedule as may be required to satisfy the condition
set forth in Section 6.3(i). For purposes of this Section 5.14, any disclosure made in a schedule
to the Compliance Certificate shall be deemed to be an update of the Disclosure Schedule.
Notwithstanding anything in this Agreement to the contrary, no update to the Disclosure Schedule
pursuant to this Section 5.14
shall cure any breach of a representation or warranty of the Company contained in this Agreement
and shall not affect any of the Investor’s remedies with respect thereto.

ARTICLE VI

OPINION OF COUNSEL AND CERTIFICATE; CONDITIONS TO THE SALE AND

PURCHASE OF THE SHARES

     Section 6.1 Opinion of Counsel and Certificate. Simultaneously with the execution and
delivery of this Agreement, the Investor has received and relied upon (i) an opinion of outside
counsel to the Company, dated the Effective Date, in the form mutually agreed to by the parties
hereto, and (ii) a certificate from the Company, dated the Effective Date, in the form of
Exhibit C hereto.

     Section 6.2 Conditions Precedent to the Obligation of the Company. The obligation
hereunder of the Company to issue and sell the Shares to the Investor under any Fixed Request
Notice or Optional Amount is subject to the satisfaction or (to the extent permitted by applicable
law) waiver of each of the conditions set forth below. These conditions are for the Company’s sole
benefit and (to the extent permitted by applicable law) may be waived by the Company at any time in
its sole discretion.

          (i) Accuracy of the Investor’s Representations and Warranties. The representations
and warranties of the Investor contained in this Agreement (i) that are not qualified by
“materiality” shall have been true and correct in all material respects when made and shall be true
and correct in all material respects as of the applicable Fixed Request Exercise Date and the
applicable Settlement Date with the same force and effect as if made on such dates, except to the
extent such representations and warranties are as of another date, in which case, such
representations and warranties shall be true and correct in all material respects as of such other
date and (ii) that are qualified by “materiality” shall have been true and correct when made and
shall be true and correct as of the applicable Fixed Request Exercise Date and the applicable
Settlement Date with the same force and effect as if made on such dates, except to the extent

25

 

such representations and warranties are as of another date, in which case, such representations and
warranties shall be true and correct as of such other date.

          (ii) Registration Statement. The Registration Statement is effective and neither the
Company nor the Investor shall have received notice that the Commission has issued or intends to
issue a stop order with respect to the Registration Statement. The Company shall have a maximum
dollar amount of Shares registered under the Registration Statement which are in an amount not less
than the maximum dollar amount worth of Shares issuable pursuant to all Fixed Request Notices and
Optional Amounts during the Investment Period. The Current Report shall have been filed with the
Commission, as required pursuant to Section 1.4, and all Prospectus Supplements shall have been
filed with the Commission, as required pursuant to Sections 1.4 and 5.9 hereof, to disclose the
sale of the Shares prior to each Settlement Date, as applicable. Any other material required to be
filed by the Company or any other offering participant pursuant to Rule 433(d) under the Securities
Act shall have been filed with the
Commission within the applicable time periods prescribed for such filings by Rule 433 under
the Securities Act.

          (iii) Performance by the Investor. The Investor shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Investor at or prior to the applicable
Fixed Request Exercise Date and the applicable Settlement Date.

          (iv) No Injunction. No statute, regulation, order, decree, writ, ruling or injunction
shall have been enacted, entered, promulgated, threatened or endorsed by any court or governmental
authority of competent jurisdiction which prohibits the consummation of or which would materially
modify or delay any of the transactions contemplated by this Agreement.

          (v) No Suspension, Etc. Trading in the Common Stock shall not have been suspended by
the Commission or the Trading Market (except for any suspension of trading of limited duration
agreed to by the Company, which suspension shall be terminated prior to the applicable Fixed
Request Exercise Date and applicable Settlement Date), and, at any time prior to the applicable
Fixed Request Exercise Date and applicable Settlement Date, none of the events described in clauses
(i), (ii) and (iii) of Section 5.7 shall have occurred, trading in securities generally as reported
on the Trading Market shall not have been suspended or limited, nor shall a banking moratorium have
been declared either by the United States or New York State authorities, nor shall there have
occurred any material outbreak or escalation of hostilities or other national or international
calamity or crisis of such magnitude in its effect on, or any material adverse change in, any
financial market which, in each case, in the reasonable judgment of the Company, makes it
impracticable or inadvisable to issue the Shares.

          (vi) No Proceedings or Litigation. No action, suit or proceeding before any
arbitrator or any court or governmental authority shall have been commenced or threatened, and no
inquiry or investigation by any governmental authority shall have been commenced or threatened,
against the Company or any Subsidiary, or any of the officers, directors or affiliates of the
Company or any Subsidiary, seeking to restrain, prevent or change the transactions contemplated by
this Agreement, or seeking damages in connection with such transactions.

26

 

          (vii) Aggregate Limit. The issuance and sale of the Shares issuable pursuant to such
Fixed Request Notice or Optional Amount shall not violate Sections 2.2, 2.12 and 5.5 hereof.

     Section 6.3 Conditions Precedent to the Obligation of the Investor. The obligation
hereunder of the Investor to accept a Fixed Request or Optional Amount grant and to acquire and pay
for the Shares is subject to the satisfaction or (to the extent permitted by applicable law)
waiver, at or before each Fixed Request Exercise Date and each Settlement Date, of each of the
conditions set forth below. These conditions are for the Investor’s sole benefit and (to the extent
permitted by applicable law) may be waived by the Investor at any time in its sole discretion.

          (i) Accuracy of the Company’s Representations and Warranties. The representations and
warranties of the Company contained in this Agreement (i) that are not
qualified by “materiality” or “Material Adverse Effect” shall have been true and correct in
all material respects when made and shall be true and correct in all material respects as of the
applicable Fixed Request Exercise Date and the applicable Settlement Date with the same force and
effect as if made on such dates, except to the extent such representations and warranties are as of
another date, in which case, such representations and warranties shall be true and correct in all
material respects as of such other date and (ii) that are qualified by “materiality” or “Material
Adverse Effect” shall have been true and correct when made and shall be true and correct as of the
applicable Fixed Request Exercise Date and the applicable Settlement Date with the same force and
effect as if made on such dates, except to the extent such representations and warranties are as of
another date, in which case, such representations and warranties shall be true and correct as of
such other date.

          (ii) Registration Statement. The Registration Statement is effective and neither the
Company nor the Investor shall have received notice that the Commission has issued or intends to
issue a stop order with respect to the Registration Statement. The Company shall have a maximum
dollar amount certain of Shares registered under the Registration Statement which are in an amount
not less than the maximum dollar amount worth of Shares issuable pursuant to all Fixed Request
Notices and Optional Amounts during the Investment Period. The Current Report shall have been
filed with the Commission, as required pursuant to Section 1.4, and all Prospectus Supplements
shall have been filed with the Commission, as required pursuant to Sections 1.4 and 5.9 hereof, to
disclose the sale of the Shares prior to each Settlement Date, as applicable, and an electronic
copy of each such Prospectus Supplement together with the Base Prospectus shall have been delivered
or made available to the Investor in accordance with Section 5.9 hereof. Any other material
required to be filed by the Company or any other offering participant pursuant to Rule 433(d) under
the Securities Act shall have been filed with the Commission within the applicable time periods
prescribed for such filings by Rule 433 under the Securities Act.

          (iii) No Suspension. Trading in the Common Stock shall not have been suspended by the
Commission or the Trading Market (except for any suspension of trading of limited duration agreed
to by the Company, which suspension shall be terminated prior to the applicable Fixed Request
Exercise Date and applicable Settlement Date), and, at any time prior to the applicable Fixed
Request Exercise Date and applicable Settlement Date, none of the events described in clauses (i),
(ii) and (iii) of Section 5.7 shall have occurred, trading in securities

27

 

generally as reported on
the Trading Market shall not have been suspended or limited, nor shall a banking moratorium have
been declared either by the United States or New York State authorities, nor shall there have
occurred any material outbreak or escalation of hostilities or other national or international
calamity or crisis of such magnitude in its effect on, or any material adverse change in, any
financial market which, in each case, in the reasonable judgment of the Investor, makes it
impracticable or inadvisable to purchase the Shares.

          (iv) Performance of the Company. The Company shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Company at or prior to the applicable
Fixed Request Exercise Date and the applicable Settlement Date and shall have delivered to the
Investor on the applicable Settlement Date the Compliance Certificate substantially in the form
attached hereto as Exhibit D.

          (v) No Injunction. No statute, rule, regulation, order, decree, writ, ruling or
injunction shall have been enacted, entered, promulgated, threatened or endorsed by any court or
governmental authority of competent jurisdiction which prohibits the consummation of or which would
materially modify or delay any of the transactions contemplated by this Agreement.

          (vi) No Proceedings or Litigation. No action, suit or proceeding before any
arbitrator or any court or governmental authority shall have been commenced or threatened, and no
inquiry or investigation by any governmental authority shall have been commenced or threatened,
against the Company or any Subsidiary, or any of the officers, directors or affiliates of the
Company or any Subsidiary, seeking to restrain, prevent or change the transactions contemplated by
this Agreement, or seeking damages in connection with such transactions.

          (vii) Aggregate Limit. The issuance and sale of the Shares issuable pursuant to such
Fixed Request Notice or Optional Amount shall not violate Sections 2.2, 2.12 and 5.5 hereof.

          (viii) Shares Authorized. The Shares issuable pursuant to such Fixed Request Notice
or Optional Amount shall have been duly authorized by all necessary corporate action of the
Company.

          (ix) Notification of Listing of Shares. The Company shall have submitted to the
Trading Market a notification form of listing of additional shares related to the Shares issuable
pursuant to such Fixed Request or Optional Amount in accordance with the bylaws, listed securities
maintenance standards and other rules of the Trading Market.

          (x) Opinions of Counsel; Bring-Down. Subsequent to the filing of the Current Report
pursuant to Section 1.4 and prior to the first Fixed Request Exercise Date, the Investor shall have
received an opinion from outside counsel to the Company in the form mutually agreed to by the
parties hereto. On each Settlement Date, the Investor shall have received an opinion “bring down”
from outside counsel to the Company in the form mutually agreed to by the parties hereto.

          (xi) Payment of Investor’s Counsel Fees; Due Diligence Expenses. On the Effective
Date, the Company shall have paid by wire transfer of immediately available funds to

28

 

an account
designated by the Investor’s counsel, the fees and expenses of the Investor’s counsel in accordance
with the proviso to the first sentence of Section 9.1(i) of this Agreement. On the 30th
day of the third month in each calendar quarter during the Investment Period, the Company shall
have paid by wire transfer of immediately available funds (a) to an account designated by the
Investor, the due diligence expenses incurred by the Investor and (b) to an account designated by
the Investor’s counsel, the fees and expenses of the Investor’s counsel, in each case, in
accordance with the provisions of the second sentence of Section 9.1(i) of this Agreement.

ARTICLE VII

TERMINATION

     Section 7.1 Term, Termination by Mutual Consent. Unless earlier terminated as provided hereunder, this Agreement shall terminate automatically on
the earliest of (i) the first day of the month next following the 24-month anniversary of the
Effective Date (the “Investment Period”), (ii) the date that the aggregate dollar amount of
Shares registered under the Registration Statement have been issued and sold and (iii) the date the
Investor shall have purchased the Total Commitment of shares of Common Stock (subject in all cases
to the Trading Market Limit). The Company may terminate this Agreement effective upon three Trading
Days’ prior written notice to the Investor under Section 9.4; provided, however,
that such termination shall not occur during a Pricing Period or prior to a Settlement Date. This
Agreement may be terminated at any time by the mutual written consent of the parties, effective as
of the date of such mutual written consent unless otherwise provided in such written consent, it
being hereby acknowledged and agreed that the Investor may not consent to such termination during a
Pricing Period or prior to a Settlement Date in the event the Investor has instructed the
Broker-Dealer to effect an open-market sale of Shares which are subject to a pending Fixed Request
Notice but which have not yet been physically delivered by the Company (and/or credited by
book-entry) to the Investor in accordance with the terms and subject to the conditions of this
Agreement.

     Section 7.2 Other Termination. If the Company provides the Investor with an Other
Financing Notice (other than in respect of an underwritten public offering, registered direct or
other customary offering where the Issuer may sell stock at a discount to the market price or an
Acceptable Financing) or an Integration Notice, the Investor shall have the right to terminate this
Agreement within the subsequent 30-day period (the “Event Period”), effective upon one
Trading Day’s prior written notice delivered to the Company in accordance with Section 9.4 at any
time during the Event Period. For greater certainty, the entry by the Company into any agreement,
plan, arrangement, or transaction with a third party to obtain an Other Financing outside of a
Pricing Period shall not trigger any requirement for the Company to deliver an Other Financing
Notice and (unless entry into such agreement, plan, arrangement or transaction requires the
delivery of an Integration Notice) shall not lead to a right of termination in favor of the
Investor. The Company shall notify the Investor and the Investor shall have the right to terminate
this Agreement at any time if: (i) any condition, occurrence, state of facts or event constituting
a Material Adverse Effect has occurred; (ii) a Material Change in Ownership has occurred; or (iii)
a default or event of default has occurred and is continuing under the terms of any agreement,
contract, note or other instrument to which the Company or any of its Subsidiaries is a party with
respect to any indebtedness for borrowed money representing more than 10% of the Company’s
consolidated assets, in any such case, upon one Trading Day’s prior written notice delivered to the
Company in accordance with Section 9.4 hereof.

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     Section 7.3 Effect of Termination. In the event of termination by the Company or the
Investor, written notice thereof shall forthwith be given to the other party as provided in Section
9.4 and the transactions contemplated by this Agreement shall be terminated without further action
by either party. If this Agreement is terminated as provided in Section 7.1 or 7.2 herein, this
Agreement shall become void and of no further force and effect, except as provided in Section 9.9
hereof. Nothing in this Section 7.3 shall be deemed to release the Company or the Investor from any
liability for any breach under
this Agreement, or to impair the rights of the Company and the Investor to compel specific
performance by the other party of its obligations under this Agreement.

ARTICLE VIII

INDEMNIFICATION

     Section 8.1 General Indemnity.

          (i) Indemnification by the Company. The Company shall indemnify and hold harmless the
Investor, the Broker-Dealer, each affiliate, employee, representative and advisor of and to the
Investor and the Broker-Dealer, and each person, if any, who controls the Investor or the
Broker-Dealer within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act from and against all losses, claims, damages, liabilities and expenses (including
reasonable costs of defense and investigation and all attorneys’ fees) to which the Investor, the
Broker-Dealer and each such other person may become subject, under the Securities Act or otherwise,
insofar as such losses, claims, damages, liabilities and expenses (or actions in respect thereof)
arise out of or are based upon (i) any violation of law (including United States federal securities
laws but excluding any British Virgin Islands law) in connection with the transactions contemplated
by this Agreement by the Company or any of its Subsidiaries, affiliates, officers, directors or
employees, (ii) any untrue statement or alleged untrue statement of a material fact contained, or
incorporated by reference, in the Registration Statement or any amendment thereto or any omission
or alleged omission to state therein, or in any document incorporated by reference therein, a
material fact required to be stated therein or necessary to make the statements therein not
misleading, or (iii) any untrue statement or alleged untrue statement of a material fact contained,
or incorporated by reference, in the Prospectus, any Issuer Free Writing Prospectus, or in any
amendment thereof or supplement thereto, or in any “issuer information” (as defined in Rule 433
under the Securities Act) of the Company, which “issuer information” is required to be, or is,
filed with the Commission or otherwise contained in any Free Writing Prospectus, or any amendment
or supplement thereto, or any omission or alleged omission to state therein, or in any document
incorporated by reference therein, 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; provided, however, that (A) the Company shall not be liable under this
Section 8.1(i) to the extent that a court of competent jurisdiction shall have determined by a
final judgment (from which no further appeals are available) that such loss, claim, damage,
liability or expense resulting directly and solely from any such acts or failures to act,
undertaken or omitted to be taken by the Investor or such person through its bad faith or willful
misconduct, (B) the foregoing indemnity shall not apply to any loss, claim, damage, liability or
expense to the extent, but only to the extent, arising out of or based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon and in conformity
with written information furnished to the Company by

30

 

the Investor expressly for use in the Current
Report or any Prospectus Supplement or Permitted Free Writing Prospectus, or any amendment thereof
or supplement thereto, and (C) with respect to the Prospectus, the foregoing indemnity shall not
inure to the benefit of the Investor or any such person from whom the person asserting any loss,
claim, damage, liability or expense purchased Common Stock, if copies of all Prospectus Supplements
required to be filed pursuant to Section 1.4 and 5.9, together with the Base Prospectus, were
timely delivered or made available to the Investor pursuant hereto and a copy of the Base
Prospectus, together with a Prospectus Supplement (as applicable), was not sent or given by or on behalf of the Investor
or any such person to such person, if required by law to have been delivered, at or prior to the
written confirmation of the sale of the Common Stock to such person, and if delivery of the Base
Prospectus, together with a Prospectus Supplement (as applicable), would have cured the defect
giving rise to such loss, claim, damage, liability or expense.

     The Company shall reimburse the Investor, the Broker-Dealer and each such controlling person
promptly upon demand (with accompanying presentation of documentary evidence) for all legal and
other costs and expenses reasonably incurred by the Investor, the Broker-Dealer or such indemnified
persons in investigating, defending against, or preparing to defend against any such claim, action,
suit or proceeding with respect to which it is entitled to indemnification.

          (ii) Indemnification by the Investor. The Investor shall indemnify and hold harmless
the Company, each of its directors and officers, and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act from
and against all losses, claims, damages, liabilities and expenses (including reasonable costs of
defense and investigation and all attorneys fees) to which the Company and each such other person
may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages,
liabilities and expenses (or actions in respect thereof) arise out of or are based upon (i) any
violation of law (including United States federal securities laws) in connection with the
transactions contemplated by this Agreement by the Investor or any of its affiliates, officers,
directors or employees, or (ii) any untrue statement or alleged untrue statement of a material fact
contained in the Current Report or any Prospectus Supplement or Permitted Free Writing Prospectus,
or in any amendment thereof or supplement thereto, or any omission or alleged omission to state
therein 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, in each case, to the
extent, but only to the extent, the untrue statement, alleged untrue statement, omission or alleged
omission was made in reliance upon, and in conformity with, written information furnished by the
Investor to the Company expressly for inclusion in the Current Report or such Prospectus Supplement
or Permitted Free Writing Prospectus, or any amendment thereof or supplement thereto.

     The Investor shall reimburse the Company and each such director, officer or controlling person
promptly upon demand for all legal and other costs and expenses reasonably incurred by the Company
or such indemnified persons in investigating, defending against, or preparing to defend against any
such claim, action, suit or proceeding with respect to which it is entitled to indemnification.

     Section 8.2 Indemnification Procedures. Promptly after a person receives notice of a claim
or the commencement of an action for which the person intends to seek indemnification

31

 

under Section
8.1, the person will notify the indemnifying party in writing of the claim or commencement of the
action, suit or proceeding; provided, however, that failure to notify the
indemnifying party will not relieve the indemnifying party from liability under Section 8.1, except
to the extent it has been materially prejudiced by the failure to give notice. The indemnifying
party will be entitled to participate in the defense of any claim, action, suit or proceeding as to
which indemnification is being sought, and if the
indemnifying party acknowledges in writing the obligation to indemnify the party against whom the
claim or action is brought, the indemnifying party may (but will not be required to) assume the
defense against the claim, action, suit or proceeding with counsel satisfactory to it. After an
indemnifying party notifies an indemnified party that the indemnifying party wishes to assume the
defense of a claim, action, suit or proceeding, the indemnifying party will not be liable for any
legal or other expenses incurred by the indemnified party in connection with the defense against
the claim, action, suit or proceeding except that if, in the opinion of counsel to the indemnifying
party, one or more of the indemnified parties should be separately represented in connection with a
claim, action, suit or proceeding, the indemnifying party will pay the reasonable fees and expenses
of one separate counsel for the indemnified parties. Each indemnified party, as a condition to
receiving indemnification as provided in Section 8.1, will cooperate in all reasonable respects
with the indemnifying party in the defense of any action or claim as to which indemnification is
sought. No indemnifying party will be liable for any settlement of any action effected without its
prior written consent. Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested (by written notice provided in accordance with Section 9.4) an indemnifying
party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated hereby effected
without its written consent if (i) such settlement is entered into more than 45 days after receipt
by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have
received written notice of the terms of such settlement at least 30 days prior to such settlement
being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified
party in accordance with such request prior to the date of such settlement. No indemnifying party
will, without the prior written consent of the indemnified party, effect any settlement of a
pending or threatened action with respect to which an indemnified party is, or is informed that it
may be, made a party and for which it would be entitled to indemnification, unless the settlement
includes an unconditional release of the indemnified party from all liability and claims which are
the subject matter of the pending or threatened action.

     If for any reason the indemnification provided for in this Agreement is not available to, or
is not sufficient to hold harmless, an indemnified party in respect of any loss or liability
referred to in Section 8.1 as to which such indemnified party is entitled to indemnification
thereunder, each indemnifying party shall, in lieu of indemnifying the indemnified party,
contribute to the amount paid or payable by the indemnified party as a result of such loss or
liability, (i) in the proportion which is appropriate to reflect the relative benefits received by
the indemnifying party, on the one hand, and by the indemnified party, on the other hand, from the
sale of Shares which is the subject of the claim, action, suit or proceeding which resulted in the
loss or liability or (ii) if the allocation provided by clause (i) 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 indemnifying party, on the one hand, and the
indemnified party, on the other hand, with respect to the statements or omissions which are the
subject of the claim,

32

 

action, suit or proceeding that resulted in the loss or liability, as well as
any other relevant equitable considerations.

     The remedies provided for in Section 8.1 and this Section 8.2 are not exclusive and shall not
limit any rights or remedies which may otherwise be available to any Indemnified Person at law or
in equity.

ARTICLE IX

MISCELLANEOUS

     Section 9.1 Fees and Expenses.

          (i) Each party shall bear its own fees and expenses related to the transactions contemplated
by this Agreement; provided, however, that the Company shall pay, promptly
following the receipt of an invoice, by wire transfer of immediately available funds to an account
designated by the Investor’s counsel, all reasonable attorneys’ fees and expenses (exclusive of
disbursements and out-of-pocket expenses) incurred by the Investor, up to an aggregate of $35,000,
in connection with the preparation, negotiation, execution and delivery of this Agreement, legal
due diligence of the Company and review of the Registration Statement, the Base Prospectus, the
Current Report, and any Permitted Free Writing Prospectus. In addition, the Company shall pay, on
the 30th day of the third month in each calendar quarter during the Investment Period
(in each case following the receipt of an invoice), up to $12,500, representing (x) the due
diligence expenses incurred by the Investor during the Investment Period and (y) the attorneys’
fees and expenses incurred by the Investor in connection with ongoing legal due diligence of the
Company, any amendments, modifications or waivers of this Agreement and review of Prospectus
Supplements, Permitted Free Writing Prospectuses, opinion “bring downs” and all other related
documents to be delivered by the Company and its counsel in connection with a Fixed Request
Exercise Date and the applicable Settlement Date, provided, however, that the Company shall not be
required to pay any such fee in any calendar quarter in which the Investor has purchased Shares
under this Agreement. The Company shall pay all U.S. federal, state and local stamp and other
similar transfer taxes and duties levied in connection with issuance of the Shares pursuant hereto.

          (ii) If the Company issues a Fixed Request Notice and fails to deliver the Shares to the
Investor on the applicable Settlement Date and such failure continues for 10 Trading Days, the
Company shall pay the Investor, in cash (or, at the option of the Investor, in shares of Common
Stock which have not been registered under the Securities Act), as liquidated damages for such
failure and not as a penalty, an amount equal to 2.0% of the payment required to be paid by the
Investor on such Settlement Date (i.e., the sum of the Fixed Amount Requested and the Optional
Amount Dollar Amount) for the initial 30 days following such Settlement Date until the Shares have
been delivered, and an additional 2.0% for each additional 30-day period thereafter until the
Shares have been delivered, which amount shall be prorated for such periods less than thirty 30
days (subject in all cases to the Trading Market Limit).

33

 

     Section 9.2 Specific Enforcement, Consent to Jurisdiction, Waiver of Jury Trial.

          (i) The Company and the Investor acknowledge and agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that either party shall be
entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this
Agreement by the other party and to enforce specifically the
terms and provisions hereof this being in addition to any other remedy to which either party
may be entitled by law or equity.

          (ii) Each of the Company and the Investor (a) hereby irrevocably submits to the jurisdiction
of the United States District Court and other courts of the United States sitting in the State of
Delaware for the purposes of any suit, action or proceeding arising out of or relating to this
Agreement, and (b) hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or
proceeding is improper. Each of the Company and the Investor consents to process being served in
any such suit, action or proceeding by mailing a copy thereof to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing in this Section 9.2 shall affect or
limit any right to serve process in any other manner permitted by law.

          (iii) Each of the Company and the Investor hereby waives to the fullest extent permitted by
applicable law, any right it may have to a trial by jury in respect to any litigation directly or
indirectly arising out of, under or in connection with this Agreement or the transactions
contemplated hereby or disputes relating hereto. Each of the Company and the Investor (a) certifies
that no representative, agent or attorney of any other party has represented, expressly or
otherwise, that such other party would not, in the event of litigation, seek to enforce the
foregoing waiver and (b) acknowledges that it and the other parties hereto have been induced to
enter into this Agreement by, among other things, the mutual waivers and certifications in this
Section 9.2.

     Section 9.3 Entire Agreement; Amendment. This Agreement, together with the exhibits
referred to herein and the Disclosure Schedule, represents the entire agreement of the parties with
respect to the subject matter hereof, and there are no promises, undertakings, representations or
warranties by either party relative to subject matter hereof not expressly set forth herein. No
provision of this Agreement may be amended other than by a written instrument signed by both
parties hereto. The Disclosure Schedule and all exhibits to this Agreement are hereby incorporated
by reference in, and made a part of, this Agreement as if set forth in full herein.

     Section 9.4 Notices. Any notice, demand, request, waiver or other communication required
or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand
delivery or facsimile (with facsimile machine confirmation of delivery received) at the address or
number designated below (if delivered on a business day during normal business hours where such
notice is to be

34

 

received), or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice is to be received) or (b) on
the second business day following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The
address for such communications shall be:

	 	 	 	 	 
	 

	 	If to the Company:
	 	Onyx Pharmaceuticals, Inc.
	 

	 	 	 	2100 Powell Street
	 

	 	 	 	Emeryville, CA 94608
	 

	 	 	 	Telephone Number: (510) 597-6500
	 

	 	 	 	Fax: (510) 597-6601
	 

	 	 	 	Attention: Chief Financial Officer
	 
	 	 	 	 
	 

	 	With copies to:
	 	Cooley Godward LLP
	 

	 	 	 	Five Palo Alto Square
	 

	 	 	 	3000 El Camino Real
	 

	 	 	 	Palo Alto, CA 94303
	 

	 	 	 	Telephone Number: (650) 843-5000
	 

	 	 	 	Fax: (650) 849-7400
	 

	 	 	 	Attention: Robert L. Jones, Esq.
	 
	 	 	 	 
	 

	 	If to the Investor:
	 	Azimuth Opportunity Ltd.
	 

	 	 	 	c/o Fortis Prime Fund Solutions (BVI) Limited
	 

	 	 	 	P.O. Box 761, 1st Floor
	 

	 	 	 	James Frett Building
	 

	 	 	 	Road Town, Tortola
	 

	 	 	 	British Virgin Islands
	 

	 	 	 	Telephone Number: (284) 494-6046
	 

	 	 	 	Fax: (284) 494-6898
	 

	 	 	 	Attention: Peter O’Connell
	 
	 	 	 	 
	 

	 	With copies to:
	 	Greenberg Traurig, LLP
	 

	 	 	 	The MetLife Building
	 

	 	 	 	200 Park Avenue
	 

	 	 	 	New York, NY 10166
	 

	 	 	 	Telephone Number: (212) 801-9200
	 

	 	 	 	Fax: (212) 801-6400
	 

	 	 	 	Attention: Clifford E. Neimeth, Esq.
	 

	 	 	 	                  Anthony J. Marsico, Esq.

Either party hereto may from time to time change its address for notices by giving at least 10 days
advance written notice of such changed address to the other party hereto.

     Section 9.5 Waivers. No waiver by either party of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in
the future or a waiver of any other provisions, condition or requirement hereof nor shall any delay
or omission of any party to exercise any right hereunder in any manner impair the exercise of any
such right accruing to it thereafter. No provision of this Agreement may be waived other than in a
written instrument signed by the party against whom enforcement of such waiver is sought.

35

 

     Section 9.6 Headings. The article, section and subsection headings in this Agreement are for convenience only and
shall not constitute a part of this Agreement for any other purpose and shall not be deemed to
limit or affect any of the provisions hereof.

     Section 9.7 Successors and Assigns. The Investor may not assign this Agreement to any
person without the prior consent of the Company, in the Company’s sole discretion. This Agreement
shall be binding upon and inure to the benefit of the parties and their successors and assigns. The
assignment by a party to this Agreement of any rights hereunder shall not affect the obligations of
such party under this Agreement.

     Section 9.8 Governing Law. This Agreement shall be governed by and construed in accordance
with the internal procedural and substantive laws of the State of Delaware, without giving effect
to the choice of law provisions of such state.

     Section 9.9 Survival. The representations and warranties of the Company and the Investor
contained in Articles III and IV and the covenants contained in Article V shall survive the
execution and delivery hereof until the termination of this Agreement, and the agreements and
covenants set forth in Article VIII of this Agreement shall survive the execution and delivery
hereof.

     Section 9.10 Counterparts. This Agreement may be executed in counterparts, all of which
taken together shall constitute one and the same original and binding instrument and shall become
effective when all counterparts have been signed by each party and delivered to the other parties
hereto, it being understood that all parties hereto need not sign the same counterpart. In the
event any signature is delivered by facsimile transmission, the party using such means of delivery
shall cause four additional executed signature pages to be physically delivered to the other
parties within five days of the execution and delivery hereof.

     Section 9.11 Publicity. On or after the Effective Date, the Company may issue a press
release or otherwise make a public statement or announcement with respect to this Agreement or the
transactions contemplated hereby or the existence of this Agreement (including, without limitation,
by filing a copy of this Agreement with the Commission); provided, however, that
prior to issuing any such press release, or making any such public statement or announcement, the
Company shall consult with the Investor on the form and substance of such press release or other
disclosure.

     Section 9.12 Severability. The provisions of this Agreement are severable and, in the
event that any court of competent jurisdiction shall determine that any one or more of the
provisions or part of the provisions
contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect any other
provision or part of a provision of this Agreement, and this Agreement shall be reformed and
construed as if such invalid or illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid, legal and enforceable to the
maximum extent possible.

36

 

     Section 9.13 Further Assurances. From and after the date of this Agreement, upon the
request of the Investor or the Company, each of the Company and the Investor shall execute and
deliver such instrument, documents and other writings as may be reasonably necessary or desirable
to confirm and carry out and to effectuate fully the intent and purposes of this Agreement.

[Signature Page Follows]

37

 

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

	 	 	 	 	 	 	 
	 	 	ONYX PHARMACEUTICALS, INC.:	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Gregory W. Schafer	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Gregory W. Schafer	 	 
	 

	 	 	 	Title:
Vice President and Chief Financial 

Officer
	 	 
	 
	 	 	 	 	 	 
	 	 	AZIMUTH OPPORTUNITY LTD.:	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Deirdre M. McCoy	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Deirdre M. McCoy	 	 
	 

	 	 	 	Title: Corporate Secretary	 	 

38

 

ANNEX A TO THE

COMMON STOCK PURCHASE AGREEMENT

DEFINITIONS

     (a) “Acceptable Financing” shall have the meaning assigned to such term in Section
5.6(ii) hereof.

     (b) “Aggregate Limit” shall have the meaning assigned to such term in Section 1.1
hereof.

     (c) “Base Prospectus” shall mean the Company’s prospectus, dated June 15, 2006, a
preliminary form of which is included in the Registration Statement.

     (d) “Below Market Offering” shall have the meaning assigned to such term in Section
5.6(ii) hereof.

     (e) “Broker-Dealer” shall have the meaning assigned to such term in Section 5.13
hereof.

     (f) “Bylaws” shall have the meaning assigned to such term in Section 4.3 hereof.

     (g) “Charter” shall have the meaning assigned to such term in Section 4.3 hereof.

     (h) “Code” shall mean the Internal Revenue Code of 1986, as amended.

     (i) “Commission” shall mean the Securities and Exchange Commission or any successor
entity.

     (j) “Commission Documents” shall mean (1) all reports, schedules, registrations,
forms, statements, information and other documents filed by the Company with the Commission
pursuant to the reporting requirements of the Exchange Act, including all filings pursuant to
Section 13(a) or 15(d) of the Exchange Act, which have been filed by the Company since January 1,
2006 and which hereafter shall be filed by the Company during the Investment Period, including,
without limitation, the Current Report and the Form 10-K filed by the Company for its fiscal year
ended December 31, 2005 (the “2005 Form 10-K”), (2) the Registration Statement, as the same
may be amended from time to time, the Prospectus and each Prospectus Supplement, and each Permitted
Free Writing Prospectus and (3) all information contained in such filings and all documents and
disclosures that have been and heretofore shall be incorporated by reference therein.

     (k) “Common Stock” shall have the meaning assigned to such term in the Recitals.

     (l) “Current Market Price” means, with respect to any particular measurement date, the
closing price of a share of Common Stock as reported on the Trading Market for the Trading Day
immediately preceding such measurement date.

     (m) “Current Report” shall have the meaning assigned to such term in Section 1.4
hereof.

 

 

     (n) “Discount Price” shall have the meaning assigned to such term in Section 2.2
hereof.

     (o) “Effective Date” shall mean the date of this Agreement.

     (p) “Environmental Laws” shall have the meaning assigned to such term in Section 4.15
hereof.

     (q) “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended.

     (r) “Event Period” shall have the meaning assigned to such term in Section 7.2 hereof.

     (s) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission thereunder.

     (t) “FDA” shall have the meaning assigned to such term in Section 4.14(a) hereof.

     (u) “Fixed Amount Requested” shall mean the amount of a Fixed Request requested by the
Company in a Fixed Request Notice delivered pursuant to Section 2.1 hereof.

     (v) “Fixed Request” means the transactions contemplated under Sections 2.1 through 2.8
of this Agreement.

     (w) “Fixed Request Amount” means the actual amount of proceeds received by the Company
pursuant to a Fixed Request under this Agreement.

     (x) “Fixed Request Exercise Date” shall have the meaning assigned to such term in
Section 2.2 hereof.

     (y) “Fixed Request Notice” shall have the meaning assigned to such term in Section 2.1
hereof.

     (z) “Free Writing Prospectus” shall mean a “free writing prospectus” as defined in
Rule 405 promulgated under the Securities Act.

     (aa) “GAAP” shall mean generally accepted accounting principles in the United States
of America as applied by the Company.

     (bb) “Governmental Licenses” shall have the meaning assigned to such term in Section
4.14(a) hereof.

     (cc) “Indebtedness” shall have the meaning assigned to such term in Section 4.9
hereof.

     (dd) “Integration Notice” shall have the meaning assigned to such term in Section
5.6(ii) hereof.

 

 

     (ee) “Intellectual Property” shall have the meaning assigned to such term in Section
4.14(b) hereof.

     (ff) “Investment Period” shall have the meaning assigned to such term in Section 7.1
hereof.

     (gg) “Issuer Free Writing Prospectus” shall mean an “issuer free writing prospectus”
as defined in Rule 433 promulgated under the Securities Act.

     (hh) “Market Capitalization” shall be calculated on the Trading Day preceding the
applicable Pricing Period and shall be the product of (x) the number of shares of Common Stock
outstanding and (y) the closing bid price of the Common Stock, both as determined by Bloomberg
Financial LP using the DES and HP functions.

     (ii) “Material Adverse Effect” shall mean any condition, occurrence, state of facts or
event having, or insofar as reasonably can be foreseen would likely have, any effect on the
business, operations, properties or condition (financial or otherwise) of the Company that is
material and adverse to the Company and its Subsidiaries, taken as a whole, and/or any condition,
occurrence, state of facts or event that would prohibit or otherwise materially interfere with or
delay the ability of the Company to perform any of its obligations under this Agreement.

     (jj) “Material Agreements” shall have the meaning assigned to such term in Section
4.16 hereof.

     (kk) “Material Change in Ownership” shall mean the occurrence of any one or more of
the following: (i) the acquisition by any person, including any syndicate or group deemed to be a
“person” under Section 13(d)(3) of the Exchange Act, of beneficial ownership, directly or
indirectly, through a purchase, merger or other acquisition transaction or series of transactions,
of shares of capital stock or other securities of the Company entitling such person to exercise,
upon an event of default or default or otherwise, 50% or more of the total voting power of all
series and classes of capital stock and other securities of the Company entitled to vote generally
in the election of directors, other than any such acquisition by the Company, any Subsidiary of the
Company or any employee benefit plan of the Company; (ii) any consolidation or merger of the
Company with or into any other person, any merger of another person into the Company, or any
conveyance, transfer, sale, lease or other disposition of all or substantially all of the
properties and assets of the Company to another person, other than (a) any such transaction (x)
that does not result in any reclassification, conversion, exchange or cancellation of outstanding
shares of capital stock of the Company and (y) pursuant to which holders of capital stock of the
Company immediately prior to such transaction have the entitlement to exercise, directly or
indirectly, 50% or more of the total voting power of all shares of capital stock of the Company
entitled to vote generally in the election of directors of the continuing or surviving person
immediately after such transaction or (b) any merger which is effected solely to change the
jurisdiction of incorporation of the Company and results in a reclassification, conversion or
exchange of outstanding shares of Common Stock solely into shares of common stock of the surviving
entity; or (iii) the Company is liquidated or dissolved or a resolution is passed by the Company’s
stockholders approving a plan of liquidation or dissolution of the Company. Beneficial ownership
shall be determined in accordance with Rule 13d-3 promulgated by the SEC under the Exchange Act.
The term

 

 

“person” shall include any syndicate or group which would be deemed to be a “person” under
Section 13(d)(3) of the Exchange Act.

     (ll) “Multiplier” shall have the meaning assigned to such term in Section 2.3 hereof.

     (mm) “NASDAQ” means the NASDAQ Global Market or any successor thereto.

     (nn) “Optional Amount” means the transactions contemplated under Sections 2.9 through
2.11 of this Agreement.

     (oo) “Optional Amount Dollar Amount” shall mean the actual amount of proceeds received
by the Company pursuant to the exercise of an Optional Amount under this Agreement.

     (pp) “Optional Amount Notice” shall mean a notice sent to the Company with regard to
the Investor’s election to exercise all or any portion of an Optional Amount, as provided in
Section 2.11 hereof and substantially in the form attached hereto as Exhibit B.

     (qq) “Optional Amount Threshold Price” shall have the meaning assigned to such term in
Section 2.1 hereof.

     (rr) “Other Financing” shall have the meaning assigned to such term in Section 5.6(ii)
hereof.

     (ss) “Other Financing Notice” shall have the meaning assigned to such term in Section
5.6(ii) hereof.

     (tt) “Permitted Free Writing Prospectus” shall have the meaning assigned to such term
in Section 5.8(ii) hereof.

     (uu) “Plan” shall have the meaning assigned to such term in Section 4.22 hereof.

     (vv) “Pricing Period shall mean a period of 10 consecutive Trading Days commencing on
the day of delivery of a Fixed Request Notice (or, if the Fixed Request Notice is delivered after
9:30 a.m. (New York time), on the next Trading Day), or such other period mutually agreed upon by
the Investor and the Company.

     (ww) “Prospectus” shall mean the Base Prospectus, together with any final prospectus
filed with the Commission pursuant to Rule 424(b), as supplemented by any Prospectus Supplement.

     (xx) “Prospectus Supplement” shall mean any prospectus supplement to the Base
Prospectus filed with the Commission pursuant to Rule 424(b) under the Securities Act, including
the documents incorporated by reference therein.

     (yy) “Reduction Notice” shall have the meaning assigned to such term in Section 2.8
hereof.

 

 

     (zz) “Registration Statement” shall mean the registration statement on Form S-3,
Commission File Number 333-134565, filed by the Company with the Commission under the Securities
Act for the registration of the Shares, as such Registration Statement may be amended and
supplemented from time to time.

     (aaa) “Restricted Period” shall have the meaning assigned to such term in Section 5.10
hereof.

     (bbb) “Securities Act” shall mean the Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder.

     (ccc) “Settlement Date” shall have the meaning assigned to such term in Section 2.7
hereof.

     (ddd) “Shares” shall mean shares of Common Stock issuable to the Investor upon
exercise of a Fixed Request and shares of Common Stock issuable to the Investor upon exercise of an
Optional Amount.

     (eee) “Significant Subsidiary” means any Subsidiary of the Company that would
constitute a Significant Subsidiary of the Company within the meaning of Rule 1-02 of Regulation
S-X of the Commission.

     (fff) “SOXA” shall have the meaning assigned to such term in Section 4.6(c) hereof.

     (ggg) “Subsidiary” shall mean any corporation or other entity of which at least a
majority of the securities or other ownership interest having ordinary voting power (absolutely or
contingently) for the election of directors or other persons performing similar functions are at
the time owned directly or indirectly by the Company and/or any of its other Subsidiaries.

     (hhh) “Total Commitment” shall have the meaning assigned to such term in Section 1.1
hereof.

     (iii) “Threshold Price” is the lowest price (except to the extent otherwise provided
in Section 2.6) at which the Company may sell Shares during the applicable Pricing Period as set
forth in a Fixed Request Notice (not taking into account the applicable percentage discount during
such Pricing Period determined in accordance with Section 2.2); provided, however,
that at no time shall the Threshold Price be lower than $8.00 per share unless the Company and the
Investor mutually shall agree.

     (jjj) “Trading Day” shall mean a full trading day (beginning at 9:30 a.m., New York
City time, and ending at 4:00 p.m., New York City time) on the NASDAQ.

     (kkk) “Trading Market” means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the American Stock Exchange, the New
York Stock Exchange or the NASDAQ.

 

 

     (lll) “Trading Market Limit” means that number of shares which is one less than 20.0%
of the issued and outstanding shares of the Company’s Common Stock as of the Effective Date.

     (mmm) “VWAP” shall mean the daily volume weighted average price (based on a Trading
Day from 9:30 p.m. to 4:00 p.m. (New York time)) of the Company on the NASDAQ as reported by
Bloomberg Financial L.P. using the AQR function.

     (nnn) “Warrant Value” shall mean the fair value of all warrants, options and other
similar rights issued to a third party in connection with an Other Financing, determined by using a
standard Black-Scholes option-pricing model using an expected volatility percentage as shall be
mutually agreed by the Investor and the Company. In the case of a dispute relating to such
expected volatility assumption, the Investor shall obtain applicable volatility data from three
investment banking firms of nationally recognized reputation, and the parties hereto shall use the
average thereof for purposes of determining the expected volatility percentage in connection with
the Black-Scholes calculation referred to in the immediately preceding sentence.

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