Unassociated Document


    
       

      Exhibit 10.1

       

      14,000,000
Shares of Common Stock

      


      and
Warrants to Purchase up to 7,000,000 Shares of Common Stock

      


      DISCOVERY
LABORATORIES, INC.

      Common
Stock (par value $0.001)

      


      


      PLACEMENT AGENT
AGREEMENT

      


      May 8,
2009

      


      LAZARD
CAPITAL MARKETS LLC

      30
Rockefeller Plaza

      New York,
New York 10020

      


      Dear
Sirs:

      


      
        1.  Introduction.  Discovery
Laboratories, Inc., a Delaware corporation (the “Company”), proposes to issue
and sell to the purchasers, pursuant to the terms and conditions of this
Placement Agent Agreement (this “Agreement”) and the
Subscription Agreements in the form of Exhibit A attached hereto
(the “Subscription
Agreements”) entered into with the purchasers identified therein (each a
“Purchaser” and,
collectively, the “Purchasers”), up to an
aggregate of 14,000,000 units (the “Units”), with each Unit
consisting of (i) one share of common stock (a “Share” and, collectively, the
“Shares”), $0.001 par
value per share (the “Common
Stock”) of the Company and (ii) one warrant to purchase 0.50 of a share
of Common Stock (the “Warrants”). Units will not be
issued or certificated.  The Shares and Warrants are immediately
separable and will be issued separately. The terms and conditions of the
Warrants are set forth in the form of Exhibit B attached
hereto.  The Shares issuable upon exercise of the Warrants are
referred to herein as the “Warrant Shares” and, together
with the Units, the Shares and the Warrants, are referred to herein as the
“Securities.”  The
Company hereby confirms that Lazard Capital Markets LLC (“LCM” or the “Placement Agent”) acted as the
Placement Agent in accordance with the terms and conditions
hereof.

      

      


      2.  Agreement to Act as Placement Agent;
Placement of Units.  On
the basis of the representations, warranties and agreements of the Company
herein contained, and subject to all the terms and conditions of this
Agreement:

      


      
      

      2.1  The Company has
authorized and hereby acknowledges that the Placement Agent has acted as its
exclusive agent to solicit offers for the purchase of all or part of the Units
from the Company in connection with the proposed offering of the Units (the
“Offering”).  Until
the earlier of the termination of this Agreement or the Closing Date (as defined
in Section
4
hereof), the Company shall not, without the prior written consent of the
Placement Agent, solicit or accept offers to purchase Units otherwise than
through the Placement Agent.  LCM may utilize the expertise of Lazard
Frères & Co. LLC in connection with LCM’s placement agent
activities.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      2.2  The Company hereby
acknowledges that the Placement Agent, as agent of the Company, used its
reasonable best efforts to solicit offers to purchase the Units from the Company
on the terms and subject to the conditions set forth in the Prospectus (as
defined below). The Placement Agent shall use commercially reasonable efforts to
assist the Company in obtaining performance by each Purchaser whose offer to
purchase Units was solicited by the Placement Agent and accepted by the Company,
but the Placement Agent shall not, except as otherwise provided in this
Agreement, be obligated to disclose the identity of any potential purchaser or
have any liability to the Company in the event any such purchase is not
consummated for any reason. Under no circumstances will the Placement Agent be
obligated to underwrite or purchase any Units for its own account and, in
soliciting purchases of Units, the Placement Agent acted solely as the Company’s
agent and not as principal.  Notwithstanding the foregoing and except
as otherwise provided in Section 2.3, it is understood
and agreed that the Placement Agent (or its affiliates) may, solely at its
discretion and without any obligation to do so, purchase Units from the Company
as principal and any such purchases by the Placement Agent (or its affiliates)
shall be disclosed to the Company (including the identity of such
purchaser).

      


      2.3  Subject to the
provisions of this Section 2, offers for the
purchase of Units were solicited by the Placement Agent as agent for the Company
at such times and in such amounts as the Placement Agent deemed
advisable.  The Placement Agent communicated to the Company, orally or
in writing, each reasonable offer to purchase Units received by it as agent of
the Company.  The Company shall have the sole right in its absolute
discretion to accept offers to purchase the Units and may reject any such offer,
in whole or in part.  The Placement Agent has the right, in its
discretion reasonably exercised, subject to giving prior notice to the Company,
to reject any offer to purchase Units received by it, in whole or in part, and
any such rejection shall not be deemed a breach of this Agreement.

      


      2.4  The Units are
being sold to the Purchasers at a price of $0.81 per Unit.  The
purchases of the Units by the Purchasers shall be evidenced by the execution of
the Subscription Agreements by the parties thereto.

      


      2.5 As compensation for
services rendered, on the Closing Date (as defined in Section 4 hereof), the
Company shall pay to the Placement Agent by wire transfer of immediately
available funds to an account or accounts designated by the Placement Agent, an
aggregate amount (the “Placement Fee”) equal to six
percent (6%) of the gross proceeds received by the Company from the sale of the
Units on such Closing Date.

      


      2.6  No Units which the
Company has agreed to sell pursuant to this Agreement and the Subscription
Agreements shall be deemed to have been purchased and paid for, or sold by the
Company, until such Shares and Warrants included in the Units shall have been
delivered to the Purchaser thereof against payment by such Purchaser. If the
Company shall default in its obligations to deliver the Shares and Warrants to a
Purchaser with whom it has entered into a binding Subscription Agreement, the
Company shall indemnify and hold the Placement Agent harmless against any loss,
claim, damage or expense arising from or as a result of such default by the
Company in accordance with the procedures set forth in Section 8(c)
herein.

       

      
        
          
          

        

        
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      3.  Representations and Warranties of
the Company.  The
Company represents and warrants to, and agrees with, the Placement Agent and the
Purchasers that:

      


      (a)  The Company has
prepared and filed in conformity with the requirements of the Securities Act of
1933, as amended (the “Securities Act”), and
published rules and regulations thereunder (the “Rules and Regulations”)
adopted by the Securities and Exchange Commission (the “Commission”) a “shelf”
Registration Statement (as hereinafter defined) on Form S-3 (File No.
333-151654), which became effective as of June 18, 2008 (the “Effective Date”), including a
base prospectus relating to the Shares (the “Base Prospectus”), and such
amendments and supplements thereto as may have been required to the date of this
Agreement. The term “Registration Statement” as
used in this Agreement means the registration statement (including all exhibits,
financial schedules and all documents and information deemed to be a part of the
Registration Statement pursuant to Rule 430A of the Rules and Regulations), as
amended and/or supplemented to the date of this Agreement, including the Base
Prospectus.  The Registration Statement is effective under the
Securities Act and no stop order preventing or suspending the effectiveness of
the Registration Statement or suspending or preventing the use of the Prospectus
has been issued by the Commission and no proceedings for that purpose have been
instituted or, to the knowledge of the Company, are threatened by the
Commission.  The Company, if required by the Rules and Regulations of
the Commission, will file the Prospectus (as defined below), with the Commission
pursuant to Rule 424(b) of the Rules and Regulations. The term “Prospectus” as used in this
Agreement means the prospectus, in the form in which it is to be filed with the
Commission pursuant to Rule 424(b) of the Rules and Regulations, or, if the
prospectus is not to be filed with the Commission pursuant to Rule 424(b), the
prospectus in the form included as part of the Registration Statement as of the
Effective Date, except that if any revised prospectus or prospectus supplement
shall be provided to the Placement Agent by the Company for use in connection
with the offering and sale of the Units which differs from the Prospectus
(whether or not such revised prospectus or prospectus supplement is required to
be filed by the Company pursuant to Rule 424(b) of the Rules and Regulations),
the term “Prospectus”
shall refer to such revised prospectus or prospectus supplement, as the case may
be, from and after the time it is first provided to the Placement Agent for such
use. Any preliminary prospectus or prospectus subject to completion included in
the Registration Statement or filed with the Commission pursuant to Rule 424 of
the Rules and Regulations is hereafter called a “Preliminary
Prospectus.”  Any reference herein to the Registration
Statement, any Preliminary Prospectus or the Prospectus shall be deemed to refer
to and include the documents incorporated by reference therein pursuant to Item
12 of Form S-3 which were filed under the Securities Exchange Act of 1934, as
amended (the “Exchange
Act”), on or before the last to occur of the Effective Date, the date of
the Preliminary Prospectus, or the date of the Prospectus, and any reference
herein to the terms “amend,” “amendment,” or “supplement” with respect to the
Registration Statement, any Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include (i) the filing of any document under the Exchange
Act after the Effective Date, the date of such Preliminary Prospectus or the
date of the Prospectus, as the case may be, which is incorporated by reference
and (ii) any such document so filed. If the Company has filed an abbreviated
registration statement to register additional securities pursuant to Rule 462(b)
under the Rules and Regulations (the “462(b) Registration
Statement”), then any reference herein to the Registration Statement
shall also be deemed to include such 462(b) Registration Statement.

       

      
        
          
          

        

        
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      (b)  The conditions to
the use of Form S-3 in connection with the offering and sale of the Securities
as contemplated hereby have been satisfied. The Registration Statement meets,
and the offering and sale of the Securities as contemplated hereby complies
with, the requirements of Rule 415 under the Securities Act (including, without
limitation, Rule 415(a)(4) and (a)(5) of the Rules and
Regulations).

      


      (c)  As of the
Applicable Time (as defined below) and as of the Closing Date, neither (i) any
General Use Free Writing Prospectus (as defined below) issued at or prior to the
Applicable Time, and the Pricing Prospectus (as defined below) and the
information included on Schedule A hereto, all
considered together (collectively, the “General Disclosure Package”),
(ii) any individual Limited Use Free Writing Prospectus (as defined below)
issued at or prior to the Applicable Time nor (iii) the bona fide electronic
road show (as defined in Rule 433(h)(5) of the Rules and Regulations), if any,
that has been made available without restriction to any person, when considered
together with the General Disclosure Package, included or will include, any
untrue statement of a material fact or omitted or as of the Closing Date will
omit, to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided,
however, that the Company makes no representations or warranties as to
information contained in or omitted from any Issuer Free Writing Prospectus, in
reliance upon, and in conformity with, written information furnished to the
Company by the Placement Agent specifically for inclusion therein, which
information the parties hereto agree is limited to the Placement Agent’s
Information (as defined in Section
17).  As used in this paragraph (b) and elsewhere in
this Agreement:

      


      “Applicable
Time” means 5:00 P.M., New York time, on the date of this
Agreement.

      


      “General Use Free
Writing Prospectus” means any Issuer Free Writing Prospectus that is
identified on Schedule
A to
this Agreement.

      


      “Issuer Free
Writing Prospectus” means any “issuer free writing
prospectus,” as defined in Rule 433 of the Rules and Regulations relating
to the Units in the form filed or required to be filed with the Commission or,
if not required to be filed, in the form retained in the Company’s records
pursuant to Rule 433(g) of the Rules and Regulations.

      


      “Limited Use Free
Writing Prospectuses” means any Issuer Free Writing Prospectus that is
not a General Use Free Writing Prospectus.

      


      “Pricing
Prospectus” means the Preliminary Prospectus, if any, and the Base
Prospectus, each as amended and supplemented immediately prior to the Applicable
Time, including any document incorporated by reference therein and any
prospectus supplement deemed to be a part thereof.

       

      
        
          
          

        

        
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      (d)  No order
preventing or suspending the use of any Preliminary Prospectus, any Issuer Free
Writing Prospectus or the Prospectus relating to the Offering has been issued by
the Commission, and no proceeding for that purpose or pursuant to Section 8A of
the Securities Act has been instituted or, to the knowledge of the Company,
threatened by the Commission, and each Preliminary Prospectus (if any), at the
time of filing thereof, conformed in all material respects to the requirements
of the Securities Act and the Rules and Regulations, and did not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided, however, that the
Company makes no representations or warranties as to information contained in or
omitted from any Preliminary Prospectus, in reliance upon, and in conformity
with, written information furnished to the Company by the Placement Agent
specifically for inclusion therein, which information the parties hereto agree
is limited to the Placement Agent’s Information (as defined in Section
17).

      


      (e)  At the time the
Registration Statement became effective, at the date of this Agreement and at
the Closing Date, the Registration Statement conformed and will conform in all
material respects to the requirements of the Securities Act and the Rules and
Regulations and did not and will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading; the Prospectus, at the
time the Prospectus was issued and at the Closing Date, conformed and will
conform in all material respects to the requirements of the Securities Act and
the Rules and Regulations and did not and will not contain an untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the
foregoing representations and warranties in this paragraph (e) shall not apply
to information contained in or omitted from the Registration Statement or the
Prospectus in reliance upon, and in conformity with, written information
furnished to the Company by the Placement Agent specifically for inclusion
therein, which information the parties hereto agree is limited to the Placement
Agent’s Information (as defined in Section
17).

      


      (f)  Each Issuer Free
Writing Prospectus, if any, as of its issue date and at all subsequent times
through the completion of the public offer and sale of the Units or until any
earlier date that the Company notified or notifies the Placement Agent as
described in Section
5(e),
did not, does not and will not include any information that conflicted,
conflicts or will conflict with the information contained in the Registration
Statement, Pricing Prospectus or the Prospectus, including any document
incorporated by reference therein and any prospectus supplement deemed to be a
part thereof that has not been superseded or modified, or includes an untrue
statement of a material fact or omitted or would omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.  The foregoing sentence does not apply to statements in or
omissions from any Issuer Free Writing Prospectus in reliance upon, and in
conformity with, written information furnished to the Company by the Placement
Agent specifically for inclusion therein, which information the parties hereto
agree is limited to the Placement Agent’s Information (as defined in Section
17).

       

      
        
          
          

        

        
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      (g)  The documents
incorporated by reference in the Prospectus, when they became effective or were
filed with the Commission, as the case may be, conformed in all material
respects to the requirements of the Securities Act or the Exchange Act, as
applicable, and the rules and regulations of the Commission thereunder and none
of such documents contained any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; and any further documents so filed and incorporated by
reference in the Prospectus, when such documents become effective or are filed
with the Commission, as the case may be, will conform in all material respects
to the requirements of the Securities Act or the Exchange Act, as applicable,
and the rules and regulations of the Commission thereunder and will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading.

      


      (h) The Company has not,
directly or indirectly, distributed and will not distribute any offering
material in connection with the Offering other than any Preliminary Prospectus,
the Prospectus and other materials, if any, permitted under the Securities Act
and consistent with Section 5(b) below. The
Company is not an “ineligible issuer” in connection with the offering pursuant
to Rules 164, 405 and 433 under the Securities Act. The Company will file with
the Commission all Issuer Free Writing Prospectuses (other than a “road show,”
as defined in Rule 433(d)(8) of the Rules and Regulations), if any, in the time
and manner required under Rules 163(b)(2) and 433(d) of the Rules and
Regulations.

      


      (i) The Company and each of its
subsidiaries (as defined in Section 15) have been duly
organized and are validly existing as corporations in good standing (or the
foreign equivalent thereof) under the laws of their respective jurisdictions of
organization.  The Company and each of its subsidiaries are duly
qualified to do business and are in good standing as foreign corporations in
each jurisdiction in which their respective ownership or lease of property or
the conduct of their respective businesses requires such qualification and have
all power and authority (corporate or other) necessary to own or hold their
respective properties and to conduct the businesses in which they are engaged,
except where the failure to so qualify or have such power or authority (i) would
not have, singularly or in the aggregate, a material adverse effect on the
condition (financial or otherwise), results of operations, assets, business or
prospects of the Company and its subsidiaries taken as a whole, or (ii) impair
in any material respect the ability of the Company to perform its obligations
under this Agreement or to consummate any transactions contemplated by this
Agreement, the General Disclosure Package or the Prospectus (any such effect as
described in clauses (i) or (ii), a “Material Adverse
Effect”).  The Company owns or controls, directly or
indirectly, only the following corporations, partnerships, limited liability
partnerships, limited liability companies, associations or other
entities:  Acute Therapeutics, Inc., a Delaware
corporation.

       

      
        
          
          

        

        
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      (j)  The Company has
the full right, power and authority to enter into this Agreement, each of the
Subscription Agreements and that certain Escrow Agreement (the “Escrow Agreement”) dated as of
the date hereof by and among the Company, the Placement Agent and the escrow
agent named therein, and to perform and to discharge its obligations hereunder
and thereunder; and each of this Agreement, the Escrow Agreement and each of the
Subscription Agreements has been duly authorized, executed and delivered by the
Company, and constitutes a valid and binding obligation of the Company
enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors’ rights generally and except as enforceability
may be subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).

      


      (k)  The Shares and the
Warrants to be issued and sold by the Company to the Purchasers hereunder and
under the Subscription Agreements have been duly and validly authorized and,
when issued and delivered against payment therefor as provided herein and in the
Subscription Agreements, and the Warrant Shares, when issued and delivered
against payment therefor as provided in the Warrants, will be duly and validly
issued, fully paid and non-assessable and free of any preemptive or similar
rights and will conform to the description thereof contained in the General
Disclosure Package and the Prospectus.

      


      (l) The Company has an
authorized capitalization as set forth in the Pricing Prospectus, and all of the
issued and outstanding shares of capital stock of the Company have been duly and
validly authorized and issued, are fully paid and non-assessable, have been
issued in compliance with federal and state securities laws, and conform to the
description thereof contained in the General Disclosure Package and the
Prospectus.  As of April 30, 2009, there were 104,453,750 shares
of Common Stock issued and outstanding and no shares of Preferred Stock, par
value $0.001 of the Company issued and outstanding and 24,570,593 shares of
Common Stock were issuable upon the exercise of all options, warrants and
convertible securities outstanding as of such date. Since such date, the Company
has not issued any securities, other than Common Stock of the Company issued
pursuant to the exercise of stock options previously outstanding under the
Company’s stock option plans or the issuance of Common Stock pursuant to
employee stock purchase plans.  All of the Company’s options, warrants
and other rights to purchase or exchange any securities for shares of the
Company’s capital stock have been duly authorized and validly issued and were
issued in compliance with US federal and state securities laws.  None
of the outstanding shares of Common Stock was issued in violation of any
preemptive rights, rights of first refusal or other similar rights to subscribe
for or purchase securities of the Company, except for such rights as may have
been fully satisfied or waived.  There are no authorized or
outstanding shares of capital stock, options, warrants, preemptive rights,
rights of first refusal or other rights to purchase, or equity or debt
securities convertible into or exchangeable or exercisable for, any capital
stock of the Company or any of its subsidiaries other than those described above
or accurately described in the General Disclosure Package.  The
description of the Company’s stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted thereunder, as described
in the General Disclosure Package and the Prospectus, accurately and fairly
present the information required to be shown with respect to such plans,
arrangements, options and rights.

       

      
        
          
          

        

        
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      (m) All the outstanding shares
of capital stock of each subsidiary of the Company have been duly authorized and
validly issued, are fully paid and nonassessable and, except to the extent set
forth in the General Disclosure Package or the Prospectus, are owned by the
Company directly or indirectly through one or more wholly-owned subsidiaries,
free and clear of any claim, lien, encumbrance, security interest, restriction
upon voting or transfer or any other claim of any third party.

      


      (n) The execution, delivery and
performance of this Agreement, the Subscription Agreements and the Escrow
Agreement by the Company, the issue and sale of the Units by the Company and the
consummation of the transactions contemplated hereby and thereby will not (with
or without notice or lapse of time or both) conflict with or result in a breach
or violation of any of the terms or provisions of, constitute a default or Debt
Repayment Triggering Event (as defined below) under, give rise to any right of
termination or other right or the cancellation or acceleration of any right or
obligation or loss of a benefit under, or give rise to the creation or
imposition of any lien, encumbrance, security interest, claim or charge upon any
property or assets of the Company or any subsidiary pursuant to, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries is bound or to which any of the property or assets of
the Company or any of its subsidiaries is subject, nor will such actions result
in any violation of the provisions of (A) the charter or by-laws (or analogous
governing instruments, as applicable) of the Company or any of its subsidiaries
or (B) any law, statute, rule, regulation, judgment, order or decree of any
court or governmental agency or body, domestic or foreign, having jurisdiction
over the Company or any of its subsidiaries or any of their properties or
assets, except, with respect to clause (B), any violation which, singularly or
in the aggregate, would not have a Material Adverse Effect.  A “Debt
Repayment Triggering Event” means any event or condition that gives, or with the
giving of notice or lapse of time would give the holder of any note, debenture
or other evidence of indebtedness (or any person acting on such holder’s behalf)
the right to require the repurchase, redemption or repayment of all or a portion
of such indebtedness by the Company or any of its subsidiaries.

      


      (o)  Except for the
registration of the Units under the Securities Act and such consents, approvals,
authorizations, registrations or qualifications as may be required under the
Exchange Act and applicable state or foreign securities laws, the Financial
Industry Regulatory Authority (“FINRA”) and the Nasdaq Global
Market (the “NasdaqGM”)
in connection with the offering and sale of the Units by the Company, no
consent, approval, authorization or order of, or filing, qualification or
registration with, any court or governmental agency or body, foreign or
domestic, which has not been made, obtained or taken and is not in full force
and effect, is required for the execution, delivery and performance of this
Agreement, the Subscription Agreements and the Escrow Agreement by the Company,
the offer or sale of the Units or the consummation of the transactions
contemplated hereby or thereby.

       

      
        
          
          

        

        
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      (p)  Ernst & Young
LLP, who has audited certain financial statements and related schedules included
or incorporated by reference in the Registration Statement, the General
Disclosure Package and the Prospectus, and has audited the Company’s internal
control over financial reporting and management’s assessment thereof, is an
independent registered public accounting firm as required by the Securities Act
and the Rules and Regulations and the Public Company Accounting Oversight Board
(United States) (the “PCAOB”).  Except as
pre-approved in accordance with the requirements set forth in Section 10A of the
Exchange Act, Ernst & Young LLP has not been engaged by
the Company to perform any “prohibited activities” (as defined in Section 10A of
the Exchange Act).

      


      (q) The financial statements,
together with the related notes and schedules, included or incorporated by
reference in the General Disclosure Package, the Prospectus and in the
Registration Statement fairly present the financial position and the results of
operations and changes in financial position of the Company and its consolidated
subsidiaries and other consolidated entities at the respective dates or for the
respective periods therein specified.  Such statements and related
notes and schedules have been prepared in accordance with the generally accepted
accounting principles in the United States (“GAAP”) applied on a consistent
basis throughout the periods involved except as may be set forth in the related
notes included or incorporated by reference in the General Disclosure Package,
and except that unaudited financial statements may not contain footnotes
required by GAAP.  The financial statements, together with the related
notes and schedules, included or incorporated by reference in the General
Disclosure Package and the Prospectus comply in all material respects with the
Securities Act, the Exchange Act, and the Rules and Regulations and the rules
and regulations under the Exchange Act.  No other financial statements
or supporting schedules or exhibits are required by the Securities Act or the
Rules and Regulations to be described, or included or incorporated by reference
in the Registration Statement, the General Disclosure Package or the
Prospectus.  There is no pro forma or as adjusted financial
information which is required to be included in the Registration Statement, the
General Disclosure Package, or and the Prospectus or a document incorporated by
reference therein in accordance with the Securities Act and the Rules and
Regulations which has not been included or incorporated as so
required.

      


      (r)  Neither the
Company nor any of its subsidiaries has sustained, since the date of the latest
audited financial statements included or incorporated by reference in the
General Disclosure Package, any material loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order or
decree, otherwise than as set forth or contemplated in the General Disclosure
Package; and, since such date, there has not been any change in the capital
stock (other than Common Stock of the Company issued pursuant to the exercise of
stock options previously outstanding under the Company’s stock option plans or
the issuance of Common Stock pursuant to employee stock purchase plans) or
long-term debt of the Company or any of its subsidiaries, or any material
adverse changes, or any development involving a prospective material adverse
change, in or affecting the business, assets, general affairs, management,
financial position, prospects, stockholders’ equity or results of operations of
the Company and its subsidiaries taken as a whole, otherwise than as set forth
or contemplated in the General Disclosure Package.

       

      
        
          
          

        

        
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      (s)  Except as set
forth in the General Disclosure Package, there is no legal or governmental
action, suit, claim or proceeding pending to which the Company or any of its
subsidiaries is a party or of which any property or assets of the Company or any
of its subsidiaries is the subject which is required to be described in the
Registration Statement, the General Disclosure Package or the Prospectus or a
document incorporated by reference therein and is not described therein, or
which, singularly or in the aggregate, if determined adversely to the Company or
any of its subsidiaries, would be likely to have a Material Adverse Effect or
prevent or adversely affect the ability of the Company to perform its
obligations under this Agreement or the consummation of the transactions
contemplated hereby; and to the best of the Company’s knowledge, except as set
forth in the General Disclosure Package, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others.

      


      (t)  Neither the
Company nor any of its subsidiaries is in (i) violation of its charter or
by-laws (or analogous governing instrument, as applicable), (ii) default in any
respect, and no event has occurred which, with notice or lapse of time or both,
would constitute such a default, in the due performance or observance of any
term, covenant or condition contained in any indenture, mortgage, deed of trust,
loan agreement, lease or other agreement or instrument to which it is a party or
by which it is bound or to which any of its property or assets is subject or
(iii) violation in any respect of any statute, law, ordinance, governmental
rule, regulation or court order, decree or judgment to which it or its property
or assets may be subject except, in the case of clauses (ii) and (iii) of this
paragraph (t), for any violations or defaults which, singularly or in the
aggregate, would not have a Material Adverse Effect.

      


      (u)  The Company and
each of its subsidiaries possesses all licenses, certificates, authorizations
and permits issued by, and have made all declarations and filings with, the
appropriate local, state, federal or foreign regulatory agencies or bodies which
are necessary or desirable for the ownership of their respective properties or
the conduct of their respective businesses (including, without limitation, those
administered by the Food and Drug Administration of the U.S. Department of
Health and Human Services (the “FDA”) or by any foreign,
federal, state or local governmental or regulatory authority performing
functions similar to those performed by the FDA) as described in the General
Disclosure Package and the Prospectus (collectively, the “Governmental Permits”) except
where any failures to possess or make the same, singularly or in the aggregate,
would not have a Material Adverse Effect.  The Company and its
subsidiaries are in compliance with all such Governmental Permits; all such
Governmental Permits are valid and in full force and effect, except where the
validity or failure to be in full force and effect would not, singularly or in
the aggregate, have a Material Adverse Effect.  All such Governmental
Permits are free and clear of any restriction or condition that are in addition
to, or materially different from those normally applicable to similar licenses,
certificates, authorizations and permits. Neither the Company nor any subsidiary
has received notification of any revocation or modification (or proceedings
related thereto) of any such Governmental Permit and the Company has no reason
to believe that any such Governmental Permit will not be renewed, except as set
forth in or contemplated by the General Disclosure Package.

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      (v)  The clinical
trials conducted by or on behalf of or sponsored by the Company or in which the
Company or its product candidates have participated that are described in the
General Disclosure Package and Prospectus or the results of which are referred
to in the General Disclosure Package or Prospectus were and, if still pending,
are being conducted in all material respects in accordance with medical and
scientific research procedures that the Company reasonably believes are
appropriate. The descriptions in the General Disclosure Package and Prospectus
of the results of such clinical trials are accurate and fairly present the data
derived from such clinical trials, and the Company has no knowledge of any
studies or tests performed by or on behalf of the Company the results of which
are materially inconsistent with or otherwise materially call into question the
results described or referred to in the General Disclosure Package and
Prospectus.  Except to the extent disclosed in the General Disclosure
Package and the Prospectus, the Company has not received any notices or other
correspondence from the FDA or any other governmental agency requiring the
termination, suspension or modification of any clinical trials that are
described in the General Disclosure Package or Prospectus or the results of
which are referred to in the General Disclosure Package or
Prospectus.

      


      (w)  Neither the
Company nor any of its subsidiaries is or, after giving effect to the offering
and sale of the Securities, including the issuance, offering and sale of the
Warrant Shares, and the application of the proceeds thereof as described in the
General Disclosure Package and the Prospectus, will become an “investment
company” within the meaning of the Investment Company Act of 1940, as amended,
and the rules and regulations of the Commission thereunder.

      


      (x)  Neither the
Company, its subsidiaries nor, to the Company’s knowledge, any of the Company’s
or its subsidiaries’ officers, directors or affiliates has taken or will take,
directly or indirectly, any action designed or intended to stabilize or
manipulate the price of any security of the Company, or which caused or resulted
in, or which might in the future reasonably be expected to cause or result in,
stabilization or manipulation of the price of any security of the
Company.

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      (y)  The Company and
its subsidiaries owns or possesses the right to use all material patents,
trademarks, trademark registrations, service marks, service mark registrations,
trade names, copyrights, licenses, inventions, software, databases, know-how,
Internet domain names, trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures, and other
intellectual property (collectively, “Intellectual Property”)
necessary to carry on their respective businesses as currently conducted, and as
proposed to be conducted and described in the General Disclosure Package and
the  Prospectus, and the Company is not aware of any claim to the
contrary or any challenge by any other person to the rights of the Company and
its subsidiaries with respect to the foregoing except for those that could not
have a Material Adverse Effect.  The Intellectual Property licenses
described in the General Disclosure Package and the Prospectus are valid,
binding upon, and enforceable by or against the parties thereto in accordance to
its terms.  The Company and each of its subsidiaries has complied in
all material respects with, and is not in breach nor has received any asserted
or threatened claim of breach of, any Intellectual Property license, except for
any such breach that would not individually or in the aggregate have a Material
Adverse Effect, and the Company has no knowledge of any breach or anticipated
breach by any other person to any Intellectual Property license.  The
Company’s and each of its subsidiaries’ businesses as now conducted and as
proposed to be conducted does not and will not infringe or conflict with any
valid patents, trademarks, service marks, trade names, copyrights, trade
secrets, licenses or other Intellectual Property or franchise right of any
person.  To its knowledge, no claim has been made against the Company
or any of its subsidiaries alleging the infringement by the Company or any of
its subsidiaries of any patent, trademark, service mark, trade name, copyright,
trade secret, license in or other intellectual property right or franchise right
of any person.  The Company and each of its subsidiaries has taken all
reasonable steps to protect, maintain and safeguard its rights in all
Intellectual Property, including the execution of appropriate nondisclosure and
confidentiality agreements.  The consummation of the transactions
contemplated by this Agreement will not result in the loss or impairment of or
payment of any additional amounts with respect to, nor require the consent of
any other person in respect of, the Company’s or any of its subsidiaries’ right
to own, use, or hold for use any of the Intellectual Property as owned, used or
held for use in the conduct of the businesses as currently
conducted.  With respect to the use of the software in the Company’s
or any of its subsidiaries’ businesses as they are currently conducted, the
Company nor any of its subsidiaries has experienced any material defects in such
software including any material error or omission in the processing of any
transactions other than defects which have been corrected, and to the knowledge
of the Company, no such software contains any device or feature designed to
disrupt, disable, or otherwise impair the functioning of any software or is
subject to the terms of any “open source” or other similar license that provides
for the source code of the software to be publicly distributed or dedicated to
the public.  The Company and each of its subsidiaries has at all times
complied with all applicable laws relating to privacy, data protection, and the
collection and use of personal information collected, used, or held for use by
the Company and any of its subsidiaries in the conduct of the Company’s and its
subsidiaries businesses, except for any such breach that would individually or
in the aggregate have a Material Adverse Effect.  No claims have been
asserted or threatened against the Company or any of its subsidiaries alleging a
violation of any person’s privacy or personal information or data rights and the
consummation of the transactions contemplated hereby will not breach or
otherwise cause any violation of any law related to privacy, data protection, or
the collection and use of personal information collected, used, or held for use
by the Company or any of its subsidiaries in the conduct of the Company’s or any
of its subsidiaries’ businesses.  The Company and each of its
subsidiaries takes reasonable measures to ensure that such information is
protected against unauthorized access, use, modification, or other
misuse.

      


      (z)  Neither the
Company nor its subsidiaries own any real property.  The Company and
each of its subsidiaries have good and marketable title in fee simple to, or
have valid rights to lease or otherwise use, all items of real or personal
property, as described in the General Disclosure Package, which are material to
the business of the Company and its subsidiaries taken as a whole, in each case
free and clear of all liens, encumbrances, security interests, claims and
defects that do not, singularly or in the aggregate, materially affect the value
of such property and do not interfere with the use made and proposed to be made
of such property by the Company or any of its subsidiaries, except for those
liens, encumbrances, security interests, claims and defects that would not have
a Material Adverse Effect; and all of the leases and subleases material to the
business of the Company and its subsidiaries, considered as one enterprise, and
under which the Company or any of its subsidiaries holds properties described in
the General Disclosure Package and the Prospectus, are in full force and effect,
and neither the Company nor any subsidiary has received any notice of any
material claim of any sort that has been asserted by anyone adverse to the
rights of the Company or any subsidiary under any of the leases or subleases
mentioned above, or affecting or questioning the rights of the Company or such
subsidiary to the continued possession of the leased or subleased premises under
any such lease or sublease.

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      (aa)  No labor
disturbance by the employees of the Company or any of its subsidiaries exists
or, to the best of the Company’s knowledge, is threatened or imminent, and the
Company is not aware of any existing or imminent labor disturbance by the
employees of any of its or its subsidiaries’ principal suppliers, manufacturers,
customers or contractors, that could reasonably be expected, singularly or in
the aggregate, to have a Material Adverse Effect.  The Company is not
aware that any key employee or significant group of employees of the Company or
any subsidiary plans to terminate employment with the Company or any such
subsidiary.

      


      (bb)  No “prohibited
transaction” (as defined in Section 406 of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and published
interpretations thereunder (“ERISA”), or Section 4975 of
the Internal Revenue Code of 1986, as amended from time to time (the “Code”)) or “accumulated
funding deficiency” (as defined in Section 302 of ERISA) or any of the events
set forth in Section 4043(b) of ERISA (other than events with respect to which
the thirty (30)-day notice requirement under Section 4043 of ERISA has been
waived) has occurred or could reasonably be expected to occur with respect to
any employee benefit plan of the Company or any of its subsidiaries which could,
singularly or in the aggregate, have a Material Adverse Effect.  Each
employee benefit plan of the Company or any of its subsidiaries is in compliance
in all material respects with applicable law, including ERISA and the Code. The
Company and its subsidiaries have not incurred and could not reasonably be
expected to incur liability under Title IV of ERISA with respect to the
termination of, or withdrawal from, any pension plan (as defined in
ERISA).  Each pension plan for which the Company or any of its
subsidiaries would have any liability that is intended to be qualified under
Section 401(a) of the Code is so qualified, and nothing has occurred, whether by
action or by failure to act, which could, singularly or in the aggregate, cause
the loss of such qualification.

      


      (cc)  The Company and
its subsidiaries are in compliance in all material respects with all foreign,
federal, state and local rules, laws and regulations relating to the use,
treatment, storage and disposal of hazardous or toxic substances or waste and
protection of health and safety or the environment which are applicable to their
businesses (“Environmental
Laws”), except where the failure to comply would not, singularly or in
the aggregate, have a Material Adverse Effect.  There has been no
storage, generation, transportation, handling, treatment, disposal, discharge,
emission, or other release of any kind of toxic or other wastes or other
hazardous substances by, due to, or caused by the Company or any of its
subsidiaries (or, to the Company’s knowledge, any other entity for whose acts or
omissions the Company or any of its subsidiaries is or may otherwise be liable)
upon any of the property now or previously owned or leased by the Company or any
of its subsidiaries, or upon any other property, in violation of any law,
statute, ordinance, rule, regulation, order, judgment, decree or permit or which
would, under any law, statute, ordinance, rule (including rule of common law),
regulation, order, judgment, decree or permit, give rise to any liability,
except for any violation or liability which would not have, singularly or in the
aggregate with all such violations and liabilities, a Material Adverse Effect;
and there has been no disposal, discharge, emission or other release of any kind
onto such property or into the environment surrounding such property of any
toxic or other wastes or other hazardous substances with respect to which the
Company has knowledge, except for any such disposal, discharge, emission, or
other release of any kind which would not have, singularly or in the aggregate
with all such discharges and other releases, a Material Adverse
Effect.  In the ordinary course of business, the Company and its
subsidiaries conduct periodic reviews of the effect of Environmental Laws on
their business and assets, in the course of which they identify and evaluate
associated costs and liabilities (including, without limitation, any capital or
operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or Governmental Permits issued thereunder,
any related constraints on operating activities and any potential liabilities to
third parties).  On the basis of such reviews, the Company and its
subsidiaries have reasonably concluded that such associated costs and
liabilities would not have, singularly or in the aggregate, a Material Adverse
Effect.

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      (dd)  The Company and
its subsidiaries, each (i) has timely filed all necessary federal, state, local
and foreign tax returns that are required to be filed or has requested
extensions thereof, and all such returns were true, complete and correct, (ii)
has paid all federal, state, local and foreign taxes, assessments, governmental
or other charges due and payable for which it is liable, including, without
limitation, all sales and use taxes and all taxes which the Company or any of
its subsidiaries is obligated to withhold from amounts owing to employees,
creditors and third parties, and (iii) does not have any tax deficiency or
claims outstanding or assessed or, to the best of its knowledge, proposed
against any of them, except those, in each of the cases described in clauses
(i), (ii) and (iii) of this paragraph (dd), that would not,
singularly or in the aggregate, have a Material Adverse Effect.  The
Company and its subsidiaries, each has not engaged in any transaction which is a
corporate tax shelter or which could be characterized as such by the Internal
Revenue Service or any other taxing authority.  The accruals and
reserves on the books and records of the Company and its subsidiaries in respect
of tax liabilities for any taxable period not yet finally determined are
adequate to meet any assessments and related liabilities for any such period,
and since December 31, 2008 the Company and its subsidiaries each has not
incurred any liability for taxes other than in the ordinary course.

      


      (ee)  The Company and
each of its subsidiaries carries, or is covered by, insurance provided by
recognized, financially sound and reputable institutions with policies in such
amounts and covering such risks as the Company reasonably considers adequate for
the conduct of their respective businesses and the value of their respective
properties and as is customary for companies engaged in similar businesses in
similar industries.  The Company has no reason to believe that it or
any subsidiary will not be able (i) to renew its existing insurance coverage as
and when such policies expire or (ii) to obtain comparable coverage from similar
institutions as may be necessary or appropriate to conduct its business as now
conducted and at a cost that would not result in a Material Adverse
Effect.

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      (ff)  The Company
maintains a system of internal accounting and other controls sufficient to
provide reasonable assurances that (i) transactions are executed in accordance
with management’s general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization; and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.  Except as described in the General
Disclosure Package, since the end of the Company’s most recent audited fiscal
year, there as been (A) no material weakness in the Company’s internal control
over financial reporting (whether or not remediated) and (B) no change in the
Company’s internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, the Company’s internal
control over financial reporting.

      


      (gg) The minute books of the
Company and each of its subsidiaries that would be a “significant subsidiary”
within the meaning of Rule 1-02(w) of Regulation S-X under the Exchange Act
(such a significant subsidiary of the Company, a “Significant Subsidiary”) have
been made available to the Placement Agent and counsel for the Placement Agent,
and such books (i) contain a complete summary of all meetings and actions of the
board of directors (including each board committee) as of April 18, 2009 and
shareholders of the Company (or analogous governing bodies and interest holders,
as applicable), and each of its Significant Subsidiaries since the time of its
respective incorporation or organization through the date of the latest meeting
and action, and (ii) accurately in all material respects reflect all
transactions referred to in such minutes. There are no material transactions,
agreements or other actions of the Company or of its subsidiaries that are not
properly approved and/or recorded in the minute books of the Company or of its
subsidiaries, as applicable.

      


      (hh)  There is no
franchise, lease, contract, agreement or document required by the Securities Act
or by the Rules and Regulations to be described in the General Disclosure
Package and in the Prospectus or a document incorporated by reference therein or
to be filed as an exhibit to the Registration Statement or a document
incorporated by reference therein which is not described or filed therein as
required; and all descriptions of any such franchises, leases, contracts,
agreements or documents contained in the Registration Statement or in a document
incorporated by reference therein are accurate and complete descriptions of such
documents in all material respects.  Other than as described in the
General Disclosure Package, no such franchise, lease, contract or agreement has
been suspended or terminated for convenience or default by the Company or any of
its subsidiaries or any of the other parties thereto, and neither the Company
nor any of its subsidiaries has received notice nor does the Company have any
other knowledge of any such pending or threatened suspension, termination or
non-renewal, except for such pending or threatened suspensions, terminations or
non-renewals that would not reasonably be expected to, singularly or in the
aggregate, have a Material Adverse Effect.

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      (ii)  No relationship,
direct or indirect, exists between or among the Company and any of its
subsidiaries on the one hand, and the directors, officers, stockholders (or
analogous interest holders), customers or suppliers of the Company or any of its
subsidiaries or any of their affiliates on the other hand, which is required to
be described in the General Disclosure Package and the Prospectus or a document
incorporated by reference therein and which is not so described.

      


      (jj)  No person or
entity has the right to require registration of shares of Common Stock or other
securities of the Company or any of its subsidiaries because of the filing or
effectiveness of the Registration Statement, except for persons and entities who
have expressly waived such right in writing or who have been given timely and
proper written notice and have failed to exercise such right within the time or
times required under the terms and conditions of such right.  Except
as described in the General Disclosure Package, there are no persons with
registration rights or similar rights to have any securities registered by the
Company or any of its subsidiaries under the Securities Act.

      


      (kk)  Neither the
Company nor any of its subsidiaries own any “margin securities” as that term is
defined in Regulation U of the Board of Governors of the Federal Reserve System
(the “Federal Reserve
Board”), and none of the proceeds of the sale of the Units will be used,
directly or indirectly, for the purpose of purchasing or carrying any margin
security, for the purpose of reducing or retiring any indebtedness which was
originally incurred to purchase or carry any margin security or for any other
purpose which might cause any of the Units to be considered a “purpose credit”
within the meanings of Regulation T, U or X of the Federal Reserve
Board.

      


      (ll)  Neither the
Company nor any of its subsidiaries is a party to any contract, agreement or
understanding with any person (other than this Agreement and any letter of
understanding between the Company and the Placement Agent) that would give rise
to a valid claim against the Company or the Placement Agent for a brokerage
commission, finder’s fee or like payment in connection with the offering and
sale of the Units or any transaction contemplated by this Agreement, the
Registration Statement, the General Disclosure Package or the
Prospectus.

      


      (mm)  No
forward-looking statement (within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act) contained in either the General
Disclosure Package or the Prospectus has been made or reaffirmed without a
reasonable basis or has been disclosed other than in good faith.

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

       

      (nn) The Company is subject to
and in compliance in all material respects with the reporting requirements of
Section 13 or Section 15(d) of the Exchange Act.  The Common Stock is
registered pursuant to Section 12(b) of the Exchange Act and is listed on the
NasdaqGM, and the Company has taken no action designed to, or reasonably likely
to have the effect of, terminating the registration of the Common Stock under
the Exchange Act or delisting the Common Stock from the NasdaqGM, nor has the
Company received any notification that the Commission or the Nasdaq Stock Market
LLC is contemplating terminating such registration or listing.  No
consent, approval, authorization or order of, or filing, notification or
registration with, the NasdaqGM is required for the listing and trading of the
shares of Common Stock on the NasdaqGM, except for (i) a Notification Form:
Listing of Additional Shares and (ii) a Notification Form: Change in the Number
of Shares Outstanding.

      


      (oo)  The Company is in
compliance with all applicable provisions of the Sarbanes-Oxley Act of 2002 and
all applicable rules and regulations promulgated thereunder or implementing the
provisions thereof (the “Sarbanes-Oxley
Act”).

      


      (pp)  The Company has
taken all necessary actions to ensure that it is in compliance with all
applicable corporate governance requirements set forth in the Nasdaq Marketplace
Rules.

      


      (qq)  Neither the
Company nor any of its subsidiaries nor, to the best of the Company’s knowledge,
any employee or agent of the Company or any subsidiary, has not made any
contribution or other payment to any official of, or candidate for, any federal,
state, local or foreign office in violation of any law (including the Foreign
Corrupt Practices Act of 1977, as amended) or of the character required to be
disclosed in the Registration Statement, the General Disclosure Package or the
Prospectus or a document incorporated by reference therein.

      


      (rr)  There are no
transactions, arrangements or other relationships between and/or among the
Company, any of its affiliates (as such term is defined in Rule 405 of the
Securities Act) and any unconsolidated entity, including, but not limited to,
any structured finance, special purpose or limited purpose entity that could
reasonably be expected to materially affect the Company’s or any of its
subsidiaries’ liquidity or the availability of or requirements for their capital
resources required to be described in the General Disclosure Package and the
Prospectus or a document incorporated by reference therein which have not been
described as required.

      


      (ss)  There are no
outstanding loans, advances (except normal advances for business expenses in the
ordinary course of business) or guarantees or indebtedness by the Company or any
of its subsidiaries to or for the benefit of any of the officers or directors of
the Company, any of its subsidiaries or any of their respective family members,
except as disclosed in the Registration Statement, the General Disclosure
Package and the Prospectus.

      


      (tt)  The statistical
and market-related data included in the Registration Statement, the General
Disclosure Package and the Prospectus are based on or derived from sources that
the Company believes to be reliable and accurate.

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

       

      (uu) Neither the Company nor any
subsidiary nor any of their affiliates (within the meaning of FINRA Conduct Rule
2720(b)(1)(a)) directly or indirectly controls, are controlled by, or is under
common control with, or is an associated person (within the meaning of Article
I, Section 1(ee) of the By-laws of FINRA) of, any member firm of
FINRA.

      


      (vv) No approval of the
shareholders of the Company under the rules and regulations of Nasdaq (including
Rule 4350 of the Nasdaq Global Marketplace Rules) is required for the Company to
issue and deliver to the Purchasers the Units.

      


      Any
certificate signed by or on behalf of the Company and delivered to the Placement
Agent or to counsel for the Placement Agent shall be deemed to be a
representation and warranty by the Company to the Placement Agent and the
Purchasers as to the matters covered thereby.

      


      4.  The Closing.  The
time and date of closing and delivery of the documents required to be delivered
to the Placement Agent pursuant to Sections 5 and 7 hereof shall be at
10:00 A.M., New York time, on May 13, 2009 (the “Closing Date”) at the office
of Dickstein Shapiro LLP, 1177 Avenue of the Americas, 47th Floor, New York, New
York.

      


      5.  Further Agreements of the
Company.  The
Company agrees with the Placement Agent and the Purchasers:

      


      (a)  To prepare the
Rule 462(b) Registration Statement, if necessary, in a form approved by the
Placement Agent and file such Rule 462(b) Registration Statement with the
Commission on the date hereof; to prepare the Prospectus in a form approved by
the Placement Agent containing information previously omitted at the time of
effectiveness of the Registration Statement in reliance on rules 430A, 430B and
430C of the Rules and Regulations and to file such Prospectus pursuant to Rule
424(b) of the Rules and Regulations not later than the second  (2nd)
business day following the execution and delivery of this Agreement or, if
applicable, such earlier time as may be required by Rule 430A of the Rules and
Regulations; to notify the Placement Agent immediately of the Company’s
intention to file or prepare any supplement or amendment to any Registration
Statement or to the Prospectus and to make no amendment or supplement to the
Registration Statement, the General Disclosure Package or to the Prospectus to
which the Placement Agent shall reasonably object by notice to the Company after
a reasonable period to review; to advise the Placement Agent, promptly after it
receives notice thereof, of the time when any amendment to any Registration
Statement has been filed or becomes effective or any supplement to the General
Disclosure Package or the Prospectus or any amended Prospectus has been filed
and to furnish the Placement Agent copies thereof; to file promptly all material
required to be filed by the Company with the Commission pursuant to Rule 433(d)
or 163(b)(2), as the case may be; to file promptly all reports and any
definitive proxy or information statements required to be filed by the Company
with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of the Prospectus and for so long as the
delivery of a prospectus (or in lieu thereof, the notice referred to in Rule
173(a) of the Rules and Regulations) is required in connection with the offering
or sale of the Units; to advise the Placement Agent, promptly after it receives
notice thereof, of the issuance by the Commission of any stop order or of any
order preventing or suspending the use of any Preliminary Prospectus, any Issuer
Free Writing Prospectus or the Prospectus, of the suspension of the
qualification of the Units for offering or sale in any jurisdiction, of the
initiation or threatening of any proceeding for any such purpose, or of any
request by the Commission for the amending or supplementing of the Registration
Statement, the General Disclosure Package or the Prospectus or for additional
information; and, in the event of the issuance of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus, any Issuer Free
Writing Prospectus or the Prospectus or suspending any such qualification, and
promptly to use its best efforts to obtain the withdrawal of such
order.

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

       

      (b)  The Company
represents and agrees that it has not made and, unless it obtains the prior
consent of the Placement Agent, it will not, make any offer relating to the
Units that would constitute a “free writing prospectus” as defined in Rule 405
of the Rules and Regulations unless the prior written consent of the Placement
Agent has been received (each, a “Permitted Free Writing
Prospectus”); provided that the prior
written consent of the Placement Agent hereto shall be deemed to have been given
in respect of the Issuer Free Writing Prospectus(es) included in Schedule A
hereto.  The Company represents that it has treated and agrees that it
will treat each Permitted Free Writing Prospectus as an Issuer Free Writing
Prospectus, comply with the requirements of Rules 164 and 433 of the Rules and
Regulations applicable to any Issuer Free Writing Prospectus, including the
requirements relating to timely filing with the Commission, legending and record
keeping and will not take any action that would result in the Placement Agent or
the Company being required to file with the Commission pursuant to Rule 433(d)
of the Rules and Regulations a free writing prospectus prepared by or on behalf
of the Placement Agent that the Placement Agent otherwise would not have been
required to file thereunder.

      


      (c)  If at any time
when a Prospectus relating to the Units is required to be delivered under the
Securities Act, any event occurs or condition exists as a result of which the
Prospectus, as then amended or supplemented, would include any untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading, or the Registration Statement, as then amended or
supplemented, would include any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein not misleading,
or if for any other reason it is necessary at any time to amend or supplement
any Registration Statement or the Prospectus to comply with the Securities Act
or the Exchange Act, the Company will promptly notify the Placement Agent, and
upon the Placement Agent’s request, the Company will promptly prepare and file
with the Commission, at the Company’s expense, an amendment to the Registration
Statement or an amendment or supplement to the Prospectus that corrects such
statement or omission or effects such compliance and will deliver to the
Placement Agent, without charge, such number of copies thereof as the Placement
Agent may reasonably request.  The Company consents to the use of the
Prospectus or any amendment or supplement thereto by the Placement
Agent.

       

      
        
          
          

        

        
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      (d)  If the General
Disclosure Package is being used to solicit offers to buy the Units at a time
when the Prospectus is not yet available to prospective purchasers and any event
shall occur as a result of which, in the judgment of the Company or in the
reasonable opinion of the Placement Agent, it becomes necessary to amend or
supplement the General Disclosure Package in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or to make the statements therein not conflict with the information
contained or incorporated by reference in the Registration Statement then on
file and not superseded or modified, or if it is necessary at any time to amend
or supplement the General Disclosure Package to comply with any law, the Company
promptly will either (i) prepare, file with the Commission (if required) and
furnish to the Placement Agent and any dealers an appropriate amendment or
supplement to the General Disclosure Package or (ii) prepare and file with the
Commission an appropriate filing under the Exchange Act which shall be
incorporated by reference in the General Disclosure Package so that the General
Disclosure Package as so amended or supplemented will not, in the light of the
circumstances under which they were made, be misleading or conflict with the
Registration Statement then on file, or so that the General Disclosure Package
will comply with law.

      


      (e)  If at any time
following issuance of an Issuer Free Writing Prospectus there occurred or occurs
an event or development as a result of which such Issuer Free Writing Prospectus
conflicted or will conflict with the information contained in the Registration
Statement, Pricing Prospectus or Prospectus, including any document incorporated
by reference therein and any prospectus supplement deemed to be a part thereof
and not superseded or modified or included or would include an untrue statement
of a material fact or omitted or would omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, the
Company has promptly notified or will promptly notify the Placement Agent so
that any use of the Issuer Free Writing Prospectus may cease until it is amended
or supplemented and has promptly amended or will promptly amend or supplement,
at its own expense, such Issuer Free Writing Prospectus to eliminate or correct
such conflict, untrue statement or omission.  The foregoing sentence
does not apply to statements in or omissions from any Issuer Free Writing
Prospectus in reliance upon, and in conformity with, written information
furnished to the Company by the Placement Agent specifically for inclusion
therein, which information the parties hereto agree is limited to the Placement
Agent’s Information (as defined in Section
17).

      


      (f)  To the extent not
available on the Commission’s EDGAR or IDEA system, to furnish promptly to the
Placement Agent and to counsel for the Placement Agent a signed copy of the
Registration Statement as originally filed with the Commission, and of each
amendment thereto filed with the Commission, including all consents and exhibits
filed therewith.

       

      
        
          
          

        

        
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      (g)  To the extent not
available on the Commission’s EDGAR or IDEA system, to deliver promptly to the
Placement Agent in New York City such number of the following documents as the
Placement Agent shall reasonably request:  (i) conformed copies
of the Registration Statement as originally filed with the Commission (in each
case excluding exhibits), (ii) each Preliminary Prospectus (if any), (iii) any
Issuer Free Writing Prospectus, (iv) the Prospectus (the delivery of the
documents referred to in clauses (i), (ii), (iii) and (iv) of this paragraph (g) to be made not
later than 10:00 A.M., New York time, on the business day following the
execution and delivery of this Agreement), (v) conformed copies of any amendment
to the Registration Statement (excluding exhibits), (vi) any amendment or
supplement to the General Disclosure Package or the Prospectus (the delivery of
the documents referred to in clauses (v) and (vi) of this paragraph (g) to be made not
later than 10:00 A.M., New York City time, on the business day following the
date of such amendment or supplement) and (vii) any document incorporated by
reference in the General Disclosure Package or the Prospectus (excluding
exhibits thereto) (the delivery of the documents referred to in clause (vi) of
this paragraph
(g) to
be made not later than 10:00 A.M., New York City time, on the business day
following the date of such document).

      


      (h)  To make generally
available to its shareholders as soon as practicable, but in any event not later
than eighteen (18) months after the effective date of each Registration
Statement (as defined in Rule 158(c) of the Rules and Regulations), an earnings
statement of the Company and its subsidiaries (which need not be audited)
complying with Section 11(a) of the Securities Act and the Rules and Regulations
(including, at the option of the Company, Rule 158); and to furnish to its
shareholders as soon as practicable after the end of each fiscal year an annual
report (including a balance sheet and statements of income, shareholders’ equity
and cash flows of the Company and its consolidated subsidiaries certified by
independent public accountants) and as soon as possible after each of the first
three fiscal quarters of each fiscal year (beginning with the first fiscal
quarter after the effective date of such Registration Statement), consolidated
summary financial information of the Company and its subsidiaries for such
quarter in reasonable detail.

      


      (i)  To take promptly
from time to time such actions as the Placement Agent may reasonably request to
qualify the Units for offering and sale under the securities or Blue Sky laws of
such jurisdictions (domestic or foreign) as the Placement Agent may designate
and to continue such qualifications in effect, and to comply with such laws, for
so long as required to permit the offer and sale of the Securities in such
jurisdictions; provided
that the Company and its subsidiaries shall not be obligated to qualify
as foreign corporations in any jurisdiction in which they are not so qualified
or to file a general consent to service of process in any
jurisdiction.

      


      (j)  To the extent not
available on the Commission’s EDGAR or IDEA system, upon request, during the
period of five (5) years from the date hereof, to deliver to the Placement Agent
upon request, (i) as soon as they are available, copies of all reports or other
communications furnished to shareholders, and (ii) as soon as they are
available, copies of any reports and financial statements furnished or filed
with the Commission or any national securities exchange or automatic quotation
system on which the Common Stock is listed or quoted.

       

      
        
          
          

        

        
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      (k)  That the Company
will not, for a period of ninety (90) days from the date of the Prospectus, (the
“Lock-Up Period”)
without the prior written consent of the Placement Agent, directly or indirectly
offer, sell, assign, transfer, pledge, contract to sell, or otherwise dispose
of, any shares of Common Stock or any securities convertible into or exercisable
or exchangeable for Common Stock, other than (i) the Company’s sale of the Units
(including the Shares and the Warrants included in the Units) hereunder, (ii)
the issuance of restricted Common Stock or options to acquire Common Stock
pursuant to the Company’s employee benefit plans, qualified stock option plans
or other employee compensation plans as such plans are in existence on the date
hereof and described in the Prospectus and the issuance of Common Stock pursuant
to the valid exercises of options, warrants or rights outstanding on the date
hereof and (iii) the issuance of Common Stock or securities convertible into or
exercisable or exchangeable for Common Stock (and the issuance of Common Stock
pursuant to the terms of such securities convertible into or exercisable or
exchangeable for Common Stock) in connection with strategic alliances involving
the Company and other entities, including without limitation, joint venture,
licensing and collaboration arrangements.  The Company will cause each
executive officer, director, shareholder, option-holder and warrantholder listed
in Schedule
B to
furnish to the Placement Agent, prior to the Closing Date, a letter,
substantially in the form of Exhibit C hereto,
pursuant to which each such person shall agree, among other things, not to
directly or indirectly offer, sell, assign, transfer, pledge, contract to sell,
or otherwise dispose of, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock, not to engage
in any swap or other agreement or arrangement that transfers, in whole or in
part, directly or indirectly, the economic risk of ownership of Common Stock or
any such securities and not to engage in any short selling of any Common Stock
or any such securities, during the Lock-Up Period, without the prior written
consent of the Placement Agent.  The Company also agrees that during
such period, the Company will not file any registration statement, preliminary
prospectus or prospectus, or any amendment or supplement thereto, under the
Securities Act for any such transaction or which registers, or offers for sale,
Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock, except for a registration statement on Form S-8 relating to
employee benefit plans.  Notwithstanding the foregoing, beginning on
the date that is thirty one (31) days after the date of the Prospectus, the
Company may issue shares of Common Stock pursuant to the committed equity
financing facilities entered into with Kingsbridge Capital Limited dated April
2006, May 2008 and December 2008 (collectively, the “CEFFS”), but in no event
during the Lock-Up Period shall such issuance of shares of Common Stock under
the CEFFS exceed, in the aggregate, two percent (2.0%) of the Company’s
outstanding common stock.  The Company hereby agrees that (i) if it
issues an earnings release or material news, or if a material event relating to
the Company occurs, during the last seventeen (17) days of the Lock-Up Period,
or (ii) if prior to the expiration of the Lock-Up Period, the Company announces
that it will release earnings results during the sixteen (16)-day period
beginning on the last day of the Lock-Up Period, the restrictions imposed by
this paragraph
(k) or
the letter shall continue to apply until the expiration of the eighteen (18)-day
period beginning on the issuance of the earnings release or the occurrence of
the material news or material event.

       

      
        
          
          

        

        
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      (l)  To supply the
Placement Agent with copies of all correspondence to and from, and all documents
issued to and by, the Commission in connection with the registration of the
Units under the Securities Act or the Registration Statement, any Preliminary
Prospectus or the Prospectus, or any amendment or supplement thereto or document
incorporated by reference therein.

      


      (m)  Prior to the
Closing Date, to furnish to the Placement Agent, as soon as they have been
prepared, copies of any unaudited interim consolidated financial statements of
the Company for any periods subsequent to the periods covered by the financial
statements appearing in the Registration Statement and the
Prospectus.

      


      (n)  Prior to the
Closing Date, not to issue any press release or other communication directly or
indirectly or hold any press conference with respect to the Company, its
condition, financial or otherwise, or earnings, business affairs or business
prospects (except for routine oral marketing communications in the ordinary
course of business and consistent with the past practices of the Company and of
which the Placement Agent is notified), without the prior written consent of the
Placement Agent, unless in the judgment of the Company and its counsel, and
after notification to the Placement Agent, such press release or communication
is required by law.

      


      (o)  Until the
Placement Agent shall have notified the Company of the completion of the
offering of the Units, that the Company will not, and will cause its affiliated
purchasers (as defined in Regulation M under the Exchange Act) not to, either
alone or with one or more other persons, bid for or purchase, for any account in
which it or any of its affiliated purchasers has a beneficial interest, any
Units, or attempt to induce any person to purchase any Units; and not to, and to
cause its affiliated purchasers not to, make bids or purchase for the purpose of
creating actual, or apparent, active trading in or of raising the price of the
Units.

      


      (p)  Not to take any
action prior to the Closing Date which would require the Prospectus to be
amended or supplemented pursuant to Section 5.

      


      (q)  To at all times
comply with all applicable provisions of the Sarbanes-Oxley Act in effect from
time to time.

      


      (r)  To apply the net
proceeds from the sale of the Units as set forth in the Registration Statement,
the General Disclosure Package and the Prospectus under the heading “Use of
Proceeds.”

      


      (s)  To use its best
efforts to list, effect and maintain, subject to notice of issuance, the Common
Stock on the Nasdaq GM.

      


      (t)  To use its best
efforts to assist the Placement Agent and its counsel with any filings with
FINRA and obtaining clearance from FINRA as to the amount of compensation
allowable or payable to the Placement Agent.

       

      
        
          
          

        

        
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      (u)  To use its best
efforts to do and perform all things required to be done or performed under this
Agreement by the Company prior to the Closing Date and to satisfy all conditions
precedent to the delivery of the Units.

      


      6.  Payment of
Expenses.  The
Company agrees to pay, or reimburse if paid by the Placement Agent, whether or
not the transactions contemplated hereby are consummated or this Agreement is
terminated:  (a) the costs incident to the authorization, issuance,
sale, preparation and delivery of the Units to the Purchasers and any taxes
payable in that connection; (b) the costs incident to the Registration of the
Units under the Securities Act; (c) the costs incident to the preparation,
printing and distribution of the Registration Statement, the Base Prospectus,
any Preliminary Prospectus, any Issuer Free Writing Prospectus, the General
Disclosure Package, the Prospectus, any amendments, supplements and exhibits
thereto or any document incorporated by reference therein and the costs of
printing, reproducing and distributing any transaction document by mail, telex
or other means of communications; (d) if applicable, the fees and expenses
(including related reasonable fees and expenses of counsel for the Placement
Agent) incurred in connection with securing any required review by FINRA of the
terms of the sale of the Units and any filings made with FINRA; (e) any
applicable listing, quotation or other fees; (f) the reasonable fees and
expenses (including related reasonable fees and expenses of counsel to the
Placement Agent) of qualifying the Units under the securities laws of the
several jurisdictions as provided in Section 5(i) and of
preparing, printing and distributing wrappers, Blue Sky Memoranda and Legal
Investment Surveys; (g) the cost of preparing and printing stock certificates;
(h) all fees and expenses of the registrar and transfer agent of the Units; (i)
the reasonable fees, disbursements and expenses of counsel to the Placement
Agent not to exceed $75,000, and (j) all other costs and expenses incident to
the offering of the Units or the performance of the obligations of the Company
under this Agreement (including, without limitation, the fees and expenses of
the Company’s counsel and the Company’s independent accountants and the travel
and other expenses incurred by Company personnel in connection with any “road
show” including, without limitation, any expenses advanced by the Placement
Agent on the Company’s behalf (which will be promptly reimbursed)); provided that, except to the
extent otherwise provided in this Section 6 and in Sections 8 and 10, the Placement
Agent shall pay its own costs and expenses, including the fees and expenses of
its counsel.

      


      7.  Conditions to the Obligations of the
Placement Agent and the Purchasers, and the Sale of the Units.  The
respective obligations of the Placement Agent hereunder and the Purchasers under
the Subscription Agreements, and the Closing of the sale of the Units, are
subject to the accuracy, when made and as of the Applicable Time and on the
Closing Date, of the representations and warranties of the Company contained
herein, to the accuracy of the statements of the Company made in any
certificates pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder, and to each of the following additional
terms and conditions:

      


      (a)  No stop order
suspending the effectiveness of the Registration Statement or any part thereof,
preventing or suspending the use of any Base Prospectus, any Preliminary
Prospectus, the Prospectus or any Permitted Free Writing Prospectus or any part
thereof shall have been issued and no proceedings for that purpose or pursuant
to Section 8A under the Securities Act shall have been initiated or threatened
by the Commission, and all requests for additional information on the part of
the Commission (to be included or incorporated by reference in the Registration
Statement or the Prospectus or otherwise) shall have been complied with to the
reasonable satisfaction of the Placement Agent; the Rule 462(b) Registration
Statement, if any, each Issuer Free Writing Prospectus, if any, and the
Prospectus shall have been filed with the Commission within the applicable time
period prescribed for such filing by, and in compliance with, the Rules and
Regulations and in accordance with 5(a), and the Rule
462(b) Registration Statement, if any, shall have become effective immediately
upon its filing with the Commission; and FINRA shall have raised no objection to
the fairness and reasonableness of the terms of this Agreement or the
transactions contemplated hereby.

       

      
        
          
          

        

        
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      (b)  The Placement
Agent shall not have discovered and disclosed to the Company on or prior to the
Closing Date that the Registration Statement or any amendment or supplement
thereto contains an untrue statement of a fact which, in the opinion of counsel
for the Placement Agent, is material or omits to state any fact which, in the
opinion of such counsel, is material and is required to be stated therein or is
necessary to make the statements therein not misleading, or that the General
Disclosure Package, any Issuer Free Writing Prospectus or the Prospectus or any
amendment or supplement thereto contains an untrue statement of fact which, in
the opinion of such counsel, is material or omits to state any fact which, in
the opinion of such counsel, is material and is necessary in order to make the
statements, in the light of the circumstances in which they were made, not
misleading.

      


      (c)  All corporate
proceedings and other legal matters incident to the authorization, form and
validity of each of this Agreement, the Subscription Agreements, the Escrow
Agreement, the Units, the Registration Statement, the General Disclosure
Package, each Issuer Free Writing Prospectus, if any, and the Prospectus and all
other legal matters relating to this Agreement and the transactions contemplated
hereby shall be reasonably satisfactory in all material respects to counsel for
the Placement Agent, and the Company shall have furnished to such counsel all
documents and information that they may reasonably request to enable them to
pass upon such matters.

      


      (d)  Dickstein Shapiro
LLP shall have furnished to the Placement Agent such counsel’s written opinion
and negative assurances statement, as counsel to the Company, addressed to the
Placement Agent, dated the Closing Date, in form and substance reasonably
satisfactory to the Placement Agent.

      


      (e)  Potter Anderson
& Corroon LLP shall have furnished to the Placement Agent such counsel’s
written opinion, as intellectual property counsel to the Company, addressed to
the Placement Agent, dated the Closing Date, in form and substance reasonably
satisfactory to the Placement Agent.

      


      (f)  The Placement
Agent shall have received from Proskauer Rose LLP, counsel for the Placement
Agent, such opinion or opinions and negative assurances statement, addressed to
the Placement Agent, dated the Closing Date, with respect to such matters as the
Placement Agent may reasonably require, and the Company shall have furnished to
such counsel such documents as they request for enabling them to pass upon such
matters.

       

      
        
          
          

        

        
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      (g)  At the time of the
execution of this Agreement, the Placement Agent shall have received from Ernst
& Young LLP a letter, addressed to the Placement Agent, executed and dated
such date, in form and substance satisfactory to the Placement Agent (i)
confirming that they are an independent registered accounting firm with respect
to the Company and its subsidiaries within the meaning of the Securities Act and
the Rules and Regulations and PCAOB and (ii) stating the conclusions and
findings of such firm, of the type ordinarily included in accountants’ “comfort
letters” to underwriters, with respect to the financial statements and certain
financial information contained or incorporated by reference in the Registration
Statement, the General Disclosure Package and the Prospectus.

      


      (h)  On the effective
date of any post-effective amendment to any Registration Statement and on the
Closing Date, the Placement Agent shall have received a letter (the “Bring-Down Letter”) from Ernst
& Young LLP addressed to the
Placement Agent and dated the Closing Date confirming, as of the date of the
Bring-Down Letter (or, with respect to matters involving changes or developments
since the respective dates as of which specified financial information is given
in the General Disclosure Package and the Prospectus, as the case may be, as of
a date not more than three (3) business days prior to the date of the Bring-Down
Letter), the conclusions and findings of such firm, of the type ordinarily
included in accountants’ “comfort letters” to underwriters, with respect to the
financial information and other matters covered by its letter delivered to the
Placement Agent concurrently with the execution of this Agreement pursuant to
paragraph (g) of this Section 7.

      


      (i)  The Company shall
have furnished to the Placement Agent a certificate, dated the Closing Date, of
its Chief Executive Officer, its President or a Vice President and its chief
financial officer stating that (i) such officers have carefully examined the
Registration Statement, the General Disclosure Package, any Permitted Free
Writing Prospectus and the Prospectus and, in their opinion, the Registration
Statement and each amendment thereto, at the Applicable Time and as of the date
of this Agreement and as of the Closing Date did not include any untrue
statement of a material fact and did not omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and the General Disclosure Package, as of the Applicable Time and as of the
Closing Date, any Permitted Free Writing Prospectus as of its date and as of the
Closing Date, the Prospectus and each amendment or supplement thereto, as of the
respective date thereof and as of the Closing Date, did not include any untrue
statement of a material fact and did not omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances in
which they were made, not misleading, (ii) since the effective date
of  the initial Registration Statement, no event has occurred which
should have been set forth in a supplement or amendment to the Registration
Statement, the General Disclosure Package or the Prospectus, (iii) to the best
of their knowledge after reasonable investigation, as of the Closing Date, the
representations and warranties of the Company in this Agreement are true and
correct and the Company has complied in all material respects with all
agreements and satisfied in all material respects all conditions on its part to
be performed or satisfied hereunder at or prior to the Closing Date, and (iv)
there has not been, subsequent to the date of the most recent audited financial
statements included or incorporated by reference in the General Disclosure
Package, any material adverse change in the financial position or results of
operations of the Company and its subsidiaries, or any change or development
that, singularly or in the aggregate, would involve a material adverse change or
a prospective material adverse change, in or affecting the condition (financial
or otherwise), results of operations, business, assets or prospects of the
Company and its subsidiaries taken as a whole, except as set forth in the
Prospectus.

       

      
        
          
          

        

        
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      (j)  Since the date of
the latest audited financial statements included in the General Disclosure
Package or incorporated by reference in the General Disclosure Package as of the
date hereof, (i) neither the Company nor any of its subsidiaries shall have
sustained any loss or interference with its business from fire, explosion, flood
or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise than as set
forth in the General Disclosure Package, and (ii) there shall not have been any
change in the capital stock (other than Common Stock of the Company issued
pursuant to the exercise of stock options previously outstanding under the
Company’s stock option plans or the issuance of Common Stock pursuant to
employee stock purchase plans) or long-term debt of the Company nor any of its
subsidiaries, or any change, or any development involving a prospective change,
in or affecting the business, general affairs, management, financial position,
stockholders’ equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth in the General Disclosure Package, the
effect of which, in any such case described in clause (i) or (ii) of this paragraph (j), is, in the
judgment of the Placement Agent, so material and adverse as to make it
impracticable or inadvisable to proceed with the sale or delivery of the Units
on the terms and in the manner contemplated in the General Disclosure
Package.

      


      (k)  No action shall
have been taken and no law, statute, rule, regulation or order shall have been
enacted, adopted or issued by any governmental agency or body which would
prevent the issuance or sale of the Units or materially and adversely affect or
potentially materially and adversely affect the business or operations of the
Company or its subsidiaries; and no injunction, restraining order or order of
any other nature by any federal or state court of competent jurisdiction shall
have been issued which would prevent the issuance or sale of the Units or
materially and adversely affect or potentially materially and adversely affect
the business or operations of the Company or its subsidiaries.

      


      (l)  Subsequent to the
execution and delivery of this Agreement there shall not have occurred any of
the following:  (i) trading in securities generally on the New York
Stock Exchange, Nasdaq GM or the American Stock Exchange or in the
over-the-counter market, or trading in any securities of the Company on any
exchange or in the over-the-counter market, shall have been suspended or
materially limited, or minimum or maximum prices or maximum range for prices
shall have been established on any such exchange or such market by the
Commission, by such exchange or market or by any other regulatory body or
governmental authority having jurisdiction, (ii) a banking moratorium shall have
been declared by Federal or state authorities or a material disruption has
occurred in commercial banking or securities settlement or clearance services in
the United States, (iii) the United States shall have become engaged in
hostilities, or the subject of an act of terrorism, or there shall have been an
outbreak of or escalation in hostilities involving the United States, or there
shall have been a declaration of a national emergency or war by the United
States or (iv) there shall have occurred such a material adverse change in
general economic, political or financial conditions (or the effect of
international conditions on the financial markets in the United States shall be
such) as to make it, in the judgment of the Placement Agent, impracticable or
inadvisable to proceed with the sale or delivery of the Units on the terms and
in the manner contemplated in the General Disclosure Package and the
Prospectus.

       

      
        
          
          

        

        
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      (m)  The Company shall
have filed a Notification Form: Listing of Additional Shares with the Nasdaq GM
and shall have received no objection thereto from the Nasdaq GM.

      


      (n)  The Placement
Agent shall have received the written agreements, substantially in the form of
Exhibit C
hereto, of the executive officers, directors, shareholders, optionholders and
warrantholders of the Company listed in Schedule B to this
Agreement.

      


      (o)  The Company shall
have entered into Subscription Agreements with each of the Purchasers and such
agreements shall be in full force and effect.

      


      (p)  The Company shall
have entered into the Escrow Agreement and such agreement shall be in full force
and effect.

      


      (q)  The Placement
Agent shall have received clearance from FINRA as to the amount of compensation
allowable or payable to the Placement Agent as described in the Pricing
Prospectus.

      


      (r)  Prior to the
Closing Date, the Company shall have furnished to the Placement Agent such
further information, opinions, certificates (including a Secretary’s
Certificate), letters or documents as the Placement Agent shall have reasonably
requested.

      


      All
opinions, letters, evidence and certificates mentioned above or elsewhere in
this Agreement shall be deemed to be in compliance with the provisions hereof
only if they are in form and substance reasonably satisfactory to counsel for
the Placement Agent.

       

      
        
          
          

        

        
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      8.  Indemnification and
Contribution.

      


      (a)  The Company shall
indemnify and hold harmless the Placement Agent, its affiliates and each of its
and their respective directors, officers, members, employees, representatives
and agents (including, without limitation Lazard Frères & Co. LLC, (which
will provide services to the Placement Agent) and its affiliates, and each of
its and their respective directors, officers, members, employees,
representatives and agents and each person, if any, who controls Lazard Frères
& Co. LLC within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act) and each person, if any, who controls the Placement
Agent within the meaning of Section 15 of the Securities Act of or Section 20 of
the Exchange Act (collectively, the “Placement Agent Indemnified
Parties,” and each a “Placement Agent Indemnified
Party”) against any loss, claim, damage, expense or liability whatsoever
(or any action, investigation or proceeding in respect thereof), joint or
several, to which such Placement Agent Indemnified Party may become subject,
under the Securities Act or otherwise, insofar as such loss, claim, damage,
expense, liability, action, investigation or proceeding arises out of or is
based upon (A) any untrue statement or alleged untrue statement of a material
fact contained in any Preliminary Prospectus, any Issuer Free Writing
Prospectus, any “issuer information” filed or required to be filed pursuant to
Rule 433(d) of the Rules and Regulations, any Registration Statement or the
Prospectus, or in any amendment or supplement thereto or document incorporated
by reference therein, (B) the omission or alleged omission to state in any
Preliminary Prospectus, any Issuer Free Writing Prospectus, any “issuer
information” filed or required to be filed pursuant to Rule 433(d) of the Rules
and Regulations, any Registration Statement or the Prospectus, or in any
amendment or supplement thereto or document incorporated by reference therein, a
material fact required to be stated therein or necessary to make the statements
therein not misleading or (C) any breach of the representations and warranties
of the Company contained herein, or the failure of the Company to perform its
obligations hereunder or pursuant to any law, and shall reimburse the Placement
Agent Indemnified Party promptly upon demand for any legal fees or other
expenses reasonably incurred by that Placement Agent Indemnified Party in
connection with investigating, or preparing to defend, or defending against, or
appearing as a third party witness in respect of, or otherwise incurred in
connection with, any such loss, claim, damage, expense, liability, action,
investigation or proceeding, as such fees and expenses are incurred; provided, however, that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, expense or liability arises out of or is based upon an untrue
statement or alleged untrue statement in, or omission or alleged omission from
any Preliminary Prospectus, any Registration Statement or the Prospectus, or any
such amendment or supplement thereto, or any Issuer Free Writing Prospectus made
in reliance upon and in conformity with written information furnished to the
Company by the Placement Agent specifically for use therein, which information
the parties hereto agree is limited to the Placement Agent’s Information (as
defined in Section
17).  This indemnity agreement is not exclusive and will be in
addition to any liability, which the Company might otherwise have and shall not
limit any rights or remedies which may otherwise be available at law or in
equity to each Placement Agent Indemnified Party.

       

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

      

       

      (b)  The Placement
Agent shall indemnify and hold harmless the Company and its directors, its
officers who signed the Registration Statement and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act (collectively, the “Company Indemnified Parties,”
and each a “Company Indemnified
Party”) against any loss, claim, damage, expense or liability whatsoever
(or any action, investigation or proceeding in respect thereof), joint or
several, to which such Company Indemnified Party may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage, expense,
liability, action, investigation or proceeding arises out of or is based upon
(i) any untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, any Issuer Free Writing Prospectus, any
“issuer information” filed or required to be filed pursuant to Rule 433(d) of
the Rules and Regulations, any Registration Statement or the Prospectus, or in
any amendment or supplement thereto, or (ii) the omission or alleged omission to
state in any Preliminary Prospectus, any Issuer Free Writing Prospectus, any
“issuer information” filed or required to be filed pursuant to Rule 433(d) of
the Rules and Regulations, any Registration Statement or the Prospectus, or in
any amendment or supplement thereto, a material fact required to be stated
therein or necessary to make the statements therein not misleading, but in each
case only to the extent that the untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company by the Placement Agent specifically
for use therein, which information the parties hereto agree is limited to the
Placement Agent’s Information as defined in Section 17, and shall
reimburse the Company for any legal or other expenses reasonably incurred by
such party in connection with investigating or preparing to defend or defending
against or appearing as third party witness in connection with any such loss,
claim, damage, liability, action, investigation or proceeding, as such fees and
expenses are incurred.  This indemnity agreement is not exclusive and
will be in addition to any liability, which the Placement Agent might otherwise
have and shall not limit any rights or remedies which may otherwise be available
at law or in equity to each Company Indemnified
Party.  Notwithstanding the provisions of this Section 8(b), in no event
shall any indemnity by the Placement Agent under this Section 8(b) exceed the total
compensation received by the Placement Agent in accordance with Section
2.5.

       

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

       

      (c)  Promptly after
receipt by an indemnified party under this Section 8 of notice of the
commencement of any action, the indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party under this Section 8, notify such
indemnifying party in writing of the commencement of that action; provided, however, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have under this Section 8 except to the
extent it has been materially prejudiced by such failure; and, provided, further, that the
failure to notify an indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this Section 8.  If any
such action shall be brought against an indemnified party, and it shall notify
the indemnifying party thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense of such action with
counsel reasonably satisfactory to the indemnified party (which counsel shall
not, except with the written consent of the indemnified party, be counsel to the
indemnifying party).  After notice from the indemnifying party to the
indemnified party of its election to assume the defense of such action, except
as provided herein, the indemnifying party shall not be liable to the
indemnified party under Section 8 for any legal or
other expenses subsequently incurred by the indemnified party in connection with
the defense of such action other than reasonable costs of investigation; provided, however, that any
indemnified party shall have the right to employ separate counsel in any such
action and to participate in the defense of such action but the fees and
expenses of such counsel (other than reasonable costs of investigation) shall be
at the expense of such indemnified party unless (i) the employment thereof has
been specifically authorized in writing by the Company in the case of a claim
for indemnification under Section 8(a) or Section 2.6 or LCM in the
case of a claim for indemnification under Section 8(b), (ii) such
indemnified party shall have been advised by its counsel that there may be one
or more legal defenses available to it which are different from or additional to
those available to the indemnifying party, or (iii) the indemnifying party has
failed to assume the defense of such action and employ counsel reasonably
satisfactory to the indemnified party within a reasonable period of time after
notice of the commencement of the action or the indemnifying party does not
diligently defend the action after assumption of the defense, in which case, if
such indemnified party notifies the indemnifying party in writing that it elects
to employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of (or, in the
case of a failure to diligently defend the action after assumption of the
defense, to continue to defend) such action on behalf of such indemnified party
and the indemnifying party shall be responsible for legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
of such action; provided,
however, that the indemnifying party shall not, in connection with any
one such action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate firm of
attorneys at any time for all such indemnified parties (in addition to any local
counsel), which firm shall be designated in writing by LCM if the indemnified
parties under this Section 8 consist of any
Placement Agent Indemnified Party or by the Company if the indemnified parties
under this Section
8 consist of any Company Indemnified Parties.  Subject to this
Section 8(c), the amount
payable by an indemnifying party under Section 8 shall include, but
not be limited to, (x) reasonable legal fees and expenses of counsel to the
indemnified party and any other expenses in investigating, or preparing to
defend or defending against, or appearing as a third party witness in respect
of, or otherwise incurred in connection with, any action, investigation,
proceeding or claim, and (y) all amounts paid in settlement of any of the
foregoing.  No indemnifying party shall, without the prior written
consent of the indemnified parties, settle or compromise or consent to the entry
of judgment with respect to any pending or threatened action or any claim
whatsoever, in respect of which indemnification or contribution could be sought
under this Section 8 (whether or not the
indemnified parties are actual or potential parties thereto), unless such
settlement, compromise or consent (i) includes an unconditional release of each
indemnified party in form and substance reasonably satisfactory to such
indemnified party from all liability arising out of such action or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of any indemnified party.  Subject to
the provisions of the following sentence, no indemnifying party shall be liable
for settlement of any pending or threatened action or any claim whatsoever that
is effected without its written consent (which consent shall not be unreasonably
withheld or delayed), but if settled with its written consent, if its consent
has been unreasonably withheld or delayed or if there be a judgment for the
plaintiff in any such matter, the indemnifying party agrees to indemnify and
hold harmless any indemnified party from and against any loss or liability by
reason of such settlement or judgment.  In addition, if at any time an
indemnified party shall have requested that an indemnifying party reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated
herein effected without its written consent if (i) such settlement is entered
into more than forty-five (45) days after receipt by such indemnifying party of
the request for reimbursement, (ii) such indemnifying party shall have received
notice of the terms of such settlement at least thirty (30) days prior to such
settlement being entered into and (iii) such indemnifying party shall not have
reimbursed such indemnified party in accordance with such request prior to the
date of such settlement.

       

      
        
          
          

        

        
          31

          
            

          

        

        
          
          

        

      

       

      (d)  If the
indemnification provided for in this Section 8 is unavailable or
insufficient to hold harmless an indemnified party under Section 8(a) or Section 8(b), then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid, payable or otherwise incurred by such indemnified
party as a result of such loss, claim, damage, expense or liability (or any
action, investigation or proceeding in respect thereof), as incurred, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company on the one hand and the Placement Agent on the other
hand from the offering of the Units, or (ii) if the allocation provided by
clause (i) of this Section 8(d) is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) of this Section 8(d) but also the
relative fault of the Company on the one hand and the Placement Agent on the
other with respect to the statements, omissions, acts or failures to act which
resulted in such loss, claim, damage, expense or liability (or any action,
investigation or proceeding in respect thereof) as well as any other relevant
equitable considerations.  The relative benefits received by the
Company on the one hand and the Placement Agent on the other with respect to
such offering shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Units purchased under this Agreement (before
deducting expenses) received by the Company bear to the total Placement Fee
received by the Placement Agent in connection with the Offering, in each case as
set forth in the table on the cover page of the Prospectus.  The
relative fault of the Company on the one hand and the Placement Agent on the
other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or the Placement Agent on the other, the intent of the parties
and their relative knowledge, access to information and opportunity to correct
or prevent such untrue statement, omission, act or failure to act; provided that the parties
hereto agree that the written information furnished to the Company by the
Placement Agent for use in any Preliminary Prospectus, any Registration
Statement or the Prospectus, or in any amendment or supplement thereto, consists
solely of the Placement Agent’s Information as defined in Section
17.  The Company and the Placement Agent agree that it would
not be just and equitable if contributions pursuant to this Section 8(d) were to be
determined by pro rata allocation or by any other method of allocation that does
not take into account the equitable considerations referred to
herein.  The amount paid or payable by an indemnified party as a
result of the loss, claim, damage, expense, liability, action, investigation or
proceeding referred to above in this Section 8(d) shall be deemed
to include, for purposes of this Section 8(d), any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating, preparing to defend or defending against or
appearing as a third party witness in respect of, or otherwise incurred in
connection with, any such loss, claim, damage, expense, liability, action,
investigation or proceeding.  Notwithstanding the provisions of this
Section 8(d), the Placement
Agent shall not be required to contribute any amount in excess of the total
compensation received by the Placement Agent in accordance with Section 2.5 less the amount
of any damages which the Placement Agent has otherwise paid or become liable to
pay by reason of any untrue or alleged untrue statement, omission or alleged
omission, act or alleged act or failure to act or alleged failure to
act.  No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.

       

      
        
          
          

        

        
          32

          
            

          

        

        
          
          

        

      

       

      9.  Termination.  The
obligations of the Placement Agent and the Purchasers hereunder and under the
Subscription Agreements may be terminated by the Placement Agent, in its
absolute discretion by notice given to the Company prior to delivery of and
payment for the Units if, prior to that time, any of the events described in
Sections 7(j), 7(k) or 7(l) have occurred or
if the Purchasers shall decline to purchase the Units for any reason permitted
under this Agreement or the Subscription Agreements.

      


      10.  Reimbursement of Placement Agent’s
Expenses.  Notwithstanding
anything to the contrary in this Agreement, if (a) this Agreement shall have
been terminated pursuant to Section 9, (b) the Company
shall fail to tender the Units for delivery to the Purchasers for any reason not
permitted under this Agreement, (c) the Purchasers shall decline to purchase the
Units for any reason permitted under this Agreement or (d) the sale of the Units
is not consummated because any condition to the obligations of the Purchasers or
the Placement Agent set forth herein is not satisfied or because of the refusal,
inability or failure on the part of the Company to perform any agreement herein
or to satisfy any condition or to comply with the provisions hereof, then, in
addition to the payment of any amounts in accordance with Section 6, the
Company shall reimburse the Placement Agent for the fees and expenses of the
Placement Agent’s counsel and for such other accountable out-of-pocket expenses
as shall have been reasonably incurred by them in connection with this Agreement
and the proposed purchase of the Units, and upon demand the Company shall pay
the full amount thereof to the Placement Agent.

      


      11.  Absence of Fiduciary
Relationship.  The
Company acknowledges and agrees that:

      


      (a)  the Placement
Agent’s responsibility to the Company is solely contractual in nature, the
Placement Agent has been retained solely to act as Placement Agent in connection
with the Offering and no fiduciary, advisory or agency relationship between the
Company and the Placement Agent has been created in respect of any of the
transactions contemplated by this Agreement, irrespective of whether the
Placement Agent or Lazard Frères & Co. LLC has advised or is advising the
Company on other matters;

      


      (b)  the price of the
Units set forth in this Agreement was established by the Company following
discussions and arms-length negotiations with the Placement Agent, and the
Company is capable of evaluating and understanding, and understands and accepts,
the terms, risks and conditions of the transactions contemplated by this
Agreement;

       

      
        
          
          

        

        
          33

          
            

          

        

        
          
          

        

      

       

      (c)  it has been
advised that the Placement Agent and Lazard Frères & Co. LLC and their
affiliates are engaged in a broad range of transactions which may involve
interests that differ from those of the Company and that the Placement Agent has
no obligation to disclose such interests and transactions to the Company by
virtue of any fiduciary, advisory or agency relationship; and

      


      (d)  it waives, to the
fullest extent permitted by law, any claims it may have against the Placement
Agent for breach of fiduciary duty or alleged breach of fiduciary duty and
agrees that the Placement Agent shall have no liability (whether direct or
indirect) to the Company in respect of such a fiduciary duty claim or to any
person asserting a fiduciary duty claim on behalf of or in right of the Company,
including stockholders, employees or creditors of the Company.

      


      12.  Successors; Persons Entitled to
Benefit of Agreement.  This
Agreement shall inure to the benefit of and be binding upon the Placement Agent,
the Company, and their respective successors and assigns.  This
Agreement shall also inure to the benefit of Lazard Frères & Co. LLC, the
Purchasers, and each of their respective successors and assigns, which shall be
third party beneficiaries hereof.  Nothing expressed or mentioned in
this Agreement is intended or shall be construed to give any person, other than
the persons mentioned in the preceding sentences, any legal or equitable right,
remedy or claim under or in respect of this Agreement, or any provisions herein
contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person; except that the representations, warranties,
covenants, agreements and indemnities of the Company contained in this Agreement
shall also be for the benefit of the Placement Agent Indemnified Parties and the
indemnities of the Placement Agent shall be for the benefit of the Company
Indemnified Parties.  It is understood that the Placement Agent’s
responsibility to the Company is solely contractual in nature and the Placement
Agent does not owe the Company, or any other party, any fiduciary duty as a
result of this Agreement.

      


      13.  Survival of Indemnities,
Representations, Warranties, etc.  The
respective indemnities, covenants, agreements, representations, warranties and
other statements of the Company and the Placement Agent, as set forth in this
Agreement or made by them respectively, pursuant to this Agreement, shall remain
in full force and effect, regardless of any investigation made by or on behalf
of the Placement Agent, the Company, the Purchasers or any person controlling
any of them and shall survive delivery of and payment for the
Units.  Notwithstanding any termination of this Agreement, including
without limitation any termination pursuant to Sections 9 or 10, the indemnity and
contribution agreements contained in Section 8 and the covenants,
representations, warranties set forth in this Agreement shall not terminate and
shall remain in full force and effect at all times.

      


      14.  Notices.  All
statements, requests, notices and agreements hereunder shall be in writing,
and:

      


      (a)  if to the
Placement Agent, shall be delivered or sent by mail, telex, facsimile
transmission or email to Lazard Capital Markets LLC, Attention: General Counsel,
Fax: 212-830-3615; and

       

      
        
          
          

        

        
          34

          
            

          

        

        
          
          

        

      

       

      (b)  if to the Company,
shall be delivered or sent by mail, telex, facsimile transmission or email to
Discovery Laboratories, Inc., 2600 Kelly Road, Warrington, Pennsylvania 18976,
Attention: John G. Cooper (Fax: 215-488-9301), with a copy to: Dickstein Shapiro
LLP, 1177 Avenue of the Americas, 47th Floor, New York, New York 10036-2714,
Attention: Ira L. Kotel, Esq. (Fax: 212-997-9880).

      


      provided, however, that any
notice to the Placement Agent pursuant to Section 8 shall be delivered
or sent by mail, telex or facsimile transmission to the Placement Agent at its
address set forth in its acceptance telex to the Placement Agent, which address
will be supplied to any other party hereto by the Placement Agent upon
request.  Any such statements, requests, notices or agreements shall
take effect at the time of receipt thereof, except that any such statement,
request, notice or agreement delivered or sent by email shall take effect at the
time of confirmation of receipt thereof by the recipient thereof.

      


      15.  Definition of Certain
Terms.  For
purposes of this Agreement, (a) “business day” means any day on
which the New York Stock Exchange, Inc. is open for trading and (b) “subsidiary” has the meaning
set forth in Rule 405 of the Rules and Regulations.

      


      16.  Governing Law, Agent for Service and
Jurisdiction.  This Agreement shall be governed by
and construed in accordance with the laws of the State of New York, including
without limitation Section 5-1401 of the New York General Obligations
Law.  No legal proceeding may be commenced, prosecuted or
continued in any court other than the courts of the State of New York located in
the City and County of New York or in the United States District Court for the
Southern District of New York, which courts shall have jurisdiction over the
adjudication of such matters, and the Company and the Placement Agent each
hereby consent to the jurisdiction of such courts and personal service with
respect thereto.  The Company and the Placement Agent each hereby
consent to personal jurisdiction, service and venue in any court in which any
legal proceeding arising out of or in any way relating to this Agreement is
brought by any third party against the Company or the Placement
Agent.  The Company and the Placement Agent each hereby waive all
right to trial by jury in any legal proceeding (whether based upon contract,
tort or otherwise) in any way arising out of or relating to this
Agreement.  The Company agrees that a final judgment in any such legal
proceeding brought in any such court shall be conclusive and binding upon the
Company and the Placement Agent and may be enforced in any other courts in the
jurisdiction of which the Company is or may be subject, by suit upon such
judgment.

      


      17.  Placement Agent’s
Information.  The
parties hereto acknowledge and agree that, for all purposes of this Agreement,
the Placement Agent’s Information consists solely of the following information
in the Prospectus: (i) the last paragraph on the front cover page concerning the
terms of the offering by the Placement Agent; and (ii) the statements concerning
the Placement Agent contained in the first and sixth paragraphs under the
heading “Plan of Distribution.”

      


      18.  Partial
Unenforceability.  The
invalidity or unenforceability of any section, paragraph, clause or provision of
this Agreement shall not affect the validity or enforceability of any other
section, paragraph, clause or provision hereof.  If any section,
paragraph, clause or provision of this Agreement is for any reason determined to
be invalid or unenforceable, there shall be deemed to be made such minor changes
(and only such minor changes) as are necessary to make it valid and
enforceable.

       

      
        
          
          

        

        
          35

          
            

          

        

        
          
          

        

      

       

      19.  General.  This
Agreement constitutes the entire agreement of the parties to this Agreement and
supersedes all prior written or oral and all contemporaneous oral agreements,
understandings and negotiations with respect to the subject matter
hereof.  In this Agreement, the masculine, feminine and neuter genders
and the singular and the plural include one another.  The section
headings in this Agreement are for the convenience of the parties only and will
not affect the construction or interpretation of this Agreement.  This
Agreement may be amended or modified, and the observance of any term of this
Agreement may be waived, only by a writing signed by the Company and the
Placement Agent.

      


      20.  Counterparts.  This
Agreement may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument and such signatures may be delivered by
facsimile.

       

      21. 
Right
of First Refusal.  The parties acknowledge that,
pursuant to an engagement letter between the Company and the Placement
Agent, the Placement Agent has a right of first refusal to act as Placement
Agent with respect to a public offering by the Company and to earn
mutually agreed upon compensation in connection therewith. 

       

      
        
          
          

        

        
          36

          
            

          

        

        
          
          

        

      

       

      If the
foregoing is in accordance with your understanding of the agreement between the
Company and the Placement Agent, kindly indicate your acceptance in the space
provided for that purpose below.

       

      
        
          	 
      	
                  Very
      truly yours,

                	 
      
	 
      	 
      	 
      	 
      
	 
      	
                  DISCOVERY
      LABORATORIES, INC.

                	 
      
	 
      	 
      	 
      	 
      
	 	
                  By:

                	/s/
      Robert Capetola  	 
	 
      	
                   

                	
                  Name:
      Robert Capetola

                	 
      
	 
      	 
      	
                  Title:
      President and C.E.O.

                	 
      


        

      

      
 

      Accepted
as of the date

      first
above written:

      


      


      LAZARD
CAPITAL MARKETS LLC

       

       

      
        
          	
                  By:

                	/s/
      David G. McMillan, Jr.    	 
      
	 
      	
                  Name:
      David G. McMillan, Jr.

                	 
      
	 
      	
                  Title:
      Managing Director

                	 
      


        

        
          
            
            

          

          
            37

            
              

            

          

          
            
            

          

        

      

      


      SCHEDULE A

      


      General
Use Free Writing Prospectuses

      


      None.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      


      SCHEDULE B

      


      List
of officers and directors subject to Section 5

      


      Board of
Directors

      


      W. Thomas
Amick

      Robert J.
Capetola (President and CEO)

      Antonio
Esteve

      Max
Link

      Herbert
H. McDade, Jr.

      Marvin E.
Rosenthale

      


      Management

      


      John G.
Cooper

      David L.
Lopez

      Kathryn
Cole

      Charles
F. Katzer

      Thomas F.
Miller

      Gerald J.
Orehostky

      Robert
Segal

      Mary B.
Templeton

      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      EXHIBIT A

      


      Form
of Subscription Agreement

      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      


      EXHIBIT B

      


      Form
of Warrant

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      EXHIBIT
C

      


      Form
of Lock Up Agreement

      


      May 13,
2009

      


      LAZARD
CAPITAL MARKETS LLC

      30
Rockefeller Plaza

      New York,
New York 10020

      


      
        	
              	
                Re: 

              	
                Discovery
      Laboratories, Inc. offering of 14,000,000
  Units

              


      

      


      Dear
Sirs:

      


      In order
to induce Lazard Capital Markets LLC (“Lazard”), to enter in to a
certain placement agent agreement with Discovery Laboratories, Inc., a Delaware
corporation (the “Company”), with respect to the
public offering of units consisting of the Company’s Common Stock, par value
$0.001 per share (“Common
Stock”) and warrants to purchase the Common Stock (the “Units”), the undersigned
hereby agrees that for a period (the “lock-up period”) of ninety
(90) days following the date of the final prospectus filed by the Company with
the Securities and Exchange Commission in connection with such public offering,
the undersigned will not, without the prior written consent of Lazard, directly
or indirectly, (i) offer, sell, assign, transfer, pledge, contract to sell, or
otherwise dispose of, any shares of Common Stock or securities convertible into
or exercisable or exchangeable for Common Stock (including, without limitation,
shares of Common Stock or any such securities which may be deemed to be
beneficially owned by the undersigned in accordance with the rules and
regulations promulgated under the Securities Act of 1933, as the same may be
amended or supplemented from time to time (such shares or securities, the “Beneficially Owned Shares”)),
(ii) enter into any swap, hedge or other agreement or arrangement that transfers
in whole or in part, the economic risk of ownership of any Beneficially Owned
Shares, Common Stock or securities convertible into or exercisable or
exchangeable for Common Stock, or (iii) engage in any short selling of any
Beneficially Owned Shares, Common Stock or securities convertible into or
exercisable or exchangeable for Common Stock.

      


      If (i)
the Company issues an earnings release or material news or a material event
relating to the Company occurs during the last seventeen (17) days of the
lock-up period, or (ii) prior to the expiration of the lock-up period, the
Company announces that it will release earnings results during the sixteen
(16)-day period beginning on the last day of the lock-up period, the
restrictions imposed by this Agreement shall continue to apply until the
expiration of the eighteen (18)-day period beginning on the issuance of the
earnings release or the occurrence of the material news or material
event.

      


      In
addition, the undersigned hereby waives, from the date hereof until the
expiration of the ninetieth (90th) day
following the date of the Company’s final prospectus, any and all rights, if
any, to request or demand registration pursuant to the Securities Act of 1933,
as amended, of any shares of Common Stock or securities convertible into or
exercisable or exchangeable for Common Stock that are registered in the name of
the undersigned or that are Beneficially Owned Shares.  In order to
enable the aforesaid covenants to be enforced, the undersigned hereby consents
to the placing of legends and/or stop transfer orders with the transfer agent of
the Common Stock with respect to any shares of Common Stock, securities
convertible into or exercisable or exchangeable for Common Stock or Beneficially
Owned Shares.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      Notwithstanding
the foregoing, the undersigned may transfer Beneficially Owned Shares (i) as a
bona fide or gifts, (ii) to any trust for the direct or indirect benefit of the
undersigned or the immediate family of the undersigned, or (iii) by will or
intestate succession; provided, that (A) each donee, transferee or distribute
shall execute and deliver a letter substantially in the form hereof and (B)
neither the undersigned nor any other party to the applicable transaction shall
be required to file, or voluntarily file, a report under Section 16(a) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than a
filing on Form 5 made after expiration of the Lock-up Period.  For
purposes of this agreement, the term “immediate family” shall mean any
relationship by blood marriage or adoption, not more remote than first
cousin.

      


      In
addition, notwithstanding the foregoing, the restrictions set forth herein shall
not apply to the sale of up to an aggregate 200,000 Shares by the undersigned
together with all of the other executive officers and directors of the Company
that have entered into agreements similar to this one on the date hereof or (ii)
to the establishment of a trading plan that complies with Rule 10b5-1 under the
Exchange Act and that is existing on the date of this Agreement, but only to the
extent that such sale is in connection with options that are set to expire
during the lock-up period; provided, however, that the
restrictions shall apply in full force to sales pursuant to such trading plan
during the lock-up period.

      


      Anything
contained herein to the contrary notwithstanding, any person or entity to whom
shares of Common Stock, securities convertible into or exercisable or
exchangeable for Common Stock or Beneficially Owned Shares are transferred from
the undersigned shall be bound by the terms of this Agreement.

      


      If the
Offering is not consummated by May 22, 2009, this Agreement shall terminate and
the undersigned will be released from its obligations hereunder.

       

       

      
        
          	 
      	
                  [Signatory]

                	 
      
	 
      	 
      	 
      	 
      
	 
      	
                  By:

                	  
      	 
      
	 
      	 
      	
                  Name:

                	 
      
	 
      	 
      	
                  Title: