Exhibit 10.1

AGREEMENT AND PLAN OF MERGER

by and among:

L IGAND P HARMACEUTICALS I NCORPORATED ,

a Delaware corporation;

C AYMUS A CQUISITION , I NC . ,

a Delaware corporation; and

C Y D EX P HARMACEUTICALS , I NC .,

a Delaware corporation

Dated as of January 14, 2011

i

ii

Exhibits

EXHIBIT A: CVR Agreement

EXHIBIT B:  Shareholders’ Representative Agreement

iii

INDEX OF DEFINED TERMS (NOT OTHERWISE

DEFINED IN ARTICLE I)

Adjustment Section 6.02(b)

Agreement Preamble

Appraisal Rights Section 2.10

Bankruptcy and Equity Exception Section 3.03(a)

Certificate of Merger Section 2.03

Closing Section 2.04

Closing Date Section 2.04

Closing Date Non-Cash Working Capital Amount 6.02(a)

Closing Statement 6.02(a)

Closing Statement Objection Notice 6.03

Company Preamble

Company Board Recitals

Company Charter Documents Section 3.01(c)

Company Contracts Section 3.11(a)

Company Disclosure Letter Article III Preamble

Company Financial Statements Section 3.05(a)

Company Pension Plan Section 3.10(a)

Company Plan Section 3.10(a)

Company Stock Certificate Section 2.07

Company Stockholder Approval Section 3.03(a)

CVR Agreement Section 2.06

D&O Insurance Policy Section 5.09(e)

DGCL Recitals

Dissenting Shares Section 2.11

Effective Time Section 2.03

Environmental Laws Section 3.12(a)

Filed Parent SEC Documents Article IV Preamble

Final Closing Statement 6.02(a)

Improvements Section 3.15(d)

Lease Section 3.15(b)

Leased Real Property Section 3.15(b)

Merger Recitals

Merger Consideration Section 2.06(a)(iii)

Merger Sub Preamble

Outside Date Section 7.01(b)

Parent Preamble

Parent Financial Statements Section 4.05(b)

Parent SEC Documents Section 4.05(a)

Pre-Closing Consideration Section 5.01(a)(2)

Representatives Section 5.03(a)

Required Shareholder Consent Section 3.03(d)

Resolution Period Section 6.03

Shareholders’ Representative Section 5.11

Shareholders’ Representative Agreement Section 2.06(iii)

Surviving Corporation Section 2.01

Transactions Recitals

Transfer Taxes Section 8.06

Transmittal Letter Section 2.08a

AGREEMENT AND PLAN OF MERGER

T HIS A GREEMENT A ND P LAN O F M ERGER (“ Agreement ”) is made and entered into as of January 14, 2011, by and among Ligand Pharmaceuticals Incorporated, a Delaware corporation (“ Parent ”); Caymus Acquisition, Inc., a Delaware corporation and a wholly-owned Subsidiary of Parent (“ Merger Sub ”); and CyDex Pharmaceuticals, Inc., a Delaware corporation (the “ Company ”). Capitalized terms used but not otherwise defined in this Agreement shall have the meanings given to them in Article I .

RECITALS

WHEREAS, the respective boards of directors of each of Parent, Merger Sub and the Company have approved the acquisition of the Company by Parent upon the terms and subject to the conditions set forth in this Agreement;

WHEREAS, upon the terms and subject to the conditions set forth in this Agreement, Merger Sub shall merge with and into the Company (the “ Merger ”) and each Company Share that is issued and outstanding immediately before the Effective Time (other than Dissenting Shares) will be canceled and converted into the right to receive the Merger Consideration, all upon the terms and subject to the conditions set forth herein;

WHEREAS, the board of directors of the Company (the “ Company Board ”) has, upon the terms and subject to the conditions set forth herein, duly adopted resolutions (i) determining that the transactions contemplated by this Agreement, including the Merger (collectively, the “ Transactions ”), are advisable and in the best interests of the Company and its stockholders, (ii) approving this Agreement and the Transactions in accordance with the Delaware General Corporation Law (the “ DGCL ”), (iii) directing that this Agreement be submitted to the stockholders of the Company for adoption, and (iv) recommending that the stockholders of the Company adopt this Agreement and approve the Transactions;

WHEREAS, the boards of directors of Parent and of Merger Sub have, upon the terms and subject to the conditions set forth herein, unanimously and duly approved and declared advisable this Agreement and the Transactions, and Parent, in its capacity as the sole stockholder of Merger Sub, has adopted this Agreement, in each case, in accordance with the DGCL; and

WHEREAS, Parent, Merger Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Merger and the other transactions contemplated by this Agreement and also to prescribe certain conditions to the Merger as specified herein;

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NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Parent, Merger Sub and the Company hereby agree as follows:

ARTICLE I

CERTAIN DEFINITIONS

For purposes of the Agreement:

“ Acquisition Proposal ” shall mean any unsolicited, bona fide offer or proposal (other than an offer or proposal made or submitted by Parent or Merger Sub or any of their Affiliates) relating to a possible Acquisition Transaction.

“ Acquisition Transaction ” shall mean any transaction or series of related transactions (other than the transactions contemplated by this Agreement) involving or resulting in: (i) any acquisition or purchase by any Person or “group” (as defined in or under Section 13(d) of the Exchange Act), directly or indirectly, of more than 20% of the total outstanding voting securities of the Company, or any tender offer or exchange offer that, if consummated, would result in the Person or “group” (as defined in or under Section 13(d) of the Exchange Act) making such offer beneficially owning more than 20% of the total outstanding voting securities of the Company; (ii) any merger, consolidation, share exchange, business combination, acquisition of securities, recapitalization, tender offer, exchange offer or other similar transaction involving the Company pursuant to which the stockholders of the Company immediately before the consummation of such transaction would, as such, hold less than 80% of the equity interests in the surviving or resulting entity of such transaction immediately after consummation thereof; or (iii) other than sales of inventory in the ordinary course of business, any sale (other than the sale of laboratory equipment), lease, exchange, transfer, license, acquisition or disposition of assets constituting more than 10% of the assets of the Company (measured by either book or fair market value thereof) or the net revenues or net income of the Company taken as a whole.

“ Affiliate ” shall mean a Person who is related to another Person such that such Person directly or indirectly controls, is directly or indirectly controlled by or is directly or indirectly under common control with such other Person.

“ Business Day ” shall mean any day other than a Saturday, Sunday or a day on which the banks in San Diego, California are authorized by applicable Legal Requirement or executive order to be closed.

“ Closing Date Balance Sheet ” means a balance sheet of the Company as of the close of business on the Closing Date, to be delivered by Parent after closing pursuant to Section 6.02 , (i) prepared as if it were a year-end balance sheet (including typical year-end adjustments customarily made by the Company; (ii) prepared in accordance with GAAP; and (iii) in a format and in a manner consistent with the balance sheets otherwise provided by the Company (in each case except for the absence of footnotes) to the extent not inconsistent with GAAP.

“ Closing Payment Amount ” shall mean (a) $31,200,000, and (b) either plus (i) the amount, if any, by which the Projected Non-Cash Working Capital Amount exceeds the sum of (A) Target Non-Cash Working Capital Amount plus (B) $200,000; or minus (ii) the amount, if any, by which the Target Non-Cash Working Capital Amount minus $200,000 exceeds the Projected Non-Cash Working Capital Amount (the parties acknowledge that (i) and (ii) are mutually exclusive alternatives).

“ Code ” shall mean the Internal Revenue Code of 1986, as amended from time to time.

“ Company Cash ” shall mean all cash and cash equivalents, plus all short-term and long-term investments to the extent not already included in such, of the Company. It is understood that in the preceding sentence “investments” refers to ownership of financial instruments and not, for example, to investments which the Company has made in its technology.

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“ Company Equity Plans ” shall mean the 1997 Equity Compensation Plan of the Company, as amended from time to time.

“ Company Intellectual Property ” shall mean the Intellectual Property, IP Licenses and Software held for use or used in the business of the Company as presently conducted.

“ Company Material Adverse Effect ” shall mean, in reference to any fact, circumstance, event, change or occurrence, any such fact, circumstance, event, change or occurrence that, individually or in the aggregate with all other facts, circumstances, events, changes or occurrences, has or would reasonably be expected to have a material adverse effect on the results of operations or financial condition of the Company, other than changes, events, occurrences or effects arising out of, resulting from or attributable to (i) changes in conditions in the United States or global economy or capital or financial markets generally, including changes in interest or exchange rates, (ii) conditions (or changes therein) in any industry or industries in which the Company operates, (iii) any change in Legal Requirements or GAAP or interpretation of any of the foregoing, (iv) acts of war, sabotage or terrorism, or any escalation or worsening of any such acts of war, sabotage or terrorism threatened or underway as of the date of this Agreement, (v) storms, earthquakes or other natural disasters, (vi) any action taken by the Company as contemplated or permitted by this Agreement or with Parent’s consent, (vii) the initiation of any litigation by any stockholder of the Company relating to this Agreement or the Merger, (viii) any decline in the market price, or change in trading volume, of the capital stock of the Company or any failure of the Company to meet revenue or earnings projections, either published by the Company or any third party ( provided that this exception shall not prevent or otherwise affect a determination that any changes, state of facts, circumstances, events or effects underlying a change described in this clause (viii) has resulted in, or contributed to, a Company Material Adverse Effect), (ix) any adverse changes, developments, circumstances, events or occurrences relating to the Company’s ongoing research programs to the extent resulting from an action by Parent or any of its Affiliates, (x) the determination by, or the delay of a determination by, the FDA, or any panel or advisory body empowered or appointed thereby, with respect to the approval, non-approval or disapproval of any products similar to or competitive with the Company’s product candidates, (xi) the results of any clinical trial of one or more products or product candidates of any Person other than the Company, (xii) the entry or threatened entry into the market of a generic version of one or more product candidates of the Company or (xiii) the negotiation, execution, announcement or performance of this Agreement or the consummation of the Transactions, including the impact thereof on relationships, contractual or otherwise, with customers, suppliers, distributors, partners, collaborators or employees; except, in the case of the foregoing clauses (i), (ii), (iii), (iv) and (v), to the extent that any such condition has a materially disproportionate adverse effect on the Company, relative to other companies of comparable size to the Company operating in the industry in which the Company operates.

“ Company Options ” shall mean options to purchase Company Shares from the Company, whether granted by the Company pursuant to the Company Equity Plans or otherwise.

“ Company Shares ” shall mean all shares of capital stock of the Company.

“ Confidentiality Agreement ” shall mean the Mutual Confidentiality Agreement dated July 14, 2010, and as may be thereafter extended/amended, between Parent and the Company.

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“ Contract ” shall mean any loan or credit agreement, bond, debenture, note, mortgage, indenture, guarantee, lease or other contract, commitment, agreement, instrument, arrangement, understanding, obligation, undertaking or license (each, including all amendments thereto).

“ Copyrights ” shall mean all registered and unregistered copyrights (including those in Software) and registrations and applications to register the same.

“ CVR ” shall mean a contingent value right having the terms and conditions set forth in the CVR Agreement to be issued in accordance with Section 2.06 in respect of each Outstanding Company Share and as further governed by the Shareholders’ Representative Agreement, whether such CVR is issued at Closing or is a Postclosing CVR—it being understood in any case that the entitlement of a holder of a CVR shall differ depending on whether its holder was at the Effective Time a holder of Company Series B Preferred Stock, of Company Series A Preferred Stock, of Company Series A-1 Preferred Stock, or of Company Common Stock. Nontendering Shareholders shall have no rights under CVRs otherwise issuable to them except for rights that accrue after they are entitled to Postclosing CVRs.

“ CVR Agreement ” shall mean the agreement governing the terms and conditions of the CVRs substantially in the form attached hereto as Exhibit A .

“ Encumbrance ” shall mean, with respect to any property or asset, any mortgage, easement, lien, pledge (including any negative pledge), security interest or other encumbrance of any nature whatsoever in respect of such property or asset.

“ Entity ” shall mean any corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any company limited by shares, limited liability company or joint stock company), firm, society or other enterprise, association, organization or entity (including any Governmental Entity).

“ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ Escrow Account ” shall mean an account maintained by the Escrow Agent pursuant to the Escrow Agreement.

“ Escrow Agent ” shall mean a financial institution chosen as such by mutual agreement of the Shareholders’ Representative and Parent prior to the Effective Time, or its successor determined in accordance with the Escrow Agreement.

“ Escrow Agreement ” shall mean the Escrow Agreement to be entered into among Parent, the Shareholders’ Representative, and the Escrow Agent at or prior to the Effective Time.

“ Exchange ” shall mean The NASDAQ Global Market.

“ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended.

“ Executive ” shall mean any executive officer of the Company.

“ FDA ” shall mean the United States Food and Drug Administration.

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“ GAAP ” shall mean United States generally accepted accounting principles.

“ Governmental Authorization ” shall mean any permit, license, registration, qualification, certificate, clearance, variance, waiver, exemption, certificate of occupancy, exception, franchise, entitlement, consent, confirmation, order, approval or authorization granted by any Governmental Entity.

“ Governmental Entity ” shall mean any federal, state or local government or body or any agency, authority, subdivision or instrumentality of any of the foregoing, including any court, tribunal, department, bureau, administrative agency, commission or board, or any quasi-governmental or private body duly exercising any regulatory, taxing, inspecting or other governmental authority.

“ Indebtedness ” shall mean (i) indebtedness for borrowed money, including indebtedness evidenced by a note, bond, debenture or similar instrument, or (ii) obligations in respect of outstanding letters of credit, acceptances and similar obligations created for the account of such Person.

“ Indemnified Leader ” shall mean each individual who is or was an officer or director of the Company at any time on or before the Effective Time.

“ Indemnified Party ” shall mean each individual who is or was an officer, director, employee or agent of the Company, or its Subsidiaries, at any time on or before the Effective Time who is or was entitled to indemnification pursuant to the DGCL, the Company Charter Documents or any Contract with such Person.

“ Intellectual Property ” shall mean all U.S. and foreign (i) Trademarks, (ii) Patents, (iii) Copyrights, (iv) Trade Secrets and (v) databases and compilations, including any and all electronic data and electronic collections of data.

“ IP Licenses ” shall mean any license or sublicense rights in or to any Intellectual Property.

“ IRS ” shall mean the United States Internal Revenue Service.

“ Knowledge of Parent ” shall mean the actual knowledge of John Higgins, John Sharp or Charles Berkman.

“ Knowledge of the Company ” shall mean the actual knowledge of Theron Odlaug or Allen Roberson.

“ Legal Proceeding ” shall mean any claim (presented formally to a judicial or quasi-judicial Governmental Entity), lawsuit, court action, suit, arbitration or other judicial or administrative proceeding.

“ Legal Prohibition ” shall mean any final, permanent Legal Requirement that is in effect and that prevents or prohibits consummation of the Transactions.

“ Legal Requirement ” shall mean any federal, state or local law, statute, code, ordinance, regulation, code, order, judgment, writ, injunction, decision, ruling or decree promulgated by any Governmental Entity.

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“ MIP ” shall mean the Company’s Management Incentive Plan dated November 29, 2010.

“ Non-Cash Working Capital ” shall mean the Working Capital Amount minus Company Cash.

“ Nontendering Shareholders ” shall mean holders of Company Shares who have not, as of the Effective Time, properly tendered those Company Shares and the related Company Stock Certificates, Transmittal Letters, and signature pages to the Shareholders’ Representative Agreement pursuant to Section 2.08.

“ Outstanding Company Shares ” shall mean the Company Shares issued and outstanding immediately before the Effective Time (not including, for purposes of calculating the allocation of the Merger Consideration, any Company Shares to be cancelled pursuant to Section 2.06(a)(i) and (ii) ).

“ Parent Material Adverse Effect ” shall mean, in reference to any fact, circumstance, event, change or occurrence, any such fact, circumstance, event, change or occurrence that, individually or in the aggregate with all other facts, circumstances, events, changes or occurrences, has or would reasonably be expected to have a material adverse effect on the results of operations or financial condition of Parent and the Parent Subsidiaries, taken as a whole, other than changes, events, occurrences or effects arising out of, resulting from or attributable to (i) changes in conditions in the United States or global economy or capital or financial markets generally, including changes in interest or exchange rates, (ii) conditions (or changes therein) in any industry or industries in which Parent and the Parent Subsidiaries operate, (iii) any change in Legal Requirements or GAAP or interpretation of any of the foregoing, (iv) acts of war, sabotage or terrorism, or any escalation or worsening of any such acts of war, sabotage or terrorism threatened or underway as of the date of this Agreement, (v) storms, earthquakes or other natural disasters, (vi) the initiation of any litigation by any stockholder of Parent relating to this Agreement or the Merger, (vii) any decline in the market price, or change in trading volume, of the capital stock of Parent or any failure of Parent to meet revenue or earnings projections, either published by Parent or any third party ( provided that this exception shall not prevent or otherwise affect a determination that any changes, state of facts, circumstances, events or effects underlying a change described in this clause (vii) has resulted in, or contributed to, a Parent Material Adverse Effect), (viii) the negotiation, execution, announcement or performance of this Agreement or the consummation of the Transactions, including the impact thereof on relationships, contractual or otherwise, with customers, suppliers, distributors, partners, collaborators or employees, (ix) any action taken by Parent or any Parent Subsidiary as contemplated or permitted by this Agreement or with the Company’s consent, (x) the determination by, or the delay of a determination by, the FDA, or any panel or advisory body empowered or appointed thereby, with respect to the approval, non-approval or disapproval of any products similar to or competitive with Parent’s product candidates, (xi) the results of any clinical trial of one or more products or product candidates of any Person other than Parent, or (xii) the entry or threatened entry into the market of a generic version of one or more product candidates of Parent, except , in the case of the foregoing clauses (i), (ii), (iii), (iv) and (v), to the extent that any such condition has a materially disproportionate adverse effect on Parent and the Parent Subsidiaries, taken as a whole, relative to other companies of comparable size to Parent and the Parent Subsidiaries operating in such industry or industries.

“ Parent Subsidiary ” shall mean a Subsidiary of Parent.

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“ Patents ” shall mean all patents and pending patent applications, invention disclosure statements, and any and all divisions, continuations, continuations-in-part, reissues, reexaminations and extensions thereof, any counterparts claiming priority therefrom and like statutory rights.

“ Permitted Encumbrances ” shall mean: (i) Encumbrances for Taxes not yet due and payable or for Taxes that are being contested in good faith by appropriate proceedings; (ii) Encumbrances or imperfections of title resulting from or otherwise relating to any of the contracts referred to in the Company Disclosure Letter, to the extent the Company Disclosure Letter expressly identifies such Encumbrance or imperfection of title (or such is obvious on the face of the contract); (iii) Encumbrances or imperfections of title relating to liabilities expressly reflected in the Company Financial Statements (including any related notes); (iv) Encumbrances arising from or otherwise relating to transfer restrictions under the Securities Act and the securities laws of the various states of the United States or foreign jurisdictions; and (v) mechanics’, materialmen’s and similar statutory liens arising or incurred in the ordinary course of business for amounts not overdue.

“ Person ” shall mean any individual or Entity.

“ Postclosing CVRs ” shall mean the CVRs issuable to Nontendering Shareholders who comply in full with the provisions of Section 2.08(a) after the Effective Time.

“ Projected Closing Date Balance Sheet ” shall mean a balance sheet of the Company as of a date within 3 Business Days before the Effective Time, delivered by the Company at least 2 full Business Days before the Effective Time, containing projections of the Projected Non-Cash Working Capital Amount, as of the projected Effective Time.

“ Projected Non-Cash Working Capital Amount ” shall mean the amount of Non-Cash Working Capital as reflected in those line items on the Projected Closing Date Balance Sheet.

“ SEC ” shall mean the United States Securities and Exchange Commission.

“ Securities Act ” shall mean the United States Securities Act of 1933, as amended.

“ Shareholders’ Account ” shall mean the account established and controlled by the Shareholders’ Representative in accordance with the Shareholders’ Representative Agreement to receive and disburse monies, and among other things to provide for the Adjustment.

“ Shareholders’ Representative ” shall mean the persons (referred to herein jointly in the singular) appointed as such in the Shareholders’ Representative Agreement or their successor(s) as such as appointed pursuant to the Shareholders’ Representative Agreement.

“ Shareholders’ Representative Agreement ” shall mean the agreement of even date herewith by and among the Company and the Shareholders’ Representative, and all of, or up to all of, but in any event at least one of, the Persons who are and who shall be, immediately before the Effective Time, shareholders of record of the Company, and which has been executed by Theron Odlaug and Allen Roberson in their individual capacities solely for the purpose of agreeing to Sections 2.4(c) and 4.2 thereof, which agreement includes, among other things, covenants and acknowledgements for the express benefit of Parent, and a form of which agreement is attached to this Agreement as Exhibit B .

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“ Software ” means all computer programs, including any and all software implementations of algorithms, models and methodologies whether in source code or object code form, and all documentation, including user manuals and training materials, related to any of the foregoing.

“ Subsidiary ” shall mean an Entity that is related to another Entity such that such other Entity directly or indirectly owns, beneficially or of record: (i) an amount of voting securities or other interests in such Entity that is sufficient to enable such other Entity to elect at least a majority of the members of such Entity’s board of directors or comparable governing body; or (ii) more than 50% of the outstanding equity interests issued by such Entity.

“ Superior Proposal ” shall mean any unsolicited, bona fide written offer made by a third party unaffiliated with the Company to directly or indirectly acquire (by way of merger, tender or exchange offer, or otherwise) greater than 95% of the Company’s assets or greater than 95% of the Company shares that the Company Board shall have determined in good faith (after consultation with the Company’s outside legal counsel and financial advisor, and after taking into account, among other things, the financial, legal, and regulatory aspects of such offer (including any financing required and the availability thereof), is more favorable to the stockholders of the Company than the terms of the Merger (taking into account any revisions to the terms hereof proposed by Parent pursuant to Section 5.03(d) ) and is reasonably capable of being consummated on the terms proposed.

“ Target Non-Cash Working Capital Amount ” shall mean $4,232,000.

“ Tax ” or “ Taxes ” shall mean (i) all federal, state, local or foreign taxes, including all net income, gross receipts, capital, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation, property and estimated taxes or other taxes any kind whatsoever, and (ii) all interest, penalties, fines, additions to tax or additional amounts imposed by any Governmental Entity in connection with any item described in clause (i).

“ Tax Returns ” shall mean any return, report, claim for refund, estimate, information return or statement or other similar document relating to or required to be filed with any Governmental Entity with respect to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

“ Termination Fee ” shall mean $2,400,000.

“ Total Merger Consideration ” shall mean (a) the Closing Payment Amount, plus (b) the CVRs and other rights set forth in the CVR Agreement delivered to the Shareholders’ Representative at Closing, and the payments to be made by the Parent pursuant thereto.

“ Trade Secrets ” shall mean confidential technology, know-how, plans, data, designs, protocols, plans, strains, molecules, works of authorship, inventions, processes, formulae, algorithms, models and methodologies, and trade secrets as defined in applicable state law.

“ Trademarks ” shall mean all registered and unregistered trademarks, service marks, trade names, Internet domain names, designs, logos and slogans, together with goodwill, registrations and applications relating to the foregoing.

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“ Transaction Expenses ” shall mean, as of the Effective Time, (i) all amounts paid before the Effective Time or payable after the Effective Time by the Company for the reasonable out-of-pocket transaction fees and expenses of the Company to its legal and (to the extent of arrangements expressly disclosed in the Company Disclosure Letter, and excluding any incremental fees and expenses in connection with any fairness opinion) financial advisors in connection with this Agreement and the Transactions; and (ii) to the extent disclosed in the Company Disclosure Letter, (x) all severance payments paid before the Effective Time or payable after the Effective Time to all employees, consultants and directors of the Company (other than to MIP participants) in connection with separations contemplated by the parties to occur in connection with the Merger, (y) all payments pursuant to the MIP, to persons who both (i) are MIP participants and (ii) the separations of whom are contemplated by the parties to occur in connection with the Merger, to the extent that such payments otherwise would have been payable to such MIP participants as severance pursuant to their employment agreements but for the MIP, and (z) the aggregate amount of premiums, if any, paid by the Company before the Effective Time for the “tail” prepaid policy on the D&O Insurance Policy pursuant to Section 5.09(e) to the extent such payments do not exceed $50,000.

“ Warrants ” shall mean all securities and/or other rights convertible into or exchangeable or exercisable for any Company Shares, other than pursuant to Company Options or conversion of Company preferred stock.

“ Working Capital Amount ” shall mean, as of the Effective Time, the (i) current assets of the Company plus short term and long-term investments (to the extent not included in current assets) less the current liabilities of the Company; plus (ii) (to the extent the working capital of the Company had been reduced by the Transaction Expenses) the Transaction Expenses.

ARTICLE II

THE MERGER; EFFECTIVE TIME

Section 2.01. Merger of Merger Sub into the Company.

Upon the terms and subject to the conditions set forth in this Agreement and in accordance with the DGCL, at the Effective Time, Merger Sub shall be merged with and into the Company, and the separate existence of Merger Sub shall cease. The Company will continue as the surviving corporation in the Merger (the “ Surviving Corporation ”).

Section 2.02. Effect of the Merger.

The Merger shall have the effects set forth in this Agreement and in the applicable provisions of the DGCL, including, without limitation Section 259 of the DGCL. Without limiting the generality of the foregoing and subject thereto, at the Effective Time, all the property rights, privileges, immunities, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation and all the debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.

Section 2.03. Effective Time

Subject to the provisions of this Agreement, Parent, Merger Sub and the Company will cause a properly executed certificate of merger conforming to the requirements of the DGCL (the “ Certificate of Merger ”) to be filed with the Secretary of State of the State of Delaware on the

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Closing Date. The Merger shall become effective at the time the Certificate of Merger is filed with the Secretary of State of the State of Delaware, or at such later time as is agreed to in writing by the parties hereto and specified in the Certificate of Merger (the time at which the Merger becomes effective being referred to in this Agreement as the “ Effective Time ”).

Section 2.04. Closing

The closing of the Transactions (the “ Closing ”) will take place at 10:00 a.m. (San Diego time) on the date (the “ Closing Date ”) that is the second Business Day after the satisfaction or waiver (if such waiver is permitted and effective under applicable Legal Requirements) of the latest to be satisfied or waived of the conditions set forth in Article VI (excluding conditions that, by their terms, are to be satisfied on the Closing Date), unless another time or date is agreed to in writing by the parties. The Closing shall be held at the offices of Stradling Yocca Carlson & Rauth located at 4365 Executive Drive, Suite 1500, San Diego, CA 92121, unless another place is agreed to in writing by the parties.

Section 2.05. Certificate of Incorporation and Bylaws; Officers and Directors.

Unless otherwise jointly determined by Parent and the Company before the Effective Time:

(a) Subject to Section 5.09(a) , (i) the certificate of incorporation of the Company as in effect immediately before the Effective Time shall be the certificate of incorporation of the Surviving Corporation, until thereafter changed or amended as provided therein or by applicable Legal Requirements, and (ii) the bylaws of the Company as in effect immediately before the Effective Time shall be the bylaws of the Surviving Corporation, until thereafter changed or amended as provided therein or by applicable Legal Requirements.

(b) The directors and officers of Merger Sub immediately before the Effective Time shall be the initial directors and officers, respectively, of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation.

Section 2.06. Conversion of Company Shares.

(a) At the Effective Time, by virtue of the Merger and without any further action on the part of Parent, Merger Sub, the Company or any stockholder of the Company or of Merger Sub:

(i) any Company Shares then held by the Company (or held in the Company’s treasury) shall cease to exist, and no consideration shall be paid in exchange therefor;

(ii) any Company Shares then held by Parent, Merger Sub or any other wholly-owned Parent Subsidiary shall cease to exist, and no consideration shall be paid in exchange therefor;

(iii) except as provided in clauses (i) and (ii) above, each issued and outstanding Company Share (other than Dissenting Shares) held by a given holder of Company Shares shall be converted into the right to (subject to applicable prerequisites of having properly tendered such Company shares and the related Company Stock Certificates, Transmittal Letters and signature pages to the Shareholders’ Representative Agreement) receive that portion of the Total Merger Consideration (including any right to receive CVRs and future payments thereunder) set forth opposite such holder’s name in Schedule A to the Shareholders’ Representative Agreement (all referred to herein, as applicable in context per Outstanding Company Share as to each respective type of Outstanding Company Share, as the “ Merger Consideration ”); and

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(iv) each share of Merger Sub then outstanding shall be converted into one share of the common stock of the Surviving Corporation, such that immediately after the Effective Time Parent shall, as the former holder of all the shares of Merger Sub, own a number of shares of the common stock of the Surviving Corporation equal to the number (immediately before the Effective Time) of Outstanding Company Shares.

Section 2.07. Closing of the Company’s Transfer Books.

At the Effective Time: (a) all Company Shares outstanding immediately before the Effective Time shall cease to exist as provided in Section 2.06 and all holders of certificates representing Company Shares that were outstanding immediately before the Effective Time shall cease to have any rights as stockholders of the Company except the right to receive the applicable Merger Consideration therefor; and (b) the stock transfer books of the Company shall be closed with respect to all Company Shares. No further transfer of any such Company Shares shall be made on such stock transfer books after the Effective Time. If, after the Effective Time, a valid certificate previously representing any Company Shares (a “ Company Stock Certificate ”) is presented to the Surviving Corporation or Parent, such Company Stock Certificate shall be canceled and, if it represents Outstanding Company Shares, shall be exchanged as provided in Section 2.08 .

Section 2.08. Exchange of Certificates; Payment of Closing Payment Amount; Issuance of CVRs

(a) Before the Effective Time, the Company shall mail to each Person who is a holder of record of Company Shares, or is anticipated to be such a holder immediately before the Effective Time pursuant to the proper exercise of options, a form of letter of transmittal (“ Transmittal Letter ”) and instructions for use in effecting the surrender of Company Stock Certificates representing such Company Shares in exchange for payment of the applicable Merger Consideration therefor, including instructions that each such Person must tender a signature page agreeing to be bound by the Shareholders’ Representative Agreement. The Company shall deliver to Parent at Closing each such Company Stock Certificate and properly completed and executed Transmittal Letter as has been received at such time, together with a copy of each counterpart signature page to the Shareholders’ Representative Agreement as has been received at such time.

(b) At Closing Parent shall (i) pay by wire transfer to the Shareholders’ Account the Closing Payment Amount, and (ii) issue to each Person who was a holder of record of Company Shares immediately before the Effective Time (or, under the circumstances described in Section 2.08(d) , the transferee of the Company Shares represented by such Company Stock Certificate) the number and type of (uncertificated) CVRs set forth opposite such holder’s name in Schedule A to the Shareholders’ Representative Agreement; provided however that no CVR shall be deemed to be issued to any Nontendering Shareholder unless and until such Nontendering Shareholder is entitled to Postclosing CVRs. The Closing Payment Amount shall be subject to subsequent Adjustment pursuant to Section 2.09 below.

(c) Neither Parent nor the Surviving Corporation shall be liable to any holder of Company Shares for any amount properly paid to a public official pursuant to any applicable abandoned property or escheat Legal Requirements.

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(d) If any Company Stock Certificate shall have been lost, stolen or destroyed, then, upon the making of an affidavit of that fact by the Person claiming such Company Stock Certificate to be lost, stolen or destroyed in a form reasonably satisfactory to Parent and the Shareholders’ Representative (together with an indemnity in form reasonably satisfactory to Parent and the Shareholders’ Representative against any claim that may be made against Parent or the Shareholders’ Representative or otherwise with respect to such certificate and, if required by Parent or the Shareholders’ Representative, the posting by such Person of a bond in such reasonable amount as Parent or the Shareholders’ Representative may direct to support such indemnity), the Shareholders’ Representative shall (subject to the other prerequisites described in Section 2.06(a)(iii) and Section 2.08(b) ) pay out of the Shareholders’ Account in exchange for such lost, stolen or destroyed Company Stock Certificate the applicable Merger Consideration.

(e) In the event of a transfer of ownership of Company Shares which is not registered in the transfer records of the Company, the Merger Consideration may (subject to the other prerequisites described in Section 2.06(a)(iii) and Section 2.08(b) ) be paid and issued with respect to such Company Shares to a transferee of such Company Shares if the Company Stock Certificate representing such Company Shares is presented to Parent or the Shareholders’ Representative, accompanied by all documents reasonably required by Parent or the Shareholders’ Representative to evidence and effect such transfer and to evidence that any applicable stock transfer taxes relating to such transfer have been paid.

(f) The Surviving Corporation or Parent shall bear and pay all charges and expenses incurred in connection with the exchange of the Company Shares.

(g) Parent and the Surviving Corporation shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to the Merger or this Agreement to or toward the Shareholders’ Account, such amounts as Parent or the Surviving Corporation are required to deduct and withhold under the Code with respect to the making of such payment. To the extent that amounts are so withheld and paid over to the appropriate Tax authority or other Governmental Entity by Parent or the Surviving Corporation, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of Company Shares, in respect of whom such deduction and withholding was made by Parent or the Surviving Corporation.

Section 2.09. Closing Payment Adjustment.

(a) Within 60 calendar days after the Closing Date, Parent or the Company shall prepare and deliver to the Shareholders’ Representative a statement (the “ Closing Statement ”) consisting of (i) an unaudited Closing Date Balance Sheet and (ii) a calculation of the amount of Non-Cash Working Capital (the “ Closing Date Non-Cash Working Capital Amount ”) as of the Closing Date, as reflected on the Closing Date Balance Sheet. The Closing Statement will be finalized (as finalized, the “ Final Closing Statement ”) by the parties in accordance with the procedures set forth in Section 2.09(c) . If the Shareholders’ Representative does not object in writing to any item set forth on the Closing Statement by complying in full with Section 2.09(c) , the Closing Statement shall be deemed to have been finalized by the parties as the Final Closing Statement and, as a result thereof shall be final, conclusive, and binding on each of the parties and shall become the Final Closing Statement for purposes of this Agreement. If the Shareholders’ Representative objects in writing to any item set forth on the Closing Statement as provided in Section 2.09(c) , then the Final Closing Statement shall be determined in accordance with Section 2.09(c) , and then shall be final, conclusive, and binding on each of the parties.

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(b) Based on the Final Closing Statement, the Closing Payment Amount shall be adjusted on a dollar-for-dollar basis by the amount of the difference, if any, between

(i) the final Closing Date Non-Cash Working Capital Amount determined from the Final Closing Statement; and

(ii)

(A) the Target Non-Cash Working Capital Amount plus the amount, if any, by which (w) the Projected Non-Cash Net Working Capital Amount exceeded (x) the Target Non-Cash Net Working Capital Amount; or

(B) the Target Non-Cash Working Capital Amount minus the amount, if any, by which (y) the Target Non-Cash Working Capital Amount exceeded (z) the Projected Non-Cash Working Capital Amount

(the parties acknowledging that (ii)(A) and (B) are mutually exclusive) (the “ Adjustment ”). If the Adjustment is a negative amount, then the Closing Payment Amount shall be reduced by the absolute value of the Adjustment. If the Adjustment is a positive amount, the Closing Payment Amount shall be increased by the Adjustment. If the Adjustment results in a reduction to the Closing Payment Amount, the Shareholders’ Representative shall pay the amount of such reduction to the Closing Payment Amount to Parent by wire transfer of immediately available funds out of the Shareholders’ Account to an account designated by Parent within five Business Days after the date of approval of the Final Closing Statement. (To ensure that funds are available for any such payment, the Shareholders’ Representative shall retain in and not distribute out of the Shareholders’ Account at least $2,000,000 until the Final Closing Statement has been determined and any amounts owed to the Parent pursuant thereto have been paid, at which time such restriction shall expire.) If the Adjustment results in an increase in the Closing Payment Amount, Parent shall pay the amount of such increase to the Shareholders’ Account by wire transfer of immediately available funds within five Business Days after the date the Closing Statement is finalized. Any amount that is not paid when due in accordance with this Section 2.09(b) shall accrue interest at a per annum rate equal to the lesser of 5% or the highest rate permitted under Applicable Laws from the date of finalization of the Final Closing Statement until such amount and all interest accrued thereon is paid in full (with all payments being applied first to interest and then to any unpaid balance of the such amount). The parties agree that any amount paid pursuant to this Section 2.09(b) shall be deemed to be a reduction or an increase, as applicable, in the amount of the Closing Payment for all purposes.

(c) If the Shareholders’ Representative has any objections to the Closing Statement as prepared by Parent, then the Shareholders’ Representative must, within 30 calendar days after its receipt thereof, give written notice (the “ Closing Statement Objection Notice ”) to Parent specifying in reasonable detail such objections. With respect to any disputed amounts, the Shareholders’ Representative and Parent shall negotiate in good faith during the 30 calendar day period (the “ Resolution Period ”) after the date of Parent’s receipt of the Closing Statement Objection Notice to resolve any such disputes. If the Stockholders’ Representative and Parent are unable to resolve all such disputes within the Resolution Period, then either party may submit the disputes to the Kansas City, Missouri office of Grant Thornton LLP (the “ Accountant ”), who shall be engaged to provide a final and conclusive resolution of all unresolved disputes within 30 calendar days after such engagement. If Grant Thornton LLP is unable or unwilling to serve as the Accountant, the Accountant shall be the Kansas City, Missouri office of an independent accounting firm, with no

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material relationship to any of the parties or their Affiliates, of national reputation selected promptly by agreement of the Shareholders’ Representative and Parent. In selecting Grant Thornton LLP (or such other firm as may be selected in accordance with the foregoing sentence) as the Accountant for purposes of this Agreement, the parties hereby waive any conflict or potential conflict arising from any services performed by such firm for the Shareholders’ Representative, the shareholders of Company before the Transactions, Parent, or any of their respective Affiliates. The Accountant shall act as an arbitrator to determine only those issues that remain in dispute and such determination shall be based solely on a review of the factual materials presented by the Shareholders’ Representative and Parent, either on their own initiative or at the specific request of the Accountant, and the applicable provisions of this Agreement. The determination of the Accountant shall be final, binding and conclusive on the parties, and the Closing Statement as adjusted by such determination shall be the Final Closing Statement. The fees and expenses of the Accountant shall be allocated by the Accountant between the Shareholders’ Account and Parent based on the aggregate percentage by which the portions of the contested amounts not awarded to each party bear to the aggregate amounts contested by such party.

Section 2.10. Company Stock Options.

The Company Board, by operation of existing agreements or by resolution, will take all requisite actions such that immediately before the Effective Time all outstanding Company Options not theretofore exercised shall be terminated and canceled without any payment or liability on the part of the Company.

Section 2.11. Dissenting Shares

Notwithstanding anything in this Agreement to the contrary, any Company Share issued and outstanding immediately before the Effective Time held by a holder who is entitled to demand and properly demands appraisal of such Company Shares (the “ Dissenting Shares ”), pursuant to, and who complies in all respects with, Section 262 of the DGCL (the “ Appraisal Rights ”), shall not be converted into the right to receive the applicable Merger Consideration, but instead shall be converted into the right to receive such consideration as may be due such holder pursuant to Section 262 of the DGCL unless such holder fails to perfect, withdraws or otherwise loses such holder’s right to such payment or appraisal. From and after the Effective Time, a holder of Dissenting Shares shall not have and shall not be entitled to exercise any of the voting rights or other rights of a stockholder of the Company or the Surviving Corporation. If, after the Effective Time, such holder fails to perfect, withdraws or otherwise loses any such Appraisal Rights, each such share of such holder shall no longer be considered a Dissenting Share and shall be deemed to have converted as of the Effective Time into the right to receive the applicable Merger Consideration in accordance with Section 2.06(iii) . The Company shall give prompt notice to Parent of any demands received by the Company for appraisal of Company Shares, withdrawals of such demands and any other instruments served pursuant to the DGCL received by the Company, and Parent shall have the right to control all negotiations and proceedings with respect to such demands. Before the Effective Time, the Company shall not, except with the prior written consent of Parent, voluntarily make any payment with respect to, or settle or offer to settle, any such demands or agree to do or commit to do any of the foregoing.

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ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby makes to Parent and Merger Sub the representations and warranties set forth in all the respective sections of this Article III , which representations and warranties shall however be deemed qualified by disclosures set forth in the letter delivered by the Company to Parent immediately before the execution of this Agreement (the “ Company Disclosure Letter ”). The Company Disclosure Letter is arranged in sections and subsections corresponding to the numbered and lettered sections and subsections contained in this Article III . The disclosures in any section or subsection of the Company Disclosure Letter shall qualify only the corresponding section or subsection in this Article III and any other Sections where the applicability thereof is reasonably apparent from the face of such Company Disclosure Letter:

Section 3.01. Organization, Standing and Corporate Power.

(a) The Company is a corporation duly organized, validly existing and in good standing under the Legal Requirements of the State of Delaware and has all requisite corporate power and authority necessary to own or lease all of its properties and assets and to carry on its business as it is now being conducted. The Company is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased or held under license by it makes such licensing or qualification necessary, except where the failure to be so licensed, qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, impair in any material respect the ability of the Company to perform its obligations hereunder or prevent or materially delay consummation of the Transactions.

(b) There are no Company Subsidiaries and never have been any.

(c) The Company has delivered to Parent complete and correct copies of the certificate of incorporation and bylaws (or other comparable organizational documents) of the Company, as amended through the date of this Agreement (the “ Company Charter Documents ”). The Company has made available to Parent and its representatives true and complete copies of the minutes (or, in the case of minutes that have not yet been finalized, a brief summary of the meeting, including in each case a summary of any resolutions adopted by the Company Board) of all meetings of the stockholders, the Company Board and each committee of the Company Board held since January 1, 2004.

Section 3.02. Capitalization.

(a) The authorized capital stock of the Company consists of: (i) 103,000,000 shares of common stock, par value $0.01 per share, and (ii) 81,665,642 shares of Preferred Stock, par value $0.01 per share, (A) 63,197,020 shares of which are designated Series B Preferred Stock, (B) 16,468,622 shares of which are designated Series A Preferred Stock, and (C) 2,000,000 shares of which are designated Series A-1 Preferred Stock. At the execution and delivery of this Agreement there are, and at the Effective Time there will be (excluding any shares issued pursuant to the exercise of outstanding Company Options), (i) 11,456,720 shares of Company common stock issued and outstanding (and 100,000 shares of Company common stock issued and held by the Company in its treasury), (ii) 63,197,019 shares of Company Series B Preferred Stock issued and outstanding, (iii) 16,468,618 shares of Company Series A Preferred Stock issued and outstanding, (iv) 2,000,000

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shares of Company Series A-1 Preferred Stock issued and outstanding, (v) an aggregate of 12,500,000 shares of Company common stock reserved for issuance under the Company Equity Plans (of which 5,745,750 shares of Company common stock are subject to outstanding Company Options granted under the Company Equity Plans), (vi) no shares of Company common stock subject to outstanding Company Options granted other than under the Company Equity Plans, and (vii) no Company Shares subject to outstanding Warrants. All Company Shares, and Company Shares reserved for issuance upon exercise of the Company Options, have been duly authorized and are, or upon issuance in accordance with the terms of the Company Options will be, validly issued, fully paid, non-assessable and free of preemptive rights. Section 3.02(a) of the Company Disclosure Letter sets forth a correct and complete list, as of January 14, 2011, of the outstanding Company Options, the number of Company Shares underlying such Company Options and the holders, exercise prices and expiration dates thereof. Since January 1, 2009, the Company has not issued, or reserved for issuance, any shares of its capital stock or any securities convertible into or exchangeable or exercisable for any shares of its capital stock, other than pursuant to the Company Options referred to above that are outstanding as of the date of this Agreement.

(b) There are no outstanding contractual obligations of the Company (i) restricting the transfer of, (ii) affecting the voting rights of, (iii) requiring the issuance, sale, repurchase, redemption or disposition of, or containing any right of first refusal with respect to, (iv) requiring the registration for sale of, or (v) granting any preemptive or anti-dilutive right with respect to, any Company Shares or any capital stock of the Company. There are no bonds, debentures, notes or other indebtedness or liabilities of the Company having the right to vote (or convertible into or exchangeable for securities having the right to vote) on any matters on which the stockholders of the Company may vote.

Section 3.03. Authority; Non-contravention; Voting Requirements.

(a) The Company has all necessary corporate power and authority to execute and deliver this Agreement and the CVR Agreement and, subject to obtaining the approval of the holders of the Company Shares of the adoption of this Agreement and approval of the Transactions, to perform its obligations hereunder and consummate the Transactions as contemplated by Section 5.04 (including also the approval by the holders of at least 70% of the Company Series B Preferred Stock and the approval, by the requisite majority or supermajority, of the holders of each other respective class and series of Company Shares to the extent the approval of such class or series is required for such purpose by the DGCL or the Company Charter Documents) (the “ Company Stockholder Approval ”). The execution, delivery and performance by the Company of this Agreement and the CVR Agreement, and the consummation by it of the Transactions, have been duly authorized and approved by the Company Board, and except for obtaining the Company Stockholder Approval, no other corporate action on the part of the Company or any stockholder of the Company is necessary to authorize the execution, delivery and performance by the Company of this Agreement and the CVR Agreement and the consummation by it of the Transactions. This Agreement has been duly executed and delivered by the Company and, assuming due authorization, execution and delivery hereof by the other parties hereto, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except that such enforceability (i) may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other similar Legal Requirements of general application affecting or relating to the enforcement of creditors’ rights generally and (ii) is subject to general principles of equity, whether considered in a proceeding at law or in equity (the “ Bankruptcy and Equity Exception ”).

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(b) The Company Board has, upon the terms and subject to the conditions set forth in this Agreement, duly adopted resolutions (i) determining that this Agreement and the Transactions are advisable and in the best interests of the Company and its stockholders, (ii) approving this Agreement and the Transactions, including the Merger, in accordance with the DGCL, (iii) directing that this Agreement be submitted to the stockholders of the Company for adoption, and (iv) recommending that the stockholders of the Company adopt this Agreement and approve the Transactions.

(c) Neither the execution and delivery of this Agreement nor the CVR Agreement by the Company nor the consummation by the Company of the Transactions, nor compliance by the Company with any of the terms or provisions hereof, will (i) conflict with or violate any provision of the Company Charter Documents or (ii) assuming that the authorizations, consents and approvals referred to in Section 3.04 and the Company Stockholder Approval are obtained and the filings referred to in Section 3.04 are made, (x) violate any Legal Requirement applicable to the Company or (y) violate or constitute a default under any Company Contract, except, in the case of clause (ii), for such violations or defaults as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, impair in any material respect the ability of the Company to perform its obligations hereunder or prevent or materially delay consummation of the Transactions.

(d) The affirmative vote (or written consent) of the holders of a majority of the issued and outstanding Company Shares and at least 70% of the issued and outstanding Series B Preferred Stock in favor of the adoption of this Agreement and approval of the Transactions (collectively, the “Required Shareholder Consent”) are the only vote or approval of the holders of any class or series of capital stock of the Company which is necessary to adopt this Agreement and approve the Transactions.

Section 3.04. Governmental Approvals.

Except for the filing of the Certificate of Merger with the Secretary of State of the State of Delaware pursuant to the DGCL, no consents or approvals of, or filings, declarations or registrations with, any Governmental Entity are necessary for the execution and delivery of this Agreement and the CVR Agreement by the Company and the consummation by the Company of the Transactions, other than such consents, approvals, filings, declarations or registrations that, if not obtained, made or given, would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, impair in any material respect the ability of the Company to perform its obligations hereunder or prevent or materially delay consummation of the Transactions.

Section 3.05. Financial Statements.

(a) The financial statements of the Company for the nine months ended September 30, 2010 and the years ended December 31, 2009 and 2008, as previously delivered to Parent (the “ Company Financial Statements ”), have been prepared in accordance with GAAP (except, in the case of unaudited interim statements, as indicated in the notes thereto) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited interim statements, to normal year-end audit adjustments).

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(b) The Company has no liabilities of any nature (whether accrued, absolute, determined, determinable, fixed or contingent) which (i) would be required to be reflected or reserved against on a consolidated balance sheet of the Company prepared in accordance with GAAP, except liabilities (A) reflected or reserved against in the consolidated balance sheet for the period ended September 30, 2010 (including the notes thereto), (B) incurred pursuant to this Agreement or in connection with the Transactions, (C) incurred since September 30, 2010 in the ordinary course of business, or (D) that have not had, and would not reasonably be expected to have, individually or in the aggregate, a cash expenditure or exposure in excess of $50,000, or (ii) that are not within subsection (i) but which have had, or would reasonably be expected to have, individually or in the aggregate, a cash expenditure or exposure in excess of $50,000.

(c) Since September 30, 2010, except for actions taken in connection with this Agreement and the Transactions, (i) the Company has conducted its businesses in all material respects in the ordinary course, and (ii) there has not been any Company Material Adverse Effect or any change, event, development, condition, occurrence or effect that has had or would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

(d) The Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that (a) all transactions are executed in accordance with management’s general or specific authorizations, (b) all transactions are recorded as necessary to permit the preparation of financial statements in conformity with GAAP and to maintain proper accountability for assets, (c) access to assets is permitted only in accordance with management’s general or specific authorization and (d) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company has, to the Knowledge of the Company, disclosed to the Company’s auditors and the audit committee of the Company Board (and has specified in the Company Disclosure Letter) (A) any “significant deficiencies” and “material weaknesses” in the design or operation of internal controls over financial reporting that are reasonably likely to adversely affect in any material respect the Company’s ability to record, process, summarize and report financial information and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting. For purposes of this Agreement, the terms “significant deficiency” and “material weakness” shall have the meanings assigned to them by the Public Company Accounting Oversight Board in Auditing Standard No. 2, as in effect on the date hereof.

Section 3.06. Legal Proceedings.

As of the date hereof, there is no pending or, to the Knowledge of the Company, threatened Legal Proceeding against or relating to the Company, nor is there any injunction, order, judgment, ruling or decree imposed upon the Company, in each case, by or before any Governmental Entity, that would, individually or in the aggregate, reasonably be expected to result in a judgment against the Company in excess of $50,000 or have a Company Material Adverse Effect, impair in any material respect the ability of the Company to perform its obligations hereunder or prevent or materially delay consummation of the Transactions.

Section 3.07. Compliance With Legal Requirements; Governmental Authorizations; FDA Laws.

(a) The Company is in compliance with all Legal Requirements applicable to the Company, except for such noncompliance as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. The Company holds all Governmental

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Authorizations necessary for the lawful conduct of their respective businesses, and all such Governmental Authorizations are valid and in full force and effect, except where the failure to hold the same or of the same to be valid and in full force and effect would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. The Company is in compliance with the terms of all Governmental Authorizations, except for such non-compliance as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

(b) All facilities operated by the Company in connection with the operation of their businesses that are subject to the FDA have been operated in compliance with the Federal Food, Drug, and Cosmetic Act (21 U.S.C. §§ 301 et seq.) and regulations and guidelines thereunder to the extent applicable, and all similar Legal Requirements applicable to the operation of the business and operations of the Company, except for such failures to be in compliance as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

(c) To the Knowledge of the Company, all clinical trials conducted by the Company have been, and are being, conducted in substantial compliance with the requirements of current good clinical practice and all applicable requirements relating to protection of human subjects contained in Title 21, Parts 50, 54, 56 and 312 of the United States Code of Federal Regulations.

(d) To the Knowledge of the Company, none of Prism Pharmaceuticals, Inc., Merck Sharp & Dohme Corp., GlaxoSmithKline plc, Onyx Pharmaceuticals, Inc., H. Lundbeck A/S, Pfizer Inc., Neuron Systems Inc., or Cardioxyl Pharmaceuticals, Inc., nor any persons or entities Known to the Company to be their Affiliates, agents or contractors, has notified the Company of any significant adverse data or events (as to toxicology or otherwise) with respect to the program such company has with the Company, nor has any of them terminated, or discontinued work under, or expressed an intent to terminate, or to discontinue work under, the program such company has with the Company.

Section 3.08. Bank Accounts; Powers of Attorney.

Section 3.08 of the Company Disclosure Letter contains an accurate, correct and complete list of the names and addresses of all banks, commercial lending institutions and other financial institutions in which the Company has an account, deposit, safe-deposit box, line of credit or other loan facility or relationship, or lock box or other arrangement for the collection of accounts receivable, with the names of all Persons authorized to draw or borrow thereon or to obtain access thereto, and an accurate, correct and complete list of the names and addresses of all persons holding powers of attorney for the Company or for any officer or agent thereof.

Section 3.09. Tax Matters.

(a) (i) The Company has timely filed, or has caused to be timely filed on its behalf (taking into account any extension of time within which to file), all material Tax Returns required to be filed by it, and all such filed Tax Returns are correct and complete in all material respects; (ii) all Taxes shown to be due on such Tax Returns have been timely paid; (iii) no deficiency with respect to Taxes has been proposed, asserted or assessed in writing against the Company which has not been fully paid or adequately reserved in the Company Financial Statements; and (iv) to the Knowledge of the Company, no audit or other administrative or court proceedings are pending with any Governmental Entity with respect to Taxes of the Company, and no written notice thereof has been received.

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(b) The Company is not a party to or bound by any material Tax allocation or sharing agreement.

(c) To the Knowledge of the Company, the Company (i) has not been a member of an affiliated group filing a consolidated federal income Tax Return (other than a group the common parent of which was the Company) and (ii) has no liability for the Taxes of any Person (other than the Company) under United States Treasury Regulation Section 1.1502-6 (or any similar provision of any Legal Requirement), as a transferee or successor, by Contract, or otherwise.

(d) There are no liens for Taxes upon any material property or other material assets of the Company, except liens for Taxes not yet due and payable and liens for Taxes that are being contested in good faith by appropriate proceedings for which reserves have been established in accordance with GAAP.

(e) All material Taxes required to be withheld, collected or deposited by or with respect to the Company have been timely withheld, collected or deposited, as the case may be, and to the extent required, have been paid to the relevant Tax authority or other Governmental Entity, and to the Knowledge of the Company no Taxes so required have not been so paid.

(f) The Company is not a party to any agreement, contract, arrangement or plan that has resulted or would result, individually or in the aggregate, in the payment of any “excess parachute payment” within the meaning of Section 280G of the Code (or any corresponding provision of state, local or foreign Tax law).

(g) No material deduction by the Company in respect of any “applicable employee remuneration” (within the meaning of Section 162(m) of the Code) has been disallowed or is subject to disallowance by reason of Section 162(m) of the Code.

(h) The Company has not been a party to a transaction governed in whole or part by Code Section 355.

(i) No position has been taken on any Tax Return with respect to the business or operations of the Company for a taxable period for which the statute of limitations for the assessment of any Taxes with respect thereto has not expired that is contrary to any publicly announced position of a taxing authority or that is substantially similar to any position which a taxing authority has successfully challenged in the course of an examination of a Tax Return of the Company. The Company has disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of income Tax under Section 6662 of the Code.

(j) The Company has not entered into any transaction identified as a “listed transaction” for purposes of Treasury Regulations Sections 1.6011-4(b)(2) or 301.6111-2(b)(2).

(k) The Company has delivered or made available to Parent complete and accurate copies of all Tax Returns of the Company for each fiscal year since 2004.

Section 3.10. Employee Benefits and Labor Matters.

(a) Section 3.10(a) of the Company Disclosure Letter lists each “employee benefit plan” (as defined in Section 3(3) of ERISA), and any other material employee plan or agreement maintained by the Company and with respect to which the Company would reasonably be expected

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to have any material liability (each, a “ Company Plan ”). The Company has made available to Parent correct and complete copies of (i) each Company Plan (or, in the case of any such Company Plan that is unwritten, descriptions of the material terms thereof), (ii) the most recent annual report on Form 5500 required to be filed with the IRS with respect to each Company Plan (if any such report was required), (iii) the most recent summary plan description for each Company Plan for which such summary plan description is required and (iv) each material trust agreement and insurance or group annuity Contract relating to any Company Plan. To the Company’s Knowledge, each Company Plan maintained, contributed to or required to be contributed to by the Company has been administered in all material respects in accordance with its terms. To the Company’s Knowledge, the Company and all the Company Plans are all in material compliance with the applicable provisions of ERISA, the Code and all other applicable Legal Requirements. All Company Plans that constitute “employee pension plans” (as defined in Section 3(3) of ERISA) and are intended to be Tax qualified under Section 401(a) of the Code (each, a “ Company Pension Plan ”) have received an opinion or determination letter from the IRS and are expressly identified as such in Section 3.10(a) of the Company Disclosure Letter. The Company has made available to Parent a correct and complete copy of the most recent opinion or determination letter received with respect to each Company Pension Plan maintained, contributed to or required to be contributed to by the Company, as well as a correct and complete copy of each pending application for an opinion or a determination letter, if any. The Company has not contributed or been obligated to contribute to an “employee benefit plan” subject to Title IV of ERISA, a “multiemployer plan,” as defined in Section 3(37) of ERISA, or an “employee benefit plan” subject to Sections 4063 or 4064 of ERISA.

(b) The Company does not have any material liability for life, health, medical or other welfare benefits for former employees or beneficiaries or dependents thereof under Company Plans, other than Company Pension Plans and other than as required by Section 4980B of the Code, Part 6 of Title I of ERISA or other applicable Legal Requirement.

(c) There are no pending or, to the Company’s Knowledge, threatened, claims, lawsuits, arbitrations or audits asserted or instituted against any Company Plan, any fiduciary (as defined by Section 3(21) of ERISA) thereto, the Company or any employee or administrator thereof in connection with the existence, operation or administration of a Company Plan, other than routine claims for benefits.

(d) The Company is not a party to a collective bargaining agreement and no labor union has been certified to represent any employee of the Company or, to the Knowledge of the Company, has applied to represent or is attempting to organize so as to represent such employees.

(e) Section 3.10(e) of the Company Disclosure Letter lists each material (i) stay or severance or bonus or employment agreement with directors, officers or employees of or consultants to the Company; or (ii) stay or severance or bonus program or policy of the Company with or relating to its employees.

(f) There is no Legal Proceeding pending or, to the Knowledge of the Company, threatened against or affecting the Company relating to the alleged violation by the Company (or its directors or officers) of any Legal Requirement pertaining to labor relations or employment matters. To the Company’s Knowledge, the Company has not committed any unfair labor practice, nor has there has been any charge or complaint of unfair labor practice filed or, to the Knowledge of the Company, threatened against the Company before the National Labor Relations Board or any other Governmental Entity. There has been no complaint, claim or charge of discrimination filed or, to the Company’s Knowledge, threatened, against the Company with the Equal Employment Opportunity Commission or any other Governmental Entity.

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(g) To the Company’s Knowledge, the employees of the Company who are located in the United States are authorized and have appropriate documentation to work in the United States. Section 3.10(g) of the Company Disclosure Letter sets forth an accurate and complete list of all employees of the Company who are not U.S. citizens or permanent residents. Each of the employees required to be listed on such schedule is authorized under applicable U.S. immigration laws to work in his or her current position for the Company. None of the employees required to be so listed requires authorization from any Governmental Authority to be employed in his or her current position by the Company.

(h) The Company has no employee stock purchase plan.

Section 3.11. Contracts.

(a) Section 3.11(a) of the Company Disclosure Letter sets forth a correct and complete list, and the Company has made available to Parent correct and complete copies, of all Contracts (including all material amendments, modifications, extensions or renewals with respect thereto, but excluding all names, terms and conditions that have been visibly redacted in compliance with the terms of each such Contract or with applicable Legal Requirements governing the sharing of information) to which the Company is a party as of the date of this Agreement (collectively, the “ Company Contracts ”):

(i) of the sort which, if the Company were a reporting company under the Exchange Act, would be required to be filed as an exhibit to any report of the Company filed pursuant to the Exchange Act of the type described in Item 601(b)(10) of Regulation S-K promulgated by the SEC;

(ii) that contain a covenant restricting the ability of the Company to compete in any business or with any Person or in any geographic area;

(iii) with any Affiliate of the Company;

(iv) which primarily relates to (A) the granting to the Company of any IP License in or to any Company Intellectual Property owned by a third party, with annual license fees of more than $50,000, or (B) the granting by the Company to a third party of any IP License in or to any Company Intellectual Property, with annual license fees of more than $50,000, excluding “click-wrap” or “shrink-wrap” agreements, agreements contained in or pertaining to “off-the-shelf” Software, or the terms of use or service for any web site;

(v) relating to any material joint venture, partnership or other similar arrangement involving co-investment, collaboration or partnering with a third party;

(vi) with a Governmental Entity (other than ordinary course Contracts with Governmental Entities as a customer);

(vii) pursuant to which any Indebtedness of the Company is outstanding or may be incurred or pursuant to which the Company has guaranteed any Indebtedness of any other Person (other than the Company and excluding Company trade payables arising in the ordinary course of business);

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(viii) pursuant to which the Company or any other party thereto has continuing obligations, rights or interests relating to the research, development, clinical trial, distribution, supply, manufacture, marketing or co-promotion of, or collaboration with respect to, any product or product candidate for which the Company is currently engaged in research or development, including manufacture or supply services or Contracts with contract research organizations for clinical trials-related services; and

(ix) which are to any extent executory and relate to (A) the disposition or acquisition of any material assets or properties, other than dispositions or acquisitions in the ordinary course of business, or (B) any merger or other business combination transaction.

(b) Each Company Contract is valid and binding on the Company and, to the Knowledge of the Company, each other party thereto, subject to the Bankruptcy and Equity Exception, and is in full force and effect, and the Company has performed all obligations required to be performed by it before the date hereof under each Company Contract and, to the Knowledge of the Company, each other party to each Company Contract has (i) performed all obligations required to be performed by it before the date hereof under such Company Contract, except for such failures to be in compliance as would not, individually or in the aggregate, reasonably be expected to result in finding of material breach thereof, and (ii) has not expressed to the Company an intention to repudiate, terminate or non-renew it.

(c) The Company has not received or enjoyed any benefit, inducement or incentive from any Governmental Entity which will, as a result of this Agreement or the Transactions or the reduction of or (should it occur) cessation of the Company’s business operations in the geographic area where they are currently conducted or the reduction in force of or (should it occur) the termination of all or substantially all Company employees, result in any clawback, recapture, recoupment, repayment obligation, penalty, Tax or other such liability.

Section 3.12 . Environmental Matters.

(a) To the Knowledge of the Company, the Company is in compliance with (i) all applicable Legal Requirements concerning pollution or protection of the environment, including without limitation all those relating to the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened release, control or cleanup of any hazardous materials, substances or wastes, as such requirements are enacted and in effect on the date hereof (“ Environmental Laws ”), and (ii) any Governmental Authorizations required under applicable Environmental Laws for the current operations of the Company.

(b) To the Knowledge of the Company, there has been no violation of, and the Company has not received any written notice or report in the past six years regarding any actual or alleged violation of, any applicable Environmental Law or any liabilities arising under applicable Environmental Laws. The Company has delivered, or made available to Parent, copies of all environmental assessments, reports, audits, studies, analyses or tests possessed by, or reasonably available to, the Company pertaining to compliance with, or liability under, any Environmental Laws, in each case relating to the owned or leased real estate or other assets and properties of the Company.

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(c) Section 3.12(c) of the Company Disclosure Letter lists, and the Company has delivered to Parent complete and accurate copies of all environmental reports or assessments, accessible by the Company, and, since the date of such reports or assessments, to the Knowledge of the Company, no facts or conditions have arisen or been discovered which would reasonably be expected to materially alter or modify such reports or assessments if they were to be updated.

Section 3.13. Intellectual Property.

(a) Section 3.13(a)(1) of the Company Disclosure Letter sets forth as of the date hereof a true, complete and correct list of all U.S. and foreign (i) Patents; (ii) registered Trademarks; (iii) registered Copyrights; (iv) internet domain registrations; (v) Trade Secrets; and (vi) Software (other than standard and duly licensed off-the-shelf Software), in each case owned or purported to be owned or licensed by the Company and used or held for use in the conduct of the business of the Company as of the date of this Agreement. The Company is the sole and exclusive assignee (or otherwise the sole and exclusive owner) of all of the Company Intellectual Property set forth in Section 3.13(a)(1) of the Company Disclosure Letter, except for in-licensed Intellectual Property set forth on such Section 3.13(a)(2) of the Company Disclosure Letter, all of which is licensed by the Company pursuant to valid and subsisting licenses under agreements of which, to the Knowledge of the Company, neither party is in breach, there exists no default (or condition which, with the passage of time, the giving or notice or both) which would give rise to a right to terminate, convert rights to non-exclusive or otherwise limit rights granted to the Company, and which neither party has terminated nor expressed an intent to do so. The name of each licensor and the date of the license agreement are set forth next to the respective item of in-licensed Intellectual Property on such Section 3.13(a)(2) of the Company Disclosure Letter.

(b) The Company owns or possesses appropriate licenses to all Company Intellectual Property. To the Knowledge of the Company, the Company has sufficient legal rights to use, sell or license all material Company Intellectual Property and products therefrom.

(c) All Trademark registrations, Patents issued and Copyright registrations owned by the Company and included in the Company Intellectual Property are subsisting, in full force and effect and have not lapsed, expired or been abandoned, and, to the Knowledge of the Company, are not the subject of any opposition filed with the United States Patent and Trademark Office or any other Intellectual Property registry, or the subject of any proceeding challenging their validity or enforceability.

(d) To the Knowledge of the Company, the conduct of the businesses of the Company does not and has not been alleged to infringe, constitute contributory infringement, inducement to infringe, misappropriation or unlawful use of, or otherwise violate (and is not, as a practical matter, blocked by) any Intellectual Property rights of any third party; and the Company has not received any notice or other communication asserting any of the foregoing. No settlement agreements, consents, orders, forbearances to sue or similar obligations to which the Company is a party limit or restrict any rights of the Company in and to any Company Intellectual Property that is owned by the Company.

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(e) The Company does not jointly own, or pursuant to a written agreement executed by Company, license or claim any right, title or interest, with any other Person any Intellectual Property. No third party has challenged or has threatened to challenge Company’s right, title or interest in, to or under the Intellectual Property in which the Company has (or purports to have) any right, title or interest, or the validity, enforceability or claim construction of any issued patents within Patent rights and any issued or pending trademarks within Trademark rights comprising such Intellectual Property, nor are there any facts known to the Company that the Company believes are reasonably likely to give rise to a conclusion of infringement, passing off, invalidity, unenforceability or narrowing of claim construction of such Intellectual Property.

(f) No Person has asserted or threatened a claim which would adversely affect the Company’s ownership rights to, or rights under, nor are there any facts known to the Company that the Company believes are reasonably likely to adversely affect the Company’s ownership rights to or under, (i) any of the Intellectual Property in which Company has any right, title or interest, or (ii) any contract, agreement, license or any other arrangement under which Company claims any right, title or interest under any Intellectual Property.

(g) To the Knowledge of the Company, (i) all Patent rights owned or exclusively licensed by Company have been prosecuted in good faith, (ii) there are no inventorship challenges to any such Patent rights, (iii) no interference has been declared or provoked relating to any such Patent rights, (iv) all issued patents within such Patent rights are valid and enforceable, and (v) all required maintenance and annual fees have been fully paid, and all fees paid during prosecution and after issuance of any Patent have been paid in the correct entity status amounts, with respect to such Patent rights. Except for documents cited by a patent examiner or by the patent applicant in an information disclosure statement or documents to be filed in an information disclosure statement in pending applications, with respect to any Patent rights owned or exclusively licensed by Company, there does not exist any material fact known to the Company that the Company reasonably believes would (i) preclude the issuance of any patents from patent applications included in such Intellectual Property (with valid claims not materially narrower in scope than the claims as currently pending in those applications), (ii) render any patents included in such Patent rights invalid or unenforceable, or (iii) cause the claims of any patents included in such Patent rights to be narrowed.

(h) The Company has taken commercially reasonable steps and precautions to protect and maintain the confidentiality of all know-how underlying Trade Secrets in which the Company has any right, title or interest and otherwise to maintain and protect the value of all such Trade Secrets.

(i) The Company has not granted, licensed or conveyed to any third party, pursuant to any written or oral contract, agreement, license or other arrangement, any license or other right, title or interest in, to or under (i) any Intellectual Property in which the Company has any right, title or interest (or any tangible embodiment thereof), or (ii) any future Intellectual Property (or any tangible embodiment thereof) to be developed in the future from Intellectual Property in which the Company has any right, title or interest. The Company has not transferred any tangible embodiment that is the subject of Patent rights or Trade Secrets owned or exclusively licensed by Company without having the recipient thereof execute a written agreement regarding the non-transfer and non-use (other than research uses only) thereof. The Company has not disclosed any Patent rights or Trade Secrets owned or exclusively licensed by the Company to a third party without having the recipient thereof execute a written agreement regarding the non-disclosure and non-use (other than research uses only) thereof, other than the disclosure of Patent rights disclosed after the filing thereof.

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(j) There are no royalties, fees or other amounts payable by the Company to any Person by reason of the ownership (other than customary fees and amounts payable for filing, prosecuting and maintaining Patents, Trademarks and Copyrights), use, sale or disposition of Intellectual Property (or any tangible embodiment thereof), and there are no obligations to pay any such royalties, fees or other amounts that are currently payable or past due.

(k) To the Knowledge of the Company, no Intellectual Property owned or exclusively licensed by the Company has been infringed or misappropriated by any third party.

(l) The Company has not entered into any written or oral contract, agreement, license or other arrangement to indemnify any other person against any charge of infringement of any Intellectual Property.

(m) All current and former officers and employees of the Company have executed and delivered to the Company an agreement regarding the protection of proprietary information and the assignment to the Company of any Intellectual Property arising from services performed for the Company by such persons, the form of which has been provided to Parent. To the Knowledge of the Company, all current and former consultants and independent contractors to the Company have executed and delivered to the Company an agreement in the form provided to Parent regarding the protection of proprietary information and the assignment to the Company of any Intellectual Property arising from services performed for the Company by such persons. No current or former employee or independent contractor of the Company is in material violation of any term of any patent disclosure agreement or employment contract or any other contract or agreement relating to the relationship of any such employee or independent contractor with the Company.

(n) To the Knowledge of the Company, the Intellectual Property owned or licensed-in by the Company collectively constitutes all of the Intellectual Property necessary to enable the Company to conduct its business as and where conducted before and as of the date of this Agreement and as and where the Company immediately before the Effective Time plans to conduct it thereafter and to make, use, offer for sale, sell, make improvements thereto or import those products and perform those services as and where currently contemplated by the Company as a part of its business.

Section 3.14. Assets.

The Company has good and valid title to, or in the case of leased assets, valid leasehold interests in, all of its assets, tangible or intangible, free and clear of any Encumbrances. The Company owns or leases all tangible personal property used in or necessary to conduct its business as conducted and currently planned by the Company to be conducted by the Company. Each such item of tangible personal property is in good operating condition and repair, ordinary wear and tear excepted, is free from latent and patent defects, is suitable for the purposes for which it is being used and currently planned by the Company to be used by the Company and has been maintained in accordance with normal industry practice.

Section 3.15. Real Property.

(a) The Company does not own any real property, nor has the Company ever owned any real property.

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(b) Section 3.15(b) of the Company Disclosure Schedule sets forth an accurate and complete description (by subject leased real property, the date and term of the lease, sublease or other occupancy right, the name of the parties thereto, each amendment thereto and the aggregate annual rent payable thereunder) of all real property in which the Company has a leasehold (including finance leasehold) or subleasehold estate or other right to use or occupy (collectively, the “ Leased Real Property ”). The Company has made available to Parent accurate and complete copies of all leases, finance leases and other Contracts granting a right in or relating to the Leased Real Property and all Contracts and other documents evidencing, creating or constituting Encumbrances upon or rights in the Leased Real Property (each, a “ Lease ”). The transactions contemplated by this Agreement do not require the consent of any other party to such Leases, will not result in a breach or default under such Leases, and will not otherwise cause such Leases to cease to be legal, valid, binding and in full force and effect on identical terms following the Closing.

(c) The Company holds valid leasehold interests in its Leased Real Property, free and clear of any Encumbrances. The Company complies and has always complied with all obligations applicable under all leases, finance leases and other Contracts granting a right in or relating to the Leased Real Property.

(d) The use of the Leased Real Property for the various purposes for which it is presently being used is permitted as of right under applicable zoning Legal Requirements and is not subject to “permitted non conforming” use or structure classifications. All buildings, fixtures and other improvements, including the roof, foundation and floors and the heating, ventilation, air conditioning, mechanical, electrical and other building systems, located on the Leased Real Property (collectively, the “ Improvements ”) are in compliance with all applicable Legal Requirements, including those pertaining to health and safety, zoning, building and the disabled. The Leased Real Property is supplied with utilities and other services necessary for the operation of the businesses of the Company or any Company Subsidiary and each parcel of Leased Real Property abuts on and has direct vehicular access to an improved public road or access to an improved public road via a permanent, irrevocable appurtenant easement improved with a road benefiting the parcel of Leased Real Property.

(e) No Person other than the Company is in possession of any portion of the Leased Real Property. The Company has not granted to any Person the right to use or occupy any portion of any parcel of Leased Real Property, and the Company has not received notice of any claim of any Person to the contrary.

(f) To the Knowledge of the Company, the Improvements are structurally sound, are in good operating condition and repair, ordinary wear and tear excepted, are free from latent and patent defects, are suitable for the purposes for which they are being used and planned to be used by the Company and have been maintained in accordance with normal industry practice. The Leased Real Property constitutes all such property used in or necessary to conduct the businesses of the Company as conducted and as planned to be conducted by the Company.

Section 3.16. Insurance.

The Company’s policies or Contracts of insurance are listed on Section 3.16 of the Company Disclosure Letter, are in full force and effect and together constitute the insurance program of the Company. There is no material claim pending under any policies or Contracts of insurance maintained by the Company as to which coverage has been questioned, denied or disputed by the underwriters of such policies or Contracts. All premiums due and payable to date under all such policies and Contracts have been paid and the Company is otherwise in compliance in all material respects with the terms of such policies and Contracts.

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Section 3.17. Certain Business Relationships with Affiliates.

From and after January 1, 2009 and before the date hereof, no event has occurred, and there has been no transaction, or series of similar transactions, agreements, arrangements or understandings to which the Company is a party, of the sort which, if the Company were a reporting company under the Exchange Act, would be required heretofore or ultimately to be reported pursuant to Item 404 of Regulation S-K promulgated by the SEC.

Section 3.18. Product Warranty.

Section 3.18 of the Company Disclosure Letter lists all forms of guaranty, warranty, right of return, right of credit or other indemnity that legally bind the Company in connection with any licenses, goods or services sold by the Company. No product manufactured, sold, leased or delivered by the Company is subject to any guaranty, warranty or other indemnity beyond the applicable standard terms and conditions of sale or lease listed in Section 3.18 of the Company Disclosure Letter. Each product manufactured, sold, licensed, leased or delivered by the Company at all times has been in conformity in all material respects with all applicable contractual commitments and all express and implied warranties, and the Company does not have any Liability (and no facts or circumstances exist that could reasonably be expected to give rise to any Legal Proceeding, claim or demand against any of them giving rise to any Liability) for replacement or repair thereof or other damages in connection therewith, subject only to the reserve for product warranty claims set forth in the corresponding line item on the Company Financial Statements, as adjusted for the passage of time through the Closing Date in the ordinary course, consistent with the past custom and practice of the Company.

Section 3.19. Ordinary Course.

(a) The Company has at all times since January 1, 2009 conducted its business in the ordinary course of such business and not otherwise, and without limitation has not engaged in unusual efforts to accelerate the collection of accounts receivable or unusually delayed the payment of accounts payable or participated in activity of the type sometimes referred to as “trade loading” or “channel stuffing” or any other activity that reasonably could be expected to result in an increase, temporary or otherwise, in the demand for the products offered by the Company before the Closing, including sales of a product (i) with payment terms longer than terms customarily offered by the Company for such product, (ii) at a greater discount from listed prices than customarily offered for such product, other than pursuant to a promotion of a nature previously used in the ordinary course of business for such product, (iii) at a price that does not give effect to any general increase in the list price for such product publicly announced before the Closing Date, (iv) with shipment terms more favorable to the customer than shipment terms customarily offered by the Company for such product, (v) in a quantity greater than the reasonable resale requirement of the particular customer, (vi) in conjunction with other material benefits to the customer not previously offered in the ordinary course of business to such customer or (vii) accelerating the timing of any new releases for existing products.

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(b) The Company has at all times maintained its books and records (including both detailed and summary records of scientific data) in any and all tangible and intangible media, in accordance with commercially reasonable practices, and has caused its consultants and counterparties to maintain books and records pertaining to Company matters (including both detailed and summary records of scientific data) in any and all tangible and intangible media, in accordance with commercially reasonable practices; and it and they have not destroyed any of such books and records except in accordance with document retention policies which (i) are in writing, (ii) have previously been delivered to Parent and (iii) are commercially reasonable.

Section 3.20. Brokers and Other Advisors.

Except for the reasonable fees and expenses of Canaccord Genuity, Inc. (to the extent of arrangements expressly disclosed in the Company Disclosure Letter, and excluding any incremental fees and expenses in connection with any fairness opinion), which will be paid by the Company if the Merger does not occur and by Parent if the Merger occurs, no broker, investment banker, financial advisor, agent or other Person is entitled to any broker’s, finder’s, financial advisor’s, agent’s or other similar fee or commission in connection with the Transactions based upon arrangements made by or on behalf of the Company; and except for the reasonable fees and expenses of Canaccord Genuity, Inc. (to the extent of arrangements expressly disclosed in the Company Disclosure Letter, and excluding any incremental fees and expenses in connection with any fairness opinion) and the reasonable Transactions-related fees and expenses of Polsinelli Shughart PC and of the other attorneys and advisors of the Company set forth in Section 3.20 of the Company Disclosure Letter, which also will be paid by the Company if the Merger does not occur and by Parent if the Merger occurs (and if they have not been paid by the Company before the Effective Time), there are and will be no other Transaction Expenses.

Section 3.21. Section 203 of the DGCL Not Applicable; State Takeover Statutes.

The Company has taken all necessary actions so that the provisions of Section 203 of the DGCL will not apply to this Agreement or the Merger. To the Knowledge of the Company, no other state takeover statute is applicable to the Merger. The Company does not have any “poison pill” or similar antitakeover device.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

Parent and Merger Sub hereby jointly and severally represent and warrant to the Company that except as set forth in the Parent SEC Documents filed with or furnished to the SEC before the date of this Agreement (the “ Filed Parent SEC Documents ”) (it being understood that any matter set forth in such Filed Parent SEC Documents shall be deemed disclosed with respect to any Section of this Article IV to which the matter relates, to the extent the relevance of such matter to such Section is reasonably apparent):

Section 4.01. Organization and Standing.

(a) Parent is a corporation duly organized, validly existing and in good standing under the Legal Requirements of the State of Delaware and Merger Sub is a corporation duly organized, validly existing and in good standing under the Legal Requirements of the State of Delaware. Each of Parent and Merger Sub has all requisite corporate power and authority necessary to own or lease

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all of its properties and assets and to carry on its business as it is now being conducted. Each of Parent and Merger Sub is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased or held under license by it makes such licensing or qualification necessary, except where the failure to be so licensed, qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect, impair in any material respect the ability of Parent or Merger Sub to perform its obligations hereunder or prevent or materially delay consummation of the Transactions.

(b) Parent has delivered to the Company (or made publicly available via EDGAR) complete and correct copies of the certificate of incorporation and bylaws of Parent and Merger Sub, in each case as amended through the date of this Agreement.

Section 4.02. Authority; Non-contravention.

(a) Each of Parent and Merger Sub has all necessary corporate power and authority to (as applicable) execute and deliver this Agreement and the CVR Agreement, to perform their respective obligations hereunder and to consummate the Transactions. The execution, delivery and performance by Parent and Merger Sub of (as applicable) this Agreement and the CVR Agreement, and the consummation by Parent and Merger Sub of the Transactions, have been duly authorized and approved by their respective boards of directors and adopted by Parent as the sole stockholder of Merger Sub, and no other corporate action on the part of Parent and Merger Sub or any stockholders of Parent is necessary to authorize the execution, delivery and performance by Parent and Merger Sub of (as applicable) this Agreement and the CVR Agreement and the consummation by them of the Transactions. This Agreement has been duly executed and delivered by Parent and Merger Sub and, assuming due authorization, execution and delivery hereof by the Company, constitutes a legal, valid and binding obligation of each of Parent and Merger Sub, enforceable against each of them in accordance with its terms, subject to the Bankruptcy and Equity Exception.

(b) Neither the execution and delivery of this Agreement by Parent and Merger Sub, nor the execution and delivery of the CVR Agreement by Parent, nor the consummation by Parent or Merger Sub of the Transactions, nor compliance by Parent or Merger Sub with any of the terms or provisions hereof, will (i) conflict with or violate any provision of the certificate of incorporation or bylaws of Parent or Merger Sub or (ii) assuming that the authorizations, consents and approvals referred to in Section 4.04 are obtained and the filings referred to in Section 4.04 are made, (x) violate any Legal Requirement of any Governmental Entity applicable to Parent or any of its Subsidiaries, or (y) violate or constitute a default under any of the terms, conditions or provisions of any Contract to which Parent, Merger Sub or any of their respective Subsidiaries is a party, except, in the case of clause (ii), for such violations or defaults as would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect, impair in any material respect the ability of Parent or Merger Sub to perform their obligations hereunder or prevent or materially delay consummation of the Transactions.

(c) No vote of the holders of any class or series of Parent’s capital stock or other securities is necessary for the consummation by Parent of the Transactions.

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Section 4.03. Ownership and Operations of Merger Sub.

Parent owns beneficially and of record all of the outstanding shares of Merger Sub. Merger Sub was formed solely for the purpose of engaging in the Transactions, has engaged in no other business activities and has conducted its operations only as contemplated hereby.

Section 4.04. Governmental Approvals.

Except for (i) the filing with the SEC of a Form 8-K Current Report and other filings required under, and compliance with other applicable requirements of, the Exchange Act and the rules of the Exchange, (ii) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware pursuant to the DGCL, and (iii) any compliance with the “blue sky” laws of various states, no consents or approvals of, or filings, declarations or registrations with, any Governmental Entity are necessary for the execution, delivery and performance of this Agreement by Parent and Merger Sub, the execution, delivery and performance of the CVR Agreement by Parent or the consummation by Parent and Merger Sub of the Transactions, other than such other consents, approvals, filings, declarations or registrations that, if not obtained, made or given, would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect, impair in any material respect the ability of Parent or Merger Sub to perform their obligations hereunder or prevent or materially delay consummation of the Transactions.

Section 4.05. Parent SEC Documents; Financial Statements.

(a) Parent has filed all required registration statements, prospectuses, forms, reports and proxy statements with the SEC, together with all certifications required pursuant to the Sarbanes-Oxley Act, from and after January 1, 2008 (collectively, the “ Parent SEC Documents ”). As of their respective effective dates (in the case of Parent SEC Documents that are registration statements filed pursuant to the requirements of the Securities Act) and as of their respective SEC filing dates (in the case of all other Parent SEC Documents), or if amended or supplemented, as of the date of the last such amendment or supplement, and giving effect to any amendments or supplements thereto filed before the date of this Agreement, the Parent SEC Documents complied in all material respects with the requirements of the Exchange Act and the Securities Act, as the case may be, applicable to such Parent SEC Documents, and none of the Parent SEC Documents as of such respective dates contained any untrue statement of a material fact or omitted 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 consolidated financial statements of Parent included in the Parent SEC Documents (the “ Parent Financial Statements ”) have been prepared in accordance with GAAP (except, in the case of unaudited interim statements, as indicated in the notes thereto) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present in all material respects the consolidated financial position of Parent and the consolidated Parent Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited interim statements, to normal year-end audit adjustments).

(c) Since September 30, 2010, except for publicly disclosed matters and actions taken in connection with this Agreement and the Transactions, (i) Parent and the Parent Subsidiaries have conducted their businesses in the ordinary course, and (ii) there has not been any Parent Material Adverse Effect or any change, event, development, condition, occurrence or effect that has had or would reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect.

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(d) Parent and the Parent Subsidiaries have designed and maintain a system of internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Parent (i) has designed and maintains “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) to ensure that material information required to be disclosed by Parent in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to Parent’s management as appropriate to allow timely decisions regarding required disclosure, and (ii) to the Knowledge of Parent, has disclosed, based on its most recent evaluation of such disclosure controls and procedures before the date hereof, to Parent’s auditors and the audit committee of the Board of Directors of Parent (A) any “significant deficiencies” and “material weaknesses” in the design or operation of internal controls over financial reporting that are reasonably likely to adversely affect in any material respect Parent’s ability to record, process, summarize and report financial information and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in Parent’s internal controls over financial reporting.

Section 4.06. Legal Proceedings.

As of the date hereof, there is no pending or, to the Knowledge of Parent, threatened Legal Proceeding against or relating to Parent or any Parent Subsidiary, nor is there any injunction, order, judgment, ruling or decree imposed upon Parent or any Parent Subsidiary, in each case, by or before any Governmental Entity, that would, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect, impair in any material respect the ability of Parent or Merger Sub to perform their obligations hereunder or prevent or materially delay consummation of the Transactions.

Section 4.07. Compliance With Legal Requirements.

Parent and the Parent Subsidiaries are in compliance with all Legal Requirements applicable to Parent or any Parent Subsidiary, as applicable, except for such non compliance as would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect. Parent and the Parent Subsidiaries hold all Governmental Authorizations necessary for the lawful conduct of their respective businesses, and all such Governmental Authorizations are valid and in full force and effect, except where the failure to hold the same or of the same to be valid and in full force and effect would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect. Parent and the Parent Subsidiaries are in compliance with the terms of all Governmental Authorizations, except for such non-compliance as would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect.

Section 4.08. Available Funds.

Parent has, or will have, sufficient funds available to consummate the Transactions.

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Section 4.09. Payment of Transactions Expenses After the Effective Time.

Parent shall pay, within 5 Business Days after written notice to Parent, all Transaction Expenses other than those which were paid by the Company before the Effective Time.

ARTICLE V

COVENANTS

Section 5.01. Interim Operations of the Company.

(a) The Company agrees that, during the period from the date of this Agreement through the earlier of the Effective Time or the date of termination of this Agreement, except: (i) to the extent Parent shall otherwise consent in writing (which consent shall not be unreasonably withheld, delayed or conditioned); (ii) as set forth in Section 5.01(a) of the Company Disclosure Letter; or (iii) as expressly required by this Agreement, the Company shall (A) use its reasonable best efforts to (1) conduct its business in the ordinary course of business, (2) preserve intact its present business organization, (3) maintain satisfactory relations with and keep available the services of its current officers and other key employees and (4) preserve existing relationships with material customers, lenders, suppliers, distributors and others having material business relationships with the Company and (B) not:

(1) amend the Company Charter Documents except as required by Section 6.02(f) below;

(2) split, combine, subdivide or reclassify any shares of its capital stock; declare, set aside or pay any dividend (whether payable in cash, stock or property) with respect to any shares of its capital stock; provided however that on the morning of the Closing Date, before the Closing itself, the Company shall distribute to the Shareholders’ Account, an amount equal to all Company Cash on hand as of such day (the “ Pre-Closing Consideration ”);

(3) issue, sell, pledge, transfer, deliver, dispose of or encumber any shares of, or securities convertible or exchangeable for, or options or rights to acquire, any shares of its capital stock, voting securities, phantom stock, phantom stock rights, stock based performance units or other securities that derive their value by reference to such capital stock or voting securities, other than the issuance of Company Shares upon the exercise of Company Options;

(4) transfer, lease or license to any third party, or subject to an Encumbrance (except for Permitted Encumbrances), any assets of the Company other than: (i) any license agreement with a third party with respect to rapid onset intravenous Clopidogrel, subject to the prior approval of Parent, which approval shall not be unreasonably withheld; (i) sales of inventory in the ordinary course of business; (ii) licenses, sales, or other provisions for the commercialization of technology in the ordinary course of business, including without limitation such agreements or provisions with or to Merck, Sharp and Dohme Corp., subject to the prior approval of Parent, which approval shall not be unreasonably withheld; and (iii) dispositions of obsolete assets;

(5) repurchase, redeem or otherwise acquire or offer to repurchase, redeem or otherwise acquire any shares of its capital stock;

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(6) acquire (whether pursuant to merger, stock or asset purchase or otherwise) or lease (i) any asset or assets, except for purchases of raw materials, equipment and supplies in the ordinary course of business, or (ii) any equity interests in any Person or any business or division of any Person (except for marketable securities acquired by the Company from time to time in connection with its normal cash management activities);

(7) incur, issue, repurchase, modify or assume any Indebtedness or guarantee any such Indebtedness;

(8) make any loans, advances or capital contributions to, or investments in, any other Person other than (i) advances to employees in respect of travel and other expenses in the ordinary course of business, and (ii) investments made by the Company in marketable securities in connection with its normal cash management activities;

(9) (i) increase benefits under any Company Plan, except as required by applicable Legal Requirements, (ii) increase or otherwise change the method for funding or insuring benefits under any Company Plan, except as required by applicable Legal Requirements, (iii) (A) establish, adopt, enter into, amend or terminate any Company Plan that is an “employee benefit plan” as defined in Section 3(3) of ERISA or other any other arrangement that would be an employee benefit plan under ERISA if it were in existence as of the date of this Agreement, except as required by applicable Legal Requirements, or (B) establish, adopt, enter into, amend or terminate any collective bargaining agreement, Company Plan that is not an employee benefit plan under ERISA or any plan, agreement, program, policy, trust, fund or other arrangement that would be a Company Plan that is not an employee benefit plan under ERISA if it were in existence as of the date of this Agreement, except in the ordinary course of business or as required by applicable Legal Requirements (including, without limitation, Section 409A of the Code), (iv) grant any increase in the rates of salaries, compensation or fringe or other benefits payable to any Executive (other than as required by applicable Legal Requirements or pursuant to non-discretionary provisions of Contracts in effect as of the date hereof), (v) grant any increase in the rates of salaries, compensation or fringe or other benefits payable to any employee, except increases that are required by Legal Requirements or pursuant to non-discretionary provisions of Contracts in effect as of the date hereof, or normal annual increases in non-executives’ salaries taking effect in January of 2011, (vi) grant or pay any bonus of any kind or amount whatsoever to any current or former director or officer or any employee of the Company (other than pursuant to the non-discretionary provisions of Contracts in effect as of the date of this Agreement and employee bonuses for calendar year 2010 which the Company shall pay before Closing in accordance with Company’s 2010 Bonus Policy, and all of which shall be taken account of in calculations of Company Cash and working capital) or (vii) grant or pay any stay or severance or termination pay or increase in any manner the severance or termination pay of any current or former director, officer, employee or consultant of the Company other than as required by applicable Legal Requirements, or pursuant to non-discretionary provisions of Contracts in effect as of November 1, 2010;

(10) settle or compromise any Legal Proceeding (whether or not commenced before the date of this Agreement), other than settlements or compromises of Legal Proceedings where the amount paid (after giving effect to insurance proceeds actually received) in settlement or compromise does not exceed the Company’s reserves on its books therefor by more than $10,000, or for any Legal Proceeding for which the Company has not yet reserved, in an amount therefor that does not exceed $20,000;

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(11) enter into any new, or amend or prematurely terminate any current, Company Contract or waive, release or assign any rights or claims under any Company Contract (except (i) in the ordinary course of business or (ii) where the failure to amend or terminate a Company Contract would, in the reasonable judgment of the Company Board, have a Company Material Adverse Effect);

(12) change any of its methods of accounting or accounting practices in any material respect, other than changes required by GAAP or Legal Requirements;

(13) make any material Tax election (except for elections made in the ordinary course of business);

(14) make any capital expenditures;

(15) adopt a plan of complete or partial liquidation or dissolution;

(16) take any action that is intended or would reasonably be expected to result in any of the conditions to the Merger set forth in Article VI not being satisfied on or before the Outside Date; or

(17) authorize or enter into any agreement or otherwise make any commitment to do any of the foregoing.

(b) Without in any way limiting any party’s rights or obligations under this Agreement, the parties understand and agree that (i) nothing contained in this Agreement shall give Parent or Merger Sub, directly or indirectly, the right to control or direct the Company’s operations before the Effective Time, and (ii) before the Effective Time, the Company shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its operations.

Section 5.02. Interim Operations of Parent.

(a) Parent agrees that, during the period from the date of this Agreement through the earlier of the Effective Time or the date of termination of this Agreement, except: (i) to the extent the Company shall otherwise consent in writing (which consent shall not be unreasonably withheld, delayed or conditioned); or (ii) as expressly required by this Agreement, Parent shall and shall cause each Parent Subsidiary to (A) use its reasonable best efforts to conduct their businesses in the ordinary course of business or otherwise to an anticipated advantage, and (B) not:

(1) amend its certificate of incorporation;

(2) declare, set aside or pay any dividend (whether payable in cash, stock or property) with respect to any shares of its capital stock (except with respect to shares of the capital stock of a Parent Subsidiary that is directly or indirectly wholly owned by Parent);

(3) adopt a plan of complete or partial liquidation or dissolution;

(4) take any action that is intended or would reasonably be expected to result in any of the conditions to the Merger set forth in Article VI not being satisfied on or before the Outside Date; or

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(5) authorize or enter into any agreement or otherwise make any commitment to do any of the foregoing.

(b) Without in any way limiting any party’s rights or obligations under this Agreement, the parties understand and agree that (i) nothing contained in this Agreement shall give the Company, directly or indirectly, the right to control or direct the Parent’s operations, and (ii) Parent shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its operations.

Section 5.03. No Solicitation.

(a) At all times during the period commencing with the execution and delivery of this Agreement and continuing until the earlier to occur of the termination of this Agreement pursuant to Section 7.01 and the Effective Time, the Company shall not, and shall not authorize or permit the Company’s directors, officers, employees, investment bankers, attorneys and other agents or representatives (collectively, “ Representatives ”) to, directly or indirectly, (i) solicit, initiate, knowingly encourage or knowingly induce the making, submission or announcement of an Acquisition Proposal; (ii) furnish to any Person any non-public information relating to the Company in response to or in connection with an Acquisition Proposal (for avoidance of doubt, it being understood that the foregoing shall not prohibit the Company or any of its Representatives from furnishing, in the ordinary course of business, any non-public information to (A) any actual or potential customer, supplier, distributor, licensor, licensee, partner or other Person to the extent necessary to facilitate any business dealings between the Company and such actual or potential customer, supplier, distributor, licensor, licensee, partner or other Person that are unrelated to any Acquisition Proposal, or (B) a Governmental Entity); (iii) participate or engage in discussions or negotiations with any Person with respect to an Acquisition Proposal (for avoidance of doubt, it being understood that the foregoing shall not prohibit the Company or any of its Representatives from making such Person aware of the restrictions of this Section 5.03 in response to the receipt of an Acquisition Proposal, nor shall it prohibit the Company from engaging in discussions with its Representatives to the extent reasonably necessary to assist the Company in determining how to properly respond to such Acquisition Proposal); or (iv) approve, endorse or recommend to the stockholders of the Company any Acquisition Proposal; provided, however , that notwithstanding anything to the contrary contained in this Agreement, at any time before obtaining the Company Stockholder Approval, the Company may, directly or indirectly through its Representatives, (A) engage or participate in discussions or negotiations with any Person (and may engage or participate in discussions or negotiations with such Person’s Representatives and potential financing sources) that has made (after the date of this Agreement) an Acquisition Proposal that the Company Board determines in good faith (after consultation with its outside legal counsel and financial advisor) constitutes or is reasonably likely to lead to a Superior Proposal, and (B) furnish to any such Person described in clause (A) above (including to such Person’s Representatives and potential financing sources) any non public information relating to the Company and the Company Subsidiaries pursuant to a confidentiality agreement (whether executed before or after the date of this Agreement), the terms of which are no less favorable in any material respect to the Company than those contained in the Confidentiality Agreement ( provided that , for the avoidance of doubt, such confidentiality agreement is not required to contain standstill provisions); and provided further , that in the case of any action taken pursuant to clause (A) or clause (B) above, the Company Board shall first have determined in good faith (after consultation with its outside legal counsel) that the failure to take such action is inconsistent with its fiduciary obligations to the stockholders of the Company under applicable Legal Requirements; and contemporaneously with furnishing any nonpublic information to such Person, the Company furnishes such nonpublic information to Parent (to the extent such information has not been previously furnished by the Company to Parent).

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(b) Upon the execution and delivery of this Agreement, the Company shall immediately cease and cause to be terminated any active discussions with any Person that relate to any Acquisition Proposal.

(c) Unless the Company Board shall first have determined in good faith (after consultation with its outside legal counsel) that the failure to take the following actions is inconsistent with its fiduciary obligations to the stockholders of the Company under applicable Legal Requirements, the Company agrees not to release or permit the release of any Person from, or to waive or permit the waiver of any provision of, any confidentiality, standstill or similar agreement to which the Company is a party or under which the Company has any rights; provided , however , that the expiration or termination of such agreement or provision of such agreement by its own terms shall not be considered to be a violation of the foregoing by the Company.

(d) Notwithstanding anything to the contrary contained in this Agreement, if the Company Board has received an Acquisition Proposal (that has not been withdrawn) that constitutes a Superior Proposal, the Company shall provide Parent a written notice specifying the material terms and conditions of such Superior Proposal, including a copy of such Superior Proposal and identifying the Person making such Superior Proposal, and during the five day period following Parent’s receipt of such notice shall give Parent the opportunity to meet with the Company and its Representatives, and at Parent’s request, shall negotiate in good faith regarding the terms of possible revisions to the terms of this Agreement.

(e) Notwithstanding anything to the contrary contained in this Agreement, (i) the obligation of the Company to solicit written consents in favor of adoption of this Agreement and approval of the Transactions shall not be limited or otherwise affected by the commencement, disclosure, announcement or submission to it of any Acquisition Proposal unless and until the Agreement has been terminated in accordance with Section 7.01 , and (ii) the Company shall not submit to the vote (either by written consent action or at a meeting) of its stockholders any Acquisition Proposal, unless and until this Agreement is terminated in accordance with its terms.

(f) The Company shall not take any action to exempt any Person (other than Parent, Merger Sub and their respective Affiliates) from the restrictions on “business combinations” contained in Section 203 of the DGCL (or any similar provisions of any other Legal Requirement) or otherwise cause such restrictions not to apply unless such actions are taken simultaneously with a termination of this Agreement pursuant to Section 7.01.

(g) The terms of this Section 5.03 shall terminate and replace entirely the Exclusivity Letter from the Company to the Parent dated December 3, 2010.

Section 5.04. Solicitation of Written Consents.

The Company shall duly set the close of business on the date of this Agreement as the record date for the solicitation of written consents from the Company’s stockholders in favor of adoption of this Agreement and approval of the Transactions and performance of the Company’s obligations hereunder and consummation of the Transactions, and (ii) immediately thereafter conduct such solicitation and use its reasonable best efforts to obtain through such written consent action, Company Stockholder Approval. Such efforts shall include the full enforcement (by proxies/power of attorney consents and, if additionally necessary, by any other means) of all applicable contractual drag along rights.

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Section 5.05. Filings; Other Action; Tax.

(a) Each of the Company, Parent and Merger Sub shall: (i) promptly make and effect all registrations, filings and submissions required to be made or effected by it pursuant to the Exchange Act and other applicable Legal Requirements with respect to the Transactions; and (ii) use its reasonable best efforts to cause to be taken, on a timely basis, all other actions necessary or appropriate for the purpose of consummating and effectuating the transactions contemplated by this Agreement. Without limiting the generality of the foregoing, each of the Company, Parent and Merger Sub shall promptly provide all information requested by any Governmental Entity in connection with the Transactions.

(b) Without limiting the generality of anything contained in Section 5.05(a) or Section 5.05(c) , each party hereto shall (to the extent permitted by applicable Legal Requirements): (i) give the other parties prompt notice of the making or commencement of any request, inquiry, investigation, action or Legal Proceeding by or before any Governmental Entity with respect to the Transactions; (ii) keep the other parties informed as to the status of any such request, inquiry, investigation, action or Legal Proceeding; and (iii) promptly inform the other parties of any communication to or from any Governmental Entity regarding the Transactions. Each party hereto will consult and cooperate with the other parties and will consider in good faith the views of the other parties in connection with any analysis, appearance, presentation, memorandum, brief, argument, opinion or proposal made or submitted in connection with any such request, inquiry, investigation, action or Legal Proceeding. In addition, except as may be prohibited by any Governmental Entity or by any Legal Requirement, in connection with any such request, inquiry, investigation, action or Legal Proceeding, each party hereto will permit authorized representatives of the other parties to be present at each meeting or conference relating to such request, inquiry, investigation, action or Legal Proceeding and to have access to and be consulted in connection with any document, opinion or proposal made or submitted to any Governmental Entity in connection with such request, inquiry, investigation, action or Legal Proceeding.

(c) In furtherance and not in limitation of the covenants of the parties contained in this Section 5.05 , each of the parties hereto shall use its reasonable best efforts to resolve such objections, if any, as may be asserted by a Governmental Entity or other Person with respect to the Transactions. Without limiting any other provision hereof, Parent and the Company shall each use its reasonable best efforts to (i) avoid the entry of, or to have vacated or terminated, any decree, order or judgment that would restrain, prevent or delay the consummation of the Transactions on or before the Outside Date, including by defending through litigation on the merits any claim asserted in any court by any Person, and (ii) avoid or eliminate each and every impediment under any antitrust law that may be asserted by any Governmental Entity with respect to the Transactions so as to enable the consummation of the Transactions to occur as soon as reasonably possible (and in any event no later than the Outside Date); except that Parent need do no such thing that would prevent it from achieving in substantial measure all of the benefits it intended to achieve via the Transactions.

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(d) For avoidance of doubt, the parties recognize that Parent shall, upon issuance thereof, not register the CVRs under the Exchange Act, and Parent shall have no obligation under this Agreement or the CVR Agreement to ever list or include the CVRs, or any of them, on the Exchange or on any other securities exchange or quotation system.

Section 5.06. Access.

Upon reasonable advance written notice, the Company shall afford Parent and its Representatives reasonable access, during normal business hours throughout the period before the Effective Time, to its books and records and, during such period, shall furnish promptly to Parent all readily available information concerning its business as Parent may reasonably request (and the Company shall also, upon such request, provide such access to its facilities, personnel and contract parties); provided , however , that the Company shall not be required to permit any inspection or other access, or to disclose any information, that in its reasonable judgment would: (a) constitute, or result in any, disclosure (whether or not to a third party) of any of its Trade Secrets in such a way as would destroy their trade-secret status; (b) result in the disclosure of any Trade Secrets of third parties; (c) violate any of its obligations to third persons with respect to confidentiality; (d) jeopardize protections afforded it under the attorney-client privilege or the attorney work product doctrine; (e) violate any Legal Requirement; or (f) materially interfere with the conduct of its business. All information obtained by Parent or its Representatives pursuant to this Section 5.06 shall be treated as “Confidential Information” for purposes of the Confidentiality Agreement.

Section 5.07. Publicity.

Parent shall be free to issue press releases and make public statements and filings with respect to the Transactions. To the extent that either (a) the content of any proposed Company press releases and public statements would not be inconsistent with previously-issued Parent press releases, public statements and filings or (b) Parent has approved particular proposed Company press releases and public statements in advance and in writing (which approval shall not be unreasonably withheld), the Company shall be free to issue such press releases and make such public statements with respect to the Transactions, but the Company shall not otherwise issue any press releases or make any public statements with respect to the Transactions. Parent shall provide copies of press releases relating to the Transactions, as soon as reasonably practicable prior to the issue thereof, to the Company prior to the Effective Time, and to the Shareholders’ Representative, after the Effective Time.

Section 5.08. Employee Benefits.

(a) Unless “cause” patently appears, any termination of employment of Company employees within 30 days before or after the Closing Date shall be treated as a “termination without cause” or “benefits eligible termination” (or equivalent term) by the Company entitling such employees to full severance payments and benefits under the employment agreements listed on Section 5.08 of the Company Disclosure Letter, determined on the basis that such termination has occurred in connection with a change in control, as applicable to individual employees. Section 5.08 of the Company Disclosure Letter sets forth the amounts of the cash severance payments applicable as of the Effective Time to each employee covered by an employment agreement with the Company. (Inclusion on such schedule shall create no inference that such employee shall be terminated in connection with the Merger, or at all.) Before the Effective Time, the Company Board may in its sole discretion deliver letters to individual employees setting forth their severance payments and benefits upon termination of employment, on a basis consistent with this Section 5.08 . Notwithstanding anything contained herein to the contrary, in no event shall any officer’s voluntary resignation as such (as contemplated by Article VI of this Agreement) affect such Person’s eligibility to receive the severance payments set forth on Section 5.08 of the Company Disclosure Letter or otherwise alter the classification of the termination of employment as contemplated under this Section 5.08 .

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(b) The Company shall as of immediately before the Effective Time terminate the Company’s 401(k) plan and take all customary ancillary actions in connection with such termination.

(c) This Section 5.08 shall survive the Effective Time and the consummation of the Merger. This Section 5.08 is intended to benefit, and may be enforced by, the employees or former employees entitled to the rights set forth hereunder and their respective heirs, representatives, successors and assigns, and shall be binding on all successors and assigns of Parent and the Surviving Corporation.

Section 5.09. Indemnification; Directors’ and Officers’ Insurance.

(a) From and after the Effective Time, Parent will cause the Surviving Corporation and its Subsidiaries to fulfill and honor in all respects the obligations of the Company pursuant to (i) each indemnification agreement in effect on the date of this Agreement between the Company and any Indemnified Party; (ii) any indemnification provision and any exculpation provision in favor of an Indemnified Party that is set forth in the certificate of incorporation or bylaws of the Company in effect as of the date of this Agreement and (iii) any other rights to indemnification now existing in favor of any Indemnified Party under any statute or any express written Contract. The certificate of incorporation and bylaws of the Surviving Corporation shall contain the provisions with respect to indemnification and exculpation from liability set forth in the Company’s certificate of incorporation and bylaws on the date of this Agreement, and, from and after the Effective Time, such provisions shall not be amended, repealed or otherwise modified in any manner that could adversely affect the rights thereunder of any Indemnified Party.

(b) Without limiting the provisions of Section 5.09(a) , during the period commencing at the Effective Time and ending on the sixth anniversary of the Effective Time, Parent shall indemnify and hold harmless each Indemnified Leader against and from any costs, fees and expenses (including reasonable attorneys’ fees and investigation expenses), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any Legal Proceeding, arbitration, investigation or inquiry, whether civil, criminal, administrative or investigative, to the extent such Legal Proceeding, arbitration, investigation or inquiry arises directly or indirectly out of or pertains directly or indirectly to: (i) any action or omission or alleged action or omission in such Indemnified Leader’s capacity as a director, officer, employee or agent of the Company; or (ii) any of the transactions contemplated by this Agreement; provided , however , that if, at any time before the sixth anniversary of the Effective Time, any Indemnified Leader delivers to the Company, the Surviving Corporation or Parent, as applicable, a written notice asserting a claim for indemnification under this Section 5.09(b) , then the claim asserted in such notice shall survive the sixth anniversary of the Effective Time until such time as such claim is fully and finally resolved. In the event of any such Legal Proceeding, arbitration, investigation or inquiry: (A) any counsel retained by the Indemnified Leaders with respect to the defense thereof for any period after the Effective Time must be reasonably satisfactory to Parent; and (B) Parent will pay the reasonable fees and expenses of such counsel, promptly after statements therefor are received; provided that the individual to whom expenses are advanced provides an undertaking to repay such advances to the extent required by applicable Legal Requirements. The Indemnified Leaders as a group may retain only one law firm (in addition to local counsel) to represent them with respect to any single action unless counsel for

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any Indemnified Leader determines in good faith that, under applicable standards of professional conduct, a conflict exists or is reasonably likely to arise on any material issue between the positions of any two or more Indemnified Leaders. Notwithstanding anything to the contrary contained in this Section 5.09(b) or elsewhere in this Agreement, Parent agrees that it will not settle or compromise or consent to the entry of any judgment or otherwise seek termination with respect to any Legal Proceeding, arbitration, investigation or inquiry for which indemnification may be sought under this Agreement unless such settlement, compromise, consent or termination includes an unconditional release of all Indemnified Leaders from all liability arising out of such Legal Proceeding, arbitration, investigation or inquiry.

(c) Parent and the Surviving Corporation jointly and severally agree to pay all expenses, including attorneys’ fees, that may be incurred by the Indemnified Parties in successfully enforcing their indemnity rights and other rights provided in this Section 5.09 .

(d) This Section 5.09 shall survive the Effective Time and the consummation of the Merger. This Section 5.09 is intended to benefit, and may be enforced by, the Indemnified Parties and their respective heirs, representatives, successors and assigns, and shall be binding on all successors and assigns of Parent and the Surviving Corporation.

(e) Through the sixth anniversary of the Effective Time, Parent will cause the Surviving Corporation to maintain in effect, for the benefit of the Company’s directors and officers that are insured under the Company’s current directors’ and officers’ liability insurance policy in effect as of the date of this Agreement (the “ D&O Insurance Policy ”), the current level and similar scope of directors’ and officers’ liability insurance coverage as set forth in the D&O Insurance Policy with a carrier selected by Parent; provided, however that in no event shall the Surviving Corporation be required pursuant to this Section 5.09(e) to expend in any one year an amount in excess of 100% of the annual premium currently payable by the Company with respect to such current D&O Insurance Policy, it being understood that if the annual premiums payable for such insurance coverage exceed such amount, the Surviving Corporation shall be obligated to obtain a policy with what Parent determines in good faith to be the most favorable coverage available for a cost equal to such amount. At any time before or forthwith after the Effective Time, notwithstanding anything to the contrary set forth in this Agreement, the Company may (and at Parent’s direction shall) purchase a customary “tail” prepaid policy on the D&O Insurance Policy covering a period of six years from the Effective Time. In the event that the Company does purchase such a customary “tail” prepaid policy before the Effective time, Parent will cause the surviving Corporation to maintain such “tail” policy in full force and effect and continue to honor its respective obligations thereunder, in lieu of all other obligations of Parent under the first sentence of this Section 5.09(e) , for so long as such “tail” policy shall be maintained in full force and effect.

Section 5.10. Efforts to Satisfy Closing Conditions.

Each of Parent, Merger Sub and the Company shall use its reasonable best efforts to cause the conditions to the other party’s obligations to effect the Merger and the other Transactions to be satisfied. Each party hereto, at the reasonable request of the other, shall execute and deliver such other instruments and do and perform such other acts and things as may be reasonably necessary and consistent with this Agreement to effect the consummation of the Merger and other Transactions contemplated by this Agreement.

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Section 5.11. Shareholders’ Representative; Shareholders’ Account; Exhaustion of Obligations.

(a) There shall be a Shareholders’ Representative, who shall be the person(s) appointed as such in the Shareholders’ Representative Agreement, or such subsequent or other person as may be appointed in accordance with the Shareholders’ Representative Agreement, pursuant to which agreement the Shareholders’ Representative is or will be appointed as the agent and attorney-in-fact with respect to the matters set forth therein, including any matters relating to this Agreement and the Transactions. All payments of cash to be paid toward any shareholder or ex-shareholder of the Company pursuant to the Transactions, whether by the Company, Merger Sub, or Parent, or any of them, hereunder, including without limitation the Pre-Closing Consideration, the Merger Consideration, the Adjustment, or any payment pursuant to the CVR Agreement, shall be paid to the Shareholders’ Account. Parent hereby agrees to be bound by Section 1.1(e) of the Shareholders’ Representative Agreement, including without limitation the provision therein that any Dispute (as defined therein) with respect to the existence of a conflict of interest shall be resolved in accordance with Section 6.4 of the Shareholders’ Representative Agreement.

(b) For avoidance of doubt, and notwithstanding anything in this Agreement or any other agreement to the contrary: upon each such respective payment to the Shareholders’ Account, all obligations whatsoever of the Company, Escrow Agent, Merger Sub and/or Parent with respect such payment and the safeguarding, investment, allocation and/or distribution thereof shall be exhausted and shall cease; and the shareholders/ex-shareholders of the Company /holders of CVRs shall have no rights or remedies whatsoever against the Company, Escrow Agent, Merger Sub and/or Parent with respect to such payment, but instead must look solely and exclusively to any available rights or remedies (if any) they might have against the Shareholders’ Representative.

Section 5.12. Mutual Release of Claims and Waiver and Covenant Not To Sue

This Section 5.12 shall become effective upon, and only upon, the Effective Time. In consideration of the mutual releases and covenants contained hereunder, and other good and valuable consideration, the sufficiency and receipt of which is hereby acknowledged and agreed, Parent and Merger Sub, on the one hand, and the Company, on the other, each hereby release, relinquish and forever discharge and forgive the other, and their respective directors, officers, agents, employees, bankers, advisors, representatives, successors, and assigns (the “Released Parties”), from any and all wrongs, injuries, claims, or damages, direct or indirect, whether known or unknown and of any kind or nature, relating to or arising from (i) that certain Mutual Confidentiality Agreement entered into as of July 14, 2010 by and between Parent and the Company, (ii) that certain “Exclusivity Letter Agreement” entered into as of December 3, 2010 by and between Parent and the Company, (iii) that certain letter of intent agreement entered into as of December 3, 2010 by and between Parent and the Company Term Sheet, and (iv) the negotiation of such documents and this Agreement by and among by Parent, the Company, and the Released Parties the (“Underlying Causes”). Parent, Merger Sub, and the Company each hereby acknowledge that there may be unknown and unanticipated claims or damages arising out of the Underlying Causes and that, in making this release, they fully intend to release one another and the Released Parties from any claims or damages relating to the Underlying Causes of which the parties are not presently aware, and which are currently unknown and unanticipated, and which may develop or be discovered in the future. Parent, Merger Sub, and the Company each additionally hereby covenant and agree not to sue or bring other legal action against the other for any claims which have been released herein. Finally, and notwithstanding the foregoing, Parent, Merger Sub, and the Company hereby agree that nothing herein shall be construed as a release of those rights retained by any party hereto pursuant to other sections of this Agreement or as a release of claims for any future conduct that occurs after the Effective Time.

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ARTICLE VI

CONDITIONS TO EACH PARTY’S OBLIGATION TO EFFECT THE MERGER

Section 6.01. Conditions to Obligations of Each Party Under This Agreement.

The respective obligations of each party to effect the Merger and the other Transactions shall be subject to the satisfaction at or before the Effective Time of the following conditions, any or all of which may be waived, in whole or in part, to the extent permitted by applicable Legal Requirements:

(a) The Company Stockholder Approval shall have been obtained.

(b) No temporary, preliminary or permanent order or injunction shall have been issued by a court of competent jurisdiction and shall be continuing that prohibits the consummation of the Merger, and no Legal Prohibition shall have been enacted since the date of this Agreement and shall remain in effect.

Section 6.02. Additional Conditions to Obligations of Parent and Merger Sub.

The obligations of Parent and Merger Sub to effect the Merger and the other transactions contemplated herein are also subject to the following conditions:

(a) Each of the representations and warranties of the Company set forth in the Agreement (without giving effect to any “Company Material Adverse Effect” or other materiality qualifications contained in such representations and warranties) shall be true and correct as of the Effective Time as though made on and as of the Effective Time (except that those representations and warranties which address matters only as of a particular date need only be true and correct as of such date), except for such inaccuracies, individually or in the aggregate, that would not reasonably be expected to have a Company Material Adverse Effect, and Parent shall have received a certificate of an executive officer of the Company to that effect.

(b) The covenants of the Company contained in the Agreement that are required to have been performed by the Company before the Effective Time shall have been performed in all material respects, and Parent shall have received a certificate of an executive officer of the Company to that effect and to the effect that Section 6.02(c) , Section 6.02(d) , Section 6.02(e) , Section 6.02(f) , Section 6.02(g) , Section 6.02(h) and Section 6.02(l) have been satisfied.

(c) Since the date of this Agreement, there shall not have occurred and be continuing any event or development which, individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect.

(d) All of those Company stockholders who, assuming full enforcement of all available contractual dragalong provisions, are or would have been required to vote or give a written consent in favor of adoption of this Agreement and approval of the Transactions, shall have given written consents in favor of adoption of this Agreement and approval of the Transactions constituting the Required Shareholder Consent.

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(e) The Company shall have delivered to Parent each of the Company Stock Certificates, together with each of the properly completed and executed Transmittal Letters (and copies of properly completed and executed signature pages to the Shareholders’ Representative Agreement) for all holders of Company Shares who are not Nontendering Shareholders as of the Effective time.

(f) The Company shall have amended its certificate of incorporation to clarify (i) that the Merger shall be treated as a liquidation, (ii) that the Pre-Closing Consideration, and cash and CVR portions of the Total Merger Consideration and the payments under the CVRs shall be applied toward satisfaction of the liquidation preferences of the Company’s respective shares of preferred stock on an “actual-payout-over-time” basis, (iii) how the cash and CVR portions of the Total Merger Consideration shall be allocated among series and in what order, and (iv) that for liquidation-preference purposes dividends will cease to accrue as of the Effective Time. The Company and each participant in the MIP shall have amended the MIP to confirm and clarify that for MIP purposes the CVRs shall be valued on an “actual payout over time” basis, and that the MIP participants shall look solely to the Shareholders’ Account for payment of any and all MIP bonus pool amounts and that the Company and Parent shall have no obligation to make payments to such participants (or additional payments to the Shareholders’ Account (except possibly pursuant to Section 2.09 above) in respect thereof.

(g) The Company shall have satisfied all advance notice rights of holders of Company Preferred Stock pursuant to the Company Charter Documents, or all holders of Company Preferred Stock shall have expressly waived such advance notice rights in writing.

(h) The Company shall have delivered to Parent the resignations of each director and officer of the Company, as such, each effective as of the Effective Time, with such exceptions as Parent may designate in its sole discretion.

(i) The Company shall have obtained (and shall have delivered to Parent satisfactory evidence that it has obtained) consents or approvals from all parties in the absence of whose consent or approval the consummation of the Merger and the Transactions would violate or constitute a default under any Company Contract, except for such violations or defaults as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, impair in any material respect the ability of the Company to perform its obligations hereunder or the ability of Parent to enjoy the intended benefit of the Transactions, or prevent or materially delay consummation of the Transactions; and the Company shall have obtained, made or received all consents or approvals of, or filings, declarations or registrations with, any Governmental Entity necessary for the execution and delivery of this Agreement and the CVR Agreement by the Company and the consummation by the Company of the Transactions, other than (i) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware pursuant to the DGCL, and (ii) such consents, approvals, filings, declarations or registrations that, if not obtained, made or given, would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, impair in any material respect the ability of the Company to perform its obligations hereunder or the ability of Parent to enjoy the intended benefit of the Transactions, or prevent or materially delay consummation of the Transactions.

(j) Parent shall have received from the Company (i) a properly executed statement, dated as of the Effective Time, stating under penalties of perjury that the Company is not, and has not been, a “United States real property holding corporation” as defined in Section 897(c)(2) of the Code during the applicable period described in Section 897(c)(1)(A)(ii) of the Code, in form and substance

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reasonably acceptable to Parent, and (ii) proof reasonably satisfactory to Parent that the Company has provided notice of such verification to the Internal Revenue Service in accordance with the provisions of Treasury Regulations Section 1.897-2(h)(2), if such is required.

(k) The Company shall have executed and delivered to Parent and Merger Sub the Certificate of Merger, in a form reasonably satisfactory to Parent.

(l) The Shareholders’ Representative Agreement shall have been executed and delivered by the Company, the Shareholders’ Representative, and the holder of at least one Company Share, and by Theron Odlaug and Allen Roberson in their individual capacities solely for the purpose of agreeing to Sections 2.4(c) and 4.2 thereof.

(m) Each executive employee of the Company before the Effective Time who shall thereafter remain an employee of the Company, shall have executed and delivered an employment agreement providing for the terms of such employment, including without limitation provisions for salary, benefits, severance, and change-of-control after the Effective Time, having format and content reasonably satisfactory to Parent, which approval shall not be unreasonably withheld.

(n) Escrow Agent and the Shareholders’ Representative shall have executed and delivered the Escrow Agreement in a form reasonably satisfactory to Parent.

Section 6.03. Additional Conditions to Obligations of the Company.

The obligation of the Company to effect the Merger and the other transactions contemplated herein are also subject to the following conditions:

(a) Parent shall have paid by wire transfer of immediately available funds to the Shareholders’ Account the Closing Payment Amount.

(b) Each of the representations and warranties of Parent and Merger Sub set forth in the Agreement (without giving effect to any “Parent Material Adverse Effect” or other materiality qualifications contained in such representations and warranties) shall be true and correct as of the Effective Time as though made on and as of the Effective Time (except that those representations and warranties which address matters only as of a particular date need only be true and correct as of such date), except for such inaccuracies, individually or in the aggregate, that would not reasonably be expected to have a Parent Material Adverse Effect, and the Company shall have received a certificate of an executive officer of Parent to that effect.

(c) The covenants of Parent and Merger Sub contained in the Agreement that are required to have been performed by Parent and Merger Sub before the Effective Time shall have been performed in all material respects, and the Company shall have received a certificate of an executive officer of Parent to that effect and to the effect that Section 6.03(f) has been satisfied.

(d) Parent shall have executed and delivered the Escrow Agreement in a form reasonably satisfactory to Escrow Agent and the Shareholders’ Representative.

(e) The Company (or Parent on behalf of the Company) shall have executed and delivered to each respective executive employee of the Company before the Effective Time who shall thereafter remain an employee of the Company, an employment agreement providing for the terms of such employment, including without limitation provisions for salary, benefits, severance, and change-of-control after the Effective Time, having format and content reasonably satisfactory to such executive employees, which approval shall not be unreasonably withheld.

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(f) Since the date of this Agreement, there shall not have occurred and be continuing any event or development which, individually or in the aggregate, has had or would reasonably be expected to have a Parent Material Adverse Effect.

Section 6.04. Estoppel.

Notwithstanding anything to the contrary contained herein, no party whose failure to take any action required to fulfill or satisfy any of the conditions set forth in this Article VI may claim failure of such condition as grounds for termination pursuant to Article VII of this Agreement.

ARTICLE VII

TERMINATION

Section 7.01. Termination.

This Agreement may be terminated and the Merger may be abandoned (before or after the obtaining of the Company Stockholder Approval):

(a) by mutual written consent of the Company and Parent at any time before the Effective Time;

(b) by either Parent or the Company if, as of the day that is 30 calendar days after the day on which this Agreement is executed by the last to sign of Parent, Merger Sub, and the Company (the “ Outside Date ”), the Company Stockholder Approval shall not have been obtained (provided, that the Company may not so terminate if the reason the Company Stockholder Approval was not so obtained was the Company’s failure to perform one or more of its covenants and agreements hereunder, including under Section 5.04 , or a major shareholder’s breach of contractual obligations);

(c) by Parent or the Company at any time after the Outside Date if the Effective Time shall not have occurred on or before the Outside Date ( provided that the right to terminate this Agreement pursuant to this Section 7.01(c) shall not be available to any party where the failure of such party (or any Affiliate or Representative of such party) to fulfill any obligation under this Agreement, other than the failure to obtain the Company Stockholder Approval (which shall be governed by Section 7.01(b) ), has resulted in the failure of the Effective Time to have occurred on or before the Outside Date);

(d) by Parent or the Company if there shall be any Legal Prohibition in effect preventing the consummation of the Merger and which Legal Prohibition, following written notice thereof from the Company to Parent or vice versa, is not cured, or is incapable of being cured, on or before the Outside Date.; provided , however , that a party shall not be permitted to terminate this Agreement pursuant to this Section 7.01(d) if the existence of the Legal Prohibition is attributable to the failure of such party (or any Affiliate or Representative of such party) to perform in any material respect any covenant in this Agreement required to be performed by such party (or any Affiliate or Representative of such party) at or before the Effective Time, and provided , further , that the party seeking to terminate this Agreement pursuant to this Section 7.01(d) shall have used its reasonable best efforts to prevent such Legal Prohibition and to cause any such Legal Prohibition to be vacated or otherwise rendered of no effect as soon as possible and in any event by the Outside Date;

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(e) by Parent or the Company if after completion of the Section 5.03(d) process the Company Board authorizes and directs the Company, subject to complying with the terms of this Agreement, to accept (or to enter into a written agreement for a transaction constituting) a Superior Proposal, subject to Section 7.03 below;

(f) by Parent at any time before the Effective Time if: (i) the representations and warranties of the Company set forth in this Agreement shall not be true and correct on and as of the date of such determination as if made on such date (other than those representations and warranties that address matters only as of a particular date, which shall be true and correct as of such date), except where the failure of any such representation or warranty to be true and correct (without giving effect to any Company Material Adverse Effect or other materiality qualifications set forth therein) would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect or impair in any material respect the ability of the Company to perform its obligations under this Agreement; or (ii) the Company shall have, in any material respect, breached or failed to perform or comply with any obligation, agreement or covenant required by this Agreement to be performed or complied with by it, which breach or failure (in each case under clauses (i) and (ii)), following written notice thereof from Parent to the Company, is not cured, or is incapable of being cured, on or before the Outside Date; or

(g) by the Company at any time before the Effective Time if: (i) the representations and warranties of Parent or Merger Sub set forth in this Agreement shall not be true and correct on and as of the date of such determination as if made on such date (other than those representations and warranties that address matters only as of a particular date, which shall be true and correct as of such date), except where the failure of any such representation or warranty to be true and correct (without giving effect to any Parent Material Adverse Effect or other materiality qualifications set forth therein) would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect or impair in any material respect the ability of Parent or Merger Sub to perform their obligations under this Agreement; or (ii) Parent or Merger Sub shall have, in any material respect, breached or failed to perform or comply with any obligation, agreement or covenant required by this Agreement to be performed or complied with by them, which breach or failure (in each case under clauses (i) and (ii)), following written notice thereof from the Company to Parent, is not cured, or is incapable of being cured, on or before the Outside Date.

Section 7.02. Effect of Termination.

In the event of the termination of this Agreement as provided in Section 7.01 , written notice thereof shall forthwith be given to the other party or parties specifying the provision hereof pursuant to which such termination is made and this Agreement shall be of no further force or effect; provided , however , that: (a)  Article VIII and the Confidentiality Agreement shall survive the termination of this Agreement and shall remain in full force and effect; and (b) the termination of this Agreement shall not relieve any party from any liability or damage that was the result of fraud or the breach of any representation, warranty or covenant contained in this Agreement before the date of such termination.

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Section 7.03. Termination Fee.

(a) If this Agreement is validly terminated by Parent or the Company pursuant to Section 7.01(e) , then, within 2 Business Days after such termination, the Company shall pay to Parent by wire transfer of immediately available funds an amount equal to the Termination Fee.

(b) Each of the parties hereto acknowledges that the agreements contained in this Section 7.03 are an integral part of the transactions contemplated by this Agreement and that the Termination Fee is not a penalty, but rather is liquidated damages in a reasonable amount that will compensate Parent and Merger Sub, as the case may be, in the circumstances in which such Termination Fee is payable for the efforts and resources expended and opportunities foregone while negotiating this Agreement and in reliance on this Agreement and on the expectation of the consummation of the Transactions, which amount would otherwise be impossible to calculate with precision.

(c) In circumstances under which the Termination Fee is payable and has been paid, Parent and Merger Sub agree that, to the extent they have incurred losses or damages in connection with this Agreement other than as a result of fraud or intentional misconduct, their sole and exclusive remedy against the Company and any of its directors, officers, Affiliates or Representatives, and the Shareholders’ Representative, for any breach, loss, or damage shall be to receive payment of the Termination Fee to the extent provided in this Section 7.03 and (ii) upon payment in full of such amount, (y) neither Parent nor Merger Sub shall have any other rights or claims or seek damages against the Company or any of its directors, officers, Affiliates or Representatives, or the Shareholders’ Representative, under this Agreement or otherwise, whether at law or equity, in contract, in tort or otherwise, other than as a result of fraud or intentional misconduct and (z) neither the Company nor any of its directors, officers, Affiliates or Representatives, nor the Shareholders’ Representative, shall have any further liability or obligation relating to or arising out of this Agreement or the Transactions, other than as a result of fraud or intentional misconduct.

ARTICLE VIII

MISCELLANEOUS PROVISIONS

Section 8.01. Amendment.

This Agreement may be amended with the written approval of the respective parties at any time before the Effective Time; provided , however , that after the Company Stockholder Approval shall have been obtained, no amendment shall be made which by applicable Legal Requirements requires further approval of the stockholders of the Company, without such further approval.

Section 8.02. Waiver.

(a) No failure on the part of any party to exercise any power, right, privilege or remedy under this Agreement, and no delay on the part of any party in exercising any power, right, privilege or remedy under this Agreement, shall operate as a waiver of such power, right, privilege or remedy; and no single or partial exercise of any such power, right, privilege or remedy shall preclude any other or further exercise thereof or of any other power, right, privilege or remedy.

(b) No party shall be deemed to have waived any claim arising out of this Agreement, or any power, right, privilege or remedy under this Agreement, unless the waiver of such claim, power, right, privilege or remedy is expressly set forth in a written instrument duly executed and delivered on behalf of such party; and any such waiver shall not be applicable or have any effect except in the specific instance in which it is given.

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Section 8.03. Entire Agreement; Counterparts.

This Agreement, the CVR Agreement, the other agreements referred to herein, and the Confidentiality Agreement constitute the entire agreement of the parties hereto and supersede all prior or contemporaneous agreements and understandings, both written and oral, among or between any of the parties hereto with respect to the subject matter hereof and thereof. This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument.

Section 8.04. Applicable Legal Requirements; Jurisdiction; Waiver of Jury Trial.

(a) This Agreement is made under, and shall be construed and enforced in accordance with, the Legal Requirements of the State of Delaware applicable to agreements made and to be performed solely therein. The parties hereto agree that any Legal Proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought in the Court of Chancery of the State of Delaware, and each of the parties hereby irrevocably consents to the jurisdiction of such court (and of the appropriate appellate courts therefrom) in any such Legal Proceeding and irrevocably waives, to the fullest extent permitted by Legal Requirements, any objection that it may now or hereafter have to the laying of the venue of such Legal Proceeding in any such court or that any such Legal Proceeding brought in any such court has been brought in an inconvenient forum. Each of the parties hereto agrees that a final judgment in any such Legal Proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Legal Requirements. Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 8.08 . Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by Legal Requirements. Each party hereto agrees not to commence any legal proceedings relating to or arising out of this Agreement or the transactions contemplated hereby in any jurisdiction or courts other than as provided herein.

(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) 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 EITHER OF SUCH WAIVERS, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (C) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.04(b) .

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Section 8.05. Payment of Expenses.

If the Merger is not consummated, each party hereto shall pay its own expenses incident to this Agreement and preparing for, and otherwise in connection with, the Transactions. Nothing contained in this Agreement shall be deemed to limit the right or ability of any party to this Agreement to pay such expenses, as and when due and payable.

Section 8.06. Transfer Taxes.

All transfer, documentary, sales, use, stamp, registration and other substantially similar Taxes and fees (including any penalties and interest) incurred in connection with this Agreement (collectively, “ Transfer Taxes ”) shall be paid by Parent and Merger Sub when due, and Parent and Merger Sub will, at their own expense, file all necessary Tax Returns and other documentation with respect to all such Transfer Taxes.

Section 8.07. Assignability; No Third Party Rights.

Before the Effective Time, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned, in whole or in part, by operation of a Legal Requirement or otherwise, by any of the parties without the prior written consent of the other parties and any purported assignment without such consent shall be void. This Agreement shall be binding upon, and shall be enforceable by and inure to the benefit of, the parties hereto and their respective permitted successors and assigns. Notwithstanding anything contained herein to the contrary, Parent shall not consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, unless the Person formed by such consolidation or into which Parent is merged or the Person that acquires by conveyance or transfer, or that leases, the properties and assets of Parent substantially as an entirety shall expressly assume (or assumes by operation of law) (a) payment (if and to the extent required) of all amounts that may become payable under the CVR Agreement and (b) the performance of every duty and covenant of the CVR Agreement on the part of Parent to be performed or observed; provided , further, Parent shall remain jointly and severally liable for the foregoing obligations after the date of such transfer, lease or similar transaction. Except (i) for the rights of holders of Company Stock to receive payment in accordance with Article II after the Effective Time, and (ii) as set forth in Section 5.08 and Section 5.09 , nothing in this Agreement, express or implied, is intended to or shall confer upon any Person, other than the parties hereto, any right, benefit or remedy of any nature. To the extent permitted by applicable Legal Requirements, it is expressly agreed that in no event shall any former stockholders of the Company (as opposed to the Shareholders’ Representative) or any holders of CVRs (as opposed to the Shareholders’ Representative) have, after the Effective Time, any power or right to commence or join in any Legal Proceeding based on or arising out of this Agreement or the CVR Agreement.

Section 8.08. Notices.

All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given or made as follows: (a) if sent by registered or certified mail in the United States return receipt requested, upon receipt; (b) if sent designated for overnight delivery by nationally recognized overnight air courier (such as Federal Express), upon receipt of proof of delivery; (c) if sent by email before 5:00 p.m. California time, when transmitted; (d) if sent by email after 5:00 p.m. California time, on the following Business Day; and (e) if

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otherwise actually personally delivered, when delivered, provided that such notices, requests, demands and other communications are delivered to the address set forth below, or to such other address as any party shall provide by like notice to the other parties to this Agreement:

if to Parent or Merger Sub:

Ligand Pharmaceuticals Incorporated

11085 North Torrey Pines Road

Suite 300

La Jolla, CA 92037

Attention: Charles Berkman

Email: cberkman@ligand.com

with a copy to:

Stradling Yocca Carlson & Rauth

4365 Executive Drive, Suite 1500

San Diego, CA 92121

Attention: Hayden Trubitt, Esq.

Email: htrubitt@sycr.com

if to the Company:

CyDex Pharmaceuticals, Inc.

10513 W. 84th Terrace

Lenexa, KS 66214

Attention: Theron E. Odlaug

Email: todlaug@cydexpharma.com

with a copy to:

Polsinelli Shughart PC

700 W. 47th Street, Suite 1000

Kansas City, MO 64112

Attention: Kevin R. Sweeney, Esq.

Email: krsweeney@polsinelli.com

if to Shareholders’ Representative:

Allen K. Roberson

c/o CyDex Pharmaceuticals, Inc.

10513 W. 84th Terrace Lenexa, KS 66214

Email: aroberson@cydexpharma.com

and

David Poltack

c/o TVM Capital

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101 Arch Street

Suite 1950

Boston, MA 02110

Email: poltack@tvm-capital.com

with a copy to:

Polsinelli Shughart PC

700 W. 47th Street, Suite 1000

Kansas City, MO 64112

Attention: Kevin R. Sweeney, Esq.

Email: krsweeney@polsinelli.com

Section 8.09. Severability.

Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction declares that any term or provision hereof is invalid or unenforceable, the parties hereto agree that the court making such determination shall have the power to limit the term or provision, to delete specific words or phrases or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified. In the event such court does not exercise the power granted to it in the prior sentence, the parties hereto agree to negotiate in good faith to replace such invalid or unenforceable term or provision with a valid and enforceable term or provision that will achieve, to the extent possible, the economic, business and other purposes of such invalid or unenforceable term.

Section 8.10. Obligation of Parent.

Parent shall ensure that each of Merger Sub and the Surviving Corporation duly performs, satisfies and discharges on a timely basis each of the covenants, obligations and liabilities of Merger Sub and (after the Effective Time) the Surviving Corporation under this Agreement and the CVR Agreement.

Section 8.11. Specific Performance.

The parties hereto agree that irreparable damage would occur in the event any of the provisions of this Agreement were not to be performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof in addition to any other remedies at law or in equity. Each party agrees to waive any requirement for the posting of, or securing of, a bond in connection with any such remedy.

Section 8.12. Remedies.

All rights and remedies of either party hereto are cumulative of each other and of every other right or remedy such party may otherwise have at law or in equity, and the exercise of one or more rights or remedies shall not prejudice or impair the concurrent or subsequent exercise of other rights or remedies.

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Section 8.13. Construction.

(a) For purposes of this Agreement, whenever the context requires: the singular number shall include the plural, and vice versa; the masculine gender shall include the feminine and neuter genders; the feminine gender shall include the masculine and neuter genders; and the neuter gender shall include the masculine and feminine genders.

(b) The parties hereto agree that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be applied in the construction or interpretation of this Agreement.

(c) As used in this Agreement, the words “include” and “including,” and variations thereof, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words “without limitation.”

(d) Except as otherwise indicated, all references in this Agreement to “Articles,” “Sections” and “Exhibits” are intended to refer to Articles, Sections or Exhibits to this Agreement, as the case may be.

(e) All references in this Agreement to “$” are intended to refer to U.S. dollars.

(f) Unless otherwise specifically provided for herein, the term “or” shall not be deemed to be exclusive.

(g) The titles, captions or headings of the Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.

Section 8.14. Further Action.

The parties hereto shall execute and deliver such certificates and other documents and take such other actions as may be reasonably necessary or appropriate in order to effect and to more perfectly evidence the Merger and the Transactions, including, but not limited to, making filings, recordings or publications required under the DGCL. Without limitation, if at any time after the Effective Time any further action is necessary to vest in the Surviving Corporation the title to all property or rights of Merger Sub or the Company, the officers of the Surviving Entity are fully authorized in the name of Merger Sub or the Company, as the case may be, to take, and shall take, any and all such lawful action.

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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this Agreement and Plan of Merger to be executed as of the date first written above.

[Signature Page to the Agreement and Plan of Merger]

EXHIBIT A: CVR Agreement

EXHIBIT B: Shareholders’ Representative Agreement

A-1

Exhibit 10.2

CONTINGENT VALUE RIGHTS AGREEMENT

THIS CONTINGENT VALUE RIGHTS AGREEMENT , dated as of January 14, 2011 (this “ Agreement” ), is entered into by and among Ligand Pharmaceuticals Incorporated, a Delaware corporation (“ Parent ”), CyDex Pharmaceuticals, Inc., a Delaware corporation (the “ Company” ), and Allen K. Roberson and David Poltack, acting jointly as Shareholders’ Representative (collectively the “ Shareholders’ Representative ”).

Preamble

Parent, Caymus Acquisition, Inc., a Delaware corporation and wholly-owned subsidiary of Parent (“ Sub ”), and the Company entered into an Agreement and Plan of Merger dated as of January 14, 2011 (the “ Merger Agreement ”), pursuant to which Sub will merge with and into the Company (the “ Merger ”), with the Company surviving the Merger as a subsidiary of Parent (the “ Surviving Corporation ”).

Pursuant to the Merger Agreement, Parent agreed to (subject to certain prerequisites as stated in the Merger Agreement) create and issue to the Company’s stockholders of record immediately before the Effective Time, contingent value rights as hereinafter described.

The parties have done all things necessary to make the contingent value rights, when issued pursuant to the Merger Agreement and hereunder, the valid obligations of Parent and to make this Agreement a valid and binding agreement of Parent, in accordance with its terms.

NOW, THEREFORE, for and in consideration of the premises and the consummation of the transactions referred to above, it is mutually covenanted and agreed, for the benefit of the Holders (as hereinafter defined), as follows:

ARTICLE I

DEFINITIONS

Section 1.1. Definitions.

(a) For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:

(i) the terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular;

(ii) all accounting terms used herein and not expressly defined herein shall have the meanings assigned to such terms in accordance with United States generally accepted accounting principles, as in effect on the date hereof;

(iii) the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision;

(iv) unless the context otherwise requires, words describing the singular number shall include the plural and vice versa, words denoting any gender shall include all genders and words denoting natural Persons shall include corporations, partnerships and other Persons and vice versa; and

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(v) all references to “including” shall be deemed to mean including without limitation.

(b) Capitalized terms used but not otherwise defined herein shall have the meanings ascribed thereto in the Merger Agreement. The following terms shall have the meanings ascribed to them as follows:

“ Accountant ” has the meaning set forth in Section 2.9.

“ Adjustment ” has the meaning set forth in Section 2.4(e)(v).

“ Adjustment Date ” has the meaning set forth in Section 2.4(e)(v).

“ Affiliate ” means, with respect to any Person, any Person that controls, is controlled by, or is under common control with such Person.

“ Board of Directors ” means the board of directors of Parent.

“ Board Resolution ” means a copy of a resolution certified by the secretary or an assistant secretary of Parent to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification.

“ Business Day ” means any day other than a Saturday, Sunday or a day on which the banks in San Diego, California are authorized or obligated by law or executive order to close.

“ Clopidogrel License ” means any license agreement with a third party with respect to rapid onset intravenous Clopidogrel that may be executed by the Company after the Effective Time and before December 31, 2016.

“ Clopidogrel Payment ” means a payment to be made on a Clopidogrel Payment Date in the applicable Clopidogrel Payment Amount.

“ Clopidogrel Payment Amount ” (a) if the Clopidogrel License is executed with The Medicines Company on or before the ninetieth (90 ^th ) day after the Closing Date, then (i) 100% of the upfront fee received by the Company pursuant thereto, but excluding any portion of such upfront fee exceeding $1,750,000; plus (ii) 50% of the cumulative amount of Clopidogrel Revenue received (excluding from Clopidogrel Revenue for the purposes of this clause the amounts payable under clause (a)(i)) (the “Subsequent Clopidogrel Payment Amounts”) less the cumulative Subsequent Clopidogrel Payment Amounts previously paid to the Shareholders’ Account; or (b) if the Clopidogrel License is not executed with The Medicines Company on or before the ninetieth (90 ^th ) day after the Closing Date or is executed with a company other than The Medicines Company, then 50% of the cumulative amount of Clopidogrel Revenue received less the cumulative Clopidogrel Payment Amounts previously paid to the Shareholders’ Account.

“ Clopidogrel Payment Date ” means the tenth Business Day following the receipt of any Clopidogrel Revenue that will result in a Clopidogrel Payment. (There can be more than one such Clopidogrel Payment Date, i.e., if Clopidogrel Revenue is received on more than one date.)

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“Clopidogrel Revenue ” means the excess of (a) any and all upfront fees or milestone fees ever received by Parent under the Clopidogrel License, if any, over (b) any and all payments required to be made to Prism in respect of such upfront fees or milestone fees. (For the avoidance of doubt: Clopidogrel Revenue does not include running royalty payments.) The determination of Clopidogrel Revenue shall be consistent with the factual and GAAP determinations with respect to same made in Parent’s audited financial statements for the applicable Year and the payments made with respect to Clopidogrel Revenue received in any Quarter during any Year shall be subject to adjustment based on the results of the audit following such Year, with any such adjustment to be reflected in the Clopidogrel Payment and/or Revenue Sharing Payment to be made for the next-following Quarter(s) until satisfied or, in the case of the last payment, by a payment to or from (as appropriate to reflect the adjustment) the Shareholders’ Account within 30 Business Days after the delivery of such audit to the Shareholders’ Representative.

“ Company Assets ” means any non-financial assets of the Company acquired by Parent as a result of the Merger, including, without limitation, the Company Technology.

“ Company Business ” means the business conducted before the Merger by the Company with respect to the Company Technology, and any business that may be conducted after the Merger by Parent or any affiliate of Parent (including, without limitation, the Surviving Corporation) utilizing the Company Technology in whole or in part.

“ Company Technology ” means any Company technology, including, without limitation, the Company’s Captisol technology and other Cyclodextrin derivatives, together with any derivations, improvements and modifications thereto.

“ CVR Payment Amount ” means an applicable respective amount payable pursuant to Onyx Drug Application Payment, Onyx Drug Approval Payment, any Clopidogrel Payment, Payment A and the Revenue Sharing Payments.

“ CVR Payment Date ” means the Onyx Drug Application Payment Date, the Onyx Drug Approval Payment Date, any Clopidogrel Payment Date, the Payment A Date, and any Revenue Sharing Payment Date, as applicable.

“ CVR Register ” has the meaning set forth in Section 2.3(b).

“ CVR Registrar ” has the meaning set forth in Section 2.3(b).

“ CVRs ” means the Contingent Value Rights issued by Parent pursuant to the Merger Agreement and this Agreement, whether Postclosing CVRs or CVRs issued at Closing of the Merger (Closing having the meaning set forth in the Merger Agreement). Certain CVRs will be designated as Series B CVRs, Series A CVRs, Series A-1 CVRs and Common CVRs, as set forth in the Shareholders’ Representative Agreement. Unless otherwise specified herein, all the CVRs shall be considered as part of and shall act as one class only for purposes of this Agreement.

“ Default ” shall mean that any of the following has occurred and has not been cured by Parent within five Business Days after written notice by the Shareholders’ Representative to Parent thereof: (a) Parent fails to pay to the Shareholders’ Account any amount as and when required hereunder, (b) at any time Parent is obligated for more than $35,000,000 of financial indebtedness (other than financial indebtedness which is expressly subordinated to all obligations of Parent hereunder

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pursuant to a written subordination agreement signed by and reasonably acceptable to the Shareholder Representative), (c) at any time after March 15, 2011 Parent’s cash, cash equivalents and short-term investments (minus any restricted cash) is less than $10,000,000, (d) Parent fails to notify the Shareholder Representative promptly if either of the events set forth in clauses (b) or (c) occur, (e) Parent commits any material breach of this Agreement, including but not limited to any breach of clauses (a) or (d) above or failure to deliver any Quarterly Report or Interim Certificate complying with Section 2.4(e)(i) below. It is understood that in the event of a good faith dispute regarding item “(a)” (e.g., as to Indemnification Offset), no amount subject to a bona fide dispute shall be due until the Dispute is resolved in favor of the Shareholders’ Representative pursuant to Section 6.10 hereof.

“ Dispute ” has the meaning set forth in Section 6.10.

“ Effective Time ” has the meaning set forth in the Merger Agreement.

“ Entitlement Certificate ” has the meaning set forth in Section 2.4(d).

“ Escrow Agent ” means a financial institution chosen as Escrow Agent by mutual agreement of Shareholders’ Representative and Parent prior to the Effective Time, or its successor, determined in accordance with the Escrow Agreement.

“ Escrow Agreement ” means the agreement among the Shareholders’ Representative, the Parent, and the Escrow Agent providing the terms and conditions by which the Escrow Agent will hold the Escrow Amount, of even date herewith.

“ Escrow Amount ” means the amounts, if any, to be held in the escrow account established and funded as contemplated by the Merger Agreement and this Agreement and held in accordance with the terms and conditions of the Escrow Agreement, the interest on which shall be paid to the Parent.

“ FTE ” means the full time equivalent effort of one employee with a B.A., B.Sc., M.S., or Ph.D. or equivalent degree or one employee without such degree but with a minimum of five years senior management experience in the biotech or pharmaceutical industry consisting of 1,875 hours per Year of business development, operational, technical, legal or scientific work.

“GAAP” means United States generally accepted accounting principles, as consistently applied by Parent.

“ Holder ” means a Person in whose name a CVR is registered in the CVR Register.

“ Indemnification Amount ” means (on a cumulative basis) 100% of the monetary value of any Losses (subject to a cumulative cap of $2,500,000 of Losses, and further subject to Section 2.7(a) below) directly or indirectly arising out of, relating to or resulting from any of the following, and incurred or suffered by Parent, any of Parent’s Affiliates, the Surviving Corporation or any of their respective directors, officers, employees, agents, consultants, advisors, representatives and equity holders (individually the “Indemnified Party” and collectively, the “Indemnified Parties”):

(i) any inaccuracy in or breach of any representation or warranty of the Company contained in the Merger Agreement, any Ancillary Agreement or in any certificate, instrument or document delivered by the Company in connection with the Merger Agreement;

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(ii) the nonfulfillment, nonperformance or other breach of any covenant or agreement of the Company contained in the Merger Agreement, any Ancillary Agreement or in any certificate, instrument or document delivered pursuant thereto; and

(iii) any claim by any actual or purported stockholder or former stockholder of the Company, or any other Person, seeking to assert, or based upon (i) ownership or rights to ownership of any equity securities, (ii) any rights of a stockholder (other than the right to receive such stockholder’s portion of the Merger Consideration pursuant to the Merger Agreement), including any option, preemptive rights or rights to notice or to vote, (iii) any rights under the Company Charter Documents, in effect as of immediately before the Effective Time, or (iv) any claim that his, her or its equity securities were wrongfully repurchased by the Company.

Provided , however, that the Indemnification Amount shall be deemed to be zero unless and until the aggregate such Losses exceed $250,000 (the “Basket”), in which case the Indemnification Amount shall include all such Losses, including those constituting the Basket.

If an Indemnified Party determines to seek indemnification under this Agreement with respect to one or more indemnifiable claims resulting from the assertion of liability by any third party (an “Indemnifiable Claim”), it shall give notice to the Shareholders’ Representative within 20 calendar days of the Indemnified Party becoming aware of such claim (a “Claim Notice”), which notice shall set forth such material information with respect to such Indemnifiable Claim as is then reasonably available to the Indemnified Party. If any such liability is asserted against the Indemnified Party and the Indemnified Party notifies the Shareholders’ Representative of such liability, the Shareholders’ Representative shall be entitled, if it so elects by written notice delivered to the Indemnified Party within 20 calendar days after receiving the Claim Notice, to assume the defense of such asserted liability with counsel reasonably satisfactory to the Indemnified Party. If the Shareholders’ Representative elects to assume the defense of such asserted liability, the claims made by such third party shall be conclusively established as being within the scope of and subject to the indemnification provisions of this Agreement. Notwithstanding the foregoing, the Indemnified Party shall have the right to employ its own counsel in any such case, but the fees and expenses of such counsel shall be payable by the Indemnified Party. With respect to any assertion of liability by a third party that results in an Indemnifiable Claim, the parties shall make reasonably available to each other all relevant information in their possession that is material to any such assertion and otherwise cooperate in the defense of the Indemnifiable Claim subject to their respective attorney-client privileges and work product doctrine protections.

If the Shareholders’ Representative disputes its liability with respect to such Indemnifiable Claim, it shall, within 20 calendar days after receiving the Claim Notice with respect to such Indemnifiable Claim, give written notice of such dispute to the Indemnified Party in which event the parties will negotiate in good faith to mutually agree to resolve such dispute. If the parties are unable to resolve the indemnifiability of the Indemnifiable Claim within 60 calendar days after the Shareholders’ Representative delivers such notice, then pending resolution of any such dispute, the Indemnified Party shall have the right to defend, compromise, or settle such Indemnifiable Claim at the risk of the Shareholders’ Representative, subject to the cumulative cap on Indemnifiable Losses provided herein.

“ Indemnification Offset ” means the cumulative Indemnification Amount (to the extent not recovered by subtraction from previous Revenue Sharing Payments) as of the date of a Revenue Sharing Payment.

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“Loss” means any loss, Legal Proceeding, judgment, settlement, order, injunction, decree, ruling, assessment, arbitration award, damage, fine, penalty, expense (including reasonable attorneys’ or other professional fees and expenses and court costs), injury, diminution of value, Tax, Encumbrance, liability, debts or other obligations of any nature, whether known or unknown, absolute, accrued, contingent, liquidated, unliquidated or otherwise, due or to become due or otherwise, and whether or not required to be reflected on a balance sheet prepared in accordance with GAAP, or other cost, expense or adverse effect whatsoever, whether or not involving the claim of another Person.

“ Nontendering Shareholders ” means holders of Company Shares who have not properly tendered those Company Shares and the related Company Stock Certificates, Transmittal Letters (such capitalized terms not defined herein having the meaning set forth in the Merger Agreement), and signature pages to the Shareholders’ Representative Agreement pursuant to section 2.08 of the Merger Agreement as of the Effective Time.

“ Onyx Drug ” means Carfilzomib, formulated with Captisol, as currently in development by Onyx Pharmaceuticals, Inc. as a drug in multiple myeloma and solid tumors.

“ Onyx Drug Application Payment ” means $2,000,000.

“ Onyx Drug Application Payment Date ” means the fifth Business Day following the filing of a bona fide New Drug Application for the Onyx Drug with the FDA.

“ Onyx Drug Approval Payment ” means $3,500,000.

“ Onyx Drug Approval Payment Date ” means the fifth Business Day following FDA approval of the Onyx Drug’s New Drug Application.

“ Paid Annual Revenue Sharing Amount ” has the meaning set forth in Section 2.4(e)(v).

“ Payment A ” means a payment to be made on the first anniversary of the Effective Time (or such sooner date as Parent may in its sole discretion designate) equal to $4,300,000.

“Payment A Date ” means the first anniversary of the Effective Time (or such sooner date as Parent may in its sole discretion designate).

“ Permitted Transfer ” means any transfer which is not in violation of applicable securities laws and in connection with which the transferee has executed and delivered a joinder signature page as to the Shareholders’ Representative Agreement; provided, that in the case of a transfer of Series B CVRs, Series A-1 CVRs or Common CVRs, the transfer must also be in at least one of the following categories for the transfer to be a Permitted Transfer: (i) the transfer of any or all of the CVRs (upon the death of the Holder) by will or intestacy; (ii) transfer by instrument to an inter vivos or testamentary trust in which the CVRs are to be passed to beneficiaries upon the death of the trustee; (iii) transfers made pursuant to a court order of a court of competent jurisdiction (such as in connection with divorce, bankruptcy or liquidation); (iv) if the Holder is a partnership or limited liability company, a distribution by the transferring partnership or limited liability company to its partners or members, as applicable; (v) a transfer made by operation of law (including a consolidation or merger) or in connection with the dissolution, liquidation or termination of any corporation, limited liability company, partnership or other entity; (vi) a transfer from a participant’s

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account in a tax-qualified employee benefit plan to the participant or to such participant’s account in a different tax-qualified employee benefit plan or to a tax-qualified individual retirement account for the benefit of such participant; (vii) a transfer from a participant in a tax-qualified employee benefit plan, who received the CVRs from such participant’s account in such tax-qualified employee benefit plan, to such participant’s account in a different tax-qualified employee benefit plan or to a tax-qualified individual retirement account for the benefit of such participant; or (viii) any transfer of a CVR by a venture capital firm, private equity firm, or other similarly-situated type of institutional investor that (a) provides to Parent an opinion of legal counsel that such transfer can be effected pursuant to an applicable exemption from the registration requirements of the Securities Act of 1933 and other applicable securities laws that is reasonably acceptable to Parent; and (b) certifies to Parent that it has not received a Quarterly Report dated within six (6) months prior to such transfer.

“Person” means any individual, firm, corporation, limited liability company, partnership, trust or other entity, and shall include any successor (by merger or otherwise) thereof or thereto.

“ Postclosing CVRs ” means the CVRs issuable to Nontendering Shareholders who comply with the provisions of Section 2.08(a) of the Merger Agreement after the Effective Time.

“ Quarter ” means any full or partial calendar quarter during any Year.

“ Quarterly Report ” has the meaning set forth in Section 2.4(e).

“ Required Funding ” has the meaning set forth in Section 2.6.

“ Revenue ” means all revenues and other assets received during any Quarter during any Year during the Term, by Parent or any Affiliate of Parent from any non-Affiliate of Parent, from the sale of products involving the Company Assets or the Company Technology (including products combining the Company Technology with other products or services and products containing any product derived from the Company Technology as a component part), the licensing of the Company Technology (whether upfront fees, royalty fees or milestone fees), materials sales, contract development and grants, but excluding the Clopidogrel Payment Amounts. The determination of Revenue shall be consistent with the factual and GAAP determinations with respect to same made in Parent’s audited financial statements for the applicable Year and the payments made with respect to Revenue received in any Quarter during any Year shall be subject to adjustment based on the results of the audit following such Year, with any such adjustment to be reflected in the Revenue Sharing Payment to be made for the next-following Quarter or, in the case of the last payment, by a payment to or from (as appropriate to reflect the adjustment) the Shareholders’ Account within 30 Business Days after the delivery of such audit to the Shareholders’ Representative. In the event that a product involving the Company Technology is sold as a single product, component, or service, or in the event that the sale is of a pharmaceutical product that is enhanced or enabled by integration with the Captisol technology, then Revenue shall include 100% of the revenues or other assets received from such sale or other transaction. “Revenue” for any Quarter during the Term shall additionally include the present value (discounted at an annual rate of 10%) of all revenues and other assets unconditionally guaranteed to be received after such Quarter (including, without limitation, future minimum guaranteed royalty or milestone payments) pursuant to written agreements entered into during such Quarter during the Term by Parent or any Affiliate of Parent (including, without limitation, the Surviving Corporation) from such sale, licensing, materials sales, contract development and grants; but thereafter the actual receipt of such unconditionally guaranteed revenues and other assets shall not be included within “Revenue.” The preceding sentence shall not apply to

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any portion of such revenues and other assets unconditionally guaranteed to be received after a Quarter which pertain to bona fide agreements for payment for or funding of the provision of services (e.g., drug research/development services) over an extended period; in such a case, the guaranteed payments shall be prorated over the period in which the services would be provided and deemed to be received on a daily basis in accordance with such proration (by way of example: on November 1, 2016 Parent enters into such a bona fide agreement to provide drug research/development services over 36 months, with payment of a guaranteed fixed $1,000,000 to come at the end of the 36 months—2016 Revenue would include 2/36 of $1,000,000).

“ Revenue Sharing Amount ” means 20% of all Revenue recognized during any Quarter in each applicable Year, but only to the extent that and beginning only when aggregate Revenues for such Year exceed $15,000,000; plus an additional 10% of all Revenue recognized during any Quarter in each applicable Year, but only to the extent that and beginning only when aggregate Revenues for such Year exceed $35,000,000.

“ Revenue Sharing Payment ” means the excess, if any, of (a) the Revenue Sharing Amount for an applicable Quarter; over (b) an amount equal to the Indemnification Offset as of the applicable Revenue Sharing Payment Date. Provided, that in no event may any further reductions be made from Revenue Sharing Payments on account of a quantity “(b)” after a cumulative total of $2,500,000 of such reductions have been made from Revenue Sharing Payments. It is understood that such reductions from Revenue Sharing Payments shall be Parent’s sole remedy for claims arising from the Indemnification Amount.

“ Revenue Sharing Payment Date ” means 45 Business Days after the end of the Quarter during which a Revenue Sharing Payment is earned.

“ Shareholders’ Account ” means a bank account designated by the Shareholders’ Representative to Parent in writing.

“ Shareholders’ Representative Agreement ” shall mean that certain Shareholders’ Representative Agreement by and among the Company and the Shareholders’ Representative and some or all of the Holders, dated as of January 14, 2011, and which has been executed by Theron Odlaug and Allen Roberson in their individual capacities solely for the purpose of agreeing to Sections 2.4(c) and 4.2 thereof.

“ Surviving Person ” has the meaning set forth in Section 5.1(a)(i).

“ Term ” means the period beginning at the Effective Time and ending at the close of business on December 31, 2016.

“ Year ” means each full or partial calendar year during the Term.

ARTICLE II

CONTINGENT VALUE RIGHTS

Section 2.1. Issuance of CVRs.

The CVRs shall be issued pursuant to the Merger Agreement at the time and in the manner set forth in the Merger Agreement. Distribution of any CVR Payment Amount to the Holders shall be governed by the Shareholders’ Representative Agreement.

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Section 2.2. Nontransferable.

The CVRs shall not be sold, assigned, transferred, pledged, encumbered or in any other manner transferred or disposed of, in whole or in part, other than through a Permitted Transfer.

Section 2.3. No Certificate; Registration; Registration of Transfer; Change of Address.

(a) The CVRs shall be issued in book-entry form only and shall not be evidenced by a certificate or other instrument.

(b) The Shareholders’ Representative shall keep a register (the “ CVR Register ”) for the registration of CVRs. The Shareholders’ Representative shall be the initial CVR registrar and transfer agent (“ CVR Registrar ”) for the purpose of registering CVRs and transfers of CVRs as herein provided.

(c) Subject to the restriction on transferability set forth in Section 2.2, every request made to transfer a CVR must be in writing and accompanied by a written instrument or instruments of transfer and any other reasonably requested documentation in a form reasonably satisfactory to the CVR Registrar, duly executed by the registered Holder or Holders thereof or by the duly appointed legal representative thereof or by a duly authorized attorney. Upon receipt of such written request and materials, the CVR Registrar shall register the transfer of the CVRs in the CVR Register, any such registration not to be unreasonably withheld or delayed. All duly transferred CVRs registered in the CVR Register shall be the valid obligations of Parent, evidencing the same right and shall entitle the transferee to the same benefits and rights under this Agreement and the Shareholders’ Representative Agreement, as those previously held by the transferor. No transfer of a CVR shall be valid until registered in the CVR Register, and any transfer not duly registered in the CVR Register will be void ab initio. Any transfer or assignment of the CVRs shall be without charge (other than the cost of any transfer tax which shall be the responsibility of the transferor) to the Holder.

(d) A Holder may make a written request to the CVR Registrar to change such Holder’s address of record in the CVR Register. The written request must be duly executed by the Holder and conform to such other reasonable requirements as the CVR Registrar may from time to time establish. Upon receipt of such proper written request, the CVR Registrar shall promptly record the change of address in the CVR Register.

Section 2.4. Payment Procedures.

(a) Payment A

On the Payment A Date, Parent shall deliver by wire transfer to the Shareholders’ Account the amount of Payment A in immediately available funds. Provided, that if before the Payment A Date, Parent has delivered the amount of Payment A to the Escrow Agent pursuant to Section 2.8, then instead, on the Payment A Date and pursuant to the Escrow Agreement, the Escrow Agent shall deliver by wire transfer to the Shareholders’ Account the amount of Payment A in immediately available funds out of the Escrow Amount.

(b) Clopidogrel Payments

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After the execution of the Clopidogrel License, on each Clopidogrel Payment Date, Parent shall deliver to the Shareholders’ Account the applicable Clopidogrel Payment in immediately available funds.

(c) Onyx Drug Application Payment

On the Onyx Drug Application Payment Date, Parent shall deliver by wire transfer to the Shareholders’ Account the amount of the Onyx Drug Application Payment in immediately available funds. Provided, that if before the Onyx Drug Application Payment Date, Parent has delivered the amount of the Onyx Drug Application Payment to the Escrow Agent pursuant to Section 2.8, then instead, on the Onyx Drug Application Payment Date and pursuant to the Escrow Agreement, the Escrow Agent shall deliver by wire transfer to the Shareholders’ Account the amount of the Onyx Drug Application Payment in immediately available funds out of the Escrow Amount.

(d) Onyx Drug Approval Payment

On the Onyx Drug Approval Payment Date, Parent shall deliver by wire transfer to the Shareholders’ Account the amount of the Onyx Drug Approval Payment in immediately available funds. Provided, that if before the Onyx Drug Approval Payment Date, Parent has delivered the amount of the Onyx Drug Approval Payment to the Escrow Agent pursuant to Section 2.8, then instead, on the Onyx Drug Approval Payment Date and pursuant to the Escrow Agreement, the Escrow Agent shall deliver by wire transfer to the Shareholders’ Account the amount of the Onyx Drug Approval Payment in immediately available funds out of the Escrow Amount.

(e) Revenue Sharing Payments

(i) Within 45 calendar days after the end of each Quarter of each Year during the Term, Parent shall deliver to the Shareholders’ Representative a report (a “ Quarterly Report ”) setting forth: (A) the Revenue recognized during such Quarter and cumulatively during such Year, (B) the calculation of such Revenue in reasonable detail, (C) the cumulative amount of Revenue Sharing Payments paid by Parent during such Year, (D) a 4-Quarter rolling forecast of future Revenues for the subsequent four Quarters (each, a “ Forecast ”), (E) a management discussion and analysis of the Company Business conducted during such Quarter and expected to be conducted during the period covered by the Forecast, including, without limitation, a description of the types and general terms of all license and supply agreements and limited clinical use agreements entered into during such Quarter, (F) an accurate accounting and summary of all FTEs working on the Company Business and Company Technology during such Quarter and Year, and Required Funding invested by Parent both during such Quarter and cumulatively during such Year (including sufficient back-up to allow the Shareholders’ Representative to understand the general nature and purpose of such Required Funding Payments), and (G) a certificate of Parent’s Chief Financial Officer stating (i) the amount of Parent’s cash, cash equivalents and short-term investments (minus any restricted cash) as of the end of such Quarter and the lowest amount of Parent’s cash, cash equivalents and short-term investments (minus any restricted cash) at any time during such Quarter and (ii) the highest amount of Parent’s obligations for financial indebtedness (other than financial indebtedness which is expressly subordinated to all obligations of Parent hereunder pursuant to a written subordination agreement signed by that creditor and by Shareholders’ Representative and that is reasonably acceptable to the Shareholders’ Representative) at any time during the Quarter. In addition, upon reasonable request by the Shareholder Representative Parent will provide to the Shareholder Representative a certificate of Parent’s Chief Financial Officer (the “Interim Certificate”) stating (i)

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whether or not the amount of Parent’s cash, cash equivalents and short-term investments (minus any restricted cash) exceeds $10,000,000 as of the date of such request or any date since the date of the last Quarterly Report; and (ii) whether or not Parent is or has been obligated for more than $35,000,000 of financial indebtedness (other than financial indebtedness which is expressly subordinated to all obligations of Parent hereunder pursuant to a written subordination agreement signed by that creditor and by Shareholders’ Representative and that is reasonably acceptable to the Shareholder Representative) as of the date of such request or any date since the date of the last Quarterly Report. The Quarterly Reports and any Interim Certificates and the contents thereof shall be subject in all respects to the terms of a confidentiality/nonuse agreement, to be entered into between Shareholders’ Representative and Parent, substantially as protective as the Mutual Confidentiality Agreement dated July 14, 2010, between Parent and the Company, executed contemporaneously herewith. If there is a successor Shareholders’ Representative, no Quarterly Reports need be provided to that successor unless and until the successor Shareholders’ Representative executes and delivers to Parent a confidentiality/nonuse agreement substantially as protective as such confidentiality/nonuse agreement.

(ii) On the applicable Revenue Sharing Payment Date, Parent shall deliver to the Shareholders’ Representative a certificate (the “ Entitlement Certificate ”), certifying that the Holders are entitled to have a Revenue Sharing Payment delivered to the Shareholders’ Account (and setting forth the calculation of such Revenue Sharing Payment), and shall together therewith deliver the indicated Revenue Sharing Payment to the Shareholders’ Account in immediately available funds, unless the indicated Revenue Sharing Payment is zero. No transaction described in Section 5.1(a) hereof shall give the Holders the right to have a CVR Payment Amount delivered to the Shareholders’ Account.

(iii) Within 150 calendar days after delivery by Parent of an Entitlement Certificate or a Quarterly Report (the “ Objection Period ”), the Shareholders’ Representative may deliver a written notice to Parent specifying that the Shareholders’ Representative objects to (i) the determination of Parent that no Revenue Sharing Payment is due and payable, (ii) the calculation of the Revenue Sharing Payment, or (iii) the calculation of the amount of Revenue recognized during the applicable Quarter (a “ Notice of Objection ”), and stating the reason upon which the Shareholders’ Representative has determined that (A) a Revenue Sharing Payment is due and payable, (B) the calculation of the Revenue Sharing Payment is in error, or (C) the amount of Revenue recognized during the applicable Quarter is in error. Any dispute arising from a Notice of Objection shall be resolved in accordance with the procedure set forth in Section 6.10, which decision shall be binding on the parties hereto and every Holder.

(iv) Parent shall be entitled to deduct and withhold, or cause to be deducted or withheld, from each CVR Payment Amount otherwise payable pursuant to this Agreement, such amounts as Parent or the applicable subsidiary of Parent is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code, or any provision of state, local or foreign tax law. To the extent that amounts are so withheld or paid over to or deposited with the relevant governmental entity, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Holder in respect of which such deduction and withholding was made.

(v) No later than 60 days following the conclusion of each Year (the “Adjustment Date”), the aggregate amount of Revenue Sharing Payments actually paid to the Shareholders’ Account by Parent in such Year (for each such year, the “ Paid Annual Revenue

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Sharing Amount ”) shall be adjusted on a dollar-for-dollar basis by the negative or positive amount equal to (i) the Paid Annual Revenue Sharing Amount minus (ii) the aggregate amount of Revenue Sharing Payments owed by Parent for such Year as indicated by determinations reflected in Parent’s annual audited financial statements (the “ Adjustment ”). If the Adjustment is a negative amount (i.e., if Parent underpaid), Parent shall pay such amount to the Shareholders’ Account by wire transfer of immediately available funds within five Business Days of the Adjustment Date. If the Adjustment is a positive amount (i.e., if Parent overpaid), the Shareholders’ Representative shall pay such amount to Parent by wire transfer of immediately available funds out of the Shareholders’ Account to an account designated by Parent within five Business Days of the Adjustment Date.

Section 2.5. No Voting, Dividends or Interest; No Equity or Ownership Interest in Parent.

(a) The CVRs shall not have any voting or dividend rights, and interest shall not accrue on any amounts payable on the CVRs.

(b) The CVRs shall not represent any equity or ownership interest in Parent (or in any constituent company to the Merger) or in any Company Business or the Company Technology or other asset. The rights of the holders of CVRs are limited to those expressly set forth in this Agreement and the Shareholders’ Representative Agreement, and such Holders’ sole right to receive property hereunder is the right to receive cash indirectly from Parent through the Shareholders’ Account in accordance with the terms hereof and the terms of the Shareholders’ Representative Agreement. No CVRs or Postclosing CVRs shall be issued to a Nontendering Shareholder unless and until such Nontendering Shareholder complies with the provisions of Section 2.08(a) of the Merger Agreement after the Effective Time. Any holders of Company Shares before the Effective Time who are Nontendering Shareholders as of any date of payment by Parent or the Escrow Agent to the Shareholders’ Account pursuant to this Agreement shall not be entitled to receive any portion of such payment when distributed pursuant to the Shareholders’ Representative Agreement, and the Shareholders’ Representative shall redistribute such portion of any such payment to all holders of Company Shares who are not Nontendering Shareholders as of the date of such distribution.

Section 2.6. Sole Discretion and Decision Making Authority; No Fiduciary Duty.

Parent shall have sole discretion and decision making authority (a) over any continued operation of, development of or investment in the Company Business, and (b) over when (if ever) and whether to pursue, or enter into, an agreement to dispose of and/or to commercialize or monetize in any particular manner the Company Business, and upon what terms and conditions. Parent shall conduct the Company Business in good faith and with commercial reasonableness during the Term, which, without limitation, means that (A) Parent shall dedicate to the Company Business through December 31, 2015 a minimum of five FTEs per Year¸ one of which shall be a manager dedicated at least 50% to the Company Business during each Year during the Term, the others representing a mix (as Parent shall from time to time determine) of technical, scientific, operational, legal and business development functions with the objective to operate the existing business and to seek to expand the business and revenues, and (B) Parent shall invest at least $1,500,000 per Year directly related to and in support of the research, development, licensing and commercialization of the Company Business and the Company Technology including cost of compensation and benefits of the dedicated FTEs (the “ Required Funding ”) into the Company Business during each Year thru December 31, 2015. Parent’s obligation to dedicate such FTEs or invest the Required Funding shall terminate at any time if (1) Revenue in the prior Year is less than $10,000,000 (when such “prior year” is 2011 or 2012) or

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less than $15,000,000 (when such “prior year” is 2013 or 2014); and (2) objective evidence causes Parent to reasonably conclude that the potential for the Company Business and the Company Technology does not reasonably justify continued investment in the Company Business at those levels due to negative competitive conditions, the evidence and detailed justification for which shall be provided in writing to the Shareholders’ Representative on or before March 31 of any year, which the Shareholders’ Representative shall have the right to dispute pursuant to Section 6.10 below.

Section 2.7. Indemnification.

(a) For purposes of determining the Indemnification Amount and Indemnification Offset, all representations and warranties contained in the Merger Agreement, any Ancillary Agreement or any certificate, instrument or document delivered by the Company in connection with the Merger Agreement (and all claims based upon preclosing covenants and agreements therein) will survive the Closing, irrespective of any facts known to Parent at or before the Closing or any investigation at any time made by or on behalf of Parent, for a period of 365 days from the Effective Time and no longer; provided, that if Parent delivers to the Shareholders’ Representative, before expiration of such 365 days, either a notice asserting a Loss that would constitute an Indemnification Amount, or a notice that, as a result of a Legal Proceeding instituted or claim made by a Person not a party to this Agreement, Parent reasonably expects that Parent, any of Parent’s Affiliates, the Surviving Corporation or any of their respective directors, officers, employees, agents, consultants, advisors, representatives and equity holders may incur Losses, then the applicable representation, warranty covenant or agreement will survive until, but only for purposes of, the resolution of the matter covered by such notice and the final determination of the actual Loss, if any. This Section 2.7 and the determination of the Indemnification Amount and Indemnification Offset will not be affected by any investigation conducted with respect to, or any knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of the Merger Agreement or this Agreement or the Closing Date, by or on behalf of Parent.

(b) No Holder, as a former stockholder of the Company or otherwise, has (and each Holder, as a former stockholder of the Company or otherwise, waives) any right of indemnification or contribution against the Company with respect to any breach by any Holder, as a former stockholder of the Company or otherwise, or the Company of any of their respective representations, warranties, covenants or agreements in the Merger Agreement or any Ancillary Agreement or otherwise, whether by virtue of any contractual or statutory right of indemnity or otherwise, and all claims to the contrary are hereby waived and released. In addition, each Holder, as a former stockholder of the Company or otherwise, hereby agrees that such Holder, as a former stockholder of the Company or otherwise, will not make any claim for indemnification against the Company by reason of the fact that such Holder was a director, officer, employee, or agent of the Company or was serving at the request of the Company as a partner, trustee, director, officer, employee, or agent of another entity (whether such claim is for judgments, damages, penalties, fines, costs, amounts paid in settlement, losses, expenses, or otherwise and whether such claim is pursuant to any statute, charter document, bylaw, agreement, or otherwise) to the extent that any action, suit, proceeding, complaint, claim, or demand brought against such Holder relates to a Loss described herein (whether such action, suit, proceeding, complaint, claim, or demand is pursuant to this Agreement, applicable law, or otherwise).

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Section 2.8. Effect of Default.

In the event of a Default occurring before payment of Payment A by Parent to the Shareholders’ Account, Parent shall immediately pay Payment A, the Onyx Drug Application Payment amount and the Onyx Drug Approval Payment amount to the Escrow Agent, and such amounts shall thereupon become part of the Escrow Amount and shall be distributed by the Escrow Agent on the Payment A Date, the Onyx Drug Application Payment Date and the Onyx Drug Approval Payment Date, as applicable, to the Shareholders’ Account as set forth herein. In the event of a Default occurring after payment of Payment A by Parent to the Shareholders’ Account but before payment of the Onyx Drug Application Payment amount by Parent to the Shareholders’ Account, Parent shall immediately pay the Onyx Drug Application Payment amount and the Onyx Drug Approval Payment amount to the Escrow Agent, and such amounts shall thereupon become part of the Escrow Amount and shall be distributed by the Escrow Agent on the Onyx Drug Application Payment Date and the Onyx Drug Approval Payment Date, as applicable, to the Shareholders’ Account as set forth herein. In the event of a Default occurring after payment of Payment A and the Onyx Drug Application Payment amount by Parent to the Shareholders’ Account but before payment of the Onyx Drug Approval Payment amount by Parent to the Shareholders’ Account, Parent shall immediately pay the Onyx Drug Approval Payment amount to the Escrow Agent, and such amount shall thereupon become part of the Escrow Amount and shall be distributed by the Escrow Agent on the Onyx Drug Approval Payment Date to the Shareholders’ Account as set forth herein. If the Onyx Drug Application Payment amount has been paid to the Escrow Agent and has become part of the Escrow Amount, but the Onyx Drug Application Payment Date has not occurred by December 31, 2016, the Escrow Agent shall (in accordance with the terms of the Escrow Agreement) deliver the Onyx Drug Application Payment amount to Parent. If the Onyx Drug Approval Payment amount has been paid to the Escrow Agent and has become part of the Escrow Amount, but (a) the Onyx Drug Approval Payment Date has not occurred by December 31, 2016, or (b) an event occurs which renders it substantially unlikely that the Onyx Drug Approval will occur by December 31, 2016 (e.g., a nonapproval letter from the FDA), then the Escrow Agent shall (in accordance with the terms of the Escrow Agreement) deliver the Onyx Drug Approval Payment amount to Parent. Notwithstanding the foregoing, if the Default was caused by Parent’s cash, cash equivalents and short-term investments (minus any restricted cash) falling below $10,000,000, and if within 30 days thereafter Parent has increased its cash, cash equivalents and short-term investments (minus any restricted cash) to above $14,000,000 and Parent delivers an Interim Certificate to the Escrow Agent and the Shareholders’ Representative so stating, the Default shall be deemed cured and the Escrow Agent shall forthwith return the Escrow Amount to Parent.

Section 2.9. Audit Right.

Upon the prior written request by the Shareholders’ Representative, Parent shall meet at reasonable times during normal business hours with the Shareholders’ Representative to discuss the content of any Quarterly Report or any Entitlement Certificate. Parent agrees to maintain, for at least the applicable Objection Period, all books and records relevant to the calculation of a CVR Payment Amount and the amount of Revenue recognized during the applicable Quarter. Subject to reasonable advance written notice from the Shareholders’ Representative and prior execution and delivery by it and an independent accounting firm of national reputation chosen by the Shareholders’ Representative (the “ Accountant ”) of a reasonable and customary confidentiality/nonuse agreement, Parent shall permit the Shareholders’ Representative and the Accountant, acting as agent of the Shareholders’ Representative, at the Shareholders’ Representative’s cost, to have access during normal business hours to the books and records of Parent and its affiliates (including, without limitation, the Surviving Corporation) as may be reasonably necessary to audit the calculation of such CVR Payment Amount or the calculation of the amount of Revenue recognized in the applicable Quarter, as applicable.

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ARTICLE III

COVENANTS

Section 3.1. Payment of CVR Payment Amount.

Parent shall duly and promptly pay, or the Escrow Agent shall pay, as applicable, each CVR Payment Amount, if any, to the Shareholders’ Account in the manner provided for in Section 2.4 and Section 6.10 and in accordance with the terms of this Agreement.

Section 3.2. Assignments.

Parent shall not, in whole or in part, assign any of its obligations under this Agreement other than in accordance with the terms of Section 5.1 hereof.

ARTICLE IV

AMENDMENTS

Section 4.1. Amendments Without Consent of Holders.

Without the consent of any Holders or of the Shareholders’ Representative, Parent, when authorized by a Board Resolution, at any time and from time to time, may enter into one or more amendments hereto to evidence the succession of another Person to Parent and the assumption by any such successor of the covenants of Parent herein in a transaction contemplated by Section 5.1 hereof. Promptly after the execution by Parent of any amendment pursuant to the provisions of this Section 4.1, Parent shall provide a copy of such amendment to the Shareholders’ Representative.

Section 4.2. Amendments With Consent of Holders.

Subject to Section 4.1 (which amendments pursuant to Section 4.1 may be made without the consent of the Holders or of the Shareholders’ Representative), with the consent of the Shareholders’ Representative, Parent, when authorized by a Board Resolution, and the Shareholders’ Representative may enter into one or more amendments hereto for the purpose of adding, eliminating or changing any provisions of this Agreement, even if such addition, elimination or change is in any way adverse to the interests of the Holders; provided that if such addition, elimination or change is in any way adverse to the interests of the holders of Series B CVRs, of Series A CVRs, of Series A-1 CVRs or of Common CVRs, it shall additionally require the consent, whether evidenced in writing or taken at a meeting of the applicable Holders, of the Holders of not less than a majority of the outstanding Series B CVRs, Series A CVRs, Series A-1 CVRs or Common CVRs, as applicable.

Section 4.3. Effect of Amendments.

Upon the execution of any amendment under this Article IV, this Agreement shall be modified in accordance therewith, such amendment shall form a part of this Agreement for all purposes and every Holder shall be bound thereby.

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ARTICLE V

CONSOLIDATION, MERGER, SALE OR CONVEYANCE

Section 5.1. Parent May Consolidate, Etc.

(a) Parent shall not consolidate with or merge into any other Person, convey, transfer or lease its properties and assets substantially as an entirety to any Person or convey, transfer, lease or license all or substantially all of the Company Business to any Person, unless:

(i) the Person formed by such consolidation or into which Parent is merged, the Person that acquires by conveyance or transfer, or that leases, the properties and assets of Parent substantially as an entirety or the Person that acquires by conveyance or transfer, or that leases or licenses, all or substantially all of the Company Business (the “ Surviving Person ”) shall expressly assume payment (if and to the extent required hereunder) of amounts on all the CVRs and the performance of every duty and covenant of this Agreement on the part of Parent to be performed or observed, including without limitation, those set forth in Section 2.6; and

(ii) Parent has delivered to the Shareholders’ Representative an Officer’s Certificate, stating that such consolidation, merger, conveyance, transfer, lease or license complies with this Article V and that all conditions precedent herein provided for relating to such transaction have been complied with.

(b) In the event Parent conveys, transfers or leases its properties and assets substantially as an entirety in accordance with the terms and conditions of this Section 5.1, Parent and the Surviving Person shall be jointly and severally liable for the payment of the CVR Payment Amount and the performance of every duty and covenant of this Agreement on the part of Parent to be performed or observed.

Section 5.2. Successor Substituted.

Upon any consolidation of or merger by Parent with or into any other Person, or any conveyance, transfer or lease of the properties and assets substantially as an entirety to any Person in accordance with Section 5.1, the Surviving Person shall succeed to, and be substituted for, and may exercise every right and power of, Parent under this Agreement with the same effect as if the Surviving Person had been named as Parent herein.

ARTICLE VI

OTHER PROVISIONS OF GENERAL APPLICATION

Section 6.1. Notices.

Any request, demand, authorization, direction, notice, consent, waiver or other document provided or permitted by this Agreement shall be sufficient for every purpose hereunder if in writing and delivered personally, or sent by email or sent by certified or registered mail (return receipt requested and first-class postage prepaid) or sent by a nationally recognized overnight courier (with proof of service), addressed as follows, and shall be deemed to have been given upon receipt:

(a) if to a Holder or any or all Holders or the Shareholders’ Representative, addressed to the Shareholders’ Representative at 10513 West 84th Terrace, Lenexa, KS 66214, or to the Shareholders’ Representative at any other address previously furnished in writing to Parent in accordance with this Section 6.1.

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(b) if to Parent, addressed to it at 11085 North Torrey Pines Road, Suite 300, La Jolla, CA 92037, Attention: Charles Berkman, email at cberkman@ligand.com, or at any other address previously furnished in writing to the Holders or the Shareholders’ Representative by Parent in accordance with this Section 6.1.

Section 6.2. Successors and Assigns.

All covenants and agreements in this Agreement by Parent shall bind its successors and assigns, whether so expressed or not.

Section 6.3. Benefits of Agreement.

Nothing in this Agreement, express or implied, shall give to any Person (other than the parties hereto, and their permitted successors and assigns hereunder) any benefit or any legal or equitable right, remedy or claim under this Agreement or under any covenant or provision herein contained, all such covenants and provisions being for the sole benefit of the parties hereto and their permitted successors and assigns. The Holders shall have no rights or remedies hereunder except as are expressly set forth herein. To the extent permitted by applicable Legal Requirements, it is expressly agreed that in no event shall any Holders (as opposed to the Shareholders’ Representative) or any former stockholders of the Company (as opposed to the Shareholders’ Representative) have, after the Effective Time, any power or right to commence or join in any Legal Proceeding against Parent or the Company or any Affiliate of either of them based on or arising out of this Agreement or the Merger Agreement.

Section 6.4. Governing Law.

This Agreement and the CVRs shall be governed by and construed in accordance with the laws of the State of Delaware without regards to its rules of conflicts of laws.

Section 6.5. Legal Holidays.

In the event that a CVR Payment Date shall not be a Business Day, then, notwithstanding any provision of this Agreement to the contrary, any payment required to be made in respect of the CVRs on such date need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the CVR Payment Date.

Section 6.6. Severability Clause.

In case any one or more 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 provisions of this Agreement, but this Agreement shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the court or other tribunal making such determination is authorized and instructed to modify this Agreement so as to effect the original intent of the parties as closely as possible so that the transactions and agreements contemplated herein are consummated as originally contemplated to the fullest extent possible.

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Section 6.7. Counterparts.

This Agreement may be signed in counterparts (which may be effectively delivered by scan/email or other electronic means), each of which shall be deemed to constitute but one and the same instrument.

Section 6.8. Termination.

This Agreement shall terminate and be of no further force or effect, and the parties hereto shall have no liability hereunder, on the first day after December 31, 2016 on which no further dispute is possible. A dispute shall be considered possible if an Objection Period is in progress, or if a Section 6.10 process is in progress, or if any payment or other obligation required pursuant to a final determination made in accordance with Section 6.10 has not yet occurred.

Section 6.9. Entire Agreement.

This Agreement, the Shareholders’ Representative Agreement, the Merger Agreement, and the Escrow Agreement represent the entire understanding of the parties hereto and thereto with reference to the CVRs and this Agreement supersedes any and all other oral or written agreements made with respect to the CVRs, except for the Shareholders’ Representative Agreement, the Merger Agreement, and the Escrow Agreement. If and to the extent that any provision of this Agreement is inconsistent or conflicts with the Shareholders’ Representative Agreement, the Merger Agreement, and the Escrow Agreement, or any of them, this Agreement shall govern and be controlling.

Section 6.10. Arbitration.

(a) Parent, the Company, and the Shareholders’ Representative shall attempt to resolve any dispute, controversy or claim arising out of or relating to this Agreement or the breach thereof (each, a “ Dispute ”) promptly by good faith negotiation among representatives who have authority to resolve the controversy.

(b) Any Dispute which is not amicably settled pursuant to Section 6.10(a) above shall be settled by arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. Parent and/or the Shareholders’ Representative may initiate an arbitration for any matter relating to this Agreement that is not settled pursuant to Section 6.10(a) above. However, in the event of a Dispute arising from the delivery of a Notice of Objection, the sole matter to be settled by arbitration shall be whether a CVR Payment Amount is payable, the calculation of the CVR Payment Amount, or whether the calculation of the amount of Revenue recognized in the applicable Quarter or Year is in error, and (if so) the proper corresponding calculation of the CVR Payment Amount.

(c) The number of arbitrators shall be three. Within 15 days after the commencement of arbitration, each party (Parent and the Company together being one party) shall select one person to act as arbitrator, and the two selected shall select a third arbitrator within 15 days of their appointment. If the arbitrators selected by the parties are unable or fail to agree upon the third arbitrator, the third arbitrator shall be selected by the American Arbitration Association. The place of the arbitration shall be San Diego, California. The arbitrators shall be lawyers or retired judges with experience in the life sciences industry and with mergers and acquisitions. Except as may be required by law, neither a party nor an arbitrator may disclose the existence, content or results of any arbitration hereunder without the prior written consent of both parties.

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(d) Any award payable in favor of the Shareholders’ Representative as a result of arbitration shall be paid by Parent to the Shareholders’ Account, in the manner provided for in Section 2.4 and in accordance with the terms of this Agreement. Parent and the Shareholders’ Representative shall pay in equal halves all fees and expenses of the arbitration forum, including the costs and expenses billed by the arbitrators in connection with the performance of their duties described herein; provided, however, that if the arbitrators rule in favor of Parent, the Shareholders’ Representative shall cause an amount equal to the half of the arbitrators’ fees and expenses paid by Parent to be paid to Parent out of the Shareholders’ Account, and if the arbitrators rule in favor of the Shareholders’ Representative, an amount equal to the half of the arbitrators’ fees and expenses paid by the Shareholders’ Representative shall be paid by Parent to the Shareholders’ Account, in the manner provided for in Section 2.4 and in accordance with the terms of this Agreement. Each party to the arbitration shall be responsible for its own attorney fees, expenses and costs of investigation.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF , each of the parties has caused this Contingent Value Rights Agreement to be executed on its behalf by its duly authorized officers as of the day and year first above written.

[Signature Page to Contingent Value Rights Agreement]

Exhibit 10.3

LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT (this “ Agreement ”) dated as of January 24, 2011 (the “ Effective Date ”) among OXFORD FINANCE CORPORATION , a Delaware corporation with an office located at 133 North Fairfax Street, Alexandria, Virginia 22314 (“ Oxford ”), as collateral agent (in such capacity, the “ Collateral Agent ”), Lenders listed on Schedule 1.1 hereof or otherwise a party hereto from time to time including Oxford in its capacity as a Lender (each a “ Lender ” and collectively, the “ Lenders ”), and LIGAND PHARMACEUTICALS INCORPORATED, a Delaware corporation with offices located at 11085 N. Torrey Pines Road, Suite 300, La Jolla, CA 92037 and the additional Persons signing this Agreement as Borrowers (individually, a “ Borrower , and collectively, the “ Borrowers ”) provides the terms on which Lenders shall lend to Borrowers and Borrowers shall repay Lenders. The parties agree as follows:

1.1 Accounting terms not defined in this Agreement shall be construed in accordance with GAAP . Calculations and determinations must be made in accordance with GAAP. Capitalized terms not otherwise defined in this Agreement shall have the meanings set forth in Section 14. All other terms contained in this Agreement, unless otherwise indicated, shall have the meaning provided by the Code to the extent such terms are defined therein. All references to “Dollars” or “$” are United States Dollars, unless otherwise noted.

2.1 Promise to Pay . Borrowers jointly and severally unconditionally promise to pay each Lender, the outstanding principal amount of the Term Loan advanced to Borrowers by such Lender and accrued and unpaid interest thereon and any other amounts due hereunder as and when due in accordance with this Agreement.

2.2 Term Loan.

(a) Availability . Subject to the terms and conditions of this Agreement, Lenders agree, severally and not jointly, to make a term loan to Borrowers in an aggregate amount up to Twenty Million Dollars ($20,000,000) (the “Term Loan”) according to each Lender’s Term Loan Commitment as set forth on Schedule 1.1 hereto, on or before January 31, 2011, simultaneously with the closing of the CyDex Acquisition, and shall be used solely to fund a portion of the costs of the CyDex Acquisition. After repayment, the Term Loan may not be re-borrowed.

(b) Repayment . Borrowers shall make monthly payments of interest only commencing on the first (1 ^st ) Payment Date following the Funding Date of the Term Loan, and continuing on the Payment Date of each successive month thereafter through and including the Payment Date immediately preceding the Amortization Date. The Amortization Date initially is March 1, 2012, provided that, at the written election of a Borrower made on or before January 24, 2012, as long as an Event of Default is not then continuing, the Amortization Date shall be March 1, 2013. Commencing on the Amortization Date, and continuing on the Payment Date of each month thereafter, Borrowers shall make consecutive equal monthly payments of principal and interest, in arrears, to each Lender, as calculated by Collateral Agent (which calculations shall be deemed correct absent manifest error) based upon: (1) the amount of such Lender’s Term Loan, (2) the effective rate of interest, as determined in Section 2.3(a), and (3) a repayment schedule equal to thirty (30) months from the Amortization Date (if the Amortization Date is March 1, 2012) or equal to eighteen (18) months from the Amortization Date (if the Amortization Date is March 1, 2013). All unpaid principal and accrued and unpaid interest with respect to the Term Loan is due and payable in full on the Maturity Date. The Term Loan may only be prepaid in accordance with Sections 2.2(c) and 2.2(d).

(c) Mandatory Prepayments . If the Term Loan is accelerated following the occurrence of an Event of Default, Borrowers shall immediately pay to Lenders, payable to each Lender in accordance with its respective Pro Rata Share, an amount equal to the sum of: (i) all outstanding principal of the Term Loan plus accrued interest thereon through the prepayment date, (ii) the Final Payment, (iii) the Prepayment

Fee, plus (iv) all other sums, that shall have become due and payable, including Lenders’ Expenses and interest at the Default Rate with respect to any past due amounts. Notwithstanding (but without duplication with) the foregoing, on the Maturity Date, if the Final Payment had not previously been paid in full in connection with the prepayment of the Term Loan in full, Borrowers shall pay to Collateral Agent, for payment to each Lender in accordance with its respective Pro Rata Share, the Final Payment in respect of the Term Loan. If the CyDex Acquisition does not close on or prior to February 15, 2011, Collateral Agent may, in its sole discretion, demand the immediate repayment of all outstanding principal, accrued interest, and any other amounts then outstanding under this Agreement and the Notes, and Borrower shall make such payment to Lenders within 15 days of such demand, provided in such case that Borrower shall not be required to pay the Prepayment Fee or the Final Payment.

(d) Permitted Prepayment of Term Loan . Borrowers shall have the option to prepay all, but not less than all, of the Term Loan advanced by Lenders under this Agreement, provided Borrowers (i) provide written notice to Collateral Agent of its election to prepay the Term Loan at least fourteen (14) days prior to such prepayment, and (ii) pay to Lenders on the date of such prepayment, payable to each Lender in accordance with its respective Pro Rata Share, an amount equal to the sum of (A) all outstanding principal of the Term Loan plus accrued interest thereon through the prepayment date, (B) the Final Payment, (C) the Prepayment Fee, plus (D) all other sums, that shall have become due and payable, including Lenders’ Expenses, if any, and interest at the Default Rate with respect to any past due amounts.

2.3 Payment of Interest on the Credit Extensions .

(a) Interest Rate . Subject to Section 2.3(b), the principal amount outstanding under the Term Loan shall accrue interest at a fixed per annum rate (which rate shall be fixed for the duration of the Term Loan) equal to the Basic Rate, determined by Collateral Agent on the Funding Date of the Term Loan, which interest shall be payable monthly in accordance with Sections 2.2(b) and 2.3(e). Interest shall accrue on the Term Loan commencing on, and including, the day on which the Term Loan is made, and shall accrue, or any portion thereof, for the day on which the Term Loan or such portion is paid.

(b) Default Rate . Immediately upon the occurrence and during the continuance of an Event of Default, Obligations shall bear interest at a rate per annum which is five percentage points (5.00%) above the rate that is otherwise applicable thereto (the “ Default Rate ”). Payment or acceptance of the increased interest rate provided in this Section 2.3(b) is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Collateral Agent.

(c) 360-Day Year . Interest shall be computed on the basis of a 360-day year consisting of twelve (12) months of thirty (30) days.

(d) Debit of Accounts . Collateral Agent and each Lender may debit any of a Borrower’s deposit accounts, including the Designated Deposit Account, for principal and interest payments or any other amounts a Borrower owes Lenders under the Loan Documents when due. These debits shall not constitute a set-off.

(e) Payments. Except as otherwise expressly provided herein, all loan payments by a Borrower hereunder shall be made to the respective Lender to which such payments are owed, at such Lender’s office in immediately available funds on the date specified herein. Unless otherwise provided, interest is payable monthly on the Payment Date of each month. Payments of principal and/or interest received after 3:00 p.m. Eastern time are considered received at the opening of business on the next Business Day. When a payment is due on a day that is not a Business Day, the payment is due the next Business Day and additional fees or interest, as applicable, shall continue to accrue until paid. All payments to be made by a Borrower hereunder or under any other Loan Document, including payments of principal and interest made hereunder and pursuant to any other Loan Document, and all fees, expenses, indemnities and reimbursements, shall be made without set-off, recoupment or counterclaim, in lawful money of the United States and in immediately available funds.

2.4 Secured Promissory Notes. The Term Loan shall be evidenced by a Secured Promissory Note in the form attached as Exhibit D hereto (the “ Secured Promissory Note ”), and shall be repayable as set forth herein. Each Borrower irrevocably authorizes each Lender to make or cause to be made, on or about the

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Funding Date of the Term Loan or at the time of receipt of any payment of principal on such Lender’s Secured Promissory Note, an appropriate notation on such Lender’s Secured Promissory Note Record reflecting the making of the Term Loan or (as the case may be) the receipt of such payment. The outstanding amount of the Term Loan set forth on such Lender’s Secured Promissory Note Record shall be prima facie evidence of the principal amount thereof owing and unpaid to such Lender, but the failure to record, or any error in so recording, any such amount on such Lender’s Secured Promissory Note Record shall not limit or otherwise affect the obligations of a Borrower hereunder or under any Secured Promissory Note to make payments of principal of or interest on any Secured Promissory Note when due. Upon receipt of an affidavit/indemnification agreement of an officer of a Lender as to the loss, theft, destruction, or mutilation of its Secured Promissory Note, Borrowers shall issue, in lieu thereof, a replacement Secured Promissory Note in the same principal amount thereof and of like tenor.

2.5 Fees . Borrowers shall pay to Collateral Agent:

(a) Facility Fee . A fully earned, non-refundable facility fee of $100,000, which fee has already been fully paid before the date of this Agreement;

(b) Final Payment . The Final Payment, when due hereunder, to be shared among Lenders in accordance with their respective Pro Rata Shares;

(c) Prepayment Fee . The Prepayment Fee, when due hereunder, to be shared among Lenders in accordance with their respective Pro Rata Shares;

(d) Lenders’ Expenses . All Lenders’ Expenses (including reasonable attorneys’ fees and expenses for documentation and negotiation of this Agreement) incurred through and after the Effective Date, when due.

2.6 Withholding . Payments received by Lenders from a Borrower hereunder will be made free and clear of any withholding taxes. If at any time any Governmental Authority, applicable law, regulation or international agreement requires a Borrower to make any such withholding or deduction from any such payment or other sum payable hereunder to Lenders, such the amount due from Borrower with respect to such payment or other sum payable hereunder will be increased to the extent necessary to ensure that, after the making of such required withholding or deduction, each Lender receives a net sum equal to the sum which it would have received had no withholding or deduction been required and such Borrower shall pay the full amount withheld or deducted to the relevant Governmental Authority. Each Borrower will, upon request, furnish Lenders with proof reasonably satisfactory to Lenders indicating that such Borrower has made such withholding payment provided, however, that Borrower need not make any withholding payment if the amount or validity of such withholding payment is contested in good faith by appropriate and timely proceedings and as to which payment in full is bonded or reserved against by such Borrower. The agreements and obligations of each Borrower contained in this Section 2.6 shall survive the termination of this Agreement.

3.1 Conditions Precedent to Initial Credit Extension . Each Lender’s obligation to make the Term Loan is subject to the condition precedent that Collateral Agent shall consent to or shall have received, in form and substance satisfactory to Collateral Agent, such documents, and completion of such other matters, as Collateral Agent may reasonably deem necessary or appropriate, including, without limitation:

(a) duly executed original signatures to the Loan Documents to which a Borrower is a party;

(b) duly executed original signatures to Control Agreements with any Persons with whom a Borrower maintains a depository or securities account;

(c) duly executed original Secured Promissory Notes in favor of each Lender according to its Term Loan Commitment Percentage;

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(d) the Operating Documents of each Borrower and good standing certificates of each Borrower certified by the Secretary of State of the State of its incorporation and each state in which Borrower is qualified to conduct business, each as of a date no earlier than thirty (30) days prior to the Effective Date;

(e) the Perfection Certificate;

(f) duly executed original signatures to an officer’s certificate for each Borrower;

(g) Collateral Agent shall have received certified copies, dated as of a recent date, of financing statement searches, as Collateral Agent shall request, accompanied by written evidence (including any UCC termination statements) that the Liens indicated in any such financing statements either constitute Permitted Liens or have been or, in connection with the initial Credit Extension, will be terminated or released;

(h) a landlord’s consent executed in favor of Collateral Agent;

(i) a legal opinion of Borrowers’ counsel dated as of the Effective Date together with the duly executed original signatures thereto;

(j) evidence satisfactory to Collateral Agent that the insurance policies required by Section 6.5 are in full force and effect, together with appropriate evidence showing loss payable and/or additional insured clauses or endorsements in favor of Collateral Agent, for the ratable benefit of Lenders;

(k) the agreements executed in connection with the CyDex Acquisition; and

(l) payment of the fees and Lenders’ Expenses then due as specified in Section 2.5 hereof.

3.2 Conditions Precedent to all Credit Extensions . The obligation of each Lender to make each Credit Extension, including the initial Credit Extension, is subject to the following conditions precedent:

(a) receipt by Collateral Agent of an executed Payment/Advance Form in the form of Exhibit B attached hereto;

(b) the representations and warranties in Section 5 hereof shall be true, in all material respects on the date of the Payment/Advance Form and on the Funding Date of each Credit Extension; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, and no Event of Default shall have occurred and be continuing or result from the Credit Extension. Each Credit Extension is each Borrower’s representation and warranty on that date that the representations and warranties in Section 5 hereof are true, accurate and complete in all material respects; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date;

(c) in such Lender’s sole discretion, there has not been any Material Adverse Change or any material adverse deviation by any Borrower from the most recent business plan of Borrowers presented to and accepted by Collateral Agent; and

(d) payment of the fees and Lenders’ Expenses then due as specified in Section 2.5 hereof.

3.3 Covenant to Deliver . Each Borrower shall deliver to Collateral Agent each item required to be delivered to Collateral Agent under this Agreement as a condition precedent to any Credit Extension. Borrowers acknowledge that a Credit Extension made prior to the receipt by Collateral Agent of any such item shall not constitute a waiver by Lenders of Borrowers’ obligation to deliver such item, and any such Credit Extension in the absence of a required item shall be made in each Lender’s sole discretion.

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3.4 Procedures for Borrowing . Subject to the prior satisfaction of all other applicable conditions to the making of the Term Loan set forth in this Agreement, to obtain the Term Loan, a Borrower shall notify Collateral Agent (which notice shall be irrevocable) by electronic mail, facsimile, or telephone by 12:00 noon Eastern time two (2) Business Days prior to the date the Term Loan is to be made. Together with any such electronic or facsimile notification, such Borrower shall deliver to Collateral Agent by electronic mail or facsimile a completed Payment/Advance Form executed by a Responsible Officer or his or her designee. Upon receipt of a Payment/Advance Form, Collateral Agent shall promptly provide a copy of that Payment/Advance Form to each Lender. Collateral Agent may rely on any telephone notice given by a person whom Collateral Agent reasonably believes is a Responsible Officer or designee. On the Funding Date, each Lender shall credit and/or transfer (as applicable) to Borrower’s Designated Deposit Account, an amount equal to its Term Loan Commitment.

4.1 Grant of Security Interest . Each Borrower grants Collateral Agent, for the ratable benefit of Lenders, to secure the payment and performance in full of all of the Obligations, a continuing security interest in, and pledges to Collateral Agent, for the ratable benefit of Lenders, the Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof. Each Borrower represents, warrants, and covenants that the security interest granted herein is and shall at all times continue to be a first priority perfected security interest in the Collateral, subject only to Permitted Liens that are permitted by the terms of this agreement to have priority to Collateral Agent’s Lien. If a Borrower shall acquire a commercial tort claim (as defined in the Code), such Borrower shall promptly notify Collateral Agent in a writing signed by such Borrower of the general details thereof (and further details as may be required by Collateral Agent) and grant to Collateral Agent, for the ratable benefit of Lenders, in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to Collateral Agent. If this Agreement is terminated, Collateral Agent’s Lien in the Collateral shall continue until the Obligations (other than inchoate indemnity obligations) are repaid in full in cash. Upon payment in full in cash of the Obligations and at such time as Lenders’ obligation to make Credit Extensions has terminated, Collateral Agent shall, at Borrower’s sole cost and expense, release its Liens in the Collateral and all rights therein shall revert to Borrower or Guarantor, as applicable.

4.2 Authorization to File Financing Statements . Each Borrower authorizes Collateral Agent to file financing statements or take any other action required to prefect Collateral Agent’s security interests in the Collateral with all jurisdictions to perfect or protect Collateral Agent’s and each Lender’s interest or rights hereunder, including a notice that any disposition of the Collateral, except to the extent permitted by the terms of this Agreement, shall be deemed to violate the rights of Collateral Agent and Lenders under the Code. Such financing statements may indicate the Collateral as “all assets of the Debtor or words of similar effect, or as being of an equal or lesser scope, or with greater detail, all in Collateral Agent’s discretion.

Each Borrower represents and warrants to Collateral Agent and Lenders as follows at all times:

5.1 Due Organization, Authorization: Power and Authority . Each Borrower and each of its Subsidiaries is duly existing and in good standing as Registered Organizations in its jurisdiction of organization. Each Borrower and each of its Subsidiaries is qualified and licensed to do business and is in good standing in any jurisdiction in which the conduct of its business or its ownership of property requires that it be qualified except where the failure to do so could not reasonably be expected to have a material adverse effect on Borrower’s business. In connection with this Agreement, Ligand Pharmaceuticals Incorporated (“Ligand”) has delivered to Collateral Agent a perfection certificate (the “ Perfection Certificate ”). Ligand warrants that (a) Ligand’s exact legal name is that indicated on the Perfection Certificate and on the signature page hereof; (b) Ligand is an organization of the type and is organized in the jurisdiction set forth in the Perfection Certificate; (c) the Perfection Certificate accurately sets forth Ligand’s organizational identification number or accurately states that Ligand has none; (d) the Perfection Certificate accurately sets forth Ligand’s place of business, or, if more than one, its chief

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executive office as well as Ligand’s mailing address (if different than its chief executive office); (e) subject to exceptions disclosed in writing by Ligand to Collateral Agent before the Effective Date, no Borrower (and each of their respective predecessors) has, in the past five (5) years, changed its jurisdiction of organization, organizational structure or type, or any organizational number assigned by its jurisdiction; and (f) all other information set forth on the Perfection Certificate pertaining to Ligand and each of its Subsidiaries is accurate and complete (it being understood and agreed that Ligand may from time to time update certain information in the Perfection Certificate (including the information set forth in clause (d) above) after the Effective Date to the extent permitted by one or more specific provisions in this Agreement). If a Borrower or any Subsidiary is not now a Registered Organization but later becomes one, such Borrower shall notify Collateral Agent of such occurrence and provide Collateral Agent with such Person’s organizational identification number within five (5) Business Days of receiving such organizational identification number.

The execution, delivery and performance by a Borrower of the Loan Documents to which it is a party have been duly authorized, and do not (i) conflict with any of such Borrower’s organizational documents, including the Operating Documents, (ii) contravene, conflict with, constitute a default under or violate any material Requirement of Law, (iii) contravene, conflict or violate any applicable order, writ, judgment, injunction, decree, determination or award of any Governmental Authority by which such Borrower or any of its Subsidiaries or any of their assets may be bound or affected, (iv) require any action by, filing, registration, or qualification with, or Governmental Approval from, any Governmental Authority (except such Governmental Approvals that have already been obtained and are in full force and effect) or are being obtained pursuant to Section 6.1(b), or (v) constitute an event of default under any material agreement by which a Borrower or any of its Subsidiaries or their respective properties is bound. No Borrower is in default under any agreement to which it is a party or by which it or any of its assets is bound in which such default could reasonably be expected to have a material adverse effect on Borrower’s business.

5.2 Collateral .

(a) Each Borrower has good title to, has rights in, and the power to transfer each item of the Collateral upon which it purports to grant a Lien under the Loan Documents, free and clear of any and all Liens except Permitted Liens, and no Borrower has any Deposit Accounts, Securities Accounts, Commodity Accounts or other investment accounts other than the Collateral Accounts or the other investment accounts, if any, described in the Perfection Certificate delivered to Collateral Agent in connection herewith with respect of which a Borrower has given Collateral Agent notice and taken such actions as are necessary to give Collateral Agent a perfected security interest therein. The Accounts are bona fide, existing obligations of the Account Debtors.

(b) On the Effective Date, the Collateral is not in the possession of any third party bailee (such as a warehouse) except as disclosed in the Perfection Certificate, and, as of the Effective Date, no such third party bailee possesses components of the Collateral in excess of Fifty Thousand Dollars ($50,000). None of the components of the Collateral shall be maintained at locations other than as disclosed in the Perfection Certificate on the Effective Date or as permitted pursuant to Section 7.2. In the event that a Borrower intends to store or otherwise deliver any portion of the Collateral to a bailee in excess of Fifty Thousand Dollars ($50,000), then such Borrower will first receive the written consent of Collateral Agent and such bailee must execute and deliver a bailee agreement in form and substance reasonably satisfactory to Collateral Agent.

(c) All Inventory is in all material respects of good and marketable quality, free from material defects.

(d) Subject to contested matters disclosed in the SEC Filings, each Borrower is the sole owner of the material items of Intellectual Property it purports to own, except for non-exclusive licenses granted to its customers in the ordinary course of business and licenses to strategic partners. Except as noted on the Perfection Certificate, as supplemented from time to time (but subject to Section 6.7 at all times, and further subject to the expiration of Patents at the conclusion of their statutory term), each Borrower’s Patents are valid and enforceable and no part of a Borrower’s Intellectual Property has been judged invalid or unenforceable, in whole or in part, and (ii) to the best of each Borrower’s knowledge, no claim has been made that any part of the Intellectual Property or any practice by a Borrower violates the rights of any third party except to the extent such claim could not reasonably be expected to have a material adverse effect on such Borrower’s business. Except as noted on the Perfection Certificate, no Borrower is a party to, nor is bound by, any material license or other agreement with

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respect to which such Borrower is the licensee that (i) prohibits or otherwise restricts such Borrower from granting a security interest in its interest in such license or agreement or any other property, or (ii) for which a default under or termination of could interfere with Collateral Agent’s right to sell any Collateral. A Borrower shall provide written notice to Collateral Agent within ten (10) days of entering into or becoming bound by any such license or agreement (other than over-the-counter software that is commercially available to the public). Each Borrower shall take such commercially reasonable steps as Collateral Agent requests to obtain the consent of, or waiver by, any Person whose consent or waiver is necessary for (i) all such licenses or agreements to be deemed “Collateral” and for Collateral Agent to have a security interest in it that might otherwise be restricted or prohibited by law or by the terms of any such license or agreement, whether now existing or entered into in the future, and (ii) Collateral Agent shall have the ability in the event of a liquidation of any Collateral to dispose of such Collateral in accordance with Collateral Agent’s rights and remedies under this Agreement and the other Loan Documents.

5.3 Litigation . Except as disclosed on the Perfection Certificate, there are as of the date of this Agreement no actions, suits, investigations, or proceedings pending or, to the knowledge of the Responsible Officers, threatened in writing by or against any Borrower, or any of its Subsidiaries involving more than One Hundred Thousand Dollars ($100,000).

5.4 No Material Deterioration in Financial Condition; Financial Statements . All consolidated financial statements for each Borrower and its Subsidiaries delivered to Collateral Agent fairly present, in all material respects the consolidated financial condition of such Borrower and its Subsidiaries and the consolidated results of operations of Borrowers and their Subsidiaries. There has not been any material deterioration in the consolidated financial condition of a Borrower or its Subsidiaries since the date of the most recent financial statements submitted to Collateral Agent.

5.5 Solvency . The fair salable value of each Borrower’s assets (including goodwill minus disposition costs) exceeds the fair value of its liabilities; Borrower is not left with unreasonably small capital after the transactions in this Agreement; and Borrower is able to pay its debts (including trade debts) as they mature.

5.6 Regulatory Compliance. No Borrower is an “investment company” or a company “controlled” by an “investment company” under the Investment Company Act of 1940, as amended. No Borrower is engaged as one of its important activities in extending credit for margin stock (under Regulations X, T and U of the Federal Reserve Board of Governors). No Borrower or any of its Subsidiaries is a “holding company” or an “affiliate” of a “holding company” or a “subsidiary company” of a “holding company” as each term is defined and used in the Public Utility Holding Company Act of 2005. No Borrower has violated any laws, ordinances or rules, the violation of which could reasonably be expected to have a material adverse effect on its business. None of a Borrower’s or any of its Subsidiaries’ properties or assets has been used by Borrower or any Subsidiary or, to Borrower’s knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than in material compliance with applicable laws. Each Borrower and each of its Subsidiaries have obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all Governmental Authorities that are necessary to continue their respective businesses as currently conducted. None of Borrower or its Affiliates or any of their respective agents acting or benefiting in any capacity in connection with the transactions contemplated by this Agreement is (i) in violation of any Anti-Terrorism Law, (ii) engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law, or (iii) is a Blocked Person. Neither Borrower, nor, to the knowledge of Borrower, any of its Affiliates or agents acting or benefiting in any capacity in connection with the transactions contemplated by this Agreement, (x) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person, or (y) deals in, or otherwise engages in any transaction relating to, any property or interest in property blocked pursuant to Executive Order No. 13224, any similar executive order or other Anti-Terrorism Law.

5.7 Subsidiaries; Investments . No Borrower owns any stock, shares, partnership interests or other equity securities except for Permitted Investments.

5.8 Tax Returns and Payments; Pension Contributions . Each Borrower and its Subsidiaries have timely filed all required tax returns and reports, and Borrower and its Subsidiaries have timely paid all foreign, federal, state, and local taxes, assessments, deposits and contributions owed by Borrower and its

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Subsidiaries in all jurisdictions in which such Borrower or its Subsidiaries are subject to taxes, including the United States, unless such taxes are being contested in accordance with the following sentence. Each Borrower and its Subsidiaries may defer payment of any contested taxes, provided that a Borrower or such Subsidiary (a) in good faith contests its obligation to pay the taxes by appropriate proceedings promptly and diligently instituted and conducted, (b) notifies Collateral Agent in writing of the commencement of, and any material development in, the proceedings, and (c) posts bonds or takes any other steps required to prevent the governmental authority levying such contested taxes from obtaining a Lien upon any of the Collateral that is other than a “Permitted Lien”. No Borrower is aware of any claims or adjustments proposed for any of Borrower or its Subsidiaries prior tax years that could result in material additional taxes becoming due and payable by such Borrower or its Subsidiaries. Each Borrower and its Subsidiaries have paid all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms, and such Borrower and its Subsidiaries have not withdrawn from participation in, and has not permitted partial or complete termination of, or permitted the occurrence of any other event with respect to, any such plan which could reasonably be expected to result in any liability of Borrower or its Subsidiaries, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.

5.9 Use of Proceeds . Borrowers shall use the proceeds of the Credit Extensions solely as working capital and to fund its general business requirements in accordance with the provisions of this Agreement, and not for personal, family, household or agricultural purposes.

5.10 Full Disclosure . No written representation, warranty or other statement of a Borrower in any certificate or written statement given to Collateral Agent or any Lender, as of the date such representation, warranty, or other statement was made, taken together with all such written certificates and written statements given to Collateral Agent or any Lender, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the certificates or statements not misleading (it being recognized that the projections and forecasts provided by a Borrower in good faith and based upon reasonable assumptions are not viewed as facts and that actual results during the period or periods covered by such projections and forecasts may differ from the projected or forecasted results).

Each Borrower shall, and shall cause each of its Subsidiaries to, do all of the following:

6.1 Government Compliance.

(a) Maintain its and all its Subsidiaries’ legal existence and good standing in their respective jurisdictions of organization and maintain qualification in each jurisdiction in which the failure to so qualify could reasonably be expected to have a material adverse effect on Borrower’s business or operations. Borrower shall comply, and have each Subsidiary comply, with all laws, ordinances and regulations to which it is subject, the noncompliance with which could reasonably be expected to have a material adverse effect on Borrower’s business.

(b) Obtain and keep in full force and effect, all of the Governmental Approvals necessary for the performance by Borrower of its obligations under the Loan Documents and the grant of a security interest to Collateral Agent for the ratable benefit of Lenders, in all of the Collateral. Each Borrower shall promptly provide copies to Collateral Agent of any material Governmental Approvals obtained by Borrower.

6.2 Financial Statements, Reports, Certificates.

(a) Deliver to Collateral Agent: (i) as soon as available, but no later than thirty (30) days after the last day of each month, a company prepared consolidated and consolidating balance sheet and income statement covering the consolidated operations of Borrower and its Subsidiaries for such month certified by a Responsible Officer and in a form reasonably acceptable to Collateral Agent; (ii) as soon as available, but no later than one hundred twenty (120) days after the last day of Borrower’s fiscal year, audited consolidated financial statements prepared under GAAP, consistently applied, together with an unqualified opinion on the financial

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statements from an independent certified public accounting firm acceptable to Collateral Agent in its reasonable discretion; (iii) as soon as available after approval thereof by Borrower’s Board of Directors, but no later than January 31 of each of Borrower’s fiscal years, Borrower’s financial projections for the entire current fiscal year as approved by Borrower’s Board of Directors, which such annual projections shall be set forth in a month-by-month format (such annual financial projections as originally delivered to Collateral Agent and Lenders are referred to herein as the “ Annual Projections ”); (iv) within five (5) days of delivery, copies of all statements, reports and notices made available to Borrower’s security holders or holders of Subordinated Debt; (v) in the event that Borrower becomes subject to the reporting requirements under the Securities Exchange Act of 1934, as amended, within five (5) days of filing, all reports on Form 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission, (vi) prompt notice of (A) any material change in the composition of the Intellectual Property, (B) notice of the registration of any copyright, including any subsequent ownership right of Borrower in or to any copyright, patent or trademark, and (C) prompt notice of Borrower’s knowledge of any event that could reasonably be expected to materially and adversely affect the value of the Intellectual Property; (vii) as soon as available, but no later than thirty (30) days after the last day of each month, copies of the month-end bank statements for each deposit account or securities account maintained by Borrower or any Subsidiary, which bank statements may be provided to Collateral Agent by Borrower or directly from the applicable bank(s), and (viii) other financial information as reasonably requested by Collateral Agent.

(b) Concurrently with the delivery of the financial statements specified in Section 6.2(a)(i) above but no later than thirty (30) days after the last day of each month, deliver to Collateral Agent, a duly completed Compliance Certificate signed by a Responsible Officer.

(c) Keep proper books of record and account in accordance with GAAP in all material respects, in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities. At the sole cost of Borrower, Borrower shall allow Collateral Agent and Lenders to visit and inspect any of its properties, to examine and make abstracts or copies from any of its books and records, and to conduct a collateral audit and analysis of its operations and the Collateral.

6.3 Inventory; Returns . Keep substantially all Inventory in good and marketable condition, free from material defects. Returns and allowances between Borrower and its Account Debtors shall follow Borrower’s customary practices as they exist at the Effective Date. Borrower shall promptly notify Collateral Agent of all returns, recoveries, disputes and claims that involve more than One Hundred Thousand Dollars ($100,000) individually or in the aggregate in any calendar year.

6.4 Taxes; Pensions . Timely file and require each of its Subsidiaries to timely file, all required tax returns and reports and timely pay, and require each of its Subsidiaries to timely file, all foreign, federal, state, and local taxes, assessments, deposits and contributions owed by Borrower and each of its Subsidiaries, except for deferred payment of any taxes contested pursuant to the terms of Section 5.8 hereof, and shall deliver to Collateral Agent, on demand, appropriate certificates attesting to such payments, and pay all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms.

6.5 Insurance . Keep its business and the Collateral insured for risks and in amounts standard for similarly situated companies in Borrower’s industry and location and as Collateral Agent may reasonably request. Insurance policies shall be in a form, with companies, and in amounts that are reasonably satisfactory to Collateral Agent. All property policies shall have a lender’s loss payable endorsement showing Collateral Agent as lender loss payee and waive subrogation against Collateral Agent, and all liability policies shall show, or have endorsements showing, Collateral Agent, as an additional insured. All policies (or the loss payable and additional insured endorsements) shall provide that the insurer shall endeavor to give Collateral Agent at least thirty (30) days notice before canceling, amending, or declining to renew its policy. At Collateral Agent’s request, a Borrower shall deliver certified copies of policies and evidence of all premium payments. Proceeds payable under any policy shall, at Collateral Agent’s option, be payable to Collateral Agent on behalf of Lenders on account of the Obligations. Notwithstanding the foregoing, (a) so long as no Event of Default has occurred and is continuing, a Borrower shall have the option of applying the proceeds of any casualty policy up to $50,000 with respect to any loss, but not exceeding $100,000, in the aggregate for all losses under all casualty policies in any one year, toward the replacement or repair of destroyed or damaged property; provided that any such replaced or repaired property (i) shall be of equal or like value as the replaced or repaired Collateral and (ii) shall be deemed Collateral in which

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Collateral Agent has been granted a first priority security interest, and (b) after the occurrence and during the continuance of an Event of Default, all proceeds payable under such casualty policy shall, at the option of Collateral Agent, be payable to Collateral Agent, for the ratable benefit of Lenders, on account of the Obligations. If a Borrower fails to obtain insurance as required under this Section 6.5 or to pay any amount or furnish any required proof of payment to third persons and Collateral Agent, Collateral Agent may make all or part of such payment or obtain such insurance policies required in this Section 6.5, and take any action under the policies Collateral Agent deems prudent.

6.6 Operating Accounts.

(a) Maintain all of such Borrower’s and all of their Subsidiaries’ operating and other deposit accounts and securities accounts in accounts that are subject to a Control Agreement in favor of Collateral Agent, other than Certificate of Deposit account No. 60100378 maintained with Square 1 Bank (the “Cash Collateral Account”), which shall be subject to a Control Agreement only (i) until Borrower enters into a Loan and Security Agreement between Borrower and Square 1 Bank, as amended from time to time (the “Square 1 Agreement”) and (ii) after Borrower has repaid any amounts that remain owing thereunder or Square 1 Bank no longer has any obligation to make any credit extensions to Borrower under the Square 1 Agreement. Borrower shall cause the Cash Collateral Account to be closed or made subject to a Control Agreement at all other times. Borrower shall not permit the balance in the Cash Collateral Account to exceed $5,000,000, nor permit the Collateral Account to secure any obligations other than those arising under the Square 1 Agreement.

(b) Such Borrower shall, and shall cause its Subsidiaries to, provide Collateral Agent five (5) days’ prior written notice before establishing any Collateral Account. In addition, for each Collateral Account that Borrower or Guarantor or any of their Subsidiaries any time maintains, such Borrower shall cause the applicable bank or financial institution at or with which such Collateral Account is maintained to execute and deliver a Control Agreement or other appropriate instrument with respect to such Collateral Account to perfect Collateral Agent’s Lien in such Collateral Account in accordance with the terms hereunder, which Control Agreement may not be terminated without prior written consent of Collateral Agent.

(c) No Borrower or its Subsidiaries shall maintain any Collateral Accounts except Collateral Accounts located in the United States in accordance with Sections 6.6(a) and (b).

6.7 Protection of Intellectual Property Rights . Such Borrower shall: (a) protect, defend and maintain the validity and enforceability of its Intellectual Property that is material to its business; (b) promptly advise Collateral Agent in writing of material infringement by a third party of its Intellectual Property; and (c) not allow any Intellectual Property material to its business to be abandoned, forfeited or dedicated to the public without Collateral Agent’s written consent. If a Borrower (i) obtains any patent, registered trademark or servicemark, registered copyright, registered mask work, or any pending application for any of the foregoing, whether as owner, licensee or otherwise, or (ii) applies for any patent or the registration of any trademark or servicemark, then Borrower or Guarantor shall provide written notice thereof to Collateral Agent and each Lender.

6.8 Evidence of Recording. Each Borrower shall promptly provide to Collateral Agent evidence of the recording of any agreement necessary for Collateral Agent to perfect and maintain a first priority perfected security interest in the Collateral.

6.9 Litigation Cooperation . From the date hereof and continuing through the termination of this Agreement, make available to Collateral Agent, without expense to Collateral Agent or Lenders, such Borrower and its officers, employees and agents and Borrower’s Books, to the extent that Collateral Agent may reasonably deem them necessary to prosecute or defend any third-party suit or proceeding instituted by or against Collateral Agent or Lenders with respect to any Collateral or relating to such Borrower.

6.10 Notices of Litigation and Default. Such Borrower will give prompt written notice to Collateral Agent of any litigation or governmental proceedings pending or threatened (in writing) against such Borrower or any of its Subsidiaries that could reasonably be expected to result in damages or costs to Borrower or any of its Subsidiaries of One Hundred Thousand Dollars ($100,000) or more or which could reasonably be expected to have a material adverse effect with respect to Borrower’s business. Without limiting or contradicting

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any other more specific provision of this Agreement, promptly (and in any event within three (3) Business Days) upon Borrower becoming aware of the existence of any Event of Default or event which, with the giving of notice or passage of time, or both, would constitute an Event of Default, Borrower shall give written notice to Collateral Agent of such occurrence, which such notice shall include a reasonably detailed description of such Event of Default or event which, with the giving of notice or passage of time, or both, would constitute an Event of Default.

6.11 Creation/Acquisition of Subsidiaries. In the event such Borrower or any Subsidiary creates or acquires any Subsidiary, such Borrower and such Subsidiary shall promptly notify Collateral Agent of the creation or acquisition of such new Subsidiary and take all such action as may be reasonably required by Collateral Agent to cause each such Subsidiary to become a Borrower hereunder and, in each case, grant a continuing pledge and security interest in and to the assets of such Subsidiary (substantially as described on Exhibit A hereto); and such Borrower, as applicable, shall grant and pledge to Collateral Agent, for the ratable benefit of Lenders, a perfected security interest in the stock, units or other evidence of ownership of each Subsidiary.

6.12 Further Assurances .

(a) Execute any further instruments and take further action as Collateral Agent reasonably requests to perfect or continue Collateral Agent’s Lien in the Collateral or to effect the purposes of this Agreement.

(b) Deliver to Collateral Agent, within five (5) days after the same are sent or received, copies of all material correspondence, reports, documents and other filings with any Governmental Authority that could reasonably be expected to have a material adverse effect on any of the Governmental Approvals material to Borrower’s business or otherwise on the operations of Borrower or any of its Subsidiaries.

6.13 Post Closing Requirements . Such Borrower shall complete each of the post-closing obligations and/or provide to Collateral Agent each of the documents, instruments, agreements and information listed on a Post-Closing Letter signed by Borrowers and Collateral Agent on or before the date set forth for each such item thereon, each of which shall be completed or provided in form and substance reasonably satisfactory to Collateral Agent. Failure of a Borrower to deliver the post-closing items within the time periods set forth in the Post-Closing Letter shall constitute an Event of Default.

No Borrower shall, nor permit any of its Subsidiaries to, do any of the following:

7.1 Dispositions . Convey, sell, lease, transfer, assign, or otherwise dispose of (collectively, “ Transfer ”), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, except for Transfers (a) of Inventory in the ordinary course of business; (b) of worn-out or obsolete Equipment; (c) in connection with Permitted Liens and Permitted Investments; (d) of non-exclusive licenses (or exclusive field-of-use licenses) for the use of the Intellectual Property in the ordinary course of business in connection with joint ventures and corporate collaborations which could not result in a legal transfer of title of the licensed property and with respect to which Borrower expressly retains the first right to prosecute any patents and patent applications as well as the first right to enforce any potential infringement of any such exclusively licensed patents and patent applications but that may be exclusive in respects other than territory and that may be exclusive as to territory only as to discreet geographical areas outside of the United States; or (e) of Intellectual Property that is both (i) nonmaterial and (ii) nonstrategic.

7.2 Changes in Business, Management, Ownership, or Business Locations . (a) Engage in or permit any of its Subsidiaries to engage in any business other than the businesses engaged in as of the Effective Date or reasonably related thereto; (b) liquidate or dissolve; or (c) (i) any Key Person shall cease to be actively engaged in the management of such Borrower unless a replacement for such Key Person, reasonably satisfactory to Lenders holding at least a majority of the aggregate outstanding principal balance of the Term Loan, is approved by such Borrower’s Board of Directors and engaged by such Borrower within ninety (90) days, or (ii) enter into any transaction or series of related transactions in which the stockholders of such Borrower who were not stockholders

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immediately prior to the first such transaction own more than 40% of the voting stock of such Borrower immediately after giving effect to such transaction or related series of such transactions. No Borrower shall, without at least thirty (30) days prior written notice to Collateral Agent: (A) add any new offices or business locations, including warehouses (unless such new offices or business locations contain less than Fifty Thousand Dollars ($50,000) in such Borrower’s assets or property), (B) change its jurisdiction of organization, (C) change its organizational structure or type, (D) change its legal name, or (E) change any organizational number (if any) assigned by its jurisdiction of organization.

7.3 Mergers or Acquisitions . Except for the CyDex Acquisition, merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock, shares or property of another Person. A Subsidiary may merge or consolidate into another Subsidiary as long as the surviving Subsidiary is a Borrower hereunder or into Borrower as long as Borrower is the surviving legal entity, and as long as no Event of Default is occurring prior thereto or arises as a result therefrom. Borrower and its Subsidiaries may enter into any of the foregoing transactions provided (i) the aggregate net cash consideration given (cash paid and mandatory funding obligations undertaken, less Cash Equivalents acquired) in such transactions does not exceed $5,000,000 in any calendar year and the aggregate Indebtedness assumed in connection with such transactions is (a) unsecured and (b) does not exceed $5,000,000 in any calendar year, (ii) such Borrower is the surviving entity or the surviving entity becomes a Borrower hereunder, and (iii) no Event of Default is occurring prior thereto or exists after giving effect thereto. Collateral Agent shall respond within ten (10) days to the request by a Borrower to waive this Section 7.3 or permit a transaction to occur that, without such permission, would violate this Section 7.3.

7.4 Indebtedness . Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than Permitted Indebtedness.

7.5 Encumbrance . Create, incur, allow, or suffer any Lien on any of its property, or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens, or permit any Collateral not to be subject to the first priority security interest granted herein (except for Permitted Liens that are permitted by the terms of this agreement to have priority to Collateral Agent’s Lien), or enter into any agreement, document, instrument or other arrangement (except with or in favor of Collateral Agent) with any Person that directly or indirectly prohibits or has the effect of prohibiting Borrower or any Subsidiary from assigning or encumbering its or any Subsidiary’s property, except as is otherwise permitted in Section 7.1 and the definition of “Permitted Liens”.

7.6 Maintenance of Collateral Accounts . Maintain any Collateral Account except pursuant to the terms of Section 6.6.

7.7 Distributions; Investments . (a) Pay any dividends (other than dividends payable solely in capital stock) or make any distribution or payment or redeem, retire or purchase any capital stock (other (i) than repurchases pursuant to the terms of employee stock purchase plans, employee restricted stock agreements, stockholder rights plans, director or consultant stock option plans, or similar plans, provided such repurchases do not exceed Fifty Thousand Dollars ($50,000) in the aggregate per fiscal year and (ii) repurchases of its common stock from time to time in privately negotiated and open market transactions in an aggregate repurchase amount not to exceed Seven Hundred Fifty Thousand Dollars ($750,000) in any fiscal year, provided such repurchases are on commercially reasonable terms and not executed at a premium to fair market value) or (b) directly or indirectly make any Investment other than Permitted Investments, or permit any of its Subsidiaries to do so.

7.8 Transactions with Affiliates . Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower or Guarantor, except for transactions that are in the ordinary course of Borrower’s business, upon fair and reasonable terms that are no less favorable to Borrower than would be obtained in an arm’s length transaction with a non-affiliated Person.

7.9 Subordinated Debt . (a) Make or permit any payment on any Subordinated Debt, except under the terms of the subordination, intercreditor, or other similar agreement to which such Subordinated Debt is subject, or (b) amend any provision in any document relating to the Subordinated Debt which would increase the amount thereof or adversely affect the subordination thereof to Obligations owed to Lenders.

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7.10 Compliance . Become an “investment company” or a company controlled by an “investment company”, under the Investment Company Act of 1940, as amended, or undertake as one of its important activities extending credit to purchase or carry margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System), or use the proceeds of any Credit Extension for that purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply with any law or regulation, if the violation could reasonably be expected to have a material adverse effect on Borrower’s business, or permit any of its Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any present pension, profit sharing and deferred compensation plan which could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.

7.11 Compliance with Anti-Terrorism Laws . Collateral Agent notifies each Borrower that pursuant to the requirements of Anti-Terrorism Laws, and Collateral Agent’s policies and practices, Collateral Agent is required to obtain, verify and record certain information and documentation that identifies Borrower and Guarantor and their principals, which information includes the name and address of such Borrower and its principals and such other information that will allow Collateral Agent to identify such party in accordance with Anti-Terrorism Laws. No Borrower will, nor will such Borrower permit any Subsidiary or Affiliate to, directly or indirectly, knowingly enter into any documents, instruments, agreements or contracts with any Person listed on the OFAC Lists. A Borrower shall immediately notify Collateral Agent if such Borrower has knowledge that a Borrower or any Subsidiary or Affiliate is listed on the OFAC Lists or (a) is convicted on, (b) pleads nolo contendere to, (c) is indicted on, or (d) is arraigned and held over on charges involving money laundering or predicate crimes to money laundering. No Borrower will, nor will any Borrower permit, any Subsidiary or Affiliate to, directly or indirectly, (i) conduct any business or engage in any transaction or dealing with any Blocked Person, including, without limitation, the making or receiving of any contribution of funds, goods or services to or for the benefit of any Blocked Person, (ii) deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to Executive Order No. 13224, any similar executive order or other Anti-Terrorism Law, or (iii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in Executive Order No. 13224 or other Anti-Terrorism Law.

Any one of the following shall constitute an event of default (an “ Event of Default ”) under this Agreement:

8.1 Payment Default . A Borrower fails to (a) make any payment of principal or interest on any Credit Extension on its due date, or (b) pay any other Obligations within three (3) Business Days after such Obligations are due and payable (which three (3) Business Day grace period shall not apply to payments due on the Maturity Date or the date of acceleration pursuant to Section 9.1 (a) hereof). During the cure period, the failure to cure the payment default is not an Event of Default (but no Credit Extension will be made during the cure period);

8.2 Covenant Default.

(a) A Borrower fails or neglects to perform any obligation in Sections 6 or Borrower or violates any covenant in Section 7; or

(b) A Borrower or any of its Subsidiaries fails or neglects to perform, keep, or observe any other term, provision, condition, covenant or agreement contained in this Agreement or any Loan Documents, and as to any default (other than those specified in this Section 8) under such other term, provision, condition, covenant or agreement that can be cured, has failed to cure the default within ten (10) days after the date that Borrower knew, or reasonably should have known, of the occurrence of such default; provided, however, that if the default cannot by its nature be cured within the ten (10) day period or cannot after diligent attempts by such Borrower be cured within such ten (10) day period, and such default is likely to be cured within a reasonable time, then Borrower shall have an additional period (which shall not in any case exceed thirty (30) days) to attempt to cure such default, and within such reasonable time period the failure to cure the default shall not be deemed an Event of Default (but no Credit Extensions shall be made during such cure period);

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8.3 Material Adverse Change . A Material Adverse Change occurs;

8.4 Attachment; Levy; Restraint on Business .

(a) (i) The service of process seeking to attach, by trustee or similar process, any funds of a Borrower or of any entity under control of a Borrower (including a Subsidiary) on deposit with any Lender or any Lender’s Affiliate or any bank or other institution at which a Borrower maintains a Collateral Account, or (ii) a notice of lien, levy, or assessment is filed against any of a Borrower’s assets by any government agency, and the same under subclauses (i) and (ii) hereof are not, within ten (10) days after the occurrence thereof, discharged or stayed (whether through the posting of a bond or otherwise); provided, however, no Credit Extensions shall be made during any ten (10) day cure period; and

(b) (i) any of a Borrower’s assets is attached, seized, levied on, or comes into possession of a trustee or receiver, or (ii) any court order enjoins, restrains, or prevents a Borrower from conducting any substantial part of its business;

8.5 Insolvency. (a) A Borrower is unable generally to pay its debts (including trade debts) as they become due or otherwise becomes insolvent; (b) a Borrower begins an Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against a Borrower and not dismissed or stayed within thirty (30) days (but no Credit Extensions shall be made while any of the conditions described in clause (a) exist and/or until any Insolvency Proceeding is dismissed);

8.6 Other Agreements . There is a default in any agreement to which a Borrower is a party with a third party or parties resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount in excess of One Hundred Thousand Dollars ($100,000) or that could have a material adverse effect on such Borrower’s business.

8.7 Judgments . One or more judgments, orders, or decrees for the payment of money in an amount, individually or in the aggregate, of at least Fifty Thousand Dollars ($50,000) (not covered by independent third-party insurance as to which liability has been accepted by such insurance carrier) shall be rendered against a Borrower and shall remain unsatisfied, unvacated, or unstayed for a period of ten (10) days after the entry thereof (provided that no Credit Extensions will be made prior to the satisfaction, vacation, or stay of such judgment, order or decree);

8.8 Subordinated Debt . A default or breach occurs under any agreement between a Borrower and any creditor that signed a subordination, intercreditor, or other similar agreement with Collateral Agent or Lenders, or any creditor that has signed such an agreement with Collateral Agent or Lenders breaches any terms of such agreement;

8.9 Governmental Approvals. Any Governmental Approval shall have been (a) revoked, rescinded, suspended, modified in an adverse manner or not renewed in the ordinary course for a full term or (b) subject to any decision by a Governmental Authority that designates a hearing with respect to any applications for renewal of any of such Governmental Approval or that could result in the Governmental Authority taking any of the actions described in clause (a) above, and such decision or such revocation, rescission, suspension, modification or non-renewal (i) has, or could reasonably be expected to have, a Material Adverse Change, or (ii) adversely affects the legal qualifications of a Borrower or any of its Subsidiaries to hold such Governmental Approval in any applicable jurisdiction and such revocation, rescission, suspension, modification or non-renewal could reasonably be expected to affect the status of or legal qualifications of a Borrower or any of its Subsidiaries to hold any Governmental Approval in any other jurisdiction that could reasonably be expected to have a material adverse effect on such Borrower’s business.

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8.10 Lien Priority . Any Lien created hereunder or by any other Loan Document shall at any time fail to constitute a valid and perfected Lien on any of the Collateral purported to be secured thereby, subject to no prior or equal Lien, other than Permitted Liens; or

8.11 Misrepresentations . A Borrower or any Person acting for such Borrower makes any representation, warranty, or other statement now or later in this Agreement, any Loan Document or in any writing delivered to Collateral Agent and/or Lenders or to induce Collateral Agent and/or Lenders to enter this Agreement or any Loan Document, and such representation, warranty, or other statement is incorrect in any material respect when made.

9.1 Rights and Remedies .

(a) Upon the occurrence and during the continuance of an Event of Default, Collateral Agent may, and at the written direction of any Lender shall, without notice or demand, do any or all of the following: (i) deliver notice of the Event of Default to a Borrower, (ii) by notice to a Borrower declare all Obligations immediately due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations shall be immediately due and payable without any action by Collateral Agent or Lenders) or (iii) by notice to a Borrower suspend or terminate the obligations, if any, of Lenders to advance money or extend credit for any Borrower’s benefit under this Agreement or under any other agreement between a Borrower and Collateral Agent and/or Lenders (but if an Event of Default described in Section 8.5 occurs all obligations, if any, of Lenders to advance money or extend credit for any Borrower’s benefit under this Agreement or under any other agreement between a Borrower and Collateral Agent and/or Lenders shall be immediately terminated without any action by Collateral Agent or Lenders).

(b) Without limiting the rights of the Collateral Agent and Lenders set forth in Section 9.1(a) above, upon the occurrence and during the continuance of an Event of Default Collateral Agent shall have the right, at the written direction of the Required Lenders, without notice or demand, to do any or all of the following:

(i) foreclose upon and/or sell or otherwise liquidate, the Collateral;

(ii) apply to the Obligations any (a) balances and deposits of any Borrower that Collateral Agent or any Lender holds or controls, or (b) any amount held or controlled by Collateral Agent or any Lender owing to or for the credit or the account of any Borrower; and/or

(iii) commence and prosecute an Insolvency Proceeding or consent to a Borrower commencing any Insolvency Proceeding.

(c) Without limiting the rights of the Collateral Agent and Lenders set forth in Sections 9.1(a) and (b) above, upon the occurrence and during the continuance of an Event of Default Collateral Agent shall have the right, without notice or demand, to do any or all of the following:

(i) settle or adjust disputes and claims directly with Account Debtors for amounts on terms and in any order that Collateral Agent considers advisable, notify any Person owing a Borrower money of Collateral Agent’s security interest in such funds, and verify the amount of such account;

(ii) make any payments and do any acts it considers necessary or reasonable to protect the Collateral and/or its security interest in the Collateral. Each Borrower shall assemble the Collateral if Collateral Agent requests and make it available in a location as Collateral Agent reasonably designates. Collateral Agent may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise any Lien which appears to be prior or superior to its security interest and pay all expenses incurred. Each Borrower grants Collateral Agent a license to enter and occupy any of its premises, without charge, to exercise any of Collateral Agent’s rights or remedies;

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(iii) ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, and/or advertise for sale, the Collateral. Collateral Agent is hereby granted a non-exclusive, royalty-free license or other right to use, without charge, a Borrower’s labels, patents, copyrights, mask works, rights of use of any name, trade secrets, trade names, trademarks, service marks, and advertising matter, or any similar property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Collateral Agent’s exercise of its rights under this Section 9.1, such Borrower’s rights under all licenses and all franchise agreements inure to Collateral Agent for the benefit of Lenders;

(iv) place a “hold” on any account maintained with Collateral Agent or Lenders and/or deliver a notice of exclusive control, any entitlement order, or other directions or instructions pursuant to any Control Agreement or similar agreements providing control of any Collateral;

(v) demand and receive possession of all of a Borrower’s Books;

(vi) appoint a receiver to cease, manage and realize any of the Collateral, and such receiver shall have any right and authority as any competent court will grant or authorize in accordance with any applicable law, including any power or authority to manage the business of a Borrower; and

(vii) Subject to clauses 9.1(a) and (b), exercise all rights and remedies available to Collateral Agent under the Loan Documents or at law or equity, including all remedies provided under the Code (including disposal of the Collateral pursuant to the terms thereof).

Notwithstanding any provision of this Section 9.1 to the contrary, upon the occurrence of any Event of Default, Collateral Agent shall have the right to exercise any and all remedies referenced in this Section 9.1 without the written consent of Required Lenders following the occurrence of an Exigent Circumstance. As used in the immediately preceding sentence, “Exigent Circumstance” means any event or circumstance that, in the reasonable judgment of Collateral Agent, imminently threatens the ability of Collateral Agent to realize upon all or any material portion of the Collateral, such as, without limitation, fraudulent removal, concealment, or abscondment thereof, destruction or material waste thereof, or failure of Borrower after reasonable demand to maintain or reinstate adequate casualty insurance coverage, or which, in the judgment of Collateral Agent, could reasonably be expected to result in a material diminution in value of the Collateral.

9.2 Power of Attorney. Each Borrower irrevocably appoints Collateral Agent as its lawful attorney-in-fact, exercisable upon the occurrence and during the continuance of an Event of Default, to: (a) endorse such Borrower’s name on any checks or other forms of payment or security; (b) sign such Borrower’s name on any invoice or bill of lading for any Account or drafts against Account Debtors; (c) settle and adjust disputes and claims about the Accounts directly with Account Debtors, for amounts and on terms Collateral Agent determines reasonable; (d) make, settle, and adjust all claims under such Borrower’s insurance policies; (e) pay, contest or settle any Lien, charge, encumbrance, security interest, and adverse claim in or to the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same; and (f) transfer the Collateral into the name of Collateral Agent or a third party as the Code or any applicable law permits. Such Borrower appoints Collateral Agent as its lawful attorney-in-fact to sign such Borrower’s name on any documents necessary to perfect or continue the perfection of Collateral Agent’s security interest in the Collateral regardless of whether an Event of Default has occurred until all Obligations have been satisfied in full and Collateral Agent and Lenders are under no further obligation to make Credit Extensions hereunder. Collateral Agent’s foregoing appointment as such Borrower’s attorney in fact, and all of Collateral Agent’s rights and powers, coupled with an interest, are irrevocable until all Obligations have been fully repaid and performed and Collateral Agent’s and Lenders’ obligation to provide Credit Extensions terminates.

9.3 Protective Payments. If a Borrower fails to obtain the insurance called for by Section 6.5 or fails to pay any premium thereon or fails to pay any other amount that such Borrower is obligated to pay under this Agreement or any other Loan Document, Collateral Agent may obtain such insurance or make such payment, and all amounts so paid by Collateral Agent are Lenders’ Expenses and immediately due and payable, bearing interest at the Default Rate, and secured by the Collateral. Collateral Agent will make reasonable efforts to provide a Borrower with notice of Collateral Agent obtaining such insurance or making such payment at the time it is obtained or paid or within a reasonable time thereafter. No such payments by Collateral Agent are deemed an agreement to make similar payments in the future or Collateral Agent’s waiver of any Event of Default.

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9.4 Application of Payments and Proceeds. Notwithstanding anything to the contrary contained in this Agreement, upon the occurrence and during the continuance of an Event of Default, (a) each Borrower irrevocably waives the right to direct the application of any and all payments at any time or times thereafter received by Collateral Agent from or on behalf of such Borrower of all or any part of the Obligations, and, as between such Borrower on the one hand and Collateral Agent and Lenders on the other, Collateral Agent shall have the continuing and exclusive right to apply and to reapply any and all payments received against the Obligations in such manner as Collateral Agent may deem advisable notwithstanding any previous application by Collateral Agent, and (b) the proceeds of any sale of, or other realization upon all or any part of the Collateral shall be applied: first, to Lenders’ Expenses; second, to accrued and unpaid interest on the Obligations (including any interest which, but for the provisions of the United States Bankruptcy Code, would have accrued on such amounts); third, to the principal amount of the Obligations outstanding; and fourth, to any other indebtedness or obligations of a Borrower owing to Collateral Agent or any Lender under the Loan Documents. Any balance remaining shall be delivered to such Borrower or to whoever may be lawfully entitled to receive such balance or as a court of competent jurisdiction may direct. In carrying out the foregoing, (x) amounts received shall be applied in the numerical order provided until exhausted prior to the application to the next succeeding category, and (y) each of the Persons entitled to receive a payment in any particular category shall receive an amount equal to its pro rata share of amounts available to be applied pursuant thereto for such category. Any reference in this Agreement to an allocation between or sharing by Lenders of any right, interest or obligation “ratably,” “proportionally” or in similar terms shall refer to Pro Rata Share unless expressly provided otherwise. Collateral Agent, or if applicable, each Lender, shall promptly remit to the other Lenders such sums as may be necessary to ensure the ratable repayment of each Lender’s portion of the Term Loan and the ratable distribution of interest, fees and reimbursements paid or made by a Borrower. Notwithstanding the foregoing, a Lender receiving a scheduled payment shall not be responsible for determining whether the other Lenders also received their scheduled payment on such date; provided, however, if it is later determined that a Lender received more than its ratable share of scheduled payments made on any date or dates, then such Lender shall remit to Collateral Agent or other Lenders such sums as may be necessary to ensure the ratable payment of such scheduled payments, as instructed by Collateral Agent. If any payment or distribution of any kind or character, whether in cash, properties or securities, shall be received by a Lender in excess of its ratable share, then the portion of such payment or distribution in excess of such Lender’s ratable share shall be received by such Lender in trust for and shall be promptly paid over to the other Lender for application to the payments of amounts due on the other Lenders’ claims. To the extent any payment for the account of a Borrower is required to be returned as a voidable transfer or otherwise, Lenders shall contribute to one another as is necessary to ensure that such return of payment is on a pro rata basis. If any Lender shall obtain possession of any Collateral, it shall hold such Collateral for itself and as agent and bailee for Collateral Agent and other Lenders for purposes of perfecting Collateral Agent’s security interest therein.

9.5 Liability for Collateral. So long as Collateral Agent and Lenders comply with reasonable banking practices regarding the safekeeping of the Collateral in the possession or under the control of Collateral Agent and Lenders, Collateral Agent and Lenders shall not be liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other Person. Borrowers bear all risk of loss, damage or destruction of the Collateral.

9.6 No Waiver; Remedies Cumulative. Collateral Agent’s failure, at any time or times, to require strict performance by a Borrower of any provision of this Agreement or any other Loan Document shall not waive, affect, or diminish any right of Collateral Agent thereafter to demand strict performance and compliance herewith or therewith. No waiver hereunder shall be effective unless signed by Collateral Agent and then is only effective for the specific instance and purpose for which it is given. Collateral Agent’s rights and remedies under this Agreement and the other Loan Documents are cumulative. Collateral Agent has all rights and remedies provided under the Code, any applicable law, by law, or in equity. Collateral Agent’s exercise of one right or remedy is not an election, and Collateral Agent’s waiver of any Event of Default is not a continuing waiver. Collateral Agent’s delay in exercising any remedy is not a waiver, election, or acquiescence.

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9.7 Waiver. Each Borrower waives, to the fullest extent permitted by law, demand, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by Collateral Agent on which a Borrower is liable.

All notices, consents, requests, approvals, demands, or other communication (collectively, “ Communication ”) by any party to this Agreement or any other Loan Document must be in writing and shall be deemed to have been validly served, given, or delivered: (a) upon the earlier of actual receipt and three (3) Business Days after deposit in the U.S. mail, first class, registered or certified mail return receipt requested, with proper postage prepaid; (b) upon transmission, when sent by electronic mail (if an email address is specified herein) or facsimile transmission; (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address, facsimile number, or email address indicated below. Any of Collateral Agent, Lender or Borrower may change its mailing or electronic mail address or facsimile number by giving the other party written notice thereof in accordance with the terms of this Section 10.

California law governs the Loan Documents without regard to principles of conflicts of law. Each Borrower, Lenders and Collateral Agent each submit to the exclusive jurisdiction of the State and Federal courts in San Diego County, California. NOTWITHSTANDING THE FOREGOING, COLLATERAL AGENT AND LENDERS SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST A BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH COLLATERAL AGENT AND LENDERS (IN ACCORDANCE WITH THE PROVISIONS OF SECTION 9.1) DEEM NECESSARY OR APPROPRIATE TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE COLLATERAL AGENT’S AND LENDERS’ RIGHTS AGAINST A BORROWER OR ITS PROPERTY. Each Borrower expressly submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and such Borrower hereby waives any objection that it may have based upon lack of personal jurisdiction, improper venue, or forum non conveniens and hereby consents to the granting of such legal or equitable relief as is deemed appropriate by such court. Each Borrower waives personal service of the summons, complaints, and other process issued in such action or suit and agrees that service of such summons, complaints, and other process may be made by registered or certified mail addressed to a Borrower at the address set forth in Section 10 of this Agreement and that service so made shall be deemed completed upon the earlier to occur of Borrower’s actual receipt thereof or three (3) days after deposit in the U.S. mails, first class, registered or certified mail return receipt requested, proper postage prepaid.

TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH BORROWER, COLLATERAL AGENT, AND LENDERS EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR THE PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

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WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies of any nature between them arising at any time shall be decided by a reference to a private judge, mutually selected by the parties (or, if they cannot agree, by the Presiding Judge of the San Diego County, California Superior Court) appointed in accordance with California Code of Civil Procedure Section 638 (or pursuant to comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the federal courts), sitting without a jury, in San Diego County, California; and the parties hereby submit to the jurisdiction of such court. The reference proceedings shall be conducted pursuant to and in accordance with the provisions of California Code of Civil Procedure §§ 638 through 645.1, inclusive. The private judge shall have the power, among others, to grant provisional relief, including without limitation, entering temporary restraining orders, issuing preliminary and permanent injunctions and appointing receivers. All such proceedings shall be closed to the public and confidential and all records relating thereto shall be permanently sealed. If during the course of any dispute, a party desires to seek provisional relief, but a judge has not been appointed at that point pursuant to the judicial reference procedures, then such party may apply to the San Diego County, California Superior Court for such relief. The proceeding before the private judge shall be conducted in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings. The parties shall be entitled to discovery which shall be conducted in the same manner as it would be before a court under the rules of discovery applicable to judicial proceedings. The private judge shall oversee discovery and may enforce all discovery rules and orders applicable to judicial proceedings in the same manner as a trial court judge. The parties agree that the selected or appointed private judge shall have the power to decide all issues in the action or proceeding, whether of fact or of law, and shall report a statement of decision thereon pursuant to California Code of Civil Procedure § 644(a). Nothing in this paragraph shall limit the right of any party at any time to exercise self-help remedies, foreclose against collateral, or obtain provisional remedies. The private judge shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph.

12.1 Successors and Assigns. This Agreement binds and is for the benefit of the successors and permitted assigns of each party. No Borrower may assign this Agreement or any rights or obligations under it without Collateral Agent’s prior written consent (which may be granted or withheld in Collateral Agent’s discretion, subject to Section 12.6). Lenders have the right, without the consent of or notice to Borrower, to sell, transfer, assign, negotiate, or grant participation in (any such sale, transfer, assignment, negotiation, or grant of a participation, a “Lender Transfer”) all or any part of, or any interest in, Lenders’ obligations, rights, and benefits under this Agreement and the other Loan Documents provided , however , that any such Lender Transfer (other than a sale or assignment to an Eligible Assignee) of its obligations, rights, and benefits under this Agreement and the other Loan Documents shall require the prior written consent of the Required Lenders (such approved assignee, an “ Approved Lender ”). Borrower and Collateral Agent shall be entitled to continue to deal solely and directly with such Lender in connection with the interests so assigned until Collateral Agent shall have received and accepted an effective assignment agreement in form satisfactory to Collateral Agent executed, delivered and fully completed by the applicable parties thereto, and shall have received such other information regarding such Eligible Assignee or Approved Lender as Collateral Agent reasonably shall require.

12.2 Indemnification. Each Borrower shall indemnify, defend and hold Collateral Agent and Lenders and their respective directors, officers, employees, agents, attorneys, or any other Person affiliated with or representing Collateral Agent or Lenders (each, an “ Indemnified Person ”) harmless against: (a) all obligations, demands, claims, and liabilities (collectively, “ Claims ”) asserted by any other party in connection with the transactions contemplated by the Loan Documents; and (b) all losses or Lenders’ Expenses incurred, or paid by Indemnified Person from, following, or arising from transactions between Collateral Agent, and/or Lenders and any Borrower (including reasonable attorneys’ fees and expenses), except for Claims and/or losses directly caused by such Indemnified Person’s gross negligence or willful misconduct. Each Borrower hereby further indemnifies, defends and holds each Indemnified Person harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature

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whatsoever (including the fees and disbursements of counsel for such Indemnified Person) in connection with any investigative, response, remedial, administrative or judicial matter or proceeding, whether or not such Indemnified Person shall be designated a party thereto and including any such proceeding initiated by or on behalf of such Borrower, and the reasonable expenses of investigation by engineers, environmental consultants and similar technical personnel and any commission, fee or compensation claimed by any broker (other than any broker retained by Collateral Agent or Lenders) asserting any right to payment for the transactions contemplated hereby which may be imposed on, incurred by or asserted against such Indemnified Person as a result of or in connection with the transactions contemplated hereby and the use or intended use of the proceeds of the loan proceeds.

12.3 Time of Essence . Time is of the essence for the performance of all Obligations in this Agreement.

12.4 Severability of Provisions . Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision.

12.5 Correction of Loan Documents. Collateral Agent and Lenders may correct patent errors and fill in any blanks in this Agreement and the other Loan Documents consistent with the agreement of the parties .

12.6 Amendments in Writing; Integration . (a)  No amendment, modification, termination or waiver of any provision of this Agreement or any other Loan Document, no approval or consent thereunder, or any consent to any departure by a Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by such Borrower, Collateral Agent and the Required Lenders provided that

(i) no such amendment, waiver or other modification that would have the effect of increasing or reducing a Lender’s Term Loan Commitment or Commitment Percentage shall be effective as to such Lender without such Lender’s written consent;

(ii) no such amendment, waiver or modification that would affect the rights and duties of Collateral Agent shall be effective without Collateral Agent’s written consent or signature;

(iii) no such amendment, waiver or other modification shall, unless signed by all Lenders directly affected thereby, (A) reduce the principal of, rate of interest on or any fees with respect to the Term Loan or forgive any principal, interest (other than default interest) or fees (other than late charges) with respect to the Term Loan (B) postpone the date fixed for, or waive, any payment of principal of the Term Loan or of interest on the Term Loan (other than default interest) or any fees provided for hereunder (other than late charges or for any termination of any commitment); (C) change the definition of the term “Required Lenders” or the percentage of Lenders which shall be required for Lenders to take any action hereunder; (D) release all or substantially all or any material portion of the Collateral, authorize a Borrower to sell or otherwise dispose of all or substantially all or any material portion of the Collateral or release any Guarantor of all or any portion of the Obligations or its guaranty obligations with respect thereto, except, in each case with respect to this clause (D), as otherwise may be expressly permitted under this Agreement or the other Loan Documents (including in connection with any disposition permitted hereunder); (E) amend, waive or otherwise modify this Section 12.6 or the definitions of the terms used in this Section 12.6 insofar as the definitions affect the substance of this Section 12.6; (F) consent to the assignment, delegation or other transfer by a Borrower of any of its rights and obligations under any Loan Document or release a Borrower of its payment obligations under any Loan Document, except, in each case with respect to this clause (F), pursuant to a merger or consolidation permitted pursuant to this Agreement; (G) amend any of the provisions of Section 9.4 or amend any of the definitions Pro Rata Share, Term Loan Commitment, Commitment Percentage or that provide for Lenders to receive their Pro Rata Shares of any fees, payments, setoffs or proceeds of Collateral hereunder; (H) subordinate the Liens granted in favor of Collateral Agent securing the Obligations; or (I) amend any of the provisions of Section 12.10. It is hereby understood and agreed that all Lenders shall be deemed directly affected by an amendment, waiver or other modification of the type described in the preceding clauses (C), (D), (E), (F), (G) and (H) of the preceding sentence;

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(iv) the provisions of the foregoing clauses (i), (ii) and (iii) are subject to the provisions of any interlender or agency agreement among Lenders and Collateral Agent pursuant to which any Lender may agree to give its consent in connection with any amendment, waiver or modification of the Loan Documents only in the event of the unanimous agreement of all Lenders.

(b) Other than as expressly provided for in Section 12.6(a)(i)-(iii), Collateral Agent may, if requested by the Required Lenders, from time to time designate covenants in this Agreement less restrictive by notification to a representative of a Borrower.

(c) This Agreement and the Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Agreement and the Loan Documents merge into this Agreement and the Loan Documents.

12.7 Counterparts . This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, is an original, and all taken together, constitute one Agreement.

12.8 Survival . All covenants, representations and warranties made in this Agreement continue in full force until this Agreement has terminated pursuant to its terms and all Obligations (other than inchoate indemnity obligations and any other obligations which, by their terms, are to survive the termination of this Agreement) have been satisfied. The obligation of Borrowers in Section 12.2 to indemnify each Lender and Collateral Agent, as well as the confidentiality provisions in Section 12.9 below, shall survive until the statute of limitations with respect to such claim or cause of action shall have run.

12.9 Confidentiality . In handling any confidential information of a Borrower, Lenders and Collateral Agent shall exercise the same degree of care that it exercises for their own proprietary information, but disclosure of information may be made: (a) confidentially to Lenders’ and Collateral Agent’s Subsidiaries or Affiliates; (b) confidentially to prospective transferees or purchasers of any interest in the Credit Extensions; (c) as required by law, regulation, subpoena, or other order; (d) in connection with the securitization of certain of Lenders’ assets or a loan by a senior lender to any of Lenders; (e) to Lenders’ or Collateral Agent’s regulators or as otherwise required in connection with an examination or audit; (f) as Collateral Agent considers appropriate in exercising remedies under the Loan Documents; and (g) to third party service providers of Lenders and/or Collateral Agent so long as such service providers have executed a confidentiality agreement with Lenders and Collateral Agent with terms no less restrictive than those contained herein. Confidential information does not include information that either: (i) is in the public domain or in Lenders’ and/or Collateral Agent’s possession when disclosed to Lenders and/or Collateral Agent, or becomes part of the public domain after disclosure to Lenders and/or Collateral Agent; or (ii) is disclosed to Lenders and/or Collateral Agent by a third party, if Lenders and/or Collateral Agent does not know that the third party is prohibited from disclosing the information. Collateral Agent and Lenders may use non-scientific confidential information for any purpose, including, without limitation, for the development of client databases, reporting purposes, and market analysis, so long as neither Collateral Agent nor any Lender discloses a Borrower’s identity or the identity of any person associated with Borrower unless otherwise expressly permitted by this Agreement. The provisions of the immediately preceding sentence shall survive the termination of this Agreement.

12.10 Right of Set Off . Each Borrower grants to Collateral Agent and to each Lender, a lien, security interest and right of set off as security for all Obligations to Collateral Agent and each Lender hereunder, whether now existing or hereafter arising upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of Collateral Agent or Lenders or any entity under the control of Collateral Agent or Lenders (including a Collateral Agent affiliate) or in transit to any of them. At any time after the occurrence and during the continuance of an Event of Default, without demand or notice, Collateral Agent or Lenders may set off the same or any part thereof and apply the same to any liability or obligation of a Borrower even though unmatured and regardless of the adequacy of any other collateral securing the Obligations. ANY AND ALL RIGHTS TO REQUIRE COLLATERAL AGENT TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

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12.11 Coborrowers . Only Ligand Pharmaceuticals Incorporated may request Advances hereunder. Each Borrower appoints the other as agent for the other for all purposes hereunder, including with respect to requesting Advances hereunder. Each Borrower shall be jointly and severally obligated to repay all Advances made hereunder, regardless of which Borrower actually receives said Advance, as if each Borrower hereunder directly received all Advances. Each Borrower waives (a) any suretyship defenses available to it under the Code or any other applicable law, including, without limitation, the benefit of California Civil Code Section 2815 permitting revocation as to future transactions and the benefit of California Civil Code Sections 1432, 2809, 2810, 2819, 2839, 2845, 2847, 2848, 2849, 2850, and 2899 and 3433, and (b) any right to require Bank to: (i) proceed against any Borrower or any other person; (ii) proceed against or exhaust any security; or (iii) pursue any other remedy. Bank may exercise or not exercise any right or remedy it has against any Borrower or any security it holds (including the right to foreclose by judicial or non-judicial sale) without affecting any Borrower’s liability. Notwithstanding any other provision of this Agreement or other related document, each Borrower irrevocably waives all rights that it may have at law or in equity (including, without limitation, any law subrogating Borrower to the rights of Bank under this Agreement) to seek contribution, indemnification or any other form of reimbursement from any other Borrower, or any other Person now or hereafter primarily or secondarily liable for any of the Obligations, for any payment made by Borrower with respect to the Obligations in connection with this Agreement or otherwise and all rights that it might have to benefit from, or to participate in, any security for the Obligations as a result of any payment made by Borrower with respect to the Obligations in connection with this Agreement or otherwise. Any agreement providing for indemnification, reimbursement or any other arrangement prohibited under this Section shall be null and void. If any payment is made to a Borrower in contravention of this Section, such Borrower shall hold such payment in trust for Bank and such payment shall be promptly delivered to Bank for application to the Obligations, whether matured or unmatured.

13.1 Appointment and Authorization of Collateral Agent. Each Lender irrevocably appoints, designates and authorizes Collateral Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere herein or in any other Loan Document, Collateral Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall Collateral Agent have or be deemed to have any fiduciary relationship with any Lender or participant, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against Collateral Agent. Without limiting the generality of the foregoing sentence, the use of the term “agent” herein and in the other Loan Documents with reference to Collateral Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.

13.2 Delegation of Duties. Collateral Agent may execute any of its duties under this Agreement or any other Loan Document by or through its, or its Affiliates’, agents, employees or attorneys-in-fact and shall be entitled to obtain and rely upon the advice of counsel and other consultants or experts concerning all matters pertaining to such duties. Collateral Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects in the absence of gross negligence or willful misconduct.

13.3 Liability of Collateral Agent. Except as otherwise provided herein, no Collateral Agent-Related Person shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct in connection with its duties expressly set forth herein), or (b) be responsible in any manner to any Lender or participant for any recital, statement, representation or warranty made by Borrower or any officer thereof, contained herein or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by Collateral Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of Borrower or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Collateral Agent-Related Person shall be under any obligation to any Lender or participant to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of Borrower or any Affiliate thereof.

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13.4 Reliance by Collateral Agent. Collateral Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, communication, signature, resolution, representation, notice, consent, certificate, affidavit, letter, facsimile, or telephone message, electronic mail message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to a Borrower), independent accountants and other experts selected by Collateral Agent. Collateral Agent shall be fully justified in failing or refusing to take any action under any Loan Document unless it shall first receive such advice or concurrence of all Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Collateral Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of all Lenders and such request and any action taken or failure to act pursuant thereto shall be binding upon all Lenders.

13.5 Notice of Default. Collateral Agent shall not be deemed to have knowledge or notice of the occurrence of any default and/or Event of Default, unless Collateral Agent shall have received written notice from a Lender or a Borrower, describing such default or Event of Default. Collateral Agent will notify Lenders of its receipt of any such notice. Collateral Agent shall take such action with respect to an Event of Default as may be directed in writing by the Required Lenders in accordance with Article 9(a); provided , however , that while an Event of Default has occurred and is continuing, Collateral Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Event of Default as Collateral Agent shall deem advisable or in the best interest of Lenders, including without limitation, satisfaction of other security interests, liens or encumbrances on the Collateral not permitted under the Loan Documents, payment of taxes on behalf of a Borrower, payments to landlords, warehouseman, bailees and other persons in possession of the Collateral and other actions to protect and safeguard the Collateral, and actions with respect to insurance claims for casualty events affecting a Borrower and/or the Collateral.

13.6 Credit Decision; Disclosure of Information by Collateral Agent. Each Lender acknowledges that no Collateral Agent-Related Person has made any representation or warranty to it, and that no act by Collateral Agent hereafter taken, including any consent to and acceptance of any assignment or review of the affairs of Borrower or any Affiliate thereof, shall be deemed to constitute any representation or warranty by any Collateral Agent-Related Person to any Lender as to any matter, including whether Collateral Agent-Related Persons have disclosed material information in their possession. Each Lender represents to Collateral Agent that it has, independently and without reliance upon any Collateral Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of, and investigation into, the business, prospects, operations, property, financial and other condition and creditworthiness of a Borrower and its Subsidiaries, and all applicable bank or other regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to Borrower hereunder. Each Lender also represents that it will, independently and without reliance upon any Collateral Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of a Borrower. Except for notices, reports and other documents expressly required to be furnished to Lenders by Collateral Agent herein, Collateral Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of a Borrower or any of its Affiliates which may come into the possession of any Collateral Agent-Related Person.

13.7 Indemnification of Collateral Agent. Whether or not the transactions contemplated hereby are consummated, each Lender shall, severally and pro rata based on its respective Pro Rata Share, indemnify upon demand each Collateral Agent-Related Person (to the extent not reimbursed by or on behalf of a Borrower and without limiting the obligation of Borrower to do so), and hold harmless each Collateral Agent-Related Person from and against any and all Claims (which shall not include legal expenses of Collateral Agent incurred in connection with the closing of the transactions contemplated by this Agreement) incurred by it; provided,

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however, that no Lender shall be liable for the payment to any Collateral Agent-Related Person of any portion of such Indemnified Liabilities to the extent determined in a judgment by a court of competent jurisdiction to have resulted from such Collateral Agent-Related Person’s own gross negligence or willful misconduct; provided, however, that no action taken in accordance with the directions of the Required Lenders shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section 13.7. Without limitation of the foregoing, each Lender shall, severally and pro rata based on its respective Pro Rata Share, reimburse Collateral Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Lenders’ Expenses incurred after the closing of the transactions contemplated by this Agreement) incurred by Collateral Agent (in its capacity as Collateral Agent, and not as a Lender) in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that Collateral Agent is not reimbursed for such expenses by or on behalf of a Borrower. The undertaking in this Section 13.7 shall survive the payment in full of the Obligations, the termination of this Agreement and the resignation of Collateral Agent.

13.8 Collateral Agent in its Individual Capacity. With respect to its Credit Extensions, Oxford shall have the same rights and powers under this Agreement as any other Lender and may exercise such rights and powers as though it were not Collateral Agent, and the terms “Lender” and “Lenders” include Oxford in its individual capacity.

13.9 Successor Collateral Agent. Collateral Agent may resign as Collateral Agent upon ten (10) days’ notice to Lenders. If Collateral Agent resigns under this Agreement, all Lenders shall appoint from among Lenders (or the affiliates thereof) a successor Collateral Agent for Lenders, which successor Collateral Agent shall (unless an Event of Default has occurred and is continuing) be subject to the approval of Borrower (which approval shall not be unreasonably withheld or delayed). If no successor Collateral Agent is appointed prior to the effective date of the resignation of Collateral Agent, Collateral Agent may appoint, after consulting with Lenders, a successor Collateral Agent from among Lenders (or the affiliates thereof). Upon the acceptance of its appointment as successor Collateral Agent hereunder, the Person acting as such successor Collateral Agent shall succeed to all the rights, powers and duties of the retiring Collateral Agent and the respective term “Collateral Agent” means such successor Collateral Agent and the retiring Collateral Agent’s appointment, powers and duties in such capacities shall be terminated without any other further act or deed on its behalf. After any retiring Collateral Agent’s resignation hereunder as Collateral Agent, the provisions of this Article 13 and Sections 2.3(d) and 12.2 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Collateral Agent under this Agreement. If no successor Collateral Agent has accepted appointment as Collateral Agent by the date ten (10) days following a retiring Collateral Agent’s notice of resignation, the retiring Collateral Agent’s resignation shall nevertheless thereupon become effective and Lenders shall perform all of the duties of Collateral Agent hereunder until such time, if any, as Lenders appoint a successor agent as provided for above.

13.10 Collateral Agent May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to a Borrower, Collateral Agent (irrespective of whether the principal of any Loan, shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether Collateral Agent shall have made any demand on a Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise:

(a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Credit Extensions and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of Lenders and Collateral Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of Lenders and Collateral Agent and their respective agents and counsel and all other amounts due Lenders and Collateral Agent allowed in such judicial proceeding); and

(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

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and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to Collateral Agent and, in the event that Collateral Agent shall consent to the making of such payments directly to Lenders, to pay to Collateral Agent any amount due for the reasonable compensation, expenses, disbursements and advances of Collateral Agent and its agents and counsel, and any other amounts due Collateral Agent under Section 2.3(d). To the extent that Collateral Agent fails timely to do so, each Lender may file a claim relating to such Lender’s claim.

13.11 Collateral and Guaranty Matters. Lenders irrevocably authorize Collateral Agent, at its option and in its discretion, to release any Guarantor and any Lien on any Collateral granted to or held by Collateral Agent under any Loan Document (i) upon the date that all Obligations due hereunder (other than inchoate indemnity obligations and any other obligations which, by their terms, are to survive the termination of this Agreement) have been fully and indefeasibly paid in full and no Term Loan Commitments or other obligations of any Lender to provide funds to a Borrower under this Agreement remain outstanding, (ii) that is transferred or to be transferred as part of or in connection with any Transfer permitted hereunder or under any other Loan Document, or (iii) as approved in accordance with Section 12.6. Upon request by Collateral Agent at any time, all Lenders will confirm in writing Collateral Agent’s authority to release its interest in particular types or items of Property, pursuant to this Section 13.11.

13.12 Cooperation of Borrower. At the request of Collateral Agent, each Borrower shall (i) execute any documents (including new Secured Promissory Notes) reasonably required to effectuate and acknowledge each assignment of a Term Loan Commitment or Loan to an assignee in accordance with Section 12.1, (ii) make such Borrower’s management available to meet with Collateral Agent and prospective participants and assignees of Term Loan Commitments or Credit Extensions (which meetings shall be conducted no more often than twice every twelve months unless an Event of Default has occurred and is continuing) and (iii) assist Collateral Agent or Lenders in the preparation of information relating to the financial affairs of such Borrower as any prospective participant or assignee of a Term Loan Commitment or Term Loan reasonably may request. Subject to the provisions of Section 12.9 such Borrower authorizes each Lender to disclose confidentially to any prospective participant or assignee of a Term Loan Commitment, any and all information in such Lender’s possession concerning such Borrower and its financial affairs which has been delivered to such Lender by or on behalf of such Borrower pursuant to this Agreement, or which has been delivered to such Lender by or on behalf of Borrower in connection with such Lender’s credit evaluation of Borrower prior to entering into this Agreement.

14.1 Definitions . As used in this Agreement, the following terms have the following meanings:

“ Account ” is any “account” as defined in the Code with such additions to such term as may hereafter be made, and includes, without limitation, all accounts receivable and other sums owing to Borrower.

“ Account Debtor ” is any “account debtor” as defined in the Code with such additions to such term as may hereafter be made.

“ Affiliate ” of any Person is a Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by or is under common control with the Person, and each of that Person’s senior executive officers, directors, partners and, for any Person that is a limited liability company, that Person’s managers and members.

“ Agreement ” is defined in the preamble hereof.

“ Amortization Date ” is specified in Section 2.2(b).

“ Anti-Terrorism Laws ” means any laws relating to terrorism or money laundering, including Executive Order No. 13224 (effective September 24, 2001), the USA PATRIOT Act, the laws comprising or implementing the Bank Secrecy Act, and the laws administered by OFAC.

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“ Approved Fund ” means any (i) investment company, fund, trust, securitization vehicle or conduit that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business or (ii) any Person (other than a natural person) which temporarily warehouses loans for any Lender or any entity described in the preceding clause (i) and that, with respect to each of the preceding clauses (i) and (ii), is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) a Person (other than a natural person) or an Affiliate of a Person (other than a natural person) that administers or manages a Lender.

“ Approved Lender ” has the meaning given it in Section 12.1.

“ Basic Rate ” means with respect to the Term Loan, the per annum rate of interest (based on a year of 360 days) equal to the greater of (a) 8.63% per annum and (b) the sum of (i) 8.34% plus (ii) the 3-month LIBOR rate reported in The Wall Street Journal three (3) Business Days prior to the Funding Date of the Term Loan.

“ Blocked Person ” means any Person: (a) listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224, (b) a Person owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224, (c) a Person with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law, (d) a Person that commits, threatens or conspires to commit or supports “terrorism” as defined in Executive Order No. 13224, or (e) a Person that is named a “specially designated national” or “blocked person” on the most current list published by OFAC or other similar list.

“ Borrower ” is defined in the preamble hereof.

“ Borrower’s Books ” are all a Borrower’s books and records including ledgers, federal, and state tax returns, records regarding Borrower’s assets or liabilities, the Collateral, business operations or financial condition, and all computer programs or storage or any equipment containing such information.

“ Business Day ” is any day that is not a Saturday, Sunday or a day on which Collateral Agent is closed.

“ Cash Equivalents ” are (a) marketable direct obligations issued or unconditionally guaranteed by the United States or any agency or any State thereof having maturities of not more than two (2) years from the date of acquisition; (b) commercial paper maturing no more than one (1) year after its creation and having the highest rating from either Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc., and (c) certificates of deposit maturing no more than two (2) years after issue provided that the account in which any such certificate of deposit is maintained is subject to a Control Agreement in favor of Collateral Agent. For the avoidance of doubt, the direct purchase by Borrower, Guarantor, co-borrower, or any subsidiary of a Borrower of any Auction Rate Securities, or purchasing participations in, or entering into any type of swap or other derivative transaction, or otherwise holding or engaging in any ownership interest in any type of Auction Rate Security by Borrower, Guarantor, co-borrower, or any subsidiary of a Borrower shall be conclusively determined by Lenders as an ineligible Cash Equivalent, and any such transaction shall expressly violate each other provision of this agreement governing Permitted Investments. Notwithstanding the foregoing, Cash Equivalents does not include and each Borrower and its Subsidiaries are prohibited from purchasing, purchasing participations in, entering into any type of swap or other equivalent derivative transaction, or otherwise holding or engaging in any ownership interest in any type of debt instrument, including, without limitation, any corporate or municipal bonds with a long-term nominal maturity for which the interest rate is reset through a dutch auction and more commonly referred to as an auction rate security.

“ Claims ” are defined in Section 12.2.

“ Code ” is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the State of California; provided, that, to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term contained in Article or Division 9 shall govern; provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, or priority of, or remedies with respect to, Collateral Agent’s Lien on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than

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the State of California, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies and for purposes of definitions relating to such provisions.

“ Collateral ” is any and all properties, rights and assets of a Borrower described on Exhibit A and any and all other properties, rights and assets of such Borrower granted by such Borrower to Collateral Agent for the ratable benefit of Lenders or arising under the Code or other applicable law, now, or in the future.

“ Collateral Account ” is any Deposit Account, Securities Account, or Commodity Account.

“ Collateral Agent ” means, Oxford, not in its individual capacity, but solely in its capacity as agent on behalf of and for the benefit of Lenders.

“ Collateral Agent-Related Person ” means the Collateral Agent, together with its Affiliates, and the officers, directors, employees, agents, advisors, auditors and attorneys-in-fact of such Persons; provided, however, that no Collateral Agent-Related Person shall be an Affiliate of Borrower or Guarantor .

“ Commitment Percentage ” is set forth in Schedule 1.1, as amended from time to time.

“ Commodity Account ” is any “commodity account” as defined in the Code with such additions to such term as may hereafter be made.

“ Communication ” is defined in Section 10.

“ Compliance Certificate ” is that certain certificate in the form attached hereto as Exhibit C .

“ Contingent Obligation ” is, for any Person, any direct or indirect liability, contingent or not, of that Person for (a) any indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable; (b) any obligations for undrawn letters of credit for the account of that Person; and (c) all obligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but “Contingent Obligation” does not include endorsements in the ordinary course of business. The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under any guarantee or other support arrangement.

“ Control Agreement ” is any control agreement entered into among the depository institution at which a Borrower or Guarantor maintains a Deposit Account or the securities intermediary or commodity intermediary at which Borrower or Guarantor maintains a Securities Account or a Commodity Account, Borrower or Guarantor, and Collateral Agent pursuant to which Collateral Agent obtains control (within the meaning of the Code) for the benefit of Lenders over such Deposit Account, Securities Account, or Commodity Account.

“ Credit Extension ” is the Term Loan or any other extension of credit by Collateral Agent or Lenders for Borrower’s benefit.

“ CyDex Acquisition ” is the acquisition by Borrower of the capital stock and/or assets of CyDex Pharmaceuticals, Inc.

“ Default Rate ” is defined in Section 2.3(b).

“ Deposit Account ” is any “deposit account” as defined in the Code with such additions to such term as may hereafter be made.

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“ Designated Deposit Account ” is Borrower’s deposit account, account number             , maintained with             .

“ Dollars , ” “ dollars ” and “ $ ” each mean lawful money of the United States.

“ Effective Date ” is defined in the preamble of this Agreement.

“ Eligible Assignee ” means (i) a Lender, (ii) an Affiliate of a Lender, (iii) an Approved Fund and (iv) any commercial bank, savings and loan association or savings bank or any other entity which is an “accredited investor” (as defined in Regulation D under the Securities Act of 1933, as amended) and which extends credit or buys loans as one of its businesses, including insurance companies, mutual funds, lease financing companies and commercial finance companies, in each case, which either (A) has a rating of BBB or higher from Standard & Poor’s Rating Group and a rating of Baa2 or higher from Moody’s Investors Service, Inc. at the date that it becomes a Lender or (B) has total assets in excess of $5,000,000,000, and in each case of clauses (i) through (iv), which, through its applicable lending office, is capable of lending to Borrower without the imposition of any withholding or similar taxes; provided that notwithstanding the foregoing, “Eligible Assignee” shall not include (i) Borrower or any of Borrower’s Affiliates or Subsidiaries or (ii) unless Collateral Agent has declared all amounts outstanding under this Agreement immediately due and payable, a direct competitor of Borrower or Guarantor or a vulture hedge fund, each as determined by Collateral Agent. Notwithstanding the foregoing, in connection with assignments by a Lender due to a forced divestiture at the request of any regulatory agency, the restrictions set forth herein shall not apply and Eligible Assignee shall mean any Person or party.

“ Equipment ” is all “equipment” as defined in the Code with such additions to such term as may hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing.

“ ERISA ” is the Employee Retirement Income Security Act of 1974, as amended, and its regulations.

“ Event of Default ” is defined in Section 8.

“ Final Payment ” is a payment (in addition to and not a substitution for the regular monthly payments of principal plus accrued interest) due on the earliest to occur of (a) the Maturity Date, or (b) the acceleration of the Term Loan, or (c) the prepayment of the Term Loan pursuant to Section 2.2(c) or 2.2(d), equal to the original principal amount of the Term Loan multiplied by the Final Payment Percentage, payable to Lenders in accordance with their respective Pro Rata Shares.

“ Final Payment Percentage ” is six percent (6.0%).

“ Funding Date ” is any date on which a Credit Extension is made to or on account of a Borrower which shall be a Business Day.

“ GAAP ” is generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as may be approved by a significant segment of the accounting profession in the United States, which are applicable to the circumstances as of the date of determination.

“ General Intangibles ” is all “general intangibles” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation, all copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work, whether published or unpublished, any patents, trademarks, service marks and, to the extent permitted under applicable law, any applications therefor, whether registered or not, any trade secret rights, including any rights to unpatented inventions, payment intangibles, royalties, contract rights, goodwill, franchise agreements, purchase orders, customer lists, route lists, telephone numbers, domain names, claims, income and other tax refunds, security and other deposits, options to purchase or sell real or personal property, rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise), insurance policies (including without limitation key man, property damage, and business interruption insurance), payments of insurance and rights to payment of any kind.

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“ Governmental Approval ” is any consent, authorization, approval, order, license, franchise, permit, certificate, accreditation, registration, filing or notice, of, issued by, from or to, or other act by or in respect of, any Governmental Authority.

“ Governmental Authority ” is any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization.

“ Guarantor ” is each Person who guarantees satisfaction of the Obligations.

“ Indebtedness ” is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations, and (d) Contingent Obligations.

“ Indemnified Person ” is defined in Section 12.2.

“ Insolvency Proceeding ” is any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.

“ Intellectual Property ” consists of the copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work, whether published or unpublished, any patents, patent applications and like protections, including improvements, divisions, continuations, renewals, reissues, extensions, and continuations-in-part of the same, trademarks, trade names, service marks, mask works, rights of use of any name, domain names, or any other similar rights, any applications therefor, whether registered or not, and the goodwill of the business of any Person connected with and symbolized thereby, know-how, operating manuals, trade secret rights, clinical and non-clinical data, rights to unpatented inventions, and any claims for damage by way of any past, present, or future infringement of any of the foregoing.

“ Inventory ” is all “inventory” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products, including without limitation such inventory as is temporarily out of any Person’s custody or possession or in transit and including any returned goods and any documents of title representing any of the above.

“ Investment ” is any beneficial ownership interest in any Person (including stock, partnership interest or other securities), and any loan, advance or capital contribution to any Person.

“ Key Person ” means each of Borrower’s (i) Chief Executive Officer, who is John L. Higgins as of the Effective Date, and (ii) Chief Financial Officer, who is John P. Sharp as of the Effective Date.

“ Lender ” is any one of Lenders.

“ Lenders ” shall mean the Persons identified on Schedule 1.1 hereto and each assignee that becomes a party to this Agreement pursuant to Section 12.1.

“ Lenders’ Expenses ” are all audit fees and expenses, costs, and expenses (including reasonable attorneys’ fees and expenses, as well as appraisal fees, fees incurred on account of lien searches, inspection fees, and filing fees) for preparing, amending, negotiating, administering, defending and enforcing the Loan Documents (including, without limitation, those incurred in connection with appeals or Insolvency Proceedings) or otherwise incurred by Collateral Agent and/or Lenders in connection with the Loan Documents.

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“ Lien ” is a claim, mortgage, deed of trust, levy, charge, pledge, security interest, or other encumbrance of any kind, whether voluntarily incurred or arising by operation of law or otherwise against any property.

“ Loan Documents ” are, collectively, this Agreement, the Perfection Certificate, each Compliance Certificate, any subordination agreements, any note, or notes or guaranties executed by Borrower, and any other present or future agreement between Borrower and/or Guarantor for the benefit of Lenders and Collateral Agent in connection with this Agreement, all as amended, restated, or otherwise modified.

“ Material Adverse Change ” is (a) a material impairment in the perfection or priority of Collateral Agent’s Lien in the Collateral or in the value of such Collateral; (b) a material adverse change in the business, operations, or condition (financial or otherwise) or prospects of Borrower or Guarantor; or (c) a material impairment of the prospect of repayment of any portion of the Obligations.

“ Maturity Date ” is August 1, 2014.

“ Obligations ” are Borrower’s obligation to pay when due any debts, principal, interest, Lenders’ Expenses, the Prepayment Fee, the Final Payment, and other amounts Borrower owes Lenders now or later, whether under this Agreement, the Loan Documents, or otherwise, including, without limitation, all obligations relating to letters of credit (including reimbursement obligations for drawn and undrawn letters of credit), cash management services, and foreign exchange contracts, if any, and including interest accruing after Insolvency Proceedings begin (whether or not allowed) and debts, liabilities, or obligations of Borrower assigned to Lenders and/or Collateral Agent, and the performance of Borrower’s duties under the Loan Documents.

“ OFAC ” is the U.S. Department of Treasury Office of Foreign Assets Control.

“ OFAC Lists ” are, collectively, the Specially Designated Nationals and Blocked Persons List maintained by OFAC pursuant to Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001) and/or any other list of terrorists or other restricted Persons maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable Executive Orders.

“ Operating Documents ” are, for any Person, such Person’s formation documents, as certified by the Secretary of State of such Person’s jurisdiction of organization on a date that is no earlier than 30 days prior to the Effective Date, and, (a) if such Person is a corporation, its bylaws in current form, (b) if such Person is a limited liability company, its limited liability company agreement (or similar agreement), and (c) if such Person is a partnership, its partnership agreement (or similar agreement), each of the foregoing with all current amendments or modifications thereto.

“ Payment/Advance Form ” is that certain form attached hereto as Exhibit B .

“ Payment Date ” is the first (1 ^st ) calendar day of each calendar month.

“ Perfection Certificate ” is defined in Section 5.1.

“ Permitted Indebtedness ” is:

(a) Borrower’s and Guarantor’s Indebtedness to Lenders and Collateral Agent under this Agreement and the other Loan Documents;

(b) Indebtedness existing on the Effective Date and shown on the Perfection Certificate;

(c) Subordinated Debt;

(d) unsecured Indebtedness to trade creditors incurred in the ordinary course of business;

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(e) Indebtedness secured by liens specified in clause (c) of the definition of “Permitted Liens” provided such Indebtedness shall not exceed One Hundred Thousand Dollars ($100,000) in the aggregate principal amount outstanding at any one time;

(f) Indebtedness of up to Five Million Dollars ($5,000,000) secured exclusively by a security interest in a Deposit Account held with, or Certificate of Deposit issued by, the holder of such Indebtedness, and on terms reasonably acceptable to Agent;

(g) Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of Borrower’s business; and

(h) extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through (f) above, provided that the principal amount thereof is not increased or the terms thereof are not modified to impose materially more burdensome terms upon Borrower, Guarantor or its Subsidiary, as the case may be.

“ Permitted Investments ” are:

(a) Investments shown on the Perfection Certificate and existing on the Effective Date;

(b) Investments in cash and Cash Equivalents; and

(c) Investments in the stock of CyDex Pharmaceuticals, Inc. and any stock or equity in any company acquired in a future permitted acquisition pursuant to Section 7.3.

“ Permitted Liens ” are:

(a) Liens existing on the Effective Date and shown on the Perfection Certificate or arising under this Agreement and the other Loan Documents;

(b) Liens for taxes, fees, assessments or other government charges or levies, either not delinquent or being contested in good faith and for which Borrower or Guarantor maintains adequate reserves on its Books, provided that no notice of any such Lien has been filed or recorded under the Internal Revenue Code of 1986, as amended , and the Treasury Regulations adopted thereunder;

(c) purchase money Liens (i) on Equipment or other assets subject to capital leases acquired or held by Borrower or Guarantor incurred for financing the acquisition of the Equipment or such assets subject to capital leases, or (ii) on existing Equipment or such assets subject to capital leases when acquired, in each case if the Lien is confined to the property and improvements and the proceeds of the Equipment or other assets subject to capital leases; provided that such Liens under this clause (c) (A) may have priority over liens granted to Collateral Agent hereunder to the extent provided under the Code so long as the Indebtedness secured by the Liens remain outstanding and (B) may secure Indebtedness of no more than One Hundred Thousand Dollars ($100,000) in the aggregate principal amount outstanding at any one time;

(d) statutory Liens securing claims or demands of materialmen, mechanics, carriers, warehousemen, landlords and other Persons imposed without action of such parties, provided they have no priority over any of Collateral Agent’s Lien and the aggregate amount of the obligations secured by such Liens does not any time exceed Twenty-Five Thousand Dollars ($25,000);

(e) leases or subleases of real property granted in the ordinary course of business, and leases, subleases, non-exclusive licenses or sublicenses of property (other than real property or Intellectual Property) granted in the ordinary course of Borrower’s or Guarantor’s business, if the leases, subleases, licenses and sublicenses do not prohibit granting Collateral Agent a security interest; and

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(f) banker’s liens, rights of setoff and Liens in favor of financial institutions incurred made in the ordinary course of business arising in connection with Borrower’s or Guarantor’s deposit accounts or securities accounts held at such institutions to secure solely payment of fees and similar costs and expenses and provided such accounts are maintained in compliance with Section 6.6(b) hereof;

(g) Liens to secure payment of workers’ compensation, employment insurance, social security and other like obligations incurred in the ordinary course of business (other than Liens imposed by ERISA);

(h) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under Section 8.4 or 8.7;

(i) licenses of Intellectual Property permitted by Section 7.1 hereof;

(j) Lien on the Deposit Account and/or Certificate of Deposit securing the Indebtedness described in clause (f) of the defined term “Permitted Indebtedness”, but only to the extent of such Permitted Indebtedness; and

(k) Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a), (c) and (j) above, but any extension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the Indebtedness may not increase.

“ Person ” is any individual, sole proprietorship, partnership, limited liability company, joint venture, company, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency.

“ Prepayment Fee ” means with respect to the Term Loan subject to prepayment prior to the Maturity Date, whether by mandatory or voluntary prepayment, acceleration or otherwise, an additional fee payable to Lenders in amount equal to:

(a) for a prepayment made on or after the Funding Date of the Term Loan through and including the first anniversary of the Funding Date of the Term Loan, two percent (2.0%) of the principal amount of the Term Loan prepaid; and

(b) for a prepayment made after the date which is after the first anniversary of the Funding Date of the Term Loan, one percent (1.0%) of the principal amount of the Term Loan prepaid.

“ Pro Rata Share ” means, as of any date of determination, with respect to each Lender, a percentage (expressed as a decimal, rounded to the ninth decimal place) determined by dividing the outstanding principal amount of the Term Loan held by such Lender by the aggregate outstanding principal amount of the Term Loan.

“ Registered Organization ” is any “registered organization” as defined in the Code with such additions to such term as may hereafter be made

“ Required Lenders ” means (i) for so long as all of the Persons that are Lenders on the Effective Date (each an “ Original Lender ”) have not assigned or transferred any of their interests in their respective Term Loan, Lenders holding one hundred percent (100%) of the aggregate outstanding principal balance of the Term Loan, or (ii) at any time from and after any Original Lender has assigned or transferred any interest in its Term Loan, Lenders holding, sixty-six percent (66%) or more of the aggregate outstanding principal balance of the Term Loan, plus , in respect of this clause (ii), (A) each Original Lender that has not assigned or transferred any portion of its respective Term Loan and (B) each assignee of an Original Lender provided such assignee was assigned or transferred and continues to hold 100% of the assigning Original Lender’s interest in the Term Loan (in each case in respect of clauses (A) and (B) of this clause (ii), whether or not such Lender is included within Lenders holding sixty-six percent (66%) of the Terms Loan); provided , however , that notwithstanding the foregoing, for purposes of Section 9.1(b) hereof, “Required Lenders” means (i) for so long as all Original Lenders retain 100% of their interests in their respective Term Loan, Lenders holding one hundred percent (100%) of the aggregate outstanding principal balance of the Term Loan, or (ii) at any time from and after any Original Lender has assigned or transferred any interest in

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its Term Loan, Lenders holding, sixty-six percent (66%) or more of the aggregate outstanding principal balance of the Term Loan, plus, in respect of this clause (ii), each Original Lender that has not assigned or transferred any portion of its respective Term Loan (in each case in respect of this clause (ii), whether or not such Original Lender is included within Lenders holding sixty-six percent (66%) of the Term Loan). For purposes of this definition only, a Lender shall be deemed to include itself, and any Lender that is an Affiliate or Approved Fund of such Lender.

“ Requirement of Law ” is as to any Person, the organizational or governing documents of such Person, and any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

“ Responsible Officer ” is any of the President, Chief Executive Officer, or Chief Financial Officer of a Borrower.

“ SEC Filing ” is a report filed by Ligand Pharmaceuticals Incorporated with the Securities and Exchange Commission on any of Forms 8-K, 10-Q or 10-K.

“ Secured Promissory Note ” is defined in Section 2.4.

“ Secured Promissory Note Record ” is a record maintained by each Lender with respect to the outstanding Obligations owed by Borrower to Lender and credits made thereto.

“ Securities Account ” is any “securities account” as defined in the Code with such additions to such term as may hereafter be made.

“ Subordinated Debt ” is indebtedness incurred by a Borrower subordinated to all of Borrower’s now or hereafter incurred Indebtedness to Lenders (pursuant to a subordination, intercreditor, or other similar agreement in form and substance satisfactory to Collateral Agent and Lenders executed among Collateral Agent, Borrower, and the other creditor), on terms acceptable to Collateral Agent and Lenders.

“ Subsidiary ” means, with respect to any Person, any Person of which more than 50.0% of the voting stock or other equity interests (in the case of Persons other than corporations) is owned or controlled, directly or indirectly, by such Person or one or more of Affiliates of such Person.

“ Term Loan ” is the cash advance made pursuant to Section 2.2(a) hereof.

“ Term Loan Commitment ” means, for any Lender, the obligation of such Lender to make Term Loan, up to the principal amount shown on Schedule 1.1 . “ Term Loan Commitments ” means the aggregate amount of such commitments of all Lenders.

[Signature Page to Follow]

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IN WITNESS WHEREOF , the parties hereto have caused this Agreement to be executed as of the Effective Date.

[Signature Page to Loan and Security Agreement]

[Signature Page to Loan and Security Agreement]

1.

EXHIBIT A

All goods, Accounts (including health-care receivables), Equipment, Inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, General Intangibles (except as provided below), commercial tort claims, documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts, all certificates of deposit, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), securities, and all other investment property, supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located; and

All Borrower’s Books relating to the foregoing, and any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing.

The Collateral does not include Certificate of Deposit, account No. 60100378 maintained with Square 1 Bank (the “Cash Collateral Account”) at any time that (i) obligations of Borrower owing to Square 1 Bank in connection with the loan facility secured by the Cash Collateral Account are outstanding or (ii) Square 1 Bank has any obligation to make any credit extensions to Borrower under such loan facility. The Collateral includes the Cash Collateral Account at all other times.

Notwithstanding the foregoing, the Collateral does not include any of the following, whether now owned or hereafter acquired except to the extent that it is necessary under applicable law to have a security interest in any of the following in order to have a perfected lien and security interest in and to the “IP Proceeds” defined below: any copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work, whether published or unpublished; any patents, patent applications and like protections, including improvements, divisions, continuations, renewals, reissues, extensions, and continuations-in-part of the same; trademarks, trade names, service marks, mask works, rights of use of any name or domain names and, to the extent permitted under applicable law, any applications therefor, whether registered or not; and the goodwill of the business of Borrower connected with and symbolized by such trademarks and service marks, know-how, operating manuals, trade secret rights, clinical and non-clinical data, rights to unpatented inventions; provided, however, the Collateral shall include all Accounts, license and royalty fees and other revenues, proceeds, or income arising out of or relating to any of the foregoing and any claims for damage by way of any past, present, or future infringement of any of the foregoing (collectively, the “IP Proceeds”).

Pursuant to the terms of a certain negative pledge arrangement with Lender, Borrower has agreed not to encumber any of its copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work, whether published or unpublished, any patents, patent applications and like protections, including improvements, divisions, continuations, renewals, reissues, extensions, and continuations-in-part of the same, trademarks, service marks and, to the extent permitted under applicable law, any applications therefor, whether registered or not, and the goodwill of the business of Borrower connected with and symbolized thereby, know-how, operating manuals, trade secret rights, rights to unpatented inventions, and any claims for damage by way of any past, present, or future infringement of any of the foregoing, without Lender’s prior written consent. For avoidance of doubt: the foregoing sentence is subject to certain exceptions set forth in such negative pledge arrangement with Lender, including without limitation the granting of non-exclusive licenses (or exclusive field-of-use licenses) for the use of the Intellectual Property in the ordinary course of business in connection with joint ventures and corporate collaborations to the extent permitted, and subject to the terms of, such arrangement.

2.

EXHIBIT B

Loan Payment/Advance Request Form

DISBURSEMENT LETTER

The undersigned, being the duly elected and acting of LIGAND PHARMACEUTICALS INCORPORATED (“ Borrower ”), certifies on behalf of all Borrowers to OXFORD FINANCE CORPORATION , (“ Oxford ” and “ Lender ”), as collateral agent (the “ Collateral Agent ”) in connection with that certain Loan and Security Agreement dated on or about the date hereof by and between Borrowers and Collateral Agent (the “Loan Agreement”; with other capitalized terms used below having the meanings ascribed thereto in the Loan Agreement) that:

1. The representations and warranties made by each Borrower in Section 5 of the Loan Agreement and in the other Loan Documents are true and correct in all material respects as of the date hereof.

2. No event or condition has occurred that would constitute an Event of Default under the Loan Agreement or any other Loan Document.

3. Borrowers are in compliance with the covenants and requirements contained in Sections 4, 6 and 7 of the Loan Agreement.

4. All conditions referred to in Section 3 of the Loan Agreement to the making of the Loan to be made on or about the date hereof have been satisfied or waived by Collateral Agent.

5. No Material Adverse Change has occurred.

6. The undersigned is a Responsible Officer.

7. The proceeds for the Term Loan shall be disbursed as follows:

3.

The aggregate net proceeds of the Term Loan in the amount of $            shall be transferred to Borrower’s account as follows:

4.

EXHIBIT C - COMPLIANCE CERTIFICATE

TO: Oxford Finance Corporation, as Collateral Agent

FROM: LIGAND PHARMACEUTICALS INCORPORATED

The undersigned authorized officer of Ligand Pharmaceuticals Incorporated (“Borrower”) on behalf of itself and all Borrowers, certifies that in accordance with the terms and conditions of the Loan and Security Agreement among Borrowers, Collateral Agent, and Lenders (the “Loan Agreement”),

(i) Borrowers are in compliance for the period ending             with all provisions of the Loan Agreement except as noted below;

(ii) There are no Events of Default, except as noted below;

(iii) Except as noted below, all representations and warranties contained in the Loan Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date.

(iv) Each Borrower, and each of its Subsidiaries, has timely filed all required tax returns and reports, and each Borrower has timely paid all foreign, federal, state, and local taxes, assessments, deposits and contributions owed by such Borrower except as otherwise permitted pursuant to the terms of Section 5.8 of the Agreement;

(v) No Liens have been levied or claims made against a Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which a Borrower has not previously provided written notification to Collateral Agent

Attached are the required documents, if any, supporting our certification(s). The Officer on behalf of Borrower further certifies that the attached financial statements are prepared in accordance with Generally Accepted Accounting Principles (GAAP) and are consistently applied from one period to the next except as explained in an accompanying letter or footnotes and except, in the case of unaudited financial statements, for the absence of footnotes and subject to year-end audit adjustments as to the interim financial statements. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.

5.

Please indicate compliance status since the last Compliance Certificate by circling Yes, No, or N/A under “Complies” column.