Unassociated Document


     

    EXHIBIT 4.1

    
 

    DISCOVERY
LABORATORIES, INC.

    


    FORM
OF WARRANT TO PURCHASE COMMON STOCK

    


    Warrant
No.:

    Number of
Shares of Common Stock: 2,026,156

    Date of
Issuance: [April 30], 2010 (“Issuance Date”)

    


    Discovery Laboratories, Inc., a
Delaware corporation (the “Company”), hereby certifies that, for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, PharmaBio Development Inc., a North Carolina corporation, the
registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms
set forth below, to purchase from the Company, at the Exercise Price (as defined
below) then in effect, upon surrender of this Warrant to Purchase Common Stock
(including any Warrants to Purchase Common Stock issued in exchange, transfer or
replacement hereof, the “Warrant”), at any time or times on or after the
181st day after the date hereof (the
“Exercisability
Date”) , but not after 11:59 p.m., New York
time, on the Expiration Date (as defined below), 2,026,156 (Two Million,
Twenty-Six Thousand, One Hundred and Fifty-Six) fully paid nonassessable shares of
Common Stock (as defined below) (the “Warrant
Shares”).  Except as otherwise
defined herein, capitalized terms in this Warrant shall have the meanings set
forth in  Section 15.  This Warrant is the Warrant to
purchase Common Stock (this “Warrant”) issued pursuant to
(i)  Section 2(c)  of that certain Securities Purchase
Agreement (the “Securities Purchase
Agreement”), dated as of April 27, 2010 (the
“Pricing
Date”), by and between the Company and
PharmaBio Development Inc. and (ii) the Company’s Registration Statement on Form
S-3 (File number 333-151654) (the “Registration
Statement”).

    


    1.      EXERCISE
OF WARRANT.

    


    (a)   Mechanics
of Exercise.  Subject to the terms and conditions hereof, this Warrant
may be exercised by the Holder on any day on or after the Exercisability Date,
in whole or in part, by (i) delivery of a written notice, in the form
attached hereto as  Exhibit A  (the “Exercise Notice”), of the
Holder’s election to exercise this Warrant and (ii) (A) payment to the
Company of an amount equal to the applicable Exercise Price multiplied by the
number of Warrant Shares as to which this Warrant is being exercised (the “Aggregate Exercise Price”) in
cash or by wire transfer of immediately available funds or (B) provided the
conditions for cashless exercise set forth in  Section
1(d)  are satisfied, by notifying the Company that this Warrant is
being exercised pursuant to a Cashless Exercise (as defined
in  Section 1(d)).  The Holder shall not be required to
deliver the original Warrant in order to effect an exercise
hereunder.  Execution and delivery of the Exercise Notice with respect
to less than all of the Warrant Shares shall have the same effect as
cancellation of the original Warrant and issuance of a new Warrant evidencing
the right to purchase the remaining number of Warrant Shares.  On or
before the first (1st)
Business Day following the date on which the Company has received each of the
Exercise Notice and the Aggregate Exercise Price (or notice of a Cashless
Exercise) (collectively, the “Exercise Delivery Documents”),
the Company shall transmit by facsimile or electronic mail an acknowledgment of
receipt of the Exercise Delivery Documents to the Holder and Continental Stock
Transfer & Trust Company (the Company’s “Transfer
Agent”).  On or before the third (3rd) Business Day following the
date on which the Company has received all of the Exercise Delivery Documents
(the “Share Delivery
Date”), the Company shall (X) provided that the Transfer Agent is
participating in The Depository Trust Company (“DTC”) Fast Automated
Securities Transfer Program, upon the request of the Holder, credit such
aggregate number of Warrant Shares to which the Holder is entitled pursuant to
such exercise to the Holder’s or its designee’s balance account with DTC through
its Deposit/Withdrawal At Custodian (“DWAC”) system, or (Y) if the
Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program or the Holder does not request delivery of the Warrant Shares
via DWAC, issue and dispatch by overnight courier to the address as specified in
the Exercise Notice, a certificate, registered in the Company’s share register
in the name of the Holder or its designee, for the number of Warrant Shares to
which the Holder is entitled pursuant to such exercise.  Upon delivery
of the Exercise Delivery Documents, the Holder shall be deemed for all corporate
purposes to have become the holder of record of the Warrant Shares with respect
to which this Warrant has been exercised, irrespective of the date such Warrant
Shares are credited to the Holder’s DTC account or the date of delivery of the
certificates evidencing such Warrant Shares, as the case may be.  If
this Warrant is submitted in connection with any exercise pursuant to
this  Section 1(a) and the number of Warrant Shares represented by
this Warrant submitted for exercise is greater than the number of Warrant Shares
being acquired upon an exercise, then the Company shall as soon as practicable
and in no event later than three Business Days after any exercise and at its own
expense, issue a new Warrant (in accordance with  Section 7(d))
representing the right to purchase the number of Warrant Shares purchasable
immediately prior to such exercise under this Warrant, less the number of
Warrant Shares with respect to which this Warrant is exercised.  No
fractional shares of Common Stock are to be issued upon the exercise of this
Warrant, but rather the number of shares of Common Stock to be issued shall be
rounded down to the nearest whole number.  The Company shall pay any
and all taxes which may be payable with respect to the issuance and delivery of
Warrant Shares upon exercise of this Warrant.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

    


    (b)    Exercise
Price.  For purposes of this Warrant, “Exercise Price” means $0.7058,
subject to adjustment as provided herein.

    


    (c)    Company’s
Failure to Timely Deliver Securities.  If the Company shall fail for
any reason or for no reason to issue to the Holder within three (3) Business
Days of receipt of the Exercise Delivery Documents in compliance with the terms
of this  Section 1, a certificate for the number of shares of Common
Stock to which the Holder is entitled and register such shares of Common Stock
on the Company’s share register or to credit the Holder’s balance account with
DTC for such number of shares of Common Stock to which the Holder is entitled
upon the Holder’s exercise of this Warrant, and if on or after such Trading Day
the Holder purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by the Holder of shares of
Common Stock issuable upon such exercise that the Holder anticipated receiving
from the Company (a “Buy-In”), then the Company
shall, within three (3) Business Days after the Holder’s request and in the
Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the
Holder’s total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased (the “Buy-In Price”), at which point
the Company’s obligation to deliver such certificate (and to issue such Warrant
Shares) shall terminate, or (ii) promptly honor its obligation to deliver to the
Holder a certificate or certificates representing such Warrant Shares and pay
cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price
over the product of (A) such number of shares of Common Stock, times (B) the
Closing Bid Price on the date of exercise.

    


    (d)   Cashless
Exercise.
 Notwithstanding anything contained herein to the contrary,
if a registration statement covering the Warrant Shares that are the
subject of the Exercise Notice (the “Unavailable Warrant
Shares”), and an exemption from registration are not available
for the resale of such Unavailable Warrant Shares, the Holder may exercise this
Warrant in whole or in part and, in lieu of making the cash payment otherwise
contemplated to be made to the Company upon such exercise in payment of the
Aggregate Exercise Price, elect instead to receive upon such exercise the “Net
Number” of shares of Common Stock determined according to the following formula
(a “Cashless
Exercise”):

     

    
      	
               
        Net Number =

            	
              (A
      x B) - (A x C)

            
	 
      	
                         
      B

            
	
               
        For purposes of the foregoing
formula:

            


    

     

    
      	
              A=

            	
              the
      total number of shares with respect to which this Warrant is then being
      exercised.

            


    

    


    
      	
              B=

            	
              the
      arithmetic average of the Closing Sale Prices of the shares of Common
      Stock for the five (5) consecutive Trading Days ending on the Trading Day
      immediately preceding the date of the Exercise
  Notice.

            


    

    


    
      	
              C=

            	
              the
      Exercise Price then in effect for the applicable Warrant Shares at the
      time of such exercise.

            


    

    


    For sake
of clarity, in the event that neither a registration statement or an exemption
from registration is available, there is no circumstance that requires the
Company to effect a net cash settlement of the Warrants.

    


    (e)   Rule
144.  For purposes of Rule 144(d) promulgated under the Securities
Act, as in effect on the date hereof, it is intended that the Warrant Shares
issued in a Cashless Exercise shall be deemed to have been acquired by the
Holder, and the holding period for the Warrant Shares shall be deemed to have
commenced, on the date this Warrant was originally issued pursuant to the
Securities Purchase Agreement.

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    


    (f)   Disputes.  In
the case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares, the Company shall promptly issue
to the Holder the number of Warrant Shares that are not disputed, and all such
disputes shall be resolved pursuant to  Section 12.

    


    (g)             Beneficial
Ownership.  The Company shall not effect the exercise of this Warrant,
and the Holder shall not have the right to exercise this Warrant, to the extent
that after giving effect to such exercise, such Person (together with such
Person’s affiliates) would beneficially own in excess of 9.99% (the “Maximum Percentage”) of the
shares of Common Stock outstanding immediately after giving effect to such
exercise.  For purposes of the foregoing sentence, the aggregate
number of shares of Common Stock beneficially owned by such Person and its
affiliates shall include the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to which the determination of such
sentence is being made, but shall exclude shares of Common Stock which would be
issuable upon (i) exercise of the remaining, unexercised portion of this Warrant
beneficially owned by such Person and its affiliates and (ii) exercise or
conversion of the unexercised or unconverted portion of any other securities of
the Company beneficially owned by such Person and its affiliates (including,
without limitation, any convertible notes or convertible preferred stock or
warrants) subject to a limitation on conversion or exercise analogous to the
limitation contained herein.  Except as set forth in the preceding
sentence, for purposes of this paragraph, beneficial ownership shall be
calculated in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended.  For purposes of this Warrant, in determining the
number of outstanding shares of Common Stock, the Holder may rely on the number
of outstanding shares of Common Stock as reflected in (1) the Company’s most
recent Form 10-K, Form 10-Q, Current Report on Form 8-K or other public filing
with the Securities and Exchange Commission, as the case may be, (2) a more
recent public announcement by the Company or (3) any other notice by the Company
or the Transfer Agent setting forth the number of shares of Common Stock
outstanding. To the extent that the limitation contained in
this  Section 1(g)  applies, the determination of whether
this Warrant is exercisable (in relation to other securities owned by such
Holder) and of which a portion of this Warrant is exercisable shall be in the
sole discretion of a Holder, and the submission of an Exercise Notice shall be
deemed to be each Holder’s determination of whether this Warrant is exercisable
(in relation to other securities owned by such Holder) and of which portion of
this Warrant is exercisable, in each case subject to such aggregate percentage
limitation, and the Company shall have no obligation to verify or confirm the
accuracy of such determination.   For any reason at any time,
upon the written or oral request of the Holder, the Company shall within two (2)
Business Days confirm to the Holder the number of shares of Common Stock then
outstanding.  In any case, the number of outstanding shares of Common
Stock shall be determined after giving effect to the conversion or exercise of
securities of the Company, including this Warrant, by the Holder and its
affiliates since the date as of which such number of outstanding shares of
Common Stock was reported.  By written notice to the Company, the
Holder may from time to time increase or decrease the Maximum Percentage to any
other percentage not in excess of 9.99% specified in such notice;  provided  that
(i) any such increase will not be effective until the sixty-first (61st) day after such notice is
delivered to the Company, and (ii) any such increase or decrease will apply only
to the Holder.  The provisions of this paragraph shall be construed
and implemented in a manner otherwise than in strict conformity with the terms
of this  Section 1(g)  to correct this paragraph (or any
portion hereof) which may be defective or inconsistent with the intended
beneficial ownership limitation herein contained or to make changes or
supplements necessary or desirable to properly give effect to such
limitation.

    


    2.      ADJUSTMENT
OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.  The Exercise Price
and the number of Warrant Shares shall be adjusted from time to time as
follows:

    


    (a)  Adjustment
upon Subdivision or Combination of Common Stock.  If the Company at
any time on or after the Pricing Date subdivides (by any stock split, stock
dividend, recapitalization, reorganization, scheme, arrangement or otherwise)
one or more classes of its outstanding shares of Common Stock into a greater
number of shares, the Exercise Price in effect immediately prior to such
subdivision will be proportionately reduced and the number of Warrant Shares
will be proportionately increased.  If the Company at any time on or
after the Pricing Date combines (by any stock split, stock dividend,
recapitalization, reorganization, scheme, arrangement or otherwise) one or more
classes of its outstanding shares of Common Stock into a smaller number of
shares, the Exercise Price in effect immediately prior to such combination will
be proportionately increased and the number of Warrant Shares will be
proportionately decreased.  Any adjustment under
this  Section 2(a)  shall become effective at the close of
business on the date the subdivision or combination becomes
effective.

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    


    (b)   Other
Events.  If any event occurs of the type contemplated by the
provisions of this Section 2 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features), then the Company’s
Board of Directors will make an appropriate adjustment in the Exercise Price and
the number of Warrant Shares so as to protect the rights of the Holder; provided
that no such adjustment pursuant to this  Section 2(b)  will
increase the Exercise Price or decrease the number of Warrant Shares as
otherwise determined pursuant to this  Section 2 .

    


    3.      RIGHTS
UPON DISTRIBUTION OF ASSETS.  If the Company shall declare or make any
dividend or other distribution of its assets (or rights to acquire its assets)
to all holders of shares of Common Stock, by way of return of capital or
otherwise (including, without limitation, any distribution of cash, stock or
other securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or other
similar transaction) (a “Distribution”), at any time
after the issuance of this Warrant, then, in each such case:

    


    (a)   any
Exercise Price in effect immediately prior to the close of business on the
record date fixed for the determination of holders of shares of Common Stock
entitled to receive the Distribution shall be reduced, effective as of the close
of business on such record date, to a price determined by multiplying such
Exercise Price by a fraction of which (i) the numerator shall be the Closing Bid
Price of the shares of Common Stock on the Trading Day immediately preceding
such record date minus the value of the Distribution (as determined in good
faith by the Company’s Board of Directors) applicable to one share of Common
Stock, and (ii) the denominator shall be the Closing Bid Price of the shares of
Common Stock on the Trading Day immediately preceding such record date;
and

    


    (b)   the
number of Warrant Shares shall be increased to a number of shares equal to the
number of shares of Common Stock obtainable immediately prior to the close of
business on the record date fixed for the determination of holders of shares of
Common Stock entitled to receive the Distribution multiplied by the reciprocal
of the fraction set forth in the immediately preceding paragraph (a);  provided  that
in the event that the Distribution is of shares of Common Stock (or common
stock) (“Other Shares of Common
Stock”) of a company whose shares of common stock are traded on a
national securities exchange or a national automated quotation system, then the
Holder may elect to receive a warrant to purchase Other Shares of Common Stock
in lieu of an increase in the number of Warrant Shares, the terms of which shall
be identical to those of this Warrant, except that such warrant shall be
exercisable into the number of shares of Other Shares of Common Stock that would
have been payable to the Holder pursuant to the Distribution had the Holder
exercised this Warrant immediately prior to such record date and with an
aggregate exercise price equal to the product of the amount by which the
exercise price of this Warrant was decreased with respect to the Distribution
pursuant to the terms of the immediately preceding paragraph (a) and the number
of Warrant Shares calculated in accordance with the first part of this paragraph
(b).

    


    4.      PURCHASE
RIGHTS; FUNDAMENTAL TRANSACTIONS.

    


    (a)   Purchase
Rights.  In addition to any adjustments pursuant to Section 2 above,
if at any time the Company grants, issues or sells any Options, Convertible
Securities or rights to purchase stock, warrants, securities or other property
pro rata to the record holders of any class of shares of Common Stock (the
“Purchase Rights”), then
the Holder will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which the Holder could have
acquired if the Holder had held the number of shares of Common Stock acquirable
upon complete exercise of this Warrant (without regard to any limitations on the
exercise of this Warrant) immediately before the date on which a record is taken
for the grant, issuance or sale of such Purchase Rights, or, if no such record
is taken, the date as of which the record holders of shares of Common Stock are
to be determined for the grant, issue or sale of such Purchase
Rights.

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    


    (b)   Fundamental
Transactions.  The Company shall not enter into or be party to a
Fundamental Transaction unless the Successor Entity assumes this Warrant in
accordance with the provisions of this  Section (4)(b) , including
agreements to deliver to each holder of Warrants in exchange for such Warrants a
security of the Successor Entity evidenced by a written instrument substantially
similar in form and substance to this Warrant, including, without limitation, an
adjusted exercise price equal to the value for the shares of Common Stock
reflected by the terms of such Fundamental Transaction, and exercisable for a
corresponding number of shares of capital stock equivalent to the shares of
Common Stock acquirable and receivable upon exercise of this Warrant (without
regard to any limitations on the exercise of this Warrant) prior to such
Fundamental Transaction, and satisfactory to the Holder.  Upon the
occurrence of any Fundamental Transaction, the Successor Entity shall succeed
to, and be substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Warrant referring to the “Company” shall
refer instead to the Successor Entity), and may exercise every right and power
of the Company and shall assume all of the obligations of the Company under this
Warrant with the same effect as if such Successor Entity had been named as the
Company herein.   Upon consummation of the Fundamental
Transaction, the Successor Entity shall deliver to the Holder confirmation that
there shall be issued upon exercise of this Warrant at any time after the
consummation of the Fundamental Transaction, in lieu of the shares of the Common
Stock (or other securities, cash, assets or other property) purchasable upon the
exercise of the Warrant prior to such Fundamental Transaction, such shares of
stock, securities, cash, assets or any other property whatsoever (including
warrants or other purchase or subscription rights) which the Holder would have
been entitled to receive upon the happening of such Fundamental Transaction had
this Warrant been converted immediately prior to such Fundamental Transaction,
as adjusted in accordance with the provisions of this Warrant. In addition to
and not in substitution for any other rights hereunder, prior to the
consummation of any Fundamental Transaction pursuant to which holders of shares
of Common Stock are entitled to receive securities or other assets with respect
to or in exchange for shares of Common Stock (a “Corporate Event”), the Company
shall make appropriate provision to insure that the Holder will thereafter have
the right to receive upon an exercise of this Warrant at any time after the
consummation of the Fundamental Transaction but prior to the Expiration Date, in
lieu of the shares of the Common Stock (or other securities, cash, assets or
other property) purchasable upon the exercise of the Warrant prior to such
Fundamental Transaction, such shares of stock, securities, cash, assets or any
other property whatsoever (including warrants or other purchase or subscription
rights) which the Holder would have been entitled to receive upon the happening
of such Fundamental Transaction had the Warrant been exercised immediately prior
to such Fundamental Transaction.  If holders of Common Stock are given
any choice as to the securities, cash or property to be received in a
Fundamental Transaction, then the Holder shall be given the same choice as to
the consideration it receives upon any exercise of this Warrant following such
Fundamental Transaction.   The provisions of
this  Section 4  shall apply similarly and equally to
successive Fundamental Transactions and Corporate Events and shall be applied
without regard to any limitations on the exercise of this Warrant.

    


    5.           NONCIRCUMVENTION.  The
Company hereby covenants and agrees that the Company will not, by amendment of
its Certificate of Incorporation, Bylaws or through any reorganization, transfer
of assets, consolidation, merger, scheme of arrangement, dissolution, issue or
sale of securities, or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, and will at all
times in good faith carry out all the provisions of this Warrant and take all
action as may be required to protect the rights of the
Holder.  Without limiting the generality of the foregoing, the Company
(i) shall not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, (ii) shall take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant, and
(iii) shall, so long as this Warrant is outstanding, take all action necessary
to reserve and keep available out of its authorized and unissued shares of
Common Stock, solely for the purpose of effecting the exercise of this Warrant,
100% of the number of shares of Common Stock issuable upon exercise of this
Warrant then outstanding (without regard to any limitations on
exercise).

    


    6.      WARRANT
HOLDER NOT DEEMED A STOCKHOLDER.  Except as otherwise specifically
provided herein, the Holder, solely in such Person’s capacity as a holder of
this Warrant, shall not be entitled to vote or receive dividends or be deemed
the holder of share capital of the Company for any purpose, nor shall anything
contained in this Warrant be construed to confer upon the Holder, solely in such
Person’s capacity as the Holder of this Warrant, any of the rights of a
stockholder of the Company or any right to vote, give or withhold consent to any
corporate action (whether any reorganization, issue of stock, reclassification
of stock, consolidation, merger, conveyance or otherwise), receive notice of
meetings, receive dividends or subscription rights, or otherwise, prior to the
issuance to the Holder of the Warrant Shares which such Person is then entitled
to receive upon the due exercise of this Warrant.  In addition,
nothing contained in this Warrant shall be construed as imposing any liabilities
on the Holder to purchase any securities (upon exercise of this Warrant or
otherwise) or as a stockholder of the Company, whether such liabilities are
asserted by the Company or by creditors of the Company.

    


    7.      REISSUANCE
OF WARRANTS.

    


    (a)
Transfer of Warrant.  If this Warrant is to be transferred, the Holder
shall surrender this Warrant to the Company together with a written assignment
of this Warrant in the form attached hereto as  Exhibit
B  duly executed by the Holder or its agent or attorney, whereupon the
Company will forthwith, subject to compliance with any applicable securities
laws, issue and deliver upon the order of the Holder a new Warrant (in
accordance with  Section 7(d) ), registered as the Holder may request,
representing the right to purchase the number of Warrant Shares being
transferred by the Holder and, if less then the total number of Warrant Shares
then underlying this Warrant is being transferred, a new Warrant (in accordance
with Section 7(d)) to the Holder representing the right to purchase the number
of Warrant Shares not being transferred.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

    


    (b)  Lost,
Stolen or Mutilated Warrant.  Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant, and, in the case of loss, theft or destruction, of
any indemnification undertaking by the Holder to the Company in customary form
and, in the case of mutilation, upon surrender and cancellation of this Warrant,
the Company shall execute and deliver to the Holder a new Warrant (in accordance
with  Section 7(d) ) representing the right to purchase the Warrant
Shares then underlying this Warrant.

    


    (c)  Exchangeable
for Multiple Warrants.  This Warrant is exchangeable, upon the
surrender hereof by the Holder at the principal office of the Company, for a new
Warrant or Warrants (in accordance with  Section 7(d) ) representing
in the aggregate the right to purchase the number of Warrant Shares then
underlying this Warrant, and each such new Warrant will represent the right to
purchase such portion of such Warrant Shares as is designated by the Holder at
the time of such surrender; provided, however, that no Warrants for fractional
shares of Common Stock shall be given.

    


    (d)
Issuance of New Warrants.  Whenever the Company is required to issue a
new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be
of like tenor with this Warrant, (ii) shall represent, as indicated on the face
of such new Warrant, the right to purchase the Warrant Shares then underlying
this Warrant (or in the case of a new Warrant being issued pursuant to Section
7(a)  or  Section 7(c) , the Warrant Shares designated by
the Holder which, when added to the number of shares of Common Stock underlying
the other new Warrants issued in connection with such issuance, does not exceed
the number of Warrant Shares then underlying this Warrant), (iii) shall have an
issuance date, as indicated on the face of such new Warrant, which is the same
as the Issuance Date, and (iv) shall have the same rights and conditions as this
Warrant.

    


    8.      NOTICES.  The
Company shall provide the Holder with prompt written notice of all actions taken
pursuant to this Warrant, including in reasonable detail a description of such
action and the reason therefor.  Whenever notice is required to be
given under this Warrant, unless otherwise provided herein, such notice shall be
given in writing, will be mailed (a) if within the domestic United States by
first-class registered or certified airmail, or nationally recognized overnight
express courier, postage prepaid, or by facsimile or (b) if delivered from
outside the United States, by International Federal Express or facsimile, and
(c) will be deemed given (i) if delivered by first-class registered or certified
mail domestic, three business days after so mailed, (ii) if delivered by
nationally recognized overnight carrier, one business day after so mailed, (iii)
if delivered by International Federal Express, two business days after so mailed
and (iv) if delivered by facsimile, upon electronic confirmation of receipt, and
will be delivered and addressed as follows:

    


    (a) 
if to the Company, to:

    


    Discovery
Laboratories, Inc.

    2600
Kelly Road

    Warrington,
Pennsylvania 18976

    Attention:  John
G. Cooper

    Facsimile:  215-488-9301

    


    with
copies to:

    


    Sonnenschein
Nath & Rosenthal LLP

    Two World
Financial Center

    New York,
New York 10281

    Attention:  Ira
L. Kotel, Esq.

    Facsimile:  212-768-6800



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    (b)   if to the
Holder, to:

    


    PharmaBio
Development Inc.

    c/o
Quintiles Transnational Corp.

    4820
Emperor Blvd

    Durham,
NC 27703

    Attn:  President

    Facsimile:  (919)
998-2090

    


    with
copies to:

    


    Smith,
Anderson, Blount, Dorsett,

       Mitchell
& Jernigan, L.L.P.

    2500
Wachovia Capitol Center

    Raleigh,
NC 27601

    Attn:
Christopher B. Capel

    Facsimile:
(919) 821-6800,

    


    or to
Holder’s address on any Exercise Notice delivered to the Company in the form
attached as Exhibit A hereto, or at such other address or addresses as may have
been furnished to the Company in writing.

    


    9.  
AMENDMENT AND WAIVER.  Except as otherwise provided herein, the
provisions of this Warrant may be amended only with the written consent of the
Company and the Holder, and the Company may take any action herein prohibited,
or omit to perform any act herein required to be performed by it, only with the
written consent of the Holder.

    


    10. 
GOVERNING LAW.  This Warrant shall be governed by and construed and
enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Warrant shall be governed by,
the internal laws of the State of Delaware, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of Delaware or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of Delaware.

    


    11. 
CONSTRUCTION; HEADINGS.  This Warrant shall be deemed to be jointly
drafted by the Company and the Holder and shall not be construed against any
person as the drafter hereof.  The headings of this Warrant are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Warrant.

    


    12. 
DISPUTE RESOLUTION.  In the case of a dispute as to the determination
of the Exercise Price or the arithmetic calculation of the Warrant Shares, the
Company shall submit the disputed determinations or arithmetic calculations via
facsimile or electronic mail within two (2) Business Days of receipt of the
Exercise Notice giving rise to such dispute, as the case may be, to the
Holder.  If the Holder and the Company are unable to agree upon such
determination or calculation of the Exercise Price or the Warrant Shares within
three Business Days of such disputed determination or arithmetic calculation
being submitted to the Holder, then the Company shall, within two (2) Business
Days submit via facsimile or electronic mail (a) the disputed determination of
the Exercise Price to an independent, reputable investment bank selected by the
Company and approved by the Holder or (b) the disputed arithmetic calculation of
the Warrant Shares to the Company’s independent, outside
accountant.  The Company shall cause at its expense the investment
bank or the accountant, as the case may be, to perform the determinations or
calculations and notify the Company and the Holder of the results no later than
ten Business Days from the time it receives the disputed determinations or
calculations.  Such investment bank’s or accountant’s determination or
calculation, as the case may be, shall be binding upon all parties absent
demonstrable error.

    


    13. 
REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.  The
remedies provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant, at law or in equity (including a
decree of specific performance and/or other injunctive relief), and nothing
herein shall limit the right of the Holder to pursue actual damages for any
failure by the Company to comply with the terms of this Warrant.

    


    14. 
TRANSFER.   Subject to compliance with any applicable securities
laws, this Warrant may be offered for sale, sold, transferred or assigned
without the consent of the Company.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

    


    15. 
CERTAIN DEFINITIONS.  For purposes of this Warrant, the following
terms shall have the following meanings:

    


    (a) 
“Bloomberg” means
Bloomberg Financial Markets.

    


    (b) 
“Business Day” means any
day other than Saturday, Sunday or other day on which commercial banks in The
City of New York are authorized or required by law to remain
closed.

    


    (c) 
“Change of Control”
means any Fundamental Transaction other than (A) any reorganization,
recapitalization or reclassification of the Common Stock, in which holders of
the Company’s voting power immediately prior to such reorganization,
recapitalization or reclassification continue after such reorganization,
recapitalization or reclassification to hold publicly traded securities and,
directly or indirectly, the voting power of the surviving entity or entities
necessary to elect a majority of the members of the board of directors (or their
equivalent if other than a corporation) of such entity or entities, or (B)
pursuant to a migratory merger effected solely for the purpose of changing the
jurisdiction of incorporation of the Company.

    


    (d) 
“Closing Bid Price” and
“Closing Sale Price”
means, for any security as of any date, the last closing bid price and last
closing trade price, respectively, for such security on the Principal Market, as
reported by Bloomberg, or, if the Principal Market begins to operate on an
extended hours basis and does not designate the closing bid price or the closing
trade price, as the case may be, then the last bid price or the last trade
price, respectively, of such security prior to 4:00:00 p.m., New York time, as
reported by Bloomberg, or, if the Principal Market is not the principal
securities exchange or trading market for such security, the last closing bid
price or last trade price, respectively, of such security on the principal
securities exchange or trading market where such security is listed or traded as
reported by Bloomberg, or if the foregoing do not apply, the last closing bid
price or last trade price, respectively, of such security in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no closing bid price or last trade price,
respectively, is reported for such security by Bloomberg, the average of the bid
prices, or the ask prices, respectively, of any market makers for such security
as reported in the “pink sheets” by Pink Sheets LLC (formerly the National
Quotation Bureau, Inc.).  If the Closing Bid Price or the Closing Sale
Price cannot be calculated for a security on a particular date on any of the
foregoing bases, the Closing Bid Price or the Closing Sale Price, as the case
may be, of such security on such date shall be the fair market value as
determined by the Board of Directors of the Company in the exercise of its good
faith judgment.  All such determinations to be appropriately adjusted
for any stock dividend, stock split, stock combination or other similar
transaction during the applicable calculation period.

    


    (e) 
“Common Stock” means
(i) the Company’s shares of Common Stock, par value $0.001 per share, and
(ii) any share capital into which such Common Stock shall have been changed
or any share capital resulting from a reclassification of such Common
Stock.

    


    (f) 
RESERVED

    


    (g) 
“Convertible Securities”
means any stock or securities (other than Options) directly or indirectly
convertible into or exercisable or exchangeable for shares of Common
Stock.

    


    (h) 
“Eligible Market” means
the Principal Market, The New York Stock Exchange, Inc., The American Stock
Exchange, The NASDAQ Global Select Market or The NASDAQ Capital
Market.

    


    (i) 
“Expiration Date” means the date five (5) years following the Issuance Date or,
if such date falls on a day other than a Business Day or on which trading does
not take place on the Principal Market (a “Holiday”), the next date that
is not a Holiday.

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    


    (j) 
“Fundamental
Transaction” means that the Company shall, directly or indirectly, in one
or more related transactions, (i) consolidate or merge with or into (whether or
not the Company is the surviving corporation) another Person, or (ii) sell,
assign, transfer, convey or otherwise dispose of all or substantially all of the
properties or assets of the Company to another Person, or (iii) allow another
Person to make a purchase, tender or exchange offer that is accepted by the
holders of more than the 50% of the outstanding shares of Common Stock (not
including any shares of Common Stock held by the Person or Persons making or
party to, or associated or affiliated with the Persons making or party to, such
purchase, tender or exchange offer), or (iv) consummate a stock purchase
agreement or other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of arrangement) with
another Person whereby such other Person acquires more than the 50% of the
outstanding shares of Common Stock (not including any shares of Common Stock
held by the other Person or other Persons making or party to, or associated or
affiliated with the other Persons making or party to, such stock purchase
agreement or other business combination), (v) reorganize, recapitalize or
reclassify its Common Stock, or (vi) any “person” or “group” (as these terms are
used for purposes of Sections 13(d) and 14(d) of the Exchange Act) is or shall
become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of 50% of the aggregate ordinary voting power
represented by issued and outstanding Common Stock.

    


    (k) 
“Options” means any
rights, warrants or options to subscribe for or purchase shares of Common Stock
or Convertible Securities.

    


    (l) 
“Parent Entity” of a
Person means an entity that, directly or indirectly, controls the applicable
Person and whose common stock or equivalent equity security is quoted or listed
on an Eligible Market, or, if there is more than one such Person or Parent
Entity, the Person or Parent Entity with the largest public market
capitalization as of the date of consummation of the Fundamental
Transaction.

    


    (m) 
“Person” means an
individual, a limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization, any other entity and a
government or any department or agency thereof.

    


    (n) 
“Principal Market” means
The NASDAQ Global Market.

    


    (o) 
RESERVED

    


    (p) 
“Successor Entity” means
the Person (or, if so elected by the Holder, the Parent Entity) formed by,
resulting from or surviving any Fundamental Transaction or the Person (or, if so
elected by the Holder, the Parent Entity) with which such Fundamental
Transaction shall have been entered into.

    


    (q) 
“Trading Day” means any
day on which the Common Stock are traded on the Principal Market, or, if the
Principal Market is not the principal trading market for the Common Stock, then
on the principal securities exchange or securities market on which the Common
Stock are then traded;  provided  that
“Trading Day” shall not include any day on which the Common Stock are scheduled
to trade on such exchange or market for less than 4.5 hours or any day that the
Common Stock are suspended from trading during the final hour of trading on such
exchange or market (or if such exchange or market does not designate in advance
the closing time of trading on such exchange or market, then during the hour
ending at 4:00:00 p.m., New York time).

    


    (r) 
“Weighted Average Price”
means, for any security as of any date, the dollar volume-weighted average price
for such security on the Principal Market during the period beginning at 9:30:01
a.m., New York City time, and ending at 4:00:00 p.m., New York City time, as
reported by Bloomberg through its “Volume at Price” function or, if the
foregoing does not apply, the dollar volume-weighted average price of such
security in the over-the-counter market on the electronic bulletin board for
such security during the period beginning at 9:30:01 a.m., New York City time,
and ending at 4:00:00 p.m., New York City time, as reported by Bloomberg, or, if
no dollar volume-weighted average price is reported for such security by
Bloomberg for such hours, the average of the highest closing bid price and the
lowest closing ask price of any of the market makers for such security as
reported in the “pink sheets” by Pink Sheets LLC (formerly the National
Quotation Bureau, Inc.).  If the Weighted Average Price cannot be
calculated for such security on such date on any of the foregoing bases, the
Weighted Average Price of such security on such date shall be the fair market
value as mutually determined by the Company and the Holder.  If the
Company and the Holder are unable to agree upon the fair market value of such
security, then such dispute shall be resolved pursuant to  Section
12  with the term “Weighted Average Price” being substituted for the
term “Exercise Price.” All such determinations shall be appropriately adjusted
for any share dividend, share split or other similar transaction during such
period.

    


    [Signature
Page Follows]



    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    IN WITNESS WHEREOF, the
parties have caused this Warrant to Purchase Common Stock to be duly executed
and delivered as of the Issuance Date set out above.

    


    
      
        	 
      	
                DISCOVERY
      LABORATORIES, INC.

              
	 
      	 
      
	 
      	
                By:

              	 
      
	 
      	
                Name:

              
	 
      	
                Title:

              


      

    

    


    
      
        	 
      	
                PHARMABIO
      DEVELOPMENT INC.

              
	 
      	 
      
	 
      	
                By:

              	 
      
	 
      	
                Name:

              
	 
      	
                Title:

              


      

    


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    EXHIBIT
A

    


    EXERCISE
NOTICE

    


    TO
BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

    WARRANT
TO PURCHASE COMMON STOCK

    


    DISCOVERY
LABORATORIES, INC.

    


    The
undersigned holder hereby exercises the right to purchase _________________ of
the shares of Common Stock (“Warrant Shares”) of Discovery
Laboratories, Inc, a Delaware corporation (the “Company”), evidenced by the
attached Warrant to Purchase Common Stock (the “Warrant”).  Capitalized
terms used herein and not otherwise defined shall have the respective meanings
set forth in the Warrant.

    


    1.  Form
of Exercise Price.  The Holder intends that payment of the Exercise
Price shall be made as:

    


    
      	 
      	
                 

            	
              a  “Cash
      Exercise” with respect to _________________ Warrant Shares;
      and/or

            


    

    


    
      	 
      	
                 

            	
              a
      “Cashless Exercise” with respect to _______________ Warrant
      Shares.

            


    

    


    2.  Payment
of Exercise Price.  In the event that the holder has elected a Cash
Exercise with respect to some or all of the Warrant Shares to be issued pursuant
hereto, the holder shall pay the Aggregate Exercise Price in the sum of
$___________________ to the Company in accordance with the terms of the
Warrant.

    


    3.  Delivery
of Warrant Shares.  The Company shall deliver __________ Warrant
Shares in the name of the undersigned holder or in the name of
______________________ in accordance with the terms of the Warrant to the
following DWAC Account Number or by physical delivery of a certificate
to:

    


    _______________________________

    


    _______________________________

    


    _______________________________

    


    Date:
_______________ __, ______

    


    
      	 
      	 
      
	
              Name
      of Registered Holder

            


    

     

    
      	
              By:

            	 
      	 
      
	 
      	
              Name:

            
	 
      	
              Title:

            


    

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    

    


    ACKNOWLEDGMENT

    


    The
Company hereby acknowledges this Exercise Notice and hereby directs Continental
Stock Transfer & Trust Company to issue the above indicated number of shares
of Common Stock in accordance with the Transfer Agent Instructions dated
[    ], 2010 from the Company and acknowledged and agreed to
by Continental Stock Transfer & Trust Company.

    


    
      
        	 
      	
                DISCOVERY
      LABORATORIES, INC

              
	 
      	 
      
	 
      	
                By:

              	 
      
	 
      	 
      	
                Name:

              
	 
      	 
      	
                Title:

              


      

    

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    

    


    EXHIBIT
B

    


    ASSIGNMENT
FORM

    


    (To
assign the foregoing warrant, execute

    this form
and supply required information.

    Do not
use this form to exercise the warrant.)

    


    FOR VALUE
RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all
rights evidenced thereby are hereby assigned to

    


    _______________________________________________
whose address is

    


    _______________________________________________________________.

    


    _______________________________________________________________

    


    Dated:  ______________,
_______

    


    
      	 
      	
              Holder’s
      Signature:

            	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
              Holder’s
      Address:

            	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      


    

    


    
      	
              Signature
      Guaranteed:

            	 
      	 
      


    

    


    NOTE:  The
signature to this Assignment Form must correspond with the name as it appears on
the face of the Warrant, without alteration or enlargement or any change
whatsoever, and must be guaranteed by a bank or trust
company.  Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.