Execution
      Copy

     

    COMMON
      STOCK PURCHASE AGREEMENT

     

    by
      and between

     

    KINGSBRIDGE
      CAPITAL LIMITED

     

    and

     

    DISCOVERY
      LABORATORIES, INC. 

     

    dated
      as of May 22, 2008

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

      
        	
                ARTICLE
                  I

              	
                DEFINITIONS

              	
                1

              
	 	 	 
	
                ARTICLE
                  II

              	
                PURCHASE
                  AND SALE OF COMMON STOCK

              	
                5

              
	
                Section
                  2.1

              	
                Purchase
                  and Sale of Stock

              	
                5

              
	
                Section
                  2.2

              	
                Closing

              	
                5

              
	
                Section
                  2.3

              	
                Registration
                  Statement and Prospectus

              	
                6

              
	
                Section
                  2.4

              	
                Warrant

              	
                6

              
	
                Section
                  2.5

              	
                Blackout
                  Shares

              	
                6

              
	 	 	 
	
                ARTICLE
                  III

              	
                DRAW
                  DOWN TERMS

              	
                6

              
	
                Section
                  3.1

              	
                Draw
                  Down Notice

              	
                6

              
	
                Section
                  3.2

              	
                Number
                  of Shares

              	
                6

              
	
                Section
                  3.3

              	
                Limitation
                  on Draw Downs

              	
                6

              
	
                Section
                  3.4

              	
                Trading
                  Cushion

              	
                6

              
	
                Section
                  3.5

              	
                Settlement

              	
                7

              
	
                Section
                  3.6

              	
                Delivery
                  of Shares; Payment of Draw Down Amount

              	
                7

              
	
                Section
                  3.7

              	
                Failure
                  to Deliver Shares

              	
                7

              
	 	 	 
	
                ARTICLE
                  IV

              	
                REPRESENTATIONS
                  AND WARRANTIES OF THE COMPANY

              	
                8

              
	
                Section
                  4.1

              	
                Organization,
                  Good Standing and Power

              	
                8

              
	
                Section
                  4.2

              	
                Authorization;
                  Enforcement

              	
                8

              
	
                Section
                  4.3

              	
                Capitalization

              	
                8

              
	
                Section
                  4.4

              	
                Issuance
                  of Shares

              	
                9

              
	
                Section
                  4.5

              	
                No
                  Conflicts

              	
                
                  9

                

              
	
                Section
                  4.6

              	
                Commission
                  Documents, Financial Statements

              	
                
                  9

                

              
	
                Section
                  4.7

              	
                No
                  Material Adverse Change

              	
                10

              
	
                Section
                  4.8

              	
                No
                  Undisclosed Liabilities

              	
                10

              
	
                Section
                  4.9

              	
                No
                  Undisclosed Events or Circumstances

              	
                10

              
	
                Section
                  4.10

              	
                Actions
                  Pending

              	
                10

              
	
                Section
                  4.11

              	
                Compliance
                  with Law

              	
                10

              
	
                Section
                  4.12

              	
                Certain
                  Fees

              	
                11

              
	
                Section
                  4.13

              	
                Disclosure

              	
                11

              
	
                Section
                  4.14

              	
                Material
                  Non-Public Information

              	
                11

              
	
                Section
                  4.15

              	
                Exemption
                  from Registration; Valid Issuances

              	
                11

              
	
                Section
                  4.16

              	
                No
                  General Solicitation or Advertising in Regard to this
                  Transaction

              	
                11

              
	
                Section
                  4.17

              	
                No
                  Integrated Offering

              	
                11

              
	
                Section
                  4.18

              	
                Acknowledgment
                  Regarding Investor’s Purchase of Shares

              	
                12

              
	 	 	 
	
                ARTICLE
                  V

              	
                REPRESENTATIONS,
                  WARRANTIES AND COVENANTS OF THE INVESTOR

              	
                12

              
	
                Section
                  5.1

              	
                Organization
                  and Standing of the Investor

              	
                12

              


      

       

      
        
          
          

        

        
          -
            i
            -

          
            

          

        

        
          
          

        

      

       

      
        	
                Section
                  5.2

              	
                Authorization
                  and Power

              	
                12

              
	
                Section
                  5.3

              	
                No
                  Conflicts

              	
                12

              
	
                Section
                  5.4

              	
                Financial
                  Capability

              	
                13

              
	
                Section
                  5.5

              	
                Information

              	
                13

              
	
                Section
                  5.6

              	
                Trading
                  Restrictions

              	
                13

              
	
                Section
                  5.7

              	
                Statutory
                  Underwriter Status

              	
                13

              
	
                Section
                  5.8

              	
                Not
                  an Affiliate

              	
                13

              
	
                Section
                  5.9

              	
                Manner
                  of Sale

              	
                14

              
	
                Section
                  5.10

              	
                Prospectus
                  Delivery

              	
                14

              
	 	 	 
	
                ARTICLE
                  VI

              	
                COVENANTS
                  OF THE COMPANY

              	
                14

              
	
                Section
                  6.1

              	
                Securities

              	
                14

              
	
                Section
                  6.2

              	
                Reservation
                  of Common Stock

              	
                14

              
	
                Section
                  6.3

              	
                Registration
                  and Listing

              	
                14

              
	
                Section
                  6.4

              	
                Registration
                  Statement

              	
                15

              
	
                Section
                  6.5

              	
                Compliance
                  with Laws.

              	
                15

              
	
                Section
                  6.6

              	
                Other
                  Financing

              	
                15

              
	
                Section
                  6.7

              	
                Prohibited
                  Transactions

              	
                16

              
	
                Section
                  6.8

              	
                Corporate
                  Existence

              	
                16

              
	
                Section
                  6.9

              	
                Non-Disclosure
                  of Non-Public Information

              	
                16

              
	
                Section
                  6.10

              	
                Notice
                  of Certain Events Affecting Registration; Suspension of Right to
                  Request a
                  Draw Down

              	
                16

              
	
                Section
                  6.11

              	
                Amendments
                  to the Registration Statement

              	
                16

              
	
                Section
                  6.12

              	
                Prospectus
                  Delivery

              	
                16

              
	 	 	 
	
                ARTICLE
                  VII

              	
                CONDITIONS
                  TO THE OBLIGATION OF THE INVESTOR TO ACCEPT A DRAW DOWN

              	
                17

              
	
                Section
                  7.1

              	
                Accuracy
                  of the Company’s Representations and Warranties

              	
                
                  17

                

              
	
                Section
                  7.2

              	
                Performance
                  by the Company

              	
                
                  17

                

              
	
                Section
                  7.3

              	
                Compliance
                  with Law

              	
                
                  17

                

              
	
                Section
                  7.4

              	
                Effective
                  Registration Statement

              	
                
                  17

                

              
	
                Section
                  7.5

              	
                No
                  Knowledge

              	
                18

              
	
                Section
                  7.6

              	
                No
                  Suspension

              	
                
                  18

                

              
	
                Section
                  7.7

              	
                No
                  Injunction

              	
                
                  18

                

              
	
                Section
                  7.8

              	
                No
                  Proceedings or Litigation

              	
                
                  18

                

              
	
                Section
                  7.9

              	
                Sufficient
                  Shares Registered for Resale

              	
                
                  18

                

              
	
                Section
                  7.10

              	
                Warrant

              	
                
                  18

                

              
	
                Section
                  7.11

              	
                Opinion
                  of Counsel

              	
                
                  18

                

              
	
                Section
                  7.12

              	
                Accuracy
                  of Investor’s Representation and Warranties

              	
                
                  18

                

              
	 	 	 
	
                ARTICLE
                  VIII

              	
                TERMINATION

              	
                19

              
	
                Section
                  8.1

              	
                Term

              	
                
                  19

                

              
	
                Section
                  8.2

              	
                Other
                       Termination

              	
                
                  19

                

              
	
                Section
                  8.3

              	
                Effect
                  of Termination

              	
                
                  19

                

              
	 	 	 
	
                ARTICLE
                  IX

              	
                INDEMNIFICATION

              	
                20

              
	
                Section
                  9.1

              	
                Indemnification

              	
                20

              


      

       

      
        
          
          

        

        
          - ii -

          
            

          

        

        
          
          

        

      

       

       

      
        	
                Section
                  9.2

              	
                Notification
                  of Claims for Indemnification

              	
                21

              
	 	 	 
	
                ARTICLE
                  X

              	
                MISCELLANEOUS

              	
                22

              
	
                Section
                  10.1

              	
                Fees
                  and Expenses

              	
                
                  22

                

              
	
                Section
                  10.2

              	
                Reporting
                  Entity for the Common Stock

              	
                
                  22

                

              
	
                Section
                  10.3

              	
                Brokerage

              	
                
                  22

                

              
	
                Section
                  10.4

              	
                Notices

              	
                
                  22

                

              
	
                Section
                  10.5

              	
                Assignment

              	
                24

              
	
                Section
                  10.6

              	
                Amendment;
                  No Waiver

              	
                
                  24

                

              
	
                Section
                  10.7

              	
                Entire
                  Agreement

              	
                
                  24

                

              
	
                Section
                  10.8

              	
                Severability

              	
                
                  24

                

              
	
                Section
                  10.9

              	
                Title
                  and Subtitles

              	
                25

              
	
                Section
                  10.10

              	
                Counterparts

              	
                
                  25

                

              
	
                Section
                  10.11

              	
                Choice
                  of Law

              	
                
                  25

                

              
	
                Section
                  10.12

              	
                Specific
                  Enforcement, Consent to Jurisdiction.

              	
                
                  25

                

              
	
                Section
                  10.13

              	
                Survival

              	
                
                  25

                

              
	
                Section
                  10.14

              	
                Publicity

              	
                
                  25

                

              
	
                Section
                  10.15

              	
                Further
                  Assurances

              	
                
                  25

                

              


      

    

    


    
      
        
        

      

      
        - iii -

        
          

        

      

      
        
        

      

       

    

    This
      COMMON STOCK PURCHASE AGREEMENT (this “Agreement”)
      is
      entered into as of the 22d day of May, 2008, by and between Kingsbridge Capital
      Limited, an entity organized and existing under the laws of the British Virgin
      Islands, whose registered address is Palm Grove House, 2nd Floor, Road Town,
      Tortola, British Virgin Islands (the “Investor”),
      and
      Discovery Laboratories, Inc., a corporation organized and existing under the
      laws of the State of Delaware (the “Company”).
      

     

    WHEREAS,
      the parties desire that, upon the terms and subject to the conditions and
      limitations set forth herein, the Company may issue and sell to the Investor,
      from time to time as provided herein, and the Investor shall purchase from
      the
      Company, up to $60 million worth of shares of Common Stock (as defined below);
      and

     

    WHEREAS,
      such investments will be made in reliance upon the provisions of
      Section 4(2) (“Section 4(2)”)
      and
      Regulation D (“Regulation D”)
      of the
      United States Securities Act of 1933, as amended and the rules and regulations
      promulgated thereunder (the “Securities
      Act”),
      and/or upon such other exemption from the registration requirements of the
      Securities Act as may be available with respect to any or all of the investments
      in Common Stock to be made hereunder; and

     

    WHEREAS,
      the parties hereto are concurrently entering into a Registration Rights
      Agreement in the form of Exhibit A
      hereto
      (the “Registration
      Rights Agreement”)
      pursuant to which the Company shall register the Common Stock issued and sold
      to
      the Investor under this Agreement and issuable under the Warrant (as defined
      below), upon the terms and subject to the conditions set forth therein;
      and

     

    WHEREAS,
      in consideration for the Investor’s execution and delivery of, and its
      performance of its obligations under, this Agreement, the Company is
      concurrently issuing to the Investor a Warrant in the form of Exhibit B
      hereto
      (the “Warrant”)
      pursuant to which the Investor may purchase from the Company up to 825,000
      shares of Common Stock, upon the terms and subject to the conditions set forth
      therein;

     

    NOW,
      THEREFORE, the parties hereto agree as follows:

     

    ARTICLE
      I

    DEFINITIONS

     

    As
      used
      in this Agreement, the following terms shall have the meanings set forth
      below:

     

    “Blackout
      Amount”
shall
      have the meaning assigned to such term in the Registration Rights
      Agreement. 

     

    “Blackout
      Shares”
shall
      have the meaning assigned to such term in the Registration Rights
      Agreement. 

     

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

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    “Closing
      Date”
shall
      have the meaning assigned to such term in Section 2.2 hereof.

     

    “Closing
      Price”
as
      of
      any particular day shall mean the closing price per share of the Common Stock
      as
      reported by Bloomberg L.P. on such day. 

     

    “Commission”
means
      the United States Securities and Exchange Commission. 

     

    “Commission
      Documents”
shall
      have the meaning assigned to such term in Section 4.6 hereof. 

     

    “Commitment
      Period”
means
      the period commencing on the Effective Date and expiring on the earliest to
      occur of (i) the date on which the Investor shall have purchased Shares
      pursuant to this Agreement for an aggregate purchase price equal to the Maximum
      Commitment Amount, (ii) the date this Agreement is terminated pursuant to
      Article VIII hereof, and (iii) the date occurring thirty-six (36) months
      from the Effective Date. 

     

    “Common
      Stock”
means
      the common stock of the Company, par value $0.001 per share. 

     

    “Condition
      Satisfaction Date”
shall
      have the meaning assigned to such term in Article VII hereof. 

     

    “Convertible
      Security”
shall
      have the meaning assigned to such term in Section 6.07 hereof

     

    “Damages”
means
      any loss, claim, damage, liability, costs and expenses (including, without
      limitation, reasonable attorneys’ fees and expenses and costs and reasonable
      expenses of expert witnesses and investigation). 

     

    “Draw
      Down”
shall
      have the meaning assigned to such term in Section 3.1 hereof. 

     

    “Draw
      Down Amount”
means
      the actual dollar amount of a Draw Down paid to the Company. 

     

    “Draw
      Down Discount Price”
means
      (i) 88% of the VWAP on any Trading Day during a Draw Down Pricing Period
      when the VWAP equals or exceeds $1.15 but is less than or equal to $1.75,
      (ii) 90% of the VWAP on any Trading Day during the Draw Down Pricing Period
      when VWAP exceeds $1.75 but is less than or equal to $3.85, (iii) 92% of the
      VWAP on any Trading Day during the Draw Down Pricing Period when VWAP exceeds
      $3.85 but is less than or equal to $7.25 or (iv) 94% of the VWAP on any Trading
      Day during the Draw Down Pricing Period when VWAP exceeds $7.25.

     

    “Draw
      Down Notice”
shall
      have the meaning assigned to such term in Section 3.1 hereof. 

     

    “Draw
      Down Pricing Period”
shall
      mean, with respect to each Draw Down, a period of eight (8) consecutive Trading
      Days beginning on the first Trading Day specified in a Draw Down
      Notice. 

     

    “DTC”
shall
      mean the Depository Trust Company, or any successor thereto. 

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

       

    

    “Effective
      Date”
means
      the first Trading Day immediately following the date on which the Registration
      Statement is declared effective by the Commission. 

     

    “Exchange
      Act”
means
      the United States Securities Exchange Act of 1934, as amended, and the rules
      and
      regulations promulgated thereunder. 

     

    “Excluded
      Merger or Sale”
shall
      have the meaning assigned to such term in the Warrant. 

     

    “FINRA”
means
      the Financial Industry
      Regulatory Authority. 

     

    “Knowledge”
means
      the actual knowledge of those officers of the Company required to file
      statements pursuant to Section 16 of the Exchange Act.

     

    “LIBOR” means
      the
      offered rate for twelve-month U.S. dollar deposits that appears on Moneyline
      Telerate Page 3750 (or such other page as may replace such Moneyline Telerate
      Page 3750 for the purpose of displaying comparable rates), as of 11:00 a.m.
      (London time) two (2) business days prior to the beginning of the relevant
      period.

     

    “Make
      Whole Amount”
shall
      have the meaning specified in Section 3.7. 

     

    “Market
      Capitalization”
means,
      as of any Trading Day, the product of (i) the closing sale price of the
      Company’s Common Stock as reported by Bloomberg L.P. using the AQR function and
      (ii) the number of outstanding shares of Common Stock of the Company as
      reported by Bloomberg L.P. using the DES function. 

     

    “Material
      Adverse Effect”
means
      any effect that is not negated, corrected, cured or otherwise remedied within
      a
      reasonable period of time on the business, operations, properties or financial
      condition of the Company and its consolidated subsidiaries that is material
      and
      adverse to the Company and such subsidiaries, taken as a whole, and/or any
      condition, circumstance, or situation that would prohibit or otherwise interfere
      with the ability of the Company to perform any of its obligations under this
      Agreement, the Registration Rights Agreement or the Warrant in any material
      respect; provided, however, that none of the following shall constitute a
“Material
      Adverse Effect”:
      (i)
      the effects of conditions or events that are generally applicable to the
      capital, financial, banking or currency markets or the biotechnology or
      pharmaceutical industries; (ii) the effects of conditions or events that are
      reasonably expected to occur in the Company’s ordinary course of business (such
      as, by way of example only, failed clinical trials, serious adverse events
      involving the Company’s product candidates or products, delays in product
      development or commercial launch, unfavorable regulatory determinations,
      difficulties in generating product sales or involving collaborators or
      intellectual property disputes), except for purposes of Section 4.9 herein;
      (iii) any changes or effects resulting from the announcement or consummation
      of
      the transactions contemplated by this Agreement, including, without limitation,
      any changes or effects associated with any particular Draw Down, and (iv)
      changes in the market price of the Common Stock. 

     

    “Maximum
      Commitment Amount”
means
      the lesser of (i) $60 million in aggregate Draw Down Amounts or (ii)
      19,328,000 shares of Common Stock (as adjusted for stock splits, stock
      combinations, stock dividends and recapitalizations that occur on or after
      the
      date of this Agreement) minus the number of Blackout Shares, if any, delivered
      to the Investor under the Registration Rights Agreement; provided, however,
      that
      the Maximum Commitment Amount shall not exceed that number of shares of Common
      Stock that the Company may issue pursuant to this Agreement and the transactions
      contemplated hereby without breaching the Company’s obligations under the rules
      and regulations of the Principal Market.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

       

    

    “Maximum
      Draw Down Amount”
      means
      the
      lesser of $10 million and 3.0% of the Company’s Market Capitalization at the
      time of the Draw Down.

     

    “Permitted
      Transaction”
shall
      have the meaning assigned to such term in Section 6.6 hereof. 

     

    “Person”
means
      any individual, corporation, partnership, limited liability company,
      association, trust or other entity or organization, including any government
      or
      political subdivision or an agency or instrumentality thereof. 

     

    “Principal
      Market”
means
      the NASDAQ
      Capital Market,
      the
      NASDAQ Global Select Market, the NASDAQ Global Market, the American Stock
      Exchange or the New York Stock Exchange, whichever is at the time the principal
      trading exchange or market for the Common Stock. 

     

    “Prohibited
      Transaction”
shall
      have the meaning assigned to such term in Section 6.7 hereof. 

     

    “Prospectus”
as
      used
      in this Agreement means the prospectus in the form included in the Registration
      Statement, as supplemented from time to time pursuant to Rule 424(b) of the
      Securities Act (including, without limitation, any information that may have
      been omitted from such prospectus pursuant to Rules 430(a), 430(b) and 430(c)
      of
      the Securities Act).

     

    “Registrable
      Securities”
means
      (i) the Shares, (ii) the Warrant Shares, and (iii) any securities
      issued or issuable with respect to any of the foregoing by way of exchange,
      stock dividend or stock split or in connection with a combination of shares,
      recapitalization, merger, consolidation or other reorganization or otherwise.
      As
      to any particular Registrable Securities, once issued such securities shall
      cease to be Registrable Securities when (w) the Registration Statement has
      been
      declared effective by the Commission and such Registrable Securities have been
      disposed of pursuant to the Registration Statement, (x) such Registrable
      Securities have been sold under circumstances under which all of the applicable
      conditions of Rule 144 (or any similar provision then in force) under the
      Securities Act (“Rule 144”)
      are
      met, (y) such time as such Registrable Securities have been otherwise
      transferred to holders who may trade such shares without restriction under
      the
      Securities Act, and the Company has delivered a new certificate or other
      evidence of ownership for such securities not bearing a restrictive legend
      or
      (z) in the opinion of counsel to the Company such Registrable Securities may
      be
      sold without registration and without any time, volume or manner limitations
      pursuant to Rule 144 (or any similar provision then in effect) under the
      Securities Act. 

     

    “Registration
      Rights Agreement”
shall
      have the meaning set forth in the recitals of this Agreement. 

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

       

    

    “Registration
      Statement”
shall
      have the meaning assigned to such term in the Registration Rights
      Agreement. 

     

    “Regulation D”
shall
      have the meaning set forth in the recitals of this Agreement. “Section 4(2)”
shall
      have the meaning set forth in the recitals of this Agreement. 

     

    “Securities
      Act”
shall
      have the meaning set forth in the recitals of this Agreement. 

     

    “Settlement
      Date”
shall
      have the meaning assigned to such term in Section 3.5 hereof. 

     

    “Shares”
means
      the shares of Common Stock of the Company that are and/or may be purchased
      hereunder. 

     

    “Trading
      Day”
means
      any day other than a Saturday or a Sunday on which the Principal Market is
      open
      for trading in equity securities. 

     

    “VWAP”
means
      the volume weighted average price (the aggregate sales price of all trades
      of
      Common Stock during each Trading Day divided by the total number of shares
      of
      Common Stock traded during such Trading Day) of the Common Stock during any
      Trading Day as reported by Bloomberg, L.P. using the AQR function. 

     

    “Warrant”
shall
      have the meaning set forth in the recitals of this Agreement. 

     

    “Warrant
      Shares”
means
      the shares of Common Stock issuable to the Investor upon exercise of the
      Warrant. 

     

    ARTICLE
      II

    PURCHASE
      AND SALE OF COMMON STOCK

     

    Section
      2.1 Purchase
      and Sale of Stock.
      Upon
      the terms and subject to the conditions set forth in this Agreement, the Company
      shall to the extent it elects to make Draw Downs in accordance with Article
      III
      hereof, issue and sell to the Investor and the Investor shall purchase Common
      Stock from the Company for an aggregate (in Draw Down Amounts) of up to the
      Maximum Commitment Amount, consisting of purchases based on Draw Downs in
      accordance with Article III hereof. 

     

    Section
      2.2 Closing.
      In
      consideration of and in express reliance upon the representations, warranties,
      covenants, terms and conditions of this Agreement, the Company agrees to issue
      and sell to the Investor, and the Investor agrees to purchase from the Company,
      that number of the Shares to be issued in connection with each Draw Down. The
      execution and delivery of this Agreement (the “Closing”)
      shall
      take place at the offices of Stroock & Stroock & Lavan LLP, 180 Maiden
      Lane, New York, NY 10038 at 5:00 p.m. local time on May 22, 2008, or at such
      other time and place or on such date as the Investor and the Company may agree
      upon (the “Closing
      Date”).
      Each
      party shall deliver at or prior to the Closing all documents, instruments and
      writings required to be delivered at the Closing by such party pursuant to
      this
      Agreement. 

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

       

    

    Section
      2.3 Registration
      Statement and Prospectus.
      The
      Company shall prepare and file with the Commission the Registration Statement
      (including the Prospectus) in accordance with the provisions of the Securities
      Act and the Registration Rights Agreement.

     

    Section
      2.4 Warrant.
      On the
      Closing Date, the Company shall issue and deliver the Warrant to the
      Investor. 

     

    Section
      2.5 Blackout
      Shares.
      The
      Company shall deliver any Blackout Amount or issue and deliver any Blackout
      Shares to the Investor in accordance with Section 1.1(e) of the
      Registration Rights Agreement. 

     

    ARTICLE
      III

    DRAW
      DOWN TERMS

     

    Subject
      to the satisfaction of the conditions hereinafter set forth in this Agreement,
      the parties agree as follows:

     

    Section
      3.1 Draw
      Down Notice.
      During
      the Commitment Period, the Company may, in its sole discretion, issue a Draw
      Down Notice (as hereinafter defined) which shall specify the dollar amount
      of
      Shares the Company elects to sell to the Investor (each such election, a
“Draw
      Down”)
      up to
      a Draw Down Amount equal to the Maximum Draw Down Amount, which Draw Down the
      Investor shall be obligated to accept. The Company shall inform the Investor
      in
      writing by sending a duly completed Draw Down Notice (as hereinafter defined)
      in
      the form of Exhibit
      C
      hereto
      by e-mail to the addresses set forth in Section 10.4, with a copy to the
      Investor’s counsel, as to such Draw Down Amount before commencement of trading
      on the first Trading Day of the related Draw Down Pricing Period (the
“Draw
      Down Notice”).
      In
      addition to the Draw Down Amount, each Draw Down Notice shall designate the
      first Trading Day of the Draw Down Pricing Period. In no event shall any Draw
      Down Amount exceed the Maximum Draw Down Amount. Each Draw Down Notice shall
      be
      accompanied by a certificate, signed by the Chief Executive Officer, Chief
      Financial Officer or Executive Vice President and General Counsel, dated as
      of
      the date of such Draw Down Notice, in the form of Exhibit D
      hereof. 

     

    Section
      3.2 Number
      of Shares.
      Subject
      to Section 3.6(b), the number of Shares to be issued in connection with
      each Draw Down shall be equal to the sum of the number of shares issuable on
      each Trading Day of the Draw Down Pricing Period. Subject to
      Section 3.6(b), the number of shares issuable on a Trading Day during a
      Draw Down Pricing Period shall be equal to the quotient of one eighth (1/8th)
      of
      the Draw Down Amount divided by the Draw Down Discount Price for such Trading
      Day. 

     

    Section
      3.3 Limitation
      on Draw Downs.
      Only
      one Draw Down shall be permitted for each Draw Down Pricing Period. 

     

    Section
      3.4 Trading
      Cushion.
      Unless
      the parties agree in writing otherwise, there shall be a minimum of three (3)
      Trading Days between the expiration of any Draw Down Pricing Period and the
      beginning of the next succeeding Draw Down Pricing Period. 

     

    
      
        
        

      

      
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    Section
      3.5 Settlement.
      Subject
      to Section 3.6(b), the number of Shares purchased by the Investor in any Draw
      Down shall be determined and settled on two separate dates. Shares purchased
      by
      the Investor during the first four Trading Days of any Draw Down Pricing Period
      shall be determined and settled no later than the sixth Trading Day of such
      Draw
      Down Pricing Period. Shares purchased by the Investor during the second four
      Trading Days of any Draw Down Pricing Period shall be determined and settled
      no
      later than the second Trading Day after the last Trading Day of such Draw Down
      Pricing Period. Each date on which settlement of the purchase and sale of Shares
      occurs hereunder being referred to as a “Settlement
      Date.”
The
      Investor shall provide the Company with delivery instructions for the Shares
      to
      be issued at each Settlement Date at least two Trading Days in advance of such
      Settlement Date. The number of Shares actually issued shall be rounded to the
      nearest whole number of Shares. 

     

    Section
      3.6 Delivery
      of Shares; Payment of Draw Down Amount. 

     

    (a) On
      each
      Settlement Date, the Company shall deliver the Shares purchased by the Investor
      to the Investor or its designees exclusively via book-entry through the DTC
      to
      an account designated by the Investor, and upon receipt of the Shares, the
      Investor shall cause payment thereof to be made to the Company’s designated
      account by wire transfer of immediately available funds, if the Shares are
      received by the Investor no later than 1:00 p.m. (Eastern Time), or next day
      available funds, if the Shares are received thereafter. Upon the written request
      of the Company, the Investor will cause its banker to confirm to the Company
      that the Investor has provided irrevocable instructions to cause payment for
      the
      Shares to be made as set forth above, upon confirmation by such banker that
      the
      Shares have been delivered through the DTC in unrestricted form.

     

    (b) For
      each
      Trading Day during a Draw Down Pricing Period on which the VWAP is less than
      the
      greater of (i) 90% of the Closing Price of the Company’s Common Stock on
      the Trading Day immediately preceding the commencement of such Draw Down Pricing
      Period, or (ii) $1.15, such Trading Day shall not be used in calculating
      the number of Shares to be issued in connection with such Draw Down, and the
      Draw Down Amount in respect of such Draw Down Pricing Period shall be reduced
      by
      one eighth (1/8th) of the initial Draw Down Amount specified in the Draw Down
      Notice. If trading in the Company’s Common Stock is suspended for any reason for
      more than three (3) consecutive or non-consecutive hours during any Trading
      Day
      during a Draw Down Pricing Period, such Trading Day shall not be used in
      calculating the number of Shares to be issued in connection with such Draw
      Down,
      and the Draw Down Amount in respect of such Draw Down Pricing Period shall
      be
      reduced by one eighth (1/8th) of the initial Draw Down Amount specified in
      the
      Draw Down Notice. 

     

    Section
      3.7 Failure
      to Deliver Shares.
      If on
      any Settlement Date, the Company fails to take all actions within the reasonable
      control of the Company to cause the delivery of the Shares purchased by the
      Investor, and such failure is not cured within two (2) Trading Days following
      such Settlement Date, the Company shall pay to the Investor on demand in cash
      by
      wire transfer of immediately available funds to an account designated by the
      Investor the “Make
      Whole Amount;”
      provided, however, that in the event that the Company is prevented from
      delivering Shares in respect of any such Settlement Date in a timely manner
      by
      any fact or circumstance that is not reasonably within the control of, or
      directly attributable to, the Company, or is otherwise reasonably within the
      control of, or directly attributable to, the Investor, then such two (2) Trading
      Day period shall be automatically extended until such time as such fact or
      circumstance is cured. As used herein, the Make Whole Amount shall be an amount
      equal to the sum of (i) the Draw Down Amount actually paid by the Investor
      in respect of such Shares plus (ii) an amount equal to the actual loss
      suffered by the Investor in respect of sales to subsequent purchasers, pursuant
      to transactions entered into before the Settlement Date, of the Shares that
      were
      required to be delivered by the Company, which shall be based upon documentation
      reasonably satisfactory to the Company demonstrating the difference (if greater
      than zero) between (A) the price per share paid by the Investor to purchase
      such number of shares of Common Stock necessary for the Investor to meet its
      share delivery obligations to such subsequent purchasers minus (B) the
      average Draw Down Discount Price during the applicable Draw Down Pricing
      Period
      in
      respect of such Settlement Date.
      In the
      event that the Make Whole Amount is not paid within two (2) Trading Days
      following a demand therefor from the Investor, the Make Whole Amount shall
      accrue interest compounded daily at a rate of
      LIBOR
      plus 300 basis points, per annum up to and including the date on which the
      Make
      Whole Amount is actually paid. For
      the
      purposes of this Section 3.7 facts or circumstances that are reasonably within
      the control of the Company include such facts and circumstances directly
      attributable to acts or omissions of the Company, its officers, directors,
      employees, agents and representatives, including, without limitation, any
      transfer agent(s), accountant(s) and/or attorney(s) engaged by the Company
      in
      connection with the Company’s performance of its obligations hereunder.
      Notwithstanding anything to the contrary set forth in this Agreement, in the
      event that the Company pays the Make Whole Amount (plus interest, if applicable)
      in respect of any Settlement Date in accordance with this Section 3.7, such
      payment shall be the Investor’s sole remedy in respect of the Company’s failure
      to deliver Shares in respect of such Settlement Date, and the Company shall
      not
      be obligated to deliver such Shares.  

     

    
      
        
        

      

      
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    ARTICLE
      IV

    REPRESENTATIONS
      AND
      WARRANTIES OF THE COMPANY

     

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

     

    Section
      4.1 Organization,
      Good Standing and Power.
      The
      Company is a corporation duly organized, validly existing and in good standing
      under the laws of the State of Delaware and has all requisite corporate power
      and authority to own, lease and operate its properties and assets and to carry
      on its business as now being conducted. Except as set forth in the Commission
      Documents (as defined below), as of the date hereof, the Company does not own
      more than fifty percent (50%) of the outstanding capital stock of or control
      any
      other business entity, other than any wholly-owned subsidiary that is not
“significant”
within
      the meaning of Regulation S-X promulgated by the Commission. The Company is
      duly qualified as a foreign corporation to do business and is in good standing
      in every jurisdiction in which the nature of the business conducted or property
      owned by it makes such qualification necessary, other than those in which the
      failure to be so qualified or be in good standing would not have a Material
      Adverse Effect. 

     

    Section
      4.2 Authorization;
      Enforcement.
      (i) The Company has the requisite corporate power and authority to enter
      into and perform its obligations under this Agreement, the Registration Rights
      Agreement and the Warrant and to issue the Shares, the Warrant, the Warrant
      Shares and any Blackout Shares (except to the extent that the number of Blackout
      Shares required to be issued exceeds the number of authorized shares of Common
      Stock under the Charter); (ii) the execution and delivery of this Agreement
      and the Registration Rights Agreement, and the execution, issuance and delivery
      of the Warrant, by the Company and the consummation by it of the transactions
      contemplated hereby and thereby have been duly and validly authorized by all
      necessary corporate action and no further consent or authorization of the
      Company or its Board of Directors or stockholders is required (other than as
      contemplated by Section 6.5); and (iii) each of this Agreement and the
      Registration Rights Agreement has been duly executed and delivered, and the
      Warrant has been duly executed, issued and delivered, by the Company and
      constitutes a valid and binding obligation of the Company enforceable against
      the Company in accordance with its terms, except as such enforceability may
      be
      limited by applicable bankruptcy, securities, insolvency, or similar laws
      relating to, or affecting generally the enforcement of, creditors’ rights and
      remedies or indemnification or by other equitable principles of general
      application. 

     

    Section
      4.3 Capitalization.
      The
      authorized capital stock of the Company and the shares thereof issued and
      outstanding as of December 31, 2007 are set forth in a Commission Document.
      All
      of the outstanding shares of the Common Stock have been duly and validly
      authorized and issued, and are fully paid and non-assessable. Except as set
      forth in this Agreement, as described in the Commission Documents or as
      disclosed on a schedule (the “Disclosure
      Schedule”)
      previously delivered to the Investor, as of December 31, 2007, no shares of
      Common Stock were entitled to preemptive rights or registration rights and
      there
      were no outstanding options, warrants, scrip, rights issued by the Company
      to
      subscribe to, call or commitments of any character whatsoever issued by the
      Company relating to, or securities or rights convertible into or exchangeable
      for or giving any right to subscribe for, any shares of capital stock of the
      Company, except for stock options and restricted stock units issued by the
      Company to its employees, directors and consultants. Except as set forth in
      this
      Agreement, the Commission Documents, or as previously disclosed to the Investor
      in the Disclosure Schedule, as of December 31, 2007, there were no contracts,
      commitments, understandings, or arrangements by which the Company is or may
      become bound to issue additional shares of the capital stock of the Company
      or
      options, securities or rights convertible into or exchangeable for or giving
      any
      right to subscribe for any shares of capital stock of the Company. Except as
      described in the Commission Documents or as previously disclosed to the Investor
      in
      the
      Disclosure Schedule,
      as of
      the date hereof the Company is not a party to any agreement granting
      registration rights to any Person with respect to any of its equity or debt
      securities. Except as set forth in the Commission Documents or as previously
      disclosed to the Investor in the Disclosure Schedule, as of the date hereof
      the
      Company is not a party to, and it has no Knowledge of, any agreement restricting
      the voting or transfer of any shares of the capital stock of the Company. The
      offer and sale of all capital stock, convertible securities, rights, warrants,
      or options of the Company issued during the twenty-four month period immediately
      prior to the Closing complied in all material respects with all applicable
      federal and state securities laws, and no stockholder has a right of rescission
      or damages with respect thereto that would reasonably be expected to have a
      Material Adverse Effect. The Company has furnished or made available to the
      Investor true and correct copies of the Company’s Restated Certificate of
      Incorporation, as amended and in effect on the date hereof (the “Charter”),
      and
      the Company’s Amended and Restated Bylaws, as amended and in effect on the date
      hereof (the “Bylaws”). 

     

    
      
        
        

      

      
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    Section
      4.4 Issuance
      of Shares.
      Subject
      to Section 6.5, the Shares, the Warrant and the Warrant Shares have been,
      and any Blackout Shares will be, duly authorized by all necessary corporate
      action (except to the extent that the number of Blackout Shares required to
      be
      issued exceeds the number of authorized shares of Common Stock under the
      Charter) and, when issued and paid for in accordance with the terms of this
      Agreement, the Registration Rights Agreement and the Warrant, and subject to,
      and in reliance on, the representations, warranties and covenants made herein
      by
      the Investor, the Shares and the Warrant Shares shall be validly issued and
      outstanding, fully paid and non-assessable, and the Investor shall be entitled
      to all rights accorded to a holder of shares of Common Stock. 

     

    Section
      4.5 No
      Conflicts.
      The
      execution, delivery and performance of this Agreement, the Registration Rights
      Agreement, the Warrant and any other document or instrument contemplated hereby
      or thereby, by the Company and the consummation by the Company of the
      transactions contemplated hereby and thereby do not and shall not in any
      material respect: (i) result in the violation of any provision of the
      Charter or Bylaws, (ii) conflict with, or constitute a default (or an event
      which with notice or lapse of time or both would become a default) under, or
      give rise to any rights of termination, amendment, acceleration or cancellation
      of, any material agreement, mortgage, deed of trust, indenture, note, bond,
      license, lease agreement, instrument or obligation to which the Company is
      a
      party where such default or conflict would constitute a Material Adverse Effect,
      (iii) create or impose a lien, charge or encumbrance on any property of the
      Company under any agreement or any commitment to which the Company is a party
      or
      by which the Company is bound or by which any of its respective properties
      or
      assets are bound which would constitute a Material Adverse Effect,
      (iv) result in a violation of any federal, state, local or foreign statute,
      rule, regulation, order, writ, judgment or decree (including federal and state
      securities laws and regulations) applicable to the Company or any of its
      subsidiaries or by which any property or asset of the Company or any of its
      subsidiaries are bound where such violation would constitute a Material Adverse
      Effect, or (v) require any consent of any third-party that has not been
      obtained pursuant to any material contract to which the Company is a party
      or to
      which any of its assets, operations or management may be bound where the failure
      to obtain any such consent would constitute a Material Adverse Effect. The
      Company is not required under federal, state or local law, rule or regulation
      to
      obtain any consent, authorization or order of, or make any filing or
      registration with, any court or governmental agency in order for it to execute,
      deliver or perform any of its obligations under this Agreement, the Registration
      Rights Agreement or the Warrant, or issue and sell the Shares, the Warrant
      Shares or the Blackout Shares (except to the extent that the number of Blackout
      Shares required to be issued exceeds the number of authorized shares of Common
      Stock under the Charter) in accordance with the terms hereof and thereof (other
      than any filings that may be required to be made by the Company with the
      Commission, the FINRA, Nasdaq or state securities commissions subsequent to
      the
      Closing, and, any registration statement (including any amendment or supplement
      thereto) or any other filing or consent which may be filed pursuant to this
      Agreement, the Registration Rights Agreement or the Warrant); provided that,
      for
      purposes of the representation made in this sentence, the Company is assuming
      and relying upon the accuracy of the relevant representations and agreements
      of
      the Investor herein. 

     

    Section
      4.6 Commission
      Documents, Financial Statements.
      

     

    (a) The
      Common Stock is registered pursuant to Section 12(b) or 12(g) of the
      Exchange Act, and since June 1, 2007 the Company has timely filed all reports,
      schedules, forms, statements and other documents required to be filed by it
      with
      the Commission pursuant to the reporting requirements of the Exchange Act,
      including material filed pursuant to Section 13(a) or 15(d) of the Exchange
      Act (all of the foregoing, including filings incorporated by reference therein,
      being referred to herein as the “Commission
      Documents”).
      Except as previously disclosed to the Investor in writing, since June 1, 2007
      the Company has maintained all requirements for the continued listing or
      quotation of its Common Stock, and such Common Stock is currently listed or
      quoted on the NASDAQ Global Market. The Company has made available (including
      through the Commission’s EDGAR filing system) to the Investor true and complete
      copies of the Commission Documents filed with the Commission since June 1,
      2007
      and prior to the Closing Date. The Company has not provided to the Investor
      any
      information which, according to applicable law, rule or regulation, should
      have
      been disclosed publicly by the Company but which has not been so disclosed,
      other than with respect to the transactions contemplated by this Agreement.
      As
      of its date, the Company’s Annual Report on Form 10-K for the year ended
      December 31, 2007 complied in all material respects with the requirements
      of the Exchange Act and the rules and regulations of the Commission promulgated
      thereunder applicable to such document, and, as of its date, after giving effect
      to the information disclosed and incorporated by reference therein, to the
      Company’s Knowledge such Annual Report on Form 10-K did not contain any untrue
      statement of a material fact or omit to state a material fact required to be
      stated therein or necessary in order to make the statements therein, in light
      of
      the circumstances under which they were made, not misleading. As of their
      respective dates, to the Company’s Knowledge the financial statements, together
      with the related notes and schedules thereto, of the Company included in the
      Commission Documents filed with the Commission since June 1, 2007 complied
      as to
      form and substance in all material respects with all applicable accounting
      requirements and the published rules and regulations of the Commission or other
      applicable rules and regulations with respect thereto. Such financial
      statements, together with the related notes and schedules thereto, have been
      prepared in accordance with generally accepted accounting principles
      (“GAAP”)
      applied on a consistent basis during the periods involved (except (i) as
      may be otherwise indicated in such financial statements or the notes thereto
      or
      (ii) in the case of unaudited interim statements, to the extent they may
      not include footnotes or may be condensed or summary statements), and fairly
      present in all material respects the financial condition of the Company and
      its
      subsidiaries as of the dates thereof and the results of operations and cash
      flows for the periods then ended (subject, in the case of unaudited statements,
      to normal year-end audit adjustments).

     

    (b) The
      Company has timely filed with the Commission and made available to the Investor
      via EDGAR or otherwise all certifications and statements required by (x) Rule
      13a-14 or Rule 15d-14 under the Exchange Act or (y) 18 U.S.C. Section 1350
      (Section 906 of the Sarbanes-Oxley Act of 2002 (“SOXA”))
      with
      respect to all relevant Commission Documents. The Company is in compliance
      in
      all material respects with the provisions of SOXA applicable to it as of the
      date hereof. The Company maintains disclosure controls and procedures required
      by Rule 13a-15 or Rule 15d-15 under the Exchange Act. As used in this Section
      4.6(b), the term “file” shall be broadly construed to include any manner in
      which a document or information is furnished, supplied or otherwise made
      available to the Commission.

     

    
      
        
        

      

      
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    Section
      4.7 No
      Material Adverse Change.
      Except
      as disclosed in the Commission Documents or a press release of the Company,
      since December 31, 2007 no event or series of events has or have occurred that,
      individually or in the aggregate, have had a Material Adverse Effect on the
      Company. 

     

    Section
      4.8 No
      Undisclosed Liabilities.
      Except
      as disclosed in the Commission Documents, to the Company’s Knowledge, neither
      the Company nor any of its subsidiaries has any liabilities, obligations, claims
      or losses (whether liquidated or unliquidated, secured or unsecured, absolute,
      accrued, contingent or otherwise) that would be required to be disclosed on
      a
      balance sheet of the Company or any subsidiary (including the notes thereto)
      in
      conformity with GAAP and are not disclosed in the Commission Documents, other
      than those incurred in the ordinary course of the Company’s or its subsidiaries
      respective businesses since December 31, 2007 or which, individually or in
      the
      aggregate, do not or would not have a Material Adverse Effect on the
      Company. 

     

    Section
      4.9 No
      Undisclosed Events or Circumstances.
      To the
      Company’s Knowledge, no event or circumstance has occurred or exists with
      respect to the Company or its subsidiaries or their respective businesses,
      properties, operations or financial condition, which, under applicable law,
      rule
      or regulation, requires public disclosure or announcement by the Company but
      which has not been so publicly announced or disclosed and which, individually
      or
      in the aggregate, would have a Material Adverse Effect on the
      Company. 

     

    Section
      4.10 Actions
      Pending.
      There
      is no action, suit, claim, investigation or proceeding pending or, to the
      Knowledge of the Company, threatened against the Company or any subsidiary
      which
      questions the validity of this Agreement or the transactions contemplated hereby
      or any action taken or to be taken pursuant hereto or thereto. Except as set
      forth in the Commission Documents or in the Disclosure Schedule, there is no
      material action, suit, claim, investigation or proceeding pending or, to the
      Knowledge of the Company, threatened, against or involving the Company, any
      subsidiary or any of their respective properties or assets, or to the Knowledge
      of the Company involving any officers or directors, in their capacity as
      officers or directors, of the Company or any of its subsidiaries, including,
      without limitation, any securities class action lawsuit or stockholder
      derivative lawsuit, that could be reasonably expected to have a Material Adverse
      Effect on the Company. Except as set forth in the Commission Documents or as
      previously disclosed to the Investor in writing, no judgment, order, writ,
      injunction or decree or award has been issued by or, to the Knowledge of the
      Company, requested of any court, arbitrator or governmental agency which could
      be reasonably expected to result in a Material Adverse Effect. 

     

    Section
      4.11 Compliance
      with Law.
      The
      business of the Company and its subsidiaries has been and is presently being
      conducted in accordance with all applicable federal, state, local and foreign
      governmental laws, rules, regulations and ordinances, except as set forth in
      the
      Commission Documents or such that would not reasonably be expected to cause
      a
      Material Adverse Effect. Except as set forth in the Commission Documents, each
      of the Company and each of its subsidiaries has all franchises, permits,
      licenses, consents and other governmental or regulatory authorizations and
      approvals necessary for the conduct of its business as now being conducted
      by
      it, except for such franchises, permits, licenses, consents and other
      governmental or regulatory authorizations and approvals, the failure to possess
      which, individually or in the aggregate, could not reasonably be expected to
      have a Material Adverse Effect. 

     

    
      
        
        

      

      
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    Section
      4.12 Certain
      Fees.
      Except
      as expressly set forth in this Agreement, no brokers, finders or financial
      advisory fees or commissions will be payable by the Company or any of its
      subsidiaries in respect of the transactions contemplated by this
      Agreement. 

     

    Section
      4.13 Disclosure.
      To the
      Company’s Knowledge, neither this Agreement nor any other documents,
      certificates or instruments furnished to the Investor by or on behalf of the
      Company or any subsidiary in connection with the transactions contemplated
      by
      this Agreement contain any untrue statement of a material fact or omit to state
      a material fact necessary in order to make the statements made herein or
      therein, in the light of the circumstances under which they were made herein
      or
      therein, not misleading. 

     

    Section
      4.14 Material
      Non-Public Information.
      Except
      for this Agreement and the transactions contemplated hereby, neither the Company
      nor its employees have disclosed to the Investor, any material non-public
      information that, according to applicable law, rule or regulation, should have
      been disclosed publicly by the Company prior to the date hereof but which has
      not been so disclosed. 

     

    Section
      4.15 Exemption
      from Registration; Valid Issuances.
      Subject
      to, and in reliance on, the representations, warranties and covenants made
      herein by the Investor, the issuance and sale of the Shares, the Warrant, the
      Warrant Shares and any Blackout Shares in accordance with the terms and on
      the
      bases of the representations and warranties set forth in this Agreement, may
      and
      shall be properly issued pursuant to Section 4(2), Regulation D and/or
      any other applicable federal and state securities laws. Neither the sales of
      the
      Shares, the Warrant, the Warrant Shares or any Blackout Shares pursuant to,
      nor
      the Company’s performance of its obligations under, this Agreement, the
      Registration Rights Agreement, or the Warrant shall (i) result in the
      creation or imposition of any liens, charges, claims or other encumbrances
      upon
      the Shares, the Warrant Shares, any Blackout Shares or any of the assets of
      the
      Company, or (ii) except as previously disclosed to the Investor in the
      Disclosure Schedule, entitle the holders of any outstanding shares of capital
      stock of the Company to preemptive or other rights to subscribe to or acquire
      the shares of Common Stock or other securities of the Company.

     

    Section
      4.16 No
      General Solicitation or Advertising in Regard to this
      Transaction.    Except
      for the Registration Statement, neither the Company nor any of its affiliates
      or
      any Person acting on its or their behalf (i) has conducted any general
      solicitation (as that term is used in Rule 502(c) of Regulation D) or
      general advertising with respect to any of the Shares, the Warrant, the Warrant
      Shares or any Blackout Shares or (ii) has made any offers or sales of any
      security or solicited any offers to buy any security under any circumstances
      that would require registration of the Shares under the Securities
      Act. 

     

    Section
      4.17 No
      Integrated Offering.
      Neither
      the Company, nor any of its affiliates, nor any person acting on its or their
      behalf has, directly or indirectly, made any offers or sales of any security
      or
      solicited any offers to buy any security under circumstances that would require
      registration under the Securities Act of shares of the Common Stock issuable
      hereunder with any other offers or sales of securities of the
      Company. 

     

    
      
        
        

      

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

     

    ARTICLE
      V

    REPRESENTATIONS,
      WARRANTIES AND COVENANTS OF THE INVESTOR

     

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

     

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

     

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

     

    Section
      5.3 No
      Conflicts.
      The
      execution, delivery and performance of this Agreement, the Registration Rights
      Agreement, the Warrant and any other document or instrument contemplated hereby,
      by the Investor and the consummation of the transactions contemplated thereby
      do
      not (i) violate any provision of the Investor’s charter documents or
      bylaws, (ii) conflict with, or constitute a default (or an event which with
      notice or lapse of time or both would become a default) under, or give to others
      any rights of termination, amendment, acceleration or cancellation of, any
      material agreement, mortgage, deed of trust, indenture, note, bond, license,
      lease agreement, instrument or obligation to which the Investor is a party,
      (iii) create or impose a lien, charge or encumbrance on any property of the
      Investor under any agreement or any commitment to which the Investor is a party
      or by which the Investor is bound or by which any of its respective properties
      or assets are bound, (iv) result in a violation of any federal, state,
      local or foreign statute, rule, regulation, order, writ, judgment or decree
      (including federal and state securities laws and regulations) applicable to
      the
      Investor or by which any property or asset of the Investor are bound or
      affected, or (v) require the consent of any third-party that has not been
      obtained pursuant to any material contract to which Investor is subject or
      to
      which any of its assets, operations or management may be subject. The Investor
      is not required under federal, state or local law, rule or regulation to obtain
      any consent, authorization or order of, or make any filing or registration
      with,
      any court or governmental agency in order for it to execute, deliver or perform
      any of its obligations under this Agreement or to purchase or acquire the
      Shares, the Warrant, the Warrant Shares or any Blackout Shares in accordance
      with the terms hereof, provided that, for purposes of the representation made
      in
      this sentence, the Investor is assuming and relying upon the accuracy of the
      relevant representations and agreements of the Company herein. 

     

    
      
        
        

      

      
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    Section
      5.4 Financial
      Capability.
      The
      Investor has the financial capability to perform all of its obligations under
      this Agreement, including the capability to purchase the Shares, the Warrant,
      the Warrant Shares and any Blackout Shares in accordance with the terms hereof.
      The Investor has such knowledge and experience in business and financial matters
      that it is capable of evaluating the merits and risks of an investment in Common
      Stock and the Warrant. The Investor is an “accredited
      investor”
as
      defined in Regulation D. The Investor is a “sophisticated
      investor”
as
      described in Rule 506(b)(2)(ii) of Regulation D. The Investor
      acknowledges that an investment in the Common Stock and the Warrant is
      speculative and involves a high degree of risk. 

     

    Section
      5.5 Information.
      The
      Investor and its advisors, if any, have been furnished with all materials
      relating to the business, finances and operations of the Company and materials
      relating to the offer and sale of the Shares, any Blackout Shares, the Warrant
      and the Warrant Shares which have been requested by the Investor. The Investor
      has reviewed or received copies of the Commission Documents. The Investor and
      its advisors, if any, have been afforded the opportunity to ask questions of
      the
      Company. The Investor has sought such accounting, legal and tax advice as it
      has
      considered necessary to make an informed investment decision with respect to
      its
      acquisition of the Shares, any Blackout Shares, the Warrant and the Warrant
      Shares. The Investor understands that it (and not the Company) shall be
      responsible for its own tax liabilities that may arise as a result of this
      investment or the transactions contemplated by this Agreement. 

     

    Section
      5.6 Trading
      Restrictions.
      The
      Investor covenants that during the Commitment Period, neither the Investor
      nor
      any of its affiliates nor any entity managed or controlled by the Investor
      will
      enter into or execute or cause or assist any Person to enter into or execute
      any
“short
      sale”
(as
      such term is defined in Rule 200 of Regulation SHO, or any successor regulation,
      promulgated by the Commission under the Exchange Act) of any securities of
      the
      Company. 

     

    Section
      5.7 Statutory
      Underwriter Status.
      The
      Investor acknowledges that, pursuant to the Commission’s current interpretations
      of the Securities Act, the Investor will be disclosed as an “underwriter”
within
      the meaning of the Securities Act in the Registration Statement (and amendments
      thereto) and in any Prospectus contained therein to the extent required by
      applicable law. 

     

    Section
      5.8 Not
      an
      Affiliate.
      The
      Investor is not an officer, director or “affiliate”
(as
      defined in Rule 405 of the Securities Act) of the Company. 

     

    
      
        
        

      

      
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    Section
      5.9 Manner
      of Sale.
      At no
      time was Investor presented with or solicited by or through any leaflet, public
      promotional meeting, television advertisement or any other form of general
      solicitation or advertising. 

     

    Section
      5.10 Prospectus
      Delivery.
      The
      Investor agrees that unless the Shares, the Warrant Shares or any Blackout
      Shares are eligible for resale pursuant to all the conditions of Rule 144,
      it
      will resell the Shares, the Warrant Shares and any Blackout Shares only pursuant
      to the Registration Statement, in a manner described under the caption
“Plan
      of Distribution”
in
      the
      Registration Statement, and in a manner in compliance with all applicable
      securities laws, including, without limitation, any applicable prospectus
      delivery requirements of the Securities Act and the insider trading restrictions
      of the Exchange Act. The Investor acknowledges and agrees that the Company
      shall
      be under no obligation to the Investor to supplement the Prospectus to reflect
      the issuance of any Shares pursuant to a Draw Down at any time prior to the
      day
      following the second Settlement Date with respect to such Draw
      Down.

     

    ARTICLE
      VI

    COVENANTS
      OF THE COMPANY

     

    The
      Company covenants with the Investor as follows, which covenants are for the
      benefit of the Investor and its permitted assignees (as defined
      herein):

     

    Section
      6.1 Securities
      Compliance.
      The
      Company shall notify the Commission and the Principal Market, if and as
      applicable, in accordance with their respective rules and regulations, of the
      transactions contemplated by this Agreement, and shall use commercially
      reasonable efforts to take all other necessary action and proceedings as may
      be
      required and permitted by applicable law, rule and regulation, for the legal
      and
      valid issuance of the Shares, the Warrant Shares and the Blackout Shares, if
      any, to the Investor.
      Each
      Commission Document to be filed with the Commission after the Closing Date
      and
      incorporated by reference in the Registration Statement and Prospectus, when
      such document becomes effective or is filed with the Commission, as the case
      may
      be, shall comply in all material respects with the requirements of the
      Securities Act or the Exchange Act, as applicable, and other federal, state
      and
      local laws, rules and regulations applicable to it, and shall not contain any
      untrue statement of a material fact or omit to state a material fact required
      to
      be stated therein or necessary in order to make the statements therein, in
      light
      of the circumstances under which they were made, not misleading.

     

    Section
      6.2 Reservation
      of Common Stock.
      As of
      the date hereof, the Company has available and the Company shall reserve and
      keep available at all times, free of preemptive rights and other similar
      contractual rights of stockholders, shares of Common Stock for the purpose
      of
      enabling the Company to satisfy any obligation to issue the Shares in connection
      with all Draw Downs contemplated hereunder and the Warrant Shares. The number
      of
      shares so reserved from time to time, as theretofore increased or reduced as
      hereinafter provided, may be reduced by the number of shares actually delivered
      hereunder. 

     

    Section
      6.3 Registration
      and Listing.
      During
      the Commitment Period, the Company shall use commercially reasonable efforts
      to:
      (i) take all action necessary to cause its Common Stock to continue to be
      registered under Section 12(b) or 12(g) of the Exchange Act, (ii) comply in
      all
      material respects with its reporting and filing obligations under the Exchange
      Act, (iii) prevent the termination or suspension of such registration, or the
      termination or suspension of its reporting and filing obligations under the
      Exchange Act or Securities Act (except as expressly permitted herein). The
      Company shall use commercially reasonable efforts to maintain the listing and
      trading of its Common Stock and the listing of the Shares purchased by Investor
      hereunder on the Principal Market (including, without limitation, maintaining
      sufficient net tangible assets) and will comply in all material respects with
      the Company’s reporting, filing and other obligations under the bylaws or rules
      of the FINRA and the Principal Market. The Company will not be required to
      carry
      out any action pursuant to this Agreement, the Registration Rights Agreement
      or
      the Warrant that would adversely impact the listing of the Company’s securities
      on the Principal Market, which Principal Market may be changed by the Company
      in
      the future in the Company’s discretion. 

     

    
      
        
        

      

      
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    Section
      6.4 Registration
      Statement.
      Without
      the prior written consent of the Investor, the Registration Statement shall
      be
      used solely in connection with the transactions between the Company and the
      Investor contemplated hereby. 

     

    Section
      6.5 Compliance
      with Laws. 

     

    (a) The
      Company shall comply, and cause each subsidiary to comply, with all applicable
      laws, rules, regulations and orders, noncompliance with which would reasonably
      be expected to have a Material Adverse Effect. Without limiting the generality
      of the foregoing, neither the Company nor any of its officers, directors or
      affiliates will take, directly or indirectly, any action designed or intended
      to
      stabilize or manipulate the price of any security of the Company, or which
      would
      in the future reasonably be expected to cause or result in, stabilization or
      manipulation of the price of any security of the Company.

     

    (b) Without
      the consent of its stockholders in accordance with FINRA and The NASDAQ Stock
      Market LLC rules, the Company will not be obligated to issue, and the Investor
      will not be obligated to purchase, any Shares or Blackout Shares which would
      result in the issuance under this Agreement, the Warrant and the Registration
      Rights Agreement of Shares, Warrant Shares and Blackout Shares (collectively)
      representing more than the applicable percentage under the rules of the FINRA
      and The NASDAQ Stock Market LLC , including, without limitation, NASDAQ
      Marketplace Rule 4350(i), that would require stockholder approval of the
      issuance thereof. Nothing herein shall compel the Company to seek such consent
      of its stockholders. In addition, the Company will not be obligated to issue,
      and the Investor will not be obligated to purchase, any Shares, Warrant Shares
      or Blackout Shares if as a result of the acquisition of such Shares, Warrant
      Shares and/or Blackout Shares, the Company would be required to file any
      notification or report forms under the Hart-Scott-Rodino Antitrust Improvements
      Act of 1976, as amended. Nothing herein shall compel the Company to file such
      notification and report forms.

     

    Section
      6.6 Other
      Financing.
      Nothing
      in this Agreement shall be construed to restrict the right of the Company to
      offer, sell and/or issue securities of any kind whatsoever, provided such
      transaction is not a Prohibited Transaction (as defined below) (any such
      transaction that is not a Prohibited Transaction is referred to in this
      Agreement as a “Permitted
      Transaction”).
      Without limiting the generality of the preceding sentence, the Company may,
      without the prior written consent of the Investor, (i) establish stock option
      or
      award plans or agreements (for directors, employees, consultants and/or
      advisors), and issue securities thereunder, and amend such plans or agreements,
      including increasing the number of shares available thereunder, (ii) issue
      equity securities to finance, or otherwise in connection with, the acquisition
      of one or more other companies, equipment, technologies or lines of business,
      (iii) issue shares of Common Stock and/or Preferred Stock in connection with
      the
      Company’s option or award plans, stock purchase plans, stock bonus programs,
      rights plans, warrants or options, (iv) issue shares of Common Stock and/or
      Preferred Stock in connection with the acquisition of products, licenses,
      equipment or other assets and strategic collaborations or partnerships or joint
      ventures; (v) issue shares of Common and/or Preferred Stock to employees,
      consultants and/or advisors as consideration for services rendered or to be
      rendered, (vi) issue and sell equity or debt securities in a public offering,
      (vii) issue and sell and equity or debt securities in a private placement (other
      than in connection with any Prohibited Transaction), (viii) issue equity
      securities to equipment lessors, equipment vendors, banks or similar lending
      institutions in connection with leases or loans, or in connection with strategic
      commercial or licensing transactions, (ix) issue securities in connection with
      any stock split, stock dividend, recapitalization, reclassification or similar
      event by the Company, and (x) issue shares of Common Stock to the Investor
      under
      any other agreement entered into between the Investor and the
      Company. 

     

    
      
        
        

      

      
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    Section
      6.7 Prohibited
      Transactions.
      Except
      as
      set forth on Schedule 6.7 of the Disclosure Schedule, during the term of this
      Agreement, the Company shall not enter into any Prohibited Transaction without
      the prior written consent of the Investor, which consent may be withheld at
      the
      sole discretion of the Investor. For the purposes of this Agreement, the term
      “Prohibited
      Transaction”
shall
      refer to the issuance by the Company of any “future priced securities,” which
      shall mean the issuance of shares of Common Stock or securities of any type
      whatsoever that are, or may become, convertible or exchangeable into shares
      of
      Common Stock where the purchase, conversion or exchange price for such Common
      Stock is determined using any floating discount or other post-issuance
      adjustable discount to the market price of Common Stock, including, without
      limitation, pursuant to any equity line or other financing that is substantially
      similar to the financing provided for under this Agreement, provided that
      any
      future issuance by the Company of a convertible security (“Convertible
      Security”)
      that
      contains provisions that adjust the conversion price of such Convertible
      Security in the event of stock splits, dividends, distributions or similar
      events or pursuant to anti-dilution provisions shall not be a Prohibited
      Transaction. 

     

    Section
      6.8 Corporate
      Existence.
      The
      Company shall take all steps necessary to preserve and continue the corporate
      existence of the Company; provided, however, that nothing in this Agreement
      shall be deemed to prohibit the Company from engaging in any Excluded Merger
      or
      Sale with another Person, subject to the terms of the Warrant. 

     

    Section
      6.9 Non-Disclosure
      of Non-Public Information.
      Except
      as otherwise expressly provided in this Agreement, the Registration Rights
      Agreement or the Warrant, none of the Company, its officers, directors,
      employees nor agents shall disclose material non-public information to the
      Investor, its advisors or representatives. 

     

    Section
      6.10 Notice
      of Certain Events Affecting Registration; Suspension of Right to Request a
      Draw
      Down.
      The
      Company shall promptly notify the Investor upon the occurrence of any of the
      following events in respect of the Registration Statement or the Prospectus
      related to the offer, issuance and sale of the Shares and the Warrant Shares
      hereunder: (i) receipt of any request for material additional information by
      the
      Commission or any other federal or state governmental authority or for
      amendments or supplements to the Registration Statement or the Prospectus during
      the period of effectiveness of the Registration Statement; (ii) the issuance
      by
      the Commission or any other federal or state governmental authority of any
      stop
      order suspending the effectiveness of the Registration Statement or the
      initiation of any proceedings for that purpose; (iii) receipt of any
      notification with respect to the suspension of the qualification or exemption
      from qualification of any of the Registrable Securities for sale in any
      jurisdiction or the initiation or threatening of any proceeding for such
      purpose; and (iv) the Company becoming aware of the happening of any event,
      which makes any statement of a material fact made in the Registration Statement
      or Prospectus untrue in a material respect or which requires the making of
      any
      material additions to or material changes to the statements then made in the
      Registration Statement or Prospectus in order to state a material fact required
      by the Securities Act to be stated therein or necessary in order to make the
      statements then made therein, in light of the circumstances under which they
      were made, not misleading, or of the necessity to amend the Registration
      Statement or supplement the Prospectus to comply with the Securities Act. If
      at
      any time the Commission shall issue any stop order suspending the effectiveness
      of the Registration Statement, the Company shall use commercially reasonable
      efforts to obtain the withdrawal of such order at the earliest possible time.
      The Company shall not be required to disclose to the Investor the substance
      or
      specific reasons of any of the events set forth in clauses (i) through (iv)
      of
      the previous sentence, only that the event has occurred. The Company shall
      not
      request a Draw Down during the continuation of any of the foregoing
      events. 

     

    Section
      6.11 Amendments
      to the Registration Statement.
      After
      the Registration Statement has been declared effective by the Commission, the
      Company shall not (a) file any amendment to the Registration Statement or make
      any amendment or supplement to the Prospectus of which the Investor shall not
      have been previously or be simultaneously advised; provided, however, that
      the
      Company may, to the extent it deems advisable, and without the prior consent
      of
      or notice to Investor, supplement the Prospectus within one Trading Day
      following the second Settlement Date for each Draw Down solely to reflect the
      issuance of Shares with respect to such Draw Down, and (b) so long as, in the
      reasonable opinion of counsel for the Investor, a Prospectus is required to
      be
      delivered in connection with sales of the Shares by the Investor, if the Company
      files any information, documents or reports that are incorporated by reference
      in the Registration Statement pursuant to the Exchange Act, the Company shall,
      if requested in writing by the Investor, deliver a copy of such information,
      documents or reports to the Investor promptly following such filing. 

     

    Section
      6.12 Prospectus
      Delivery.
      From
      time to time for such period as in the reasonable opinion of counsel for the
      Investor a prospectus is required by the Securities Act to be delivered in
      connection with sales by the Investor, the Company will expeditiously deliver
      to
      the Investor, without charge, as many copies of the Prospectus (and of any
      amendment or supplement thereto) as the Investor may reasonably request. Subject
      to the Registration Rights Agreement, the Company consents to the use of the
      Prospectus (and of any amendment or supplement thereto) in accordance with
      the
      provisions of the Securities Act and state securities laws in connection with
      the offering and sale of the Shares and the Warrant Shares and for such period
      of time thereafter as the Prospectus is required by the Securities Act to be
      delivered in connection with sales of the Shares and the Warrant
      Shares.
      Notwithstanding the foregoing, in no event shall the Company be under any
      obligation to the Investor to supplement the Prospectus or to reflect the
      issuance of any Shares pursuant to a Draw Down or deliver any Prospectus as
      so
      supplemented at any time prior to the Trading Day following the second
      Settlement Date with respect to such Draw Down.

     

    
      
        
        

      

      
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    ARTICLE
      VII

    CONDITIONS
      TO THE OBLIGATION OF THE INVESTOR

    TO
      ACCEPT A DRAW DOWN

     

    The
      obligation of the Investor hereunder to accept a Draw Down Notice and to acquire
      and pay for the Shares in accordance therewith is subject to the satisfaction
      or
      waiver, at each Condition Satisfaction Date, of each of the conditions set
      forth
      below. Other than those conditions set forth in Section 7.12 which are for
      the
      Company’s sole benefit and may be waived by the Company at any time in its sole
      discretion, the conditions are for the Investor’s sole benefit and may be waived
      by the Investor at any time in its sole discretion. As used in this Agreement,
      the term “Condition
      Satisfaction Date”
shall
      mean, with respect to each Draw Down, the date on which the applicable Draw
      Down
      Notice is delivered to the Investor and each Settlement Date in respect of
      the
      applicable Draw Down Pricing Period. 

     

    Section
      7.1 Accuracy
      of the Company’s Representations and Warranties.
      Each of
      the representations and warranties of the Company shall be true and correct
      in
      all material respects as of the date when made as though made at that time
      except for representations and warranties that are expressly made as of a
      particular date. 

     

    Section
      7.2 Performance
      by the Company.
      The
      Company shall have, in all material respects, performed, satisfied and complied
      with all covenants, agreements and conditions required by this Agreement, the
      Registration Rights Agreement and the Warrant to be performed, satisfied or
      complied with by the Company. 

     

    Section
      7.3 Compliance
      with Law.
      The
      Company shall have complied in all respects with all applicable federal, state
      and local governmental laws, rules, regulations and ordinances in connection
      with the execution, delivery and performance of this Agreement and the
      consummation of the transactions contemplated hereby except for any failures
      to
      so comply which could not reasonably be expected to have a Material Adverse
      Effect. 

     

    Section
      7.4 Effective
      Registration Statement.
      Upon
      the terms and subject to the conditions set forth in the Registration Rights
      Agreement, the Registration Statement shall have previously become effective
      and
      shall remain effective and (i) neither the Company nor the Investor shall have
      received notice that the Commission has issued or intends to issue a stop order
      with respect to the Registration Statement or that the Commission otherwise
      has
      suspended or withdrawn the effectiveness of the Registration Statement, either
      temporarily or permanently, or intends or has threatened to do so (unless the
      Commission’s concerns have been addressed and the Investor is reasonably
      satisfied that the Commission no longer is considering or intends to take such
      action), and (ii) no other suspension of the use or withdrawal of the
      effectiveness of the Registration Statement or the Prospectus shall
      exist. 

     

    
      
        
        

      

      
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    Section
      7.5 No
      Knowledge.
      The
      Company shall have no Knowledge of any event that could reasonably be expected
      to have the effect of causing the Registration Statement with respect to the
      resale of the Registrable Securities by the Investor to be suspended or
      otherwise ineffective (which event is reasonably likely to occur within eight
      Trading Days following the Trading Day on which a Draw Down Notice is delivered)
      as of the Settlement Date. 

     

    Section
      7.6 No
      Suspension.
      Trading
      in the Company’s Common Stock shall not have been suspended by the Commission,
      the Principal Market or the FINRA and trading in securities generally as
      reported on the Principal Market shall not have been suspended or limited as
      of
      the Condition Satisfaction Date. 

     

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

     

    Section
      7.8 No
      Proceedings or Litigation.
      No
      action, suit or proceeding before any arbitrator or any court or governmental
      authority shall be pending or, to the Knowledge of the Company, threatened,
      and,
      to the Knowledge of the Company no inquiry or investigation by any governmental
      authority shall be threatened, against the Company or any subsidiary, or any
      of
      the officers, directors or affiliates of the Company or any subsidiary, seeking
      to enjoin, prevent or change the transactions contemplated by this Agreement,
      or
      seeking material damages in connection with such transactions, except for any
      action, suit or proceeding which could not reasonably be expected to have a
      Material Adverse Effect. 

     

    Section
      7.9 Sufficient
      Shares Registered for Resale.
      The
      Company shall have sufficient Shares, calculated using the closing trade price
      of the Common Stock as of the Trading Day immediately preceding such Draw Down
      Notice, registered under the Registration Statement to issue and sell such
      Shares in accordance with such Draw Down Notice. 

     

    Section
      7.10 Warrant.
      The
      Warrant shall have been duly executed, delivered and issued to the Investor,
      and
      the Company shall not be in default in any material respect under any of the
      provisions thereof, provided that any refusal by or failure of the Company
      to
      issue and deliver Warrant Shares in respect of any exercise (in whole or in
      part) thereof shall be deemed to be material for the purposes of this Section
      7.10. 

     

    Section
      7.11 Opinion
      of Counsel.
      The
      Investor shall have received the form of opinion mutually agreed to between
      the
      parties on the date of this Agreement. 

     

    Section
      7.12 Accuracy
      of Investor’s Representation and Warranties.
      The
      representations and warranties of the Investor shall be true and correct in
      all
      material respects as of the date when made as though made at that time except
      for representations and warranties that are made as of a particular
      date. 

     

    
      
        
        

      

      
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    ARTICLE
      VIII

    TERMINATION

     

    Section
      8.1 Term.
      Unless
      otherwise terminated in accordance with Section 8.2 below, this Agreement shall
      terminate upon the earlier to occur of (i) the expiration of the Commitment
      Period or (ii) the issuance of Shares pursuant to this Agreement in an amount
      equal to the Maximum Commitment Amount. 

     

    Section
      8.2 Other
      Termination.

     

    (a) The
      Investor may terminate this Agreement upon (x) one (1) Trading Day’s notice if
      the Company enters into any Prohibited Transaction as set forth in Section
      6.7
      without the Investor’s prior written consent, or (y) one (1) Trading Day’s
      notice if the Investor provides written notice of a Material Adverse Effect
      to
      the Company, and such Material Adverse Effect continues for a period of ten
      (10)
      Trading Days after the receipt by the Company of such notice. 

     

    (b) The
      Investor may terminate this Agreement upon one (1) Trading Day’s notice to the
      Company at any time in the event that the Registration Statement is not
      initially declared effective in accordance with the Registration Rights
      Agreement, provided, however, that in the event the Registration Statement
      is
      declared effective prior to the delivery of such notice, the Investor shall
      thereafter have no right to terminate this Agreement pursuant to this Section
      8.2(b). 

     

    (c) The
      Company may terminate this Agreement upon one (1) Trading Day’s notice;
      provided, however, that the Company shall not terminate this Agreement pursuant
      to this Section 8.2(c) during any Draw Down Pricing Period; provided further,
      that, in the event of any termination of this Agreement by the Company
      hereunder, so long as the Investor owns Shares purchased hereunder and/or
      Warrant Shares, unless all of such shares of Common Stock may be resold by
      the
      Investor without registration and without any time, volume or manner limitations
      pursuant to Rule 144(k) (or any similar provision then in effect) under the
      Securities Act, the Company shall not suspend or withdraw the Registration
      Statement or otherwise cause the Registration Statement to become ineffective,
      or voluntarily delist the Common Stock from, the Principal Market without
      listing the Common Stock on another Principal Market. 

     

    (d) Each
      of
      the parties hereto may terminate this Agreement upon one (1) Trading Day’s
      notice if the other party has breached a material representation, warranty
      or
      covenant to this Agreement and such breach is not remedied within ten (10)
      Trading Days after notice of such breach is delivered to the breaching party.
      

     

    Section
      8.3 Effect
      of Termination.
      In the
      event of termination by the Company or the Investor, written notice thereof
      shall forthwith be given to the other party and the transactions contemplated
      by
      this Agreement shall be terminated without further action by either party.
      If
      this Agreement is terminated as provided in Section 8.1 or 8.2 herein, this
      Agreement shall become void and of no further force and effect, except as
      provided in Section 10.13. Nothing in this Section 8.3 shall be deemed to
      release the Company or the Investor from any liability for any breach under
      this
      Agreement occurring prior to such termination, or to impair the rights of the
      Company and the Investor to compel specific performance by the other party
      of
      its obligations under this Agreement arising prior to such
      termination. 

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

       

    

    ARTICLE
      IX

    INDEMNIFICATION

     

    Section
      9.1 Indemnification.

     

    (a) Except
      as
      otherwise provided in this Article IX, unless disputed as set forth in Section
      9.2, the Company agrees to indemnify, defend and hold harmless the Investor
      and
      its affiliates and their respective officers, directors, agents, employees,
      subsidiaries, partners, members and controlling persons (each, an “Investor
      Indemnified Party”),
      to
      the fullest extent permitted by law from and against any and all Damages
      directly resulting from or directly arising out of any breach of any
      representation or warranty, covenant or agreement (except as otherwise
      specifically provided) by the Company in this Agreement, the Registration Rights
      Agreement or the Warrant; provided, however, that the Company shall not be
      liable under this Article IX to an Investor Indemnified Party to the extent
      that
      such Damages resulted or arose from the breach by an Investor Indemnified Party
      of any representation, warranty, covenant or agreement of an Investor
      Indemnified Party contained in this Agreement, the Registration Rights Agreement
      or the Warrant or the negligence, recklessness, willful misconduct or bad faith
      of an Investor Indemnified Party. The parties intend that any Damages subject
      to
      indemnification pursuant to this Article IX will be net of insurance proceeds
      (which the Investor Indemnified Party agrees to use commercially reasonable
      efforts to recover). Accordingly, the amount which the Company is required
      to
      pay to any Investor Indemnified Party hereunder (a “Company
      Indemnity Payment”)
      will
      be reduced by any insurance proceeds actually recovered by or on behalf of
      any
      Investor Indemnified Party in reduction of the related Damages. In addition,
      if
      an Investor Indemnified Party receives a Company Indemnity Payment required
      by
      this Article IX in respect of any Damages and subsequently receives any such
      insurance proceeds, then the Investor Indemnified Party will pay to the Company
      an amount equal to the Company Indemnity Payment received less the amount of
      the
      Company Indemnity Payment that would have been due if the insurance proceeds
      had
      been received, realized or recovered before the Company Indemnity Payment was
      made. 

     

    (b) Except
      as
      otherwise provided in this Article IX, unless disputed as set forth in Section
      9.2, the Investor agrees to indemnify, defend and hold harmless the Company
      and
      its affiliates and their respective officers, directors, agents, employees,
      subsidiaries, partners, members and controlling persons (each, a “Company
      Indemnified Party”),
      to
      the fullest extent permitted by law from and against any and all Damages
      directly resulting from or directly arising out of any breach of any
      representation or warranty, covenant or agreement by the Investor in this
      Agreement, the Registration Rights Agreement or the Warrant; provided, however,
      that the Investor shall not be liable under this Article IX to a Company
      Indemnified Party to the extent that such Damages resulted or arose from the
      breach by a Company Indemnified Party of any representation, warranty, covenant
      or agreement of a Company Indemnified Party contained in this Agreement, the
      Registration Rights Agreement or the Warrant or the negligence, recklessness,
      willful misconduct or bad faith of a Company Indemnified Party. The parties
      intend that any Damages subject to indemnification pursuant to this Article
      IX
      will be net of insurance proceeds (which the Company agrees to use commercially
      reasonable efforts to recover). Accordingly, the amount which the Investor
      is
      required to pay to any Company Indemnified Party hereunder (an “Investor
      Indemnity Payment”)
      will
      be reduced by any insurance proceeds theretofore actually recovered by or on
      behalf of any Company Indemnified Party in reduction of the related Damages.
      In
      addition, if a Company Indemnified Party receives an Investor Indemnity Payment
      required by this Article IX in respect of any Damages and subsequently receives
      any such insurance proceeds, then the Company Indemnified Party will pay to
      the
      Investor an amount equal to the Investor Indemnity Payment received less the
      amount of the Investor Indemnity Payment that would have been due if the
      insurance proceeds had been received, realized or recovered before the Investor
      Indemnity Payment was made. 

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

       

    

    Section
      9.2 Notification
      of Claims for Indemnification.
      Each
      party entitled to indemnification under this Article IX (an “Indemnified
      Party”)
      shall,
      promptly after the receipt of notice of the commencement of any claim against
      such Indemnified Party in respect of which indemnity may be sought from the
      party obligated to indemnify such Indemnified Party under this Article IX (the
      “Indemnifying
      Party”),
      notify the Indemnifying Party in writing of the commencement thereof. Any such
      notice shall describe the claim in reasonable detail. The failure of any
      Indemnified Party to so notify the Indemnifying Party of any such action shall
      not relieve the Indemnifying Party from any liability which it may have to
      such
      Indemnified Party (a) other than pursuant to this Article IX or (b) under this
      Article IX unless, and only to the extent that, such failure results in the
      Indemnifying Party’s forfeiture of substantive rights or defenses or the
      Indemnifying Party is prejudiced by such delay. The procedures listed below
      shall govern the procedures for the handling of indemnification
      claims. 

     

    (a) Any
      claim
      for indemnification for Damages that do not result from a Third Party Claim
      as
      defined in the following paragraph, shall be asserted by written notice given
      by
      the Indemnified Party to the Indemnifying Party. Such Indemnifying Party shall
      have a period of thirty (30) days after the receipt of such notice within which
      to respond thereto. If such Indemnifying Party does not respond within such
      thirty (30) day period, such Indemnifying Party shall be deemed to have refused
      to accept responsibility to make payment as set forth in Section 9.1. If such
      Indemnifying Party does not respond within such thirty (30) day period or
      rejects such claim in whole or in part, the Indemnified Party shall be free
      to
      pursue such remedies as specified in this Agreement. 

     

    (b) If
      an
      Indemnified Party shall receive notice or otherwise learn of the assertion
      by a
      person or entity not a party to this Agreement of any threatened legal action
      or
      claim (collectively a “Third
      Party Claim”),
      with
      respect to which an Indemnifying Party may be obligated to provide
      indemnification, the Indemnified Party shall give such Indemnifying Party
      written notice thereof within twenty (20) days after becoming aware of such
      Third Party Claim. 

     

    (c) An
      Indemnifying Party may elect to defend (and, unless the Indemnifying Party
      has
      specified any reservations or exceptions, to seek to settle or compromise)
      at
      such Indemnifying Party’s own expense and by such Indemnifying Party’s own
      counsel, any Third Party Claim. Within thirty (30) days after the receipt of
      notice from an Indemnified Party (or sooner if the nature of such Third Party
      Claim so requires), the Indemnifying Party shall notify the Indemnified Party
      whether the Indemnifying Party will assume responsibility for defending such
      Third Party Claim, which election shall specify any reservations or exceptions.
      If such Indemnifying Party does not respond within such thirty (30) day period
      or rejects such claim in whole or in part, the Indemnified Party shall be free
      to pursue such remedies as specified in this Agreement. In case any such Third
      Party Claim shall be brought against any Indemnified Party, and it shall notify
      the Indemnifying Party of the commencement thereof, the Indemnifying Party
      shall
      be entitled to assume the defense thereof at its own expense, with counsel
      satisfactory to such Indemnified Party in its reasonable judgment; provided,
      however, that any Indemnified Party may, at its own expense, retain separate
      counsel to participate in such defense at its own expense. Notwithstanding
      the
      foregoing, in any Third Party Claim in which both the Indemnifying Party, on
      the
      one hand, and an Indemnified Party, on the other hand, are, or are reasonably
      likely to become, a party, such Indemnified Party shall have the right to employ
      separate counsel and to control its own defense of such claim if, in the
      reasonable opinion of counsel to such Indemnified Party, either (x) one or
      more
      significant defenses are available to the Indemnified Party that are not
      available to the Indemnifying Party or (y) a conflict or potential conflict
      exists between the Indemnifying Party, on the one hand, and such Indemnified
      Party, on the other hand, that would make such separate representation
      advisable; provided, however, that in such circumstances the Indemnifying Party
      (i) shall not be liable for the fees and expenses of more than one counsel
      to
      all Indemnified Parties and (ii) shall reimburse the Indemnified Parties for
      such reasonable fees and expenses of such counsel incurred in any such Third
      Party Claim, as such expenses are incurred, provided that the Indemnified
      Parties agree to repay such amounts if it is ultimately determined that the
      Indemnifying Party was not obligated to provide indemnification under this
      Article IX. The Indemnifying Party agrees that it will not, without the prior
      written consent of the Indemnified Party, settle, compromise or consent to
      the
      entry of any judgment in any pending or threatened claim relating to the matters
      contemplated hereby (if any Indemnified Party is a party thereto or has been
      actually threatened to be made a party thereto) unless such settlement,
      compromise or consent includes an unconditional release of such Indemnified
      Party from all liability arising or that may arise out of such claim. The rights
      accorded to an Indemnified Party hereunder shall be in addition to any rights
      that any Indemnified Party may have at common law, by separate agreement or
      otherwise; provided, however, that notwithstanding the foregoing or anything
      to
      the contrary contained in this Agreement, nothing in this Article IX shall
      restrict or limit any rights that any Indemnified Party may have to seek
      equitable relief. 

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

       

    

    ARTICLE
      X

    MISCELLANEOUS

     

    Section
      10.1 Fees
      and Expenses.  

     

    (a) Each
      of
      the Company and the Investor agrees to pay its own expenses incident to the
      performance of its obligations hereunder, except that the Company shall be
      solely responsible for (i) all reasonable attorneys fees and expenses incurred
      by the Investor in connection with the preparation, negotiation, execution
      and
      delivery of this Agreement, the Registration Rights Agreement and the Warrant,
      and review of the Registration Statement, and in connection with any amendments,
      modifications or waivers of this Agreement, including, without limitation,
      all
      reasonable attorneys fees and expenses, (ii) all stamp or other similar taxes
      and duties, if any, levied in connection with issuance of the Shares pursuant
      hereto; provided, however, that in each of the above instances the Investor
      shall provide customary supporting invoices or similar documentation in
      reasonable detail describing such expenses (however, the Investor shall not
      be
      obligated to provide detailed time sheets for legal fees and expenses), and
      provided further, that the maximum aggregate amount payable by the Company
      pursuant to clause (i) above shall be $75,000 and the Investor shall bear all
      fees and expenses in excess of $75,000 in connection with clause (i) above.
      

     

    (b) If
      any
      action at law or in equity is necessary to enforce or interpret the terms of
      this Agreement, the Registration Rights Agreement or the Warrant, the prevailing
      party shall be entitled to reasonable fees, costs and necessary disbursements
      in
      addition to any other relief to which such party may be entitled. 

     

    Section
      10.2 Reporting
      Entity for the Common Stock.
      The
      reporting entity relied upon for the determination of the trading price or
      trading volume of the Common Stock on any given Trading Day for the purposes
      of
      this Agreement shall be Bloomberg, L.P. or any successor thereto. The written
      mutual consent of the Investor and the Company shall be required to employ
      any
      other reporting entity. 

     

    Section
      10.3 Brokerage.
      Each of
      the parties hereto represents that it has had no dealings in connection with
      this transaction with any finder or broker who will demand payment of any fee
      or
      commission from the other party. The Company on the one hand, and the Investor,
      on the other hand, agree to indemnify the other against and hold the other
      harmless from any and all liabilities to any Persons claiming brokerage
      commissions or finder’s fees on account of services purported to have been
      rendered on behalf of the indemnifying party in connection with this Agreement
      or the transactions contemplated hereby. 

     

    Section
      10.4 Notices.
      All
      notices, demands, requests, consents, approvals, and other communications
      required or permitted hereunder shall be in writing and, unless otherwise
      specified herein, shall be (i) personally served, (ii) deposited in the mail,
      registered or certified, return receipt requested, postage prepaid, (iii)
      delivered by reputable air courier service with charges prepaid, or (iv)
      transmitted by hand delivery, telegram, or facsimile, addressed as set forth
      below or to such other address as such party shall have specified most recently
      by written notice given in accordance herewith, in each case with a copy to
      the
      e-mail address set forth beside the facsimile number for the addressee below.
      Any notice or other communication required or permitted to be given hereunder
      shall be deemed effective (a) upon hand delivery or delivery by facsimile,
      with
      accurate confirmation generated by the transmitting facsimile machine, at the
      address or number designated below (if delivered on a Trading Day during normal
      business hours where such notice is to be received), or the first Trading Day
      following such delivery (if delivered other than on a Trading Day during normal
      business hours where such notice is to be received) or (b) on the second Trading
      Day following the date of mailing by express courier service, fully prepaid,
      addressed to such address, or upon actual receipt of such mailing, whichever
      shall first occur. The addresses for such communications shall be:

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    
      	
              If
                to the Company:

            
	 
	
              Discovery
                Laboratories, Inc.

            
	
              2600
                Kelley Road, Suite 100

            
	
              Warrington,
                Pennsylvania 18976 

            
	
              Facsimile:
                215-488-9300

            
	
              Attention:
                Deputy General Counsel

            
	
              Email:
                mtempleton@DiscoveryLabs.com

            
	 
	
              with
                a copy (which shall not constitute notice) to:

            
	 
	
              Dickstein
                Shapiro LLP

            
	
              1177
                Avenue of the Americas, 41st Floor

            
	
              New
                York, NY 10036-2714

            
	
              Telephone:
                (212) 227-6500

            
	
              Facsimile:
                (212) 227-6501

            
	
              E-mail:
                koteli@dicksteinshapiro.com

            
	
              Attention:
                Ira L. Kotel

            
	 
	
              if
                to the Investor:

            
	 
	
              Kingsbridge
                Capital Limited

            
	
              Attention:
                Mr. Tony Gardner-Hillman

            
	
              P.O.
                Box 1075

            
	
              Elizabeth
                House

            
	
              9
                Castle Street

            
	
              St.
                Helier

            
	
              Jersey

            
	
              JE42QP

            
	
              Channel
                Islands

            
	
              Telephone:
                011-44-1534-636-041

            
	
              Facsimile:
                011-44-1534-636-042

            
	
              Email:
                admin@kingsbridgecap.com; and
                adamgurney@kingsbridgecap.com

            
	 
	
              with
                a copy (which shall not constitute notice) to:

            
	 
	
              Kingsbridge
                Corporate Services Limited

            
	
              Kingsbridge
                House

            
	
              New
                Abbey

            
	
              Kilcullen,
                County Kildare

            
	
              Republic
                of Ireland

            
	
              Telephone:
                011-353-45-481-811

            
	
              Facsimile:
                011-353-45-482-003 

            
	
              Email:
                adamgurney@kingsbridge.ie; emmagalway@kingsbridge.ie; and
                pwhelan@kingsbridge.ie

            


    

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    
      	
              and
                another copy (which shall not constitute notice) to:

            
	
              Stroock
                & Stroock & Lavan LLP

            
	
              180
                Maiden Lane

            
	
              New
                York, NY 10038

            
	
              Facsimile:
                (212) 806-5400

            
	
              Attention:
                Keith M. Andruschak, Esq. -
                kandruschak@stroock.com

            


    

     

    Either
      party hereto may from time to time change its contact information for notices
      under this Section by giving at least ten (10) days’ prior written notice of
      such changed contact information to the other party hereto. 

     

    Section
      10.5 Assignment.
      Neither
      this Agreement nor any rights of the Investor or the Company hereunder may
      be
      assigned by either party to any other Person. 

     

    Section
      10.6 Amendment;
      No Waiver.
      No
      party shall be liable or bound to any other party in any manner by any
      warranties, representations or covenants except as specifically set forth in
      this Agreement, the Warrant and the Registration Rights Agreement. Except as
      expressly provided in this Agreement, neither this Agreement nor any term hereof
      may be amended, waived, discharged or terminated other than by a written
      instrument signed by both parties hereto. The failure of either party to insist
      on strict compliance with this Agreement, or to exercise any right or remedy
      under this Agreement, shall not constitute a waiver of any rights provided
      under
      this Agreement, nor estop the parties from thereafter demanding full and
      complete compliance nor prevent the parties from exercising such a right or
      remedy in the future. 

     

    Section
      10.7 Entire
      Agreement.
      This
      Agreement, the Registration Rights Agreement and the Warrant set forth the
      entire agreement and understanding of the parties relating to the subject matter
      hereof and supersedes all prior and contemporaneous agreements, negotiations
      and
      understandings between the parties, both oral and written, relating to the
      subject matter hereof. 

     

    Section
      10.8 Severability.
      If any
      provision of this Agreement becomes or is declared by a court of competent
      jurisdiction to be illegal, unenforceable or void, this Agreement shall continue
      in full force and effect without said provision; provided that, if the severance
      of such provision materially changes the economic benefits of this Agreement
      to
      either party as such benefits are anticipated as of the date hereof, then such
      party may terminate this Agreement on five (5) Trading Days prior written notice
      to the other party. In such event, the Registration Rights Agreement will
      terminate simultaneously with the termination of this Agreement; provided that
      in the event that this Agreement is terminated by the Company in accordance
      with
      this Section 10.8 and the Warrant Shares either have not been registered for
      resale by the Investor in accordance with the Registration Rights Agreement
      or
      are otherwise not freely tradable (if and when issued) in accordance with
      applicable law, then the Registration Rights Agreement in respect of the
      registration of the Warrant Shares shall remain in full force and
      effect. 

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

       

    

    Section
      10.9 Title
      and Subtitles.
      The
      titles and subtitles used in this Agreement are used for the convenience of
      reference and are not to be considered in construing or interpreting this
      Agreement. 

     

    Section
      10.10 Counterparts.
      This
      Agreement may be executed in multiple counterparts, each of which may be
      executed by less than all of the parties and shall be deemed to be an original
      instrument which shall be enforceable against the parties actually executing
      such counterparts and all of which together shall constitute one and the same
      instrument. 

     

    Section
      10.11 Choice
      of Law.
      This
      Agreement shall be construed under the laws of the State of New
      York. 

     

    Section
      10.12 Specific
      Enforcement, Consent to Jurisdiction.

     

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

     

    (b) Each
      of
      the Company and the Investor (i) hereby irrevocably submits to the jurisdiction
      of the United States District Court and other courts of the United States
      sitting in the State of New York for the purposes of any suit, action or
      proceeding arising out of or relating to this Agreement and (ii) hereby waives,
      and agrees not to assert in any such suit, action or proceeding, any claim
      that
      it is not personally subject to the jurisdiction of such court, that the suit,
      action or proceeding is brought in an inconvenient forum or that the venue
      of
      the suit, action or proceeding is improper. Each of the Company and the Investor
      consents to process being served in any such suit, action or proceeding by
      mailing a copy thereof to such party at the address in effect for notices to
      it
      under this Agreement and agrees that such service shall constitute good and
      sufficient service of process and notice thereof. Nothing in this Section 10.12
      shall affect or limit any right to serve process in any other manner permitted
      by law. 

     

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

     

    Section
      10.14 Publicity.
      Except
      as otherwise required by applicable law or regulation, or NASDAQ rule or
      judicial process, prior to the Closing, neither the Company nor the Investor
      shall issue any press release or otherwise make any public statement or
      announcement with respect to this Agreement or the transactions contemplated
      hereby or the existence of this Agreement. In the event the Company is required
      by law, regulation, NASDAQ rule or judicial process, based upon reasonable
      advice of the Company’s counsel, to issue a press release or otherwise make a
      public statement or announcement with respect to this Agreement prior to the
      Closing, the Company shall consult with the Investor on the form and substance
      of such press release, statement or announcement. Promptly after the Closing,
      each party may issue a press release or otherwise make a public statement or
      announcement with respect to this Agreement or the transactions contemplated
      hereby or the existence of this Agreement; provided that, prior to issuing
      any
      such press release, making any such public statement or announcement, the party
      wishing to make such release, statement or announcement consults and cooperates
      in good faith with the other party in order to formulate such press release,
      public statement or announcement in form and substance reasonably acceptable
      to
      both parties. 

     

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

     

    [Remainder
      of this page intentionally left blank]

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    


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

     

    
      	 	 	 
	 	
              KINGSBRIDGE
                CAPITAL LIMITED

            
	 
 	 
 	 
 
	 	By:  	
              /s/
                Tony Gardner-Hillman

            
	 	
              

              Tony
                Gardner-Hillman

            
	 	
              Director

            


    

     

    
      
        	 	 	 
	 	
                
                  DISCOVERY
                    LABORATORIES, INC..

                

              
	 
 	 
 	 
 
	 	By:  	/s/ John G. Cooper
	 	
                

                
                  Name:
                    John G. Cooper

                

              
	 	
                
                  Title:
                    Executive Vice President and

                

              
	 	
                Chief
                  Financial Officer

              


      

       

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

    


    Exhibit
      A

     

    Form
      of Registration Rights Agreement

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    


    Exhibit
      B

     

    Form
      of Warrant

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    


    Exhibit
      C

     

    Form
      of Draw Down Notice

     

    
      	
              Kingsbridge
                Capital Limited

            
	
              Attention:
                Mr. Tony Gardner-Hillman

            
	
              P.O.
                Box 1075

            
	
              Elizabeth
                House

            
	
              9
                Castle Street

            
	
              St.
                Helier

            
	
              Jersey

            
	
              JE42QP

            
	
              Channel
                Islands

            
	
              Facsimile:
                011-44-1534-636-042

            
	
              Email:
                admin@kingsbridgecap.com; and
                adamgurney@kingsbridgecap.com

            
	 
	
              Kingsbridge
                Corporate Services Limited

            
	
              Kingsbridge
                House

            
	
              New
                Abbey

            
	
              Kilcullen,
                County Kildare

            
	
              Republic
                of Ireland

            
	
              Facsimile:
                011-353-45-482-003 

            
	
              Email:
                adamgurney@kingsbridge.ie; and pwhelan@kingsbridge.ie

            
	 
	
              Stroock
                & Stroock & Lavan LLP

            
	
              180
                Maiden Lane

            
	
              New
                York, NY 10038

            
	
              Facsimile:
                (212) 806-5400

            
	
              Attention:
                Keith M. Andruschak, Esq. -
                kandruschak@stroock.com

            


    

     

    Reference
      is hereby made to that certain Common Stock Purchase Agreement dated as of
      May
      22, 2008 (the “Agreement”) by and between Discovery Laboratories, Inc., a
      corporation organized and existing under the laws of the State of Delaware
      (the
“Company”), and Kingsbridge Capital Limited, an entity organized and existing
      under the laws of the British Virgin Islands (the “Investor”). Capitalized terms
      used and not otherwise defined herein shall have the meanings given such terms
      in the Agreement. 

     

    In
      accordance with and pursuant to Section 3.1 of the Agreement, the Company hereby
      issues this Draw Down Notice to the Investor pursuant to the terms set forth
      below. 

     

    Draw
      Down
      Amount: $___________; and

     

    First
      Trading Day of Draw Down Pricing Period: __________, 20[_]. 

     

    Enclosed
      with this Draw Down Notice is an executed copy of the Officer’s Certificate
      described in Section 3.1 of the Agreement, the base form of which is attached
      to
      such Agreement as Exhibit D.

     

    
      
        
        

      

      
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    Exhibit
      D

     

    Officer’s
      Certificate

     

    I,
      [NAME
      OF OFFICER], do hereby certify to Kingsbridge Capital Limited (the “Investor”),
      with
      respect to the common stock of Discovery Laboratories, Inc. (the “Company”)
      issuable in connection with the Draw Down Notice, dated _______________ (the
      “Notice”)
      attached hereto and delivered pursuant to Article III of the Common Stock
      Purchase Agreement, dated May 22, 2008 (the “Agreement”),
      by
      and between the Company and the Investor, as follows (capitalized terms used
      but
      undefined herein have the meanings given to such terms in the
      Agreement):

     

    1. I
      am the
      duly elected [OFFICER] of the Company. 

     

    2. The
      representations and warranties of the Company set forth in Article IV of the
      Agreement are true and correct in all material respects as though made on and
      as
      of the date hereof (except for such representations and warranties that are
      made
      as of a particular date). 

     

    3. The
      Company has performed in all material respects all covenants and agreements
      to
      be performed by the Company on or prior to the date hereof related to the Notice
      and has satisfied each of the conditions to the obligation of the Investor
      set
      forth in Article VII of the Agreement. 

     

    4. The
      Shares issuable in respect of the Notice will be delivered without restrictive
      legend via book entry through the Depositary Trust Company to an account
      designated by the Investor. 

     

    The
      undersigned has executed this Certificate this _____ day of, 20[_].


     

    
      	 	
              Name:

            	  

	 	
              Title:

            	  
              


    

     

    
      
        
        

      

      
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