Note 17 – Subsequent Events

Loan Facility

On February 13, 2013, the Company entered into a secured loan facility with Deerfield Management Company, L.P. (Deerfield) for up to $30.0 million in financing in 2013 (Deerfield Facility). Under terms of the Deerfield Facility, Deerfield advanced to us $10 million upon execution of the agreement and agreed to advance an additional $20 million, subject to certain conditions, on or about the date of the first commercial sale of SURFAXIN (lucinactant) for the prevention of RDS in premature infants at high risk for RDS, provided that the first sale occurs on a date that is not later than December 31, 2013. The loan matures on February13, 2019 and may be prepaid in whole or in part without penalty at any time. The principal amount of the loan is payable in three equal annual installments on the fourth, fifth and sixth anniversaries of the facility agreement, except that, if the Company achieves certain revenue or market capitalization milestones, the principal payments due on the fourth and fifth anniversaries could be deferred for one year. Accordingly, if the milestones are achieved, payment of the principal amount could be deferred until the maturity date of the loan in 2019. The outstanding principal amount of the loan accrues interest at a rate of 8.75% and is payable quarterly. The facility agreement contains customary terms and conditions but does not require us to meet minimum financial and revenue performance covenants. In connection with each advance, Deerfield will receive a transaction fee equal to 1.5% of the amount disbursed. In connection with the initial advance on February 13, 2013, Deerfield received warrants to purchase 2.3 million shares of common stock at an exercise price of $2.81 per share. Upon disbursement of the $20 million advance, Deerfield will receive warrants to purchase an additional 4.7 million shares of common stock at an exercise price of $2.81 per share. All of the warrants will expire on the sixth anniversary date of the facility agreement. Pursuant to the Agreement, the Company has granted Deerfield a security interest in substantially all of its assets.

In connection with a Major Transaction, as defined in the warrants, to the extent of consideration payable to stockholders in cash in connection with such Major Transaction, the holder may have the option to redeem the warrant or that portion of the warrant for cash in an amount equal to the Black-Scholes value (as defined in the warrant) of the warrant or that portion of the warrant redeemed. In addition, in connection with a Major Transaction, to the extent of any consideration payable to stockholders in securities, or in the event of an Event of Default, the holder may have the option to exercise the warrant and receive that number of shares of common stock that equals the Black Scholes value of the warrant or that portion of the warrant exercised. Prior to the holder exercising the Warrant for shares in such transactions, we may elect to terminate the warrant or that portion of the warrant and pay the holder cash in an amount equal to the Black Scholes value of the Warrant.

ATM Program

On February 11, 2013, we entered into the Stifel Agreement with Stifel, Nicolaus & Company, Incorporated, under which Stifel, as our exclusive agent, at our discretion and at such times that we may determine from time to time, may sell over a three-year period up to a maximum of $25,000,000 of shares of our common stock (Shares) through an ATM Program. We are not required to sell any Shares at any time during the term of the ATM Program.

If we issue a sale notice to Stifel, we may designate the minimum price per share at which Shares may be sold and the maximum number of Shares that Stifel is directed to sell during any selling period. As a result, prices are expected to vary as between purchasers and during the term of the offering. Stifel may sell the Shares by any method deemed to be an "at-the-market" equity offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, which may include ordinary brokers' transactions on The Nasdaq Capital Market, or otherwise at market prices prevailing at the time of sale or prices related to such prevailing market prices, or as otherwise agreed by Stifel and us. Either party may suspend the Offering under the Agreement by notice to the other party.

The ATM Agreement will terminate upon the earliest of: (1) the sale of all Shares of the Company's common stock subject to the Agreement, (2) February 11, 2016 or (3) the termination of the Agreement in accordance with its terms. Either party may terminate the Agreement at any time upon written notification to the other party in accordance with the Agreement, and upon such termination, the Offering will terminate.

The Company will pay Stifel a commission equal to 3.0% of the gross sales price of the Shares for amounts of Shares sold pursuant to the Agreement. With the exception of expenses related to the Shares, Stifel will be responsible for all of its own costs and expenses incurred in connection with the Offering.

Lease Amendment

On January 3, 2013, the Company entered into a Second Amendment to the lease agreement (Amendment) with respect to its headquarters located Warrington, PA. The Amendment provides for a five-year extension of the term of the lease to February 2018; a reduction to the base rent effective as of October 1, 2012; a reduction in the security deposit, over a two year period beginning in 2013, from $400,000 to $225,000; the elimination of the Company's obligation to remove certain improvements and restore the premises; and the Company's option to extend the lease was adjusted to an additional period of five years through February 2023. The total aggregate base rental payments under the lease prior to the extension were approximately $7.2 million and the total aggregate base rental payments under the Amendment are approximately $4.9 million.

The Company has recognized, in 2012, the reduction in base rent and the elimination of its obligation to restore the premises.