|   | (b) | Notwithstanding      any other provision with respect to the timing of payments under this      Section 1, in order to comply with the requirements of Section 409A of the      Internal Revenue Code of 1986 (“Section 409A”), any payment or portion      thereof, to which the Executive is entitled under this Section 1 which is      not exempt from the application of Section 409A’s “six month delay”      provision (in the Company’s sole discretion), shall be withheld until the      first business day of the seventh month following the Executive’s      termination. At such time, you shall be paid the remaining balance      otherwise owed to the Executive under this Section 1 in a lump      sum. |
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|   | (a) | “Cause”      means the Executive: (i) commits an act of dishonesty, fraud or      misrepresentation in connection with his or her employment which is      materially and demonstrably injurious to the Company; (ii) is convicted      of, or pleads nolo      contendere to, a felony; (iii) breaches any material obligation      under the Proprietary Information and Inventions Agreement or the      Company’s Code of Business Conduct and Ethics; (iv) engages in substantial      or continuing inattention to or neglect of the duties (including fiduciary      duties) and responsibilities reasonably assigned by or due to the Company;      provided such inattention or neglect remains uncured for a period of 10      days after written notice describing the same is given to the Executive;      or (v) engages in substantial or continuing acts to the detriment of the      Company or inconsistent with the Company’s policies or      practices. |
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|   | (b) | “Good      Reason” means: (i) the failure of the Company to employ the Executive in      his or her current or a substantially similar position, without regard to      title, such that the Executive’s duties and responsibilities are      materially diminished without consent (ii) a reduction in Executive’s      then-current base salary without the Executive’s consent (unless such      reduction is in connection with a proportional reduction in compensation      to all or substantially all of the Company’s Executives); or (iii) a      relocation of the primary place of employment more than 30 miles from the      current site of employment without the Executive’s consent; provided      however, if any of these conditions occur, the Executive is required to      provide written notice of any such condition to the Company’s Chief      Executive Officer and General Counsel within 60 days of the initial      occurrence of the condition, and the Company will then have 20 days to      remedy the condition, prior to the existence of such condition being      deemed to be “Good Reason.” |
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|   | (c) | a      “Change of Control” occurs: (i) when any person or entity other than the      Company or one of its subsidiaries becomes the owner of more than fifty      percent (50%) of the Company’s common stock or (ii) upon the effective      date of an agreement of acquisition, merger, or consolidation that has      been approved by the Company’s stockholders and that contemplates that all      or substantially all of the business and/or assets of the Company shall be      owned or otherwise controlled by another person or entity upon the      effective date of such agreement. |
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|   |  (d) | “Bonus”      shall mean an amount equal to the greater of either (i) the current year      target annual bonus amount or (ii) the previous year’s actual bonus; in      either case, multiplied by the fraction obtained by dividing the number of      days in the year through the date of termination by  365. |
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|   | 3. | Withholding.  All      payments made by the Company under this Agreement shall be reduced by any      tax or other amounts required to be withheld by the Company under      applicable law. |
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|   | 4. | Medical and Dental      Benefits.  In the event that the Executive’s employment is      terminated (i) by the Company for any reason other than for Cause or (ii)      by the Executive for Good Reason (including in the event any such for      Cause or Good Reason termination occurs within twenty-four (24) months      after a Change of Control), then the Company will maintain the Executive’s      medical and dental insurance coverage, providing substantially similar      benefits to those which the Executive and his dependents were receiving      immediately prior to the termination of employment, for a period of up to      twelve (12) months after the month in which employment      terminates.  Provided, however, that Executive shall elect such      coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985      (COBRA) to the extent that COBRA benefits are available and that in any      event the Executive shall pay the employee portion for such coverage      (whether through COBRA or otherwise) by making a payment to the Company      during the first five (5) days of any month in which the continuation of      such coverage is elected and, provided further, that the Company’s      obligation to continue benefits shall be reduced to the extent that      substantially similar coverages (determined on a benefit-by-benefit basis)      are provided by a subsequent employer.  The “qualifying event”      which triggers the Executive’s right to continue health insurance post      employment under COBRA shall be deemed to have occurred on the termination      date. |
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|   | 5. | No Contract of      Employment.  This Agreement is not a contract of employment      for a specific term, and employment is “At Will” and may be terminated by      the Company at any time, subject to the terms of this    letter. |
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|   | 6. | Employee Release.       Any obligation of the Company to provide the Executive with severance      payments or other benefits under this Agreement is expressly conditioned      upon the Executive reviewing and signing (and not revoking during any      applicable revocation period) a general release of claims in a form      reasonably satisfactory to the Company within the time period specified in      such release.  The Company shall provide the Executive with the      general release promptly after the date on which the Executive gives or      receives, as the case may be, notice of termination of      employment. |
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|   | 7. | Assignment.  The      Executive shall not make any assignment of this Agreement or any interest      in it, by operation of law or otherwise, without the prior written consent      of the Company.  The Company may assign its rights and obligations      under this Agreement without consent. This Agreement shall inure to the      benefit of and be binding upon the Executive and the Company, and each of      our respective successors, executors, administrators, heirs and permitted      assigns, including any organization involved in a Change of      Control. |
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|   | 8. | Severability.  If      any portion or provision of this Agreement shall to any extent be declared      illegal or unenforceable by a court of competent jurisdiction, then the      remainder of this Agreement, or the application of such portion or      provision in circumstances other than those as to which it is so declared      illegal or unenforceable, shall not be affected thereby, and each portion      and provision hereof shall be valid and enforceable to the fullest extent      permitted by law. |
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|   | 9. | Miscellaneous.       This Agreement will commence on the date hereof and will expire on      December 31, 2011, unless the Company experiences a Change of Control      prior to the expiration of the term of this Agreement, in which case this      Agreement will expire on the later of: (a) December 31, 2011, or (b) two      (2) years from the date of the closing of such Change of Control.       This Agreement sets forth the entire agreement between the Executive and      the Company in connection with the subject matter hereof, and replaces all      prior and contemporaneous communications, agreements and understandings,      written or oral, with respect to the subject matter hereof, other than any      obligations set forth in your employee confidentiality agreement with the      Company, which obligations shall remain in full force and effect.  In      consideration of the benefits provided to the Executive hereunder, it is      agreed that, in the event of the Executive’s termination from the Company,      such benefits shall be in complete satisfaction of any and all obligations      that the Company may have to you.  This Agreement may not be modified      or amended, and no breach shall be deemed to be waived, unless agreed to      in writing by the Executive and an expressly authorized representative of      the Company.  This Agreement may be executed in two counterparts,      each of which shall be an original and all of which together shall      constitute one and the same instrument.  This Agreement shall be      governed by the laws of the Commonwealth of Pennsylvania, without regard      to its conflicts of laws principles, and all disputes hereunder shall be      adjudicated in the courts of the Commonwealth of Pennsylvania, to whose      personal jurisdiction the Executive hereby consents  to. |
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|   | Discovery      Laboratories, Inc. |
|--------|-----------------------------------|
|   |                              |
|   |                              |
|   | By:                               |  /s/      Kathryn A.      Cole                            5/4/2010 |
|   |                              | Kathryn      A.      Cole                                      Date |
|   |                              |

| By:                                                                                                                                                                                                                                                                                                                                  | /s/      Robert      Segal                                  5/4/2010 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|        Dr.      Robert      Segal                                          Date |                                                                                                                                                                                                                                           |
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