Names of Reporting Persons

Double Black Diamond Offshore Ltd.

Check the Appropriate Box if a Member of a Group (See Instructions)

(a)  ¨

(b)  ¨

SEC Use Only

Source of Funds (See Instructions)

WC

Check if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e)

¨

Citizenship or Place of Organization

Cayman Islands

Number of

Shares

Beneficially

Owned by

Each

Reporting

Person

With

Sole Voting Power

0

Shared Voting Power

11,427,421 Shares

Sole Dispositive Power

0

Shared Dispositive Power

11,427,421 Shares

Aggregate Amount Beneficially Owned by Each Reporting Person

11,427,421 Shares

Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)

¨

Percent of Class Represented by Amount in Row (11)

26.5%

Type of Reporting Person (See Instructions)

CO

Names of Reporting Persons

Black Diamond Offshore Ltd.

Check the Appropriate Box if a Member of a Group (See Instructions)

(a)  ¨    

(b)  ¨

SEC Use Only

Source of Funds (See Instructions)

WC

Check if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e)

¨

Citizenship or Place of Organization

Cayman Islands

Number of

Shares

Beneficially

Owned by

Each

Reporting

Person

With

Sole Voting Power

0

Shared Voting Power

721,679 Shares

Sole Dispositive Power

0

Shared Dispositive Power

721,679 Shares

Aggregate Amount Beneficially Owned by Each Reporting Person

721,679 Shares

Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)

¨

Percent of Class Represented by Amount in Row (11)

1.7%

Type of Reporting Person (See Instructions)

CO

Names of Reporting Persons

Double Black Diamond, L.P.

Check the Appropriate Box if a Member of a Group (See Instructions)

(a)  ¨

(b)  ¨

SEC Use Only

Source of Funds (See Instructions)

WC

Check if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e)

¨

Citizenship or Place of Organization

Delaware

Number of

Shares

Beneficially

Owned by

Each

Reporting

Person

With

Sole Voting Power

0

Shared Voting Power

1,000,000 Shares (issuable upon exercise of a warrant)

Sole Dispositive Power

0

Shared Dispositive Power

1,000,000 Shares (issuable upon exercise of a warrant)

Aggregate Amount Beneficially Owned by Each Reporting Person

1,000,000 Shares (issuable upon exercise of a warrant)

Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)

¨

Percent of Class Represented by Amount in Row (11)

2.3%

Type of Reporting Person (See Instructions)

PN

Names of Reporting Persons

Carlson Capital, L.P.

Check the Appropriate Box if a Member of a Group (See Instructions)

(a)  ¨

(b)  ¨

SEC Use Only

Source of Funds (See Instructions)

AF

Check if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e)

¨

Citizenship or Place of Organization

Delaware

Number of

Shares

Beneficially

Owned by

Each

Reporting

Person

With

Sole Voting Power

0

Shared Voting Power

13,149,100 Shares (includes warrant to purchase 1,000,000 Shares)

Sole Dispositive Power

0

Shared Dispositive Power

13,149,100 Shares (includes warrant to purchase 1,000,000 Shares)

Aggregate Amount Beneficially Owned by Each Reporting Person

13,149,100 Shares (includes warrant to purchase 1,000,000 Shares)

Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)

¨

Percent of Class Represented by Amount in Row (11)

30.5%

Type of Reporting Person (See Instructions)

PN; IA

Names of Reporting Persons

Asgard Investment Corp. II

Check the Appropriate Box if a Member of a Group (See Instructions)

(a)  ¨    

(b)  ¨

SEC Use Only

Source of Funds (See Instructions)

AF

Check if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e)

¨

Citizenship or Place of Organization

Delaware

Number of

Shares

Beneficially

Owned by

Each

Reporting

Person

With

Sole Voting Power

0

Shared Voting Power

13,149,100 Shares (includes warrant to purchase 1,000,000 Shares)

Sole Dispositive Power

0

Shared Dispositive Power

13,149,100 Shares (includes warrant to purchase 1,000,000 Shares)

Aggregate Amount Beneficially Owned by Each Reporting Person

13,149,100 Shares (includes warrant to purchase 1,000,000 Shares)

Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)

¨

Percent of Class Represented by Amount in Row (11)

30.5%

Type of Reporting Person (See Instructions)

CO

Names of Reporting Persons

Asgard Investment Corp.

Check the Appropriate Box if a Member of a Group (See Instructions)

(a)  ¨

(b)  ¨

SEC Use Only

Source of Funds (See Instructions)

AF

Check if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e)

¨

Citizenship or Place of Organization

Delaware

Number of

Shares

Beneficially

Owned by

Each

Reporting

Person

With

Sole Voting Power

0

Shared Voting Power

13,149,100 Shares (includes warrant to purchase 1,000,000 Shares)

Sole Dispositive Power

0

Shared Dispositive Power

13,149,100 Shares (includes warrant to purchase 1,000,000 Shares)

Aggregate Amount Beneficially Owned by Each Reporting Person

13,149,100 Shares (includes warrant to purchase 1,000,000 Shares)

Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)

¨

Percent of Class Represented by Amount in Row (11)

30.5%

Type of Reporting Person (See Instructions)

CO

Names of Reporting Persons

Clint D. Carlson

Check the Appropriate Box if a Member of a Group (See Instructions)

(a)  ¨    

(b)  ¨

SEC Use Only

Source of Funds (See Instructions)

AF

Check if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e)

¨

Citizenship or Place of Organization

United States

Number of

Shares

Beneficially

Owned by

Each

Reporting

Person

With

Sole Voting Power

0

Shared Voting Power

13,149,100 Shares (includes warrant to purchase 1,000,000 Shares)

Sole Dispositive Power

0

Shared Dispositive Power

13,149,100 Shares (includes warrant to purchase 1,000,000 Shares)

Aggregate Amount Beneficially Owned by Each Reporting Person

13,149,100 Shares (includes warrant to purchase 1,000,000 Shares)

Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)

¨

Percent of Class Represented by Amount in Row (11)

30.5%

Type of Reporting Person (See Instructions)

IN

Names of Reporting Persons

Michael D. Weinberg

Check the Appropriate Box if a Member of a Group (See Instructions)

(a)  ¨    

(b)  ¨

SEC Use Only

Source of Funds (See Instructions)

OO

Check if Disclosure of Legal Proceedings Is Required Pursuant to Item 2(d) or 2(e)

¨

Citizenship or Place of Organization

United States

Number of

Shares

Beneficially

Owned by

Each

Reporting

Person

With

Sole Voting Power

305,000 Shares

Shared Voting Power

0

Sole Dispositive Power

305,000 Shares

Shared Dispositive Power

0

Aggregate Amount Beneficially Owned by Each Reporting Person

305,000 Shares

Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)

¨

Percent of Class Represented by Amount in Row (11)

0.7%

Type of Reporting Person (See Instructions)

IN

/s/ Clint Carlson

Parties

SWK Holdings Corporation (the “Company”); and

Funds controlled by Carlson Capital, L.P., which may include such funds as already have positions in the Company, other existing funds managed by Carlson, or entities newly formed to undertake the Transaction (collectively, the “Investor”).

Transaction

The Company will raise additional funds through a Rights Offering and Share Issuance (each as described below), such that the Investor will own 71% of the Company’s post Transaction equity interests (the “Target Equity Interest”). The Rights Offering and Share Issuance will be conducted in parallel, will be conditioned on one another and will close simultaneously.

The purpose of the Transaction is to enable the Company to substantially expand its operations in order to:

•     Capture more of the economics of its pharmaceutical and biotechnology royalty securitization business;

•     Diversify its portfolio to lower asset level risk and access more attractive debt financing in the future;

•     More effectively compete for business that requires a demonstration of substantial capital resources;

•     Retain and motivate management;

•     Better spread fixed costs; and

•     Maximize the potential benefits of its net operating loss carryforwards (“NOLs”).

Rights Offering

Share Issuance

Stockholder Vote

The Transaction as a whole shall be submitted for approval to the stockholders of the Company, with a non-waivable condition requiring the affirmative vote of a majority of the outstanding shares having voting power held by stockholders unaffiliated with the Investor that are present or represented by proxy at a duly called meeting of stockholders at which a quorum of unaffiliated stockholders is present or represented by proxy.

The Special Committee will recommend that the stockholders vote in favor of the Transaction, subject to the withdrawal and termination rights described below.

If the requisite stockholder approval is not obtained the Company shall reimburse the Investor’s reasonable expenses in an amount not to exceed $150,000.

Agreement and Proxy Statement

Existing Investor Credit Facility

Deal Protection

The Agreement will include customary deal protection provisions that include an initial solicitation period (“go-shop”) for Acquisition Proposals:

•     “Acquisition Proposal” is defined as a transaction involving at least 15% of the Company’s equity or assets.

•     Between the execution date of the Agreement and the stockholder vote, the Company (through the Special Committee) may exchange confidential information and engage in discussions and negotiations with a third party that makes an unsolicited Acquisition Proposal (or submits an Acquisition Proposal during the go-shop period) that the Special Committee determines in good faith and based on the advice of its financial advisor could reasonably be likely to lead to a transaction that is more favorable to the Company’s stockholders than the Transaction.

•     The Company (through the Special Committee) may solicit Acquisition Proposals from third parties for a period of 40 days following announcement of the Transaction (i.e., the go-shop period) and shall inform the Investor upon receipt of any Acquisition Proposal, including the identity and terms of such proposal. It is understood and agreed that the pendency of the go-shop period shall not delay the process for the proxy filing, proxy distribution and stockholder meeting (it being understood that the stockholder meeting shall not be held prior to expiration of the go-shop period).

•     The Investor will have the right to match any Acquisition Proposals.

•     The Company will not agree to pay fees or expenses of a party proposing an Acquisition Proposal in an amount greater than that offered to the Investor.

•     Prior to the stockholder vote, if (a) the Company, in compliance with its obligations in these provisions, receives a third party proposal that the Special Committee in good faith deems to be superior to the Transaction based on the advice of its financial advisor and that the Investor declines to match or (b) there is a material event (other than third party proposals) occurring or arising after the execution date of the Agreement that was not known or reasonably foreseeable to the Special Committee as of such date, the Special Committee may change its recommendation of the Transaction and/or terminate the Agreement (i) if, after consultation with its outside legal counsel, failure to change its recommendation and/or terminate the Agreement would reasonably be likely to constitute a breach of the Special Committee’s fiduciary duties and (ii) upon payment of a termination fee to the Investor equal to 3.0% of the aggregate purchase price offered by the Investor in the Transaction (the “Termination Fee”), except that in the case of a change in

recommendation and/or termination under clause (a) above involving a proposal received from a party that was solicited through the go-shop, the Termination Fee shall be 1.0% of such aggregate purchase price offered by the Investor in the Transaction.

•     The 3% Termination Fee will also be payable under the following circumstances if the Investor does not exercise matching rights with respect to the applicable transactions: (a) the Agreement is terminated following the failure to obtain the requisite stockholder approval after an Acquisition Proposal had been made, or (b) the Agreement is terminated as a result of the lapsing of the drop-dead date after an Acquisition Proposal had been made, and, in the case of both clause (a) or (b), the Company enters into a definitive agreement for an Acquisition Proposal with a third party within one year of the termination date and such transaction is consummated.

Representations and Warranties

The Agreement will contain representations and warranties of the Company (and disclosure schedules containing applicable exceptions to such representations and warranties) relating to corporate organization, authority, binding effect of the Agreement, approvals and consents, valid issuance of the shares issued to the Investor, capitalization, SEC reports, financial statements, no conflicts, absence of undisclosed liabilities, absence of changes, compliance with laws, material contracts, taxes, litigation, employee matters, information to be supplied in the proxy, takeover statutes and financial advisors, and representations and warranties of the Investor (and disclosure schedules containing applicable exceptions to such representations and warranties) relating to organization, authority, binding effect of the Agreement, approvals and consents, available funds and accredited investor status and investment intent.

The representations and warranties will survive until the earlier of two years from the closing date or the applicable statute of limitations.

Diligence

Financing Contingency

Management Employment Agreements

Closing Conditions

The Transaction shall be subject to the following conditions precedent:

•     receipt of the stockholder approval described above;

•     expiration of any applicable anti-trust waiting periods;

•     accuracy of representations and warranties in all material respects, except for representations regarding corporate organization, authority, binding effect, valid issuance of shares and capitalization, which must be accurate in all respects other than, in the case of the capitalization representation, de minimis inaccuracies;

•     compliance with covenants in all material respects;

•     no material adverse change to the Company’s business;

•     no injunctions or orders prohibiting consummation;

•     delivery of tax opinion by legal counsel to the Company that is reasonably satisfactory to the Investor to the effect that the Transaction will not create an ownership change under Section 382(g) and the Company will not become a “Personal Holding Company”;

•     Board of directors de-staggered through an amendment to the Company’s charter approved at the stockholder meeting called for voting on the Transaction;

•     Composition of the board of directors consisting of the CEO and [six] individuals designated by Carlson (two of whom will meet the independence requirements specified below);

•     receipt of material third party consents; and

•     Management Employment Agreements, voting agreement amendment (as described below) and registration rights agreement (as described below) in full force and effect.

Costs and Expenses

Use of Proceeds

Minority Protections

The Agreement shall contain additional provisions applicable for the period following consummation of the Transaction and until the earlier of (a) such time as the Investor beneficially owns less than 40% of the then total outstanding shares of voting securities of the Company or (b) five years after the closing date:

•     The Investor shall not (i) acquire shares of common stock of the Company that cause the Investor’s percentage ownership of the Company to increase by 5% or more (and subject in any event to limitations relating to retaining the benefits of the Company’s NOLs), (ii) cause the Company to engage in stock buybacks or (iii) otherwise engage in a Rule 13e-3 transaction (under the Securities Exchange Act of 1934), unless in each case the Investor first offers to purchase all remaining shares held by stockholders who are not affiliated with the Investor (an “Additional Purchase Transaction”).

•     If the Investor proposes or causes the Company to propose an Additional Purchase Transaction, such transaction (i) shall be subject to review, evaluation and negotiation by a special committee of directors who are unaffiliated with either the Company or the Investor, and no such Additional Purchase Transaction shall be approved or consummated by the Company or the Investor without the prior approval of such special committee, and (ii) shall be submitted for approval to the stockholders of the Company, with a non-waivable condition that a majority of the shares held by stockholders that are not affiliated with the Investor approve the transaction.

•     If the Investor proposes to sell shares of common stock of the Company to a third party investor that would result in the third party investor owning in excess of 40% (and with neither the Investor and its affiliates nor any other holder or its affiliates owning a greater percentage) of the outstanding shares of the Company, then the Investor shall ensure that stockholders that are not affiliated with the Investor are permitted to sell a proportionate number of their shares on the same terms as the Investor sells its shares.

•     The Company shall maintain at least two (2) directors who are unaffiliated with either the Company or the Investor.

Investor Approval Rights

Other

The Company will grant a waiver under the Company’s existing NOL rights plan to permit entry into the Agreement and consummation of the Share Issuance.

The Company will take such steps as are necessary to cause the provisions of Section 203(a) of the Delaware General Corporation Statute to be inapplicable to entry into the Agreement and consummation of the Share Issuance.

The voting agreement will be amended effective as of the closing of the Transaction to eliminate the section therein entitled “Section 2. Agreement to Vote” and to make other relevant conforming changes.

The Investor will receive customary demand and piggyback resale registration rights.