Unassociated Document


    Exhibit
      10.2

     

    

      3,030,304
        Shares

       

      DISCOVERY
        LABORATORIES, INC.

       

      Shares
        of Common Stock

      ($0.001
        par value)

       

      PLACEMENT
        AGENT AGREEMENT

       

      December
        13, 2005

       

      SG
        COWEN
& CO., LLC

      1221
        Avenue of the Americas

      New
        York,
        New York 10020

       

      Dear
        Sirs:

       

      Discovery
        Laboratories, Inc., a Delaware corporation (the “Company”),
        proposes to sell to the Purchasers, pursuant to the terms 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”),
        an
        aggregate of 3,030,304 shares of Common Stock, par value $0.001 per share
        (the
“Common
        Stock”),
        of
        the Company. The aggregate of 3,030,304 shares so proposed to be sold is
        hereinafter referred to as the “Stock.”
        The
        Company hereby confirms its agreement with SG Cowen & Co., LLC
        (“SG
        Cowen”)
        as
        follows (certain terms used herein are defined in Section
        14
        hereof):

       

      1. AGREEMENT
        TO ACT AS PLACEMENT AGENT; PLACEMENT OF SECURITIES.
        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:

      


      (a)
         The
        Company hereby authorizes SG Cowen to act as its exclusive agent (in such
        capacity, the “Placement
        Agent”)
        to
        solicit offers for the purchase of all or part of the Stock from the Company
        in
        connection with the proposed offering of the Stock (the “Offering”).
        Until
        the earlier of the termination of this Agreement or the Closing Date (as
        defined
        in Section
        3
        hereof),
        the Company shall not, without the prior consent of the Placement Agent,
        solicit
        or accept offers to purchase Stock otherwise than through the Placement
        Agent.

      


      (b)
         The
        Placement Agent agrees, as agent of the Company, to use its commercially
        reasonable efforts to solicit offers to purchase the Stock from the Company
        on
        the terms and subject to the conditions set forth in the Base Prospectus
        (as
        defined below) and the Prospectus Supplement (as defined below). The Placement
        Agent shall make commercially reasonable efforts to assist the Company in
        obtaining performance by each Purchaser whose offer to purchase Stock has
        been
        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 purchase any Stock
        for
        its own account and, in soliciting purchases of Stock, the Placement Agent
        shall
        act solely as the Company's agent and not as principal. Notwithstanding the
        foregoing and except as otherwise provided in Section
        1(c),
        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 Stock 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).

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (c)
         Subject
        to the provisions of this Section
        1,
        offers
        for the purchase of Stock may be solicited by the Placement Agent as agent
        for
        the Company at such times and in such amounts as the Placement Agent deems
        advisable. The Placement Agent shall communicate to the Company, orally or
        in
        writing, each reasonable offer to purchase Stock 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 Stock and in its absolute discretion may reject
        any such offer, in whole or in part. The Placement Agent shall have the right,
        in its discretion reasonably exercised, subject to giving prior notice to
        the
        Company, to reject any offer to purchase Stock received by it, in whole or
        in
        part, and any such rejection shall not be deemed a breach of its agreement
        contained herein. 

      


      (d) The
        purchases of the Stock by the Purchasers shall be evidenced by the execution
        of
        the Subscription Agreements by each of the parties thereto.

      


      (e)
         As
        compensation for services rendered, on the Closing Date 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 amount equal to
        four
        and three quarters percent (4 3/4%) of the gross proceeds received by the
        Company from the sale of the Stock on such Closing Date.

      


      (f)
         No
        Stock
        which the Company has agreed to sell pursuant to this Agreement shall be
        deemed
        to have been purchased and paid for, or sold by the Company, until such Stock
        shall have been delivered to the Purchaser thereof against payment by such
        Purchaser. If the Company shall default in its obligations to deliver Stock
        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 or damage arising from or as a result of such default by the
        Company.

      


      (g) The
        Placement Agent agrees to furnish the Company with a copy of each proposed
        free
        writing prospectus prepared by or on behalf of the Placement Agent before
        its
        first use and shall not use any free writing prospectus without the Company’s
        prior written consent (which shall not be unreasonably withheld).

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      2. 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 meets the requirements for use of Form S-3 under the
        Securities
        Act of 1933, as amended (the “Securities
        Act”),
        and
        has filed with the Securities and Exchange Commission (the “Commission”)
        a
        registration statement on such form (Registration File No. 333-128929), which
        became effective as of October 24, 2005, for the registration under the
        Securities Act of the Stock. Such registration statement meets the requirements
        set forth in Rule 415(a)(1)(x) under the Securities Act and complies in all
        material respects with said Rule. The Company will file with the Commission
        pursuant to Rule 424(b) under the Securities Act, and the rules and regulations
        (the “Rules
        and Regulations”)
        of the
        Commission promulgated thereunder, a supplement to the form of prospectus
        included in such registration statement relating to the placement of the
        Stock
        and the plan of distribution thereof and has advised the Placement Agent
        of all
        further information (financial and other) with respect to the Company required
        to be set forth therein. Such registration statement, including the exhibits
        thereto, as amended at the date of this Agreement, is hereinafter called
        the
“Registration
        Statement”;
        such
        prospectus in the form in which it appears in the Registration Statement
        is
        hereinafter called the “Base
        Prospectus”;
        and
        the supplemented form of prospectus, in the form in which it will be filed
        with
        the Commission pursuant to Rule 424(b) (including the Base Prospectus as
        so
        supplemented) is hereinafter called the “Prospectus
        Supplement.”
        Any
        reference herein to the Registration Statement, the Base Prospectus or the
        Prospectus Supplement shall be deemed to refer to and include the documents
        incorporated by reference therein (the “Incorporated
        Documents”)
        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 date of this Agreement, or the issue date of the Base Prospectus
        or
        the Prospectus Supplement, as the case may be; and any reference herein to
        the
        terms “amend,”“amendment” or “supplement” with respect to the Registration
        Statement, the Base Prospectus or the Prospectus Supplement shall be deemed
        to
        refer to and include the filing of any document under the Exchange Act after
        the
        date of this Agreement, or the issue date of the Base Prospectus or the
        Prospectus Supplement, as the case may be, deemed to be incorporated therein
        by
        reference. All references in this Agreement to financial statements and
        schedules and other information which is “contained,”“included,”“described,”“set
        forth” or “stated” in the Registration Statement, the Base Prospectus or the
        Prospectus Supplement (and all other references of like import) shall be
        deemed
        to mean and include all such financial statements and schedules and other
        information which is or is deemed to be incorporated by reference in the
        Registration Statement, the Base Prospectus or the Prospectus Supplement,
        as the
        case may be. No stop order suspending the effectiveness of the Registration
        Statement or the use of the Base Prospectus or the Prospectus Supplement
        has
        been issued, and no proceeding for any such purpose is pending or has been
        initiated or, to the Company's knowledge, is threatened by the Commission.
        For
        purposes of this Agreement, “free
        writing prospectus”
        has the
        meaning set forth in Rule 405 under the Securities Act and the “Time
        of Sale Prospectus”
        means
        the Base Prospectus, together with the free writing prospectuses, if any,
        used
        in connection with the Offering, including any documents incorporated by
        reference therein. All references in this Agreement to the Registration
        Statement, a Base Prospectus, the Time of Sale Prospectus and the Prospectus
        Supplement, or any amendments or supplements to any of the foregoing shall
        be
        deemed to include any copy thereof filed with the Commission pursuant to
        its
        Electronic Data Gathering, Analysis and Retrieval System (“EDGAR”).

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      (b) The
        Registration Statement (and any further documents to be filed with the
        Commission) contains all exhibits and schedules as required by the Securities
        Act. Each of the Registration Statement and any post-effective amendment
        thereto, at the time it became effective, complied in all material respects
        with
        the Securities Act and the Exchange Act and the applicable Rules and Regulations
        and did not and, as amended or supplemented, if applicable, will not, contain
        any 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
        not
        misleading. The Base Prospectus, the Time of Sale Prospectus, if any, and
        the
        Prospectus Supplement, each as of its respective date, comply in all material
        respects with the Securities Act and the Exchange Act and the applicable
        Rules
        and Regulations. Each of the Base Prospectus, the Time of Sale Prospectus,
        if
        any, and the Prospectus Supplement, as amended or supplemented, did not and
        will
        not contain as of the date thereof 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.
        The
        Incorporated Documents, when they were filed with the Commission, conformed
        in
        all material respects to the requirements of the Exchange Act and the applicable
        Rules and Regulations, and none of such documents, when they were filed with
        the
        Commission, contained any untrue statement of a material fact or omitted
        to
        state a material fact 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 Base Prospectus,
        the
        Time of Sale Prospectus, if any, or Prospectus Supplement, when such documents
        are filed with the Commission, will conform in all material respects to the
        requirements of the Exchange Act and the applicable Rules and Regulations,
        as
        applicable, and will not contain any untrue statement of a material fact
        or omit
        to state a material fact necessary to make the statements therein, in light
        of
        the circumstances under which they were made, not misleading. Notwithstanding
        the foregoing, the Company makes no representations or warranties as to
        information, if any, contained in or omitted from the Time of Sale Prospectus,
        if any, or the Prospectus Supplement or any amendment thereof or supplement
        thereto in reliance upon and in conformity with information furnished in
        writing
        to the Company by or on behalf of the Placement Agent specifically for use
        in
        the Registration Statement, the Time of Sale Prospectus, if any, or the
        Prospectus Supplement, which information the parties hereto agree is limited
        to
        the Placement Agent’s Information as defined in Section
        16.
        No
        post-effective amendment to the Registration Statement reflecting any facts
        or
        events arising after the date thereof which represent, individually or in
        the
        aggregate, a fundamental change in the information set forth therein is required
        to be filed with the Commission. There are no documents required to be filed
        with the Commission in connection with the transaction contemplated hereby
        that
        (x) have not been filed as required pursuant to the Securities Act or (y)
        will
        not be filed within the requisite time period. There are no contracts or
        other
        documents required to be described in the Base Prospectus, the Time of Sale
        Prospectus, if any, or Prospectus Supplement, or to be filed as exhibits
        or
        schedules to the Registration Statement, which have not been described or
        filed
        as required. 

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      (c) The
        Company is eligible to use free writing prospectuses in connection with the
        Offering pursuant to Rules 164 and 433 under the Securities Act. Any free
        writing prospectus that the Company is required to file pursuant to Rule
        433(d)
        under the Securities Act has been, or will be, filed with the Commission
        in
        accordance with the requirements of the Securities Act and the applicable
        rules
        and regulations of the Commission thereunder. Each free writing prospectus
        that
        the Company has filed, or is required to file, pursuant to Rule 433(d) under
        the
        Securities Act or that was prepared by or behalf of or used by the Company
        complies or will comply in all material respects with the requirements of
        the
        Securities Act and the applicable rules and regulations of the Commission
        thereunder. The Company will not, without the Placement Agent’s consent,
        prepare, use or refer to, any free writing prospectus related to the Offering.
        

       

      (d) The
        Company has delivered, or will as promptly as practicable deliver, to the
        Placement Agent complete conformed copies of the Registration Statement and
        of
        each consent and certificate of experts filed as a part thereof, and conformed
        copies of the Registration Statement (without exhibits) and the Base Prospectus,
        the Time of Sale Prospectus, if any, and the Prospectus Supplement, as amended
        or supplemented, in such quantities and at such places as the Placement Agent
        reasonably requests. Neither the Company nor any of its directors and officers
        has distributed and none of them will distribute, prior to the completion
        of the
        distribution of Stock, any offering material in connection with the offering
        and
        sale of the Stock other than the Base Prospectus, the Time of Sale Prospectus,
        if any, the Prospectus Supplement, the Registration Statement, copies of
        the
        documents incorporated by reference therein and any other materials permitted
        by
        the Securities Act. 

       

      (e) Each
        of
        the Company and Acute Therapeutics, Inc., a wholly-owned subsidiary of the
        Company (the “Subsidiary”),
        have
        been duly organized and are validly existing as corporations or other legal
        entities in good standing (or the equivalent thereof, if any) under the laws
        of
        their respective jurisdictions of incorporation, are duly qualified to do
        business and are in good standing (or the equivalent thereof, if any) 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 necessary to own or hold
        their
        respective properties and to conduct the businesses in which they are engaged,
        except where the failure to be so qualified and in good standing or have
        such
        power or authority would not have, singularly or in the aggregate, a material
        adverse effect on the condition (financial or otherwise), results of operations,
        business, properties or prospects of the Company and its Subsidiary taken
        as a
        whole (a “Material
        Adverse Effect”).

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      (f) The
        Stock
        to be issued and sold by the Company hereunder and under the Subscription
        Agreements has been duly and validly authorized and, when issued and delivered
        against payment therefor as provided herein, will be duly and validly issued,
        fully paid and nonassessable and free of any preemptive or similar rights.
        The
        Stock conforms to the description thereof contained in the Base Prospectus,
        the
        Prospectus Supplement and the Time of Sale Prospectus, if any. 

       

      (g) The
        Company has an authorized capitalization as set forth in the Base Prospectus,
        the Prospectus Supplement and the Time of Sale Prospectus, if any, 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 Base Prospectus, the Prospectus Supplement
        and the Time of Sale Prospectus, if any. 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 options or authorized or outstanding 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 its Subsidiary that have been granted
        by the
        Company other than those accurately described in the Base Prospectus. 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 Base Prospectus completely, accurately and fairly present the information
        required to be shown with respect to such plans, arrangements, options and
        rights.

       

      (h) All
        the
        outstanding shares of capital stock of the Subsidiary have been duly authorized
        and validly issued, are fully paid and nonassessable and, except to the extent
        set forth in the Base Prospectus, are owned directly by the Company, free
        and
        clear of any claim, lien, encumbrance, security interest, defect or restriction
        upon voting or transfer or any other claim of any kind (“Liens”).
        

       

      (i) The
        Company has the full right, power and authority to enter into this Agreement
        and
        each of the Subscription Agreements and to perform and to discharge its
        obligations hereunder and thereunder; and each of this 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).

       

      
        
          
          

        

        
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      (j) The
        execution, delivery and performance of this Agreement and the Subscription
        Agreements by the Company and the consummation of the transactions contemplated
        hereby and thereby will not conflict with or result in a breach or violation
        of
        any of the terms or provisions of, or constitute a default under, any indenture,
        mortgage, deed of trust, loan agreement or other agreement or instrument
        to
        which the Company or its Subsidiary is a party or by which the Company or
        its
        Subsidiary is bound or to which any of the property or assets of the Company
        or
        its Subsidiary is subject, nor will such actions result in any violation
        of the
        provisions of (A) the charter or by-laws of the Company or its Subsidiary
        or (B)
        any statute, law, rule or regulation or any judgment, order or decree of
        any
        court or governmental agency or body having jurisdiction over the Company
        or its
        Subsidiary 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.

       

      (k) There
        is
        no franchise, contract, lease, instrument or other document of a character
        required by the Securities Act or the Rules and Regulations to be described
        in
        the Base Prospectus or the Prospectus Supplement, or to be filed as an exhibit
        to the Registration Statement, which is not described or filed as required;
        and
        all statements summarizing any such franchises, contracts, leases, instruments
        or other documents or legal matters contained in the Registration Statement
        are
        accurate and complete in all material respects. Other than as described in
        the
        Base Prospectus, no such franchise, contract, lease, instrument or other
        document has been suspended or terminated for convenience or default by the
        Company or any of the other parties thereto, the Company has not sent or
        received any communication regarding intent not to renew any such franchise,
        contract, lease, instrument or other document, and the Company has not received
        notice or 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. 

       

      (l) 
        All
        existing minute books of the Company and its Subsidiary, including all existing
        records of all meetings and actions of the board of directors (including,
        Audit,
        Compensation, Nomination/Corporate Governance and other board committees)
        and
        stockholders of the Company through the date of the latest meeting and action
        (collectively, the “Corporate
        Records”)
        have
        been made available to the Placement Agent and counsel for the Placement
        Agent.
        All such Corporate Records are complete and accurately reflect, in all material
        respects, all transactions referred to in such Corporate Records. There are
        no
        material transactions, agreements or other actions of the Company that are
        not
        properly approved and/or recorded in the Corporate Records.

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      (m) No
        consent, approval, authorization, filing with or order of or registration
        with,
        any court or governmental agency or body is required in connection with the
        transactions contemplated herein or in the Subscription Agreements, except
        such
        as have been obtained or made under the Securities Act or the Exchange Act,
        such
        as may be required under the securities, or blue sky, laws of any jurisdiction
        in connection with the offer and sale of the Stock by the Company in the
        manner
        contemplated herein and in the Base Prospectus and the Prospectus Supplement,
        and the filing with The Nasdaq Stock Market (“Nasdaq”)
        of a
        Notification Form: Listing of Additional Shares.

       

      (n) Except
        as
        described in the Base Prospectus, (i) no person has the right, contractual
        or
        otherwise, to cause the Company to issue or sell to it any shares of Common
        Stock or shares of any other capital stock or other equity interests of the
        Company, (ii) no person has any preemptive rights, resale rights, rights
        of
        first refusal or other rights to purchase any shares of Common Stock or shares
        of any other capital stock or other securities of the Company, and (iii)
        except
        as provided herein, no person has the right to act as an underwriter, placement
        agent or financial advisor to the Company in connection with and as a result
        of
        the offer and sale of the Stock, in the case of each of the foregoing clauses
        (i), (ii) and (iii), whether as a result of the filing or effectiveness of
        the
        Registration Statement or the sale of the Stock as contemplated thereby or
        otherwise; no person has the right, contractual or otherwise, to cause the
        Company to register under the Securities Act any shares of Common Stock or
        shares of any other capital stock or other securities of the Company, or
        to
        include any such shares or interests in the Registration Statement or the
        offering contemplated thereby, whether as a result of the filing or
        effectiveness of the Registration Statement or the sale of the Stock as
        contemplated thereby or otherwise, except for persons and entities who have
        expressly waived such right or who have been given timely and proper notice
        and
        have failed to exercise such right within the time or times required under
        the
        terms and conditions of such right, and the Company is not required to file
        any
        registration statement for the registration of any securities of any person
        or
        register any such securities pursuant to any other registration statement
        filed
        by the Company under the Securities Act for a period of at least 90 days
        after
        the date hereof.

       

      (o) The
        financial statements, together with the related notes and schedules, of the
        Company included in the Base Prospectus, the Prospectus Supplement, the
        Registration Statement or the Time of Sale Prospectus, if any, or incorporated
        by reference therein, as the case may be, present fairly the financial
        condition, results of operations and cash flows of the Company and its
        consolidated subsidiary as of the dates and for the periods indicated, comply
        in
        all material respects with the Securities Act and the Rules and Regulations
        thereunder, and have been prepared in conformity with generally accepted
        accounting principles applied on a consistent basis throughout the periods
        involved. No other financial statements or supporting schedules or exhibits
        are
        required by the Securities Act or the Rules and Regulations thereunder to
        be
        included in the Base Prospectus, the Prospectus Supplement, the Registration
        Statement or the Time of Sale Prospectus, if any, or incorporated by reference
        therein, as the case may be. As of November 30, 2005, the Company had cash
        and
        marketable securities as set forth in that certain representation letter,
        dated
        as of the date of this Agreement, delivered by the Company to the Placement
        Agent. 

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      (p) Except
        as
        set forth in the Base Prospectus, there is no legal or governmental proceeding
        pending to which the Company or its Subsidiary is a party or of which any
        property or assets of the Company or its Subsidiary is the subject which
        is
        required to be described in the Base Prospectus and is not described therein,
        or
        which, singularly or in the aggregate, if determined adversely to the Company
        or
        its Subsidiary, 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; and to the best of the Company’s knowledge, except as set forth
        in the Base Prospectus, no such proceedings are threatened or contemplated
        by
        governmental authorities or threatened by others.

       

      (q) The
        Company and its Subsidiary have good and marketable title to all property
        (real
        and personal) described in the Registration Statement, the Base Prospectus,
        the
        Prospectus Supplement and the Time of Sale Prospectus, if any, as being owned
        by
        the Company or its Subsidiary, free and clear of all Liens, except for those
        Liens that do not materially interfere with the use made or proposed to be
        made
        of such property by the Company or its Subsidiary or that would not have
        a
        Material Adverse Effect; all the property described in the Registration
        Statement, the Base Prospectus, the Prospectus Supplement and the Time of
        Sale
        Prospectus, if any, as being held under lease by the Company or its Subsidiary
        is held thereby under valid, subsisting and enforceable leases except where
        the
        failure to be valid, subsisting or enforceable would not have a Material
        Adverse
        Effect. 

       

      (r) Neither
        the Company nor its Subsidiary is (i) in violation of any provision of its
        charter or bylaws, (ii) in 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 of
        any
        indenture, contract, lease, mortgage, deed of trust, note agreement, loan
        agreement or other agreement, obligation, condition, covenant 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) in violation in any respect of any statute, law,
        rule, regulation, ordinance, judgment, order or decree of any court, regulatory
        body, administrative agency, governmental body, arbitrator or other authority
        having jurisdiction over the Company, its Subsidiary or any of its properties,
        as applicable (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), except, with
        respect to clauses (ii) and (iii), any violations or defaults which, singularly
        or in the aggregate, would not have a Material Adverse Effect.

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      (s) The
        contracts described in the Company’s regular reports on Forms 10-Q, 10-K, and
        8-K as filed by the Company since March 16, 2005 with the Commission or
        incorporated by reference therein that are material to the Company are in
        full
        force and effect on the date hereof, and neither the Company nor, to the
        Company's knowledge, any other party to such contracts is in breach of or
        default under any of such contracts which would have a Material Adverse
        Effect. 

      


      (t) No
        labor
        problem or dispute with the employees of the Company exists or, to the Company’s
        knowledge, is threatened or imminent, which might be expected to have a Material
        Adverse Effect. The Company is not aware that any key employee or significant
        group of employees of the Company plans to terminate employment with the
        Company.

       

      (u) The
        Company has fulfilled its obligations, if any, under the minimum funding
        standards of Section 302 of the United States Employee Retirement Income
        Security Act of 1974 (“ERISA”)
        and
        the regulations and published interpretations thereunder with respect to
        each
“plan”
        (as
        defined in Section 3(3) of ERISA and such regulations and published
        interpretations) in which employees of the Company are eligible to participate
        and each such plan is in compliance in all material respects with the presently
        applicable provisions of ERISA and such regulations and published
        interpretations. No “prohibited
        transaction”
        (as
        defined in Section 406 of ERISA, or Section 4975 of the Internal Revenue
        Code of
        1986, as amended from time to time (the “Code”))
        has
        occurred with respect to any employee benefit plan which could have a Material
        Adverse Effect. The Company has not incurred any unpaid liability to the
        Pension
        Benefit Guaranty Corporation (other than for the payment of premiums in the
        ordinary course) or to any such plan under Title IV of ERISA. Each “pension
        plan”
        (as
        defined in ERISA) for which the Company would have any liability that is
        intended to be qualified under Section 401(a) of the Code is so qualified
        in all
        material respects and nothing has occurred, whether by action or by failure
        to
        act, which could cause the loss of such qualification. 

       

      (v) The
        Company maintains insurance in such amounts and covering such risks as the
        Company reasonably considers adequate for the conduct of its business and
        the
        value of its properties, all of which insurance is in full force and effect,
        except where the failure to maintain such insurance could not reasonably
        be
        expected to have a Material Adverse Effect.

       

      (w) Each
        of
        the Company and its Subsidiary has made all filings, applications and
        submissions required by, and possesses all approvals, licenses, certificates,
        certifications, clearances, consents, exemptions, marks, notifications, orders,
        permits and other authorizations issued by, the appropriate federal, state
        or
        foreign regulatory authorities (including, without limitation, the FDA, and
        any
        other foreign, federal, state or local government or regulatory authorities
        performing functions similar to those performed by the FDA) necessary to
        conduct
        its businesses (collectively, “Permits”),
        except for such Permits which the failure to obtain or comply with could
        not
        reasonably be expected to have a Material Adverse Effect, and is in compliance
        with the terms and conditions of all such Permits; all of such Permits held
        by
        each of the Company and
        its
        Subsidiary are
        valid
        and in full force and effect except as could not have a Material Adverse
        Effect;
        there is no pending or threatened action, suit, claim or proceeding which
        may
        cause any such Permit to be limited, revoked, cancelled, suspended, modified
        or
        not renewed and each of the Company and
        its
        Subsidiary has
        not
        received any notice of proceedings relating to the limitation, revocation,
        cancellation, suspension, modification or non-renewal of any such Permit
        which,
        singularly or in the aggregate, if the subject of an unfavorable decision,
        ruling or finding, would have a Material Adverse Effect, whether or not arising
        from transactions in the ordinary course of business, except as set forth
        in or
        contemplated by the Base Prospectus or the Prospectus Supplement.

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      (x)
         Ernst
        & Young LLP, who has certified certain financial statements of the Company
        and delivered its report with respect to the audited consolidated financial
        statements and schedules included in the Base Prospectus, the Prospectus
        Supplement, the Time of Sale Prospectus, if any, or the Registration Statement,
        or incorporated by reference therein, as the case may be, is an independent
        public accountant with respect to the Company within the meaning of the
        Securities Act and the Rules and Regulations.

       

      (y) Each
        of
        the Company and its Subsidiary has filed all foreign, federal, state and
        local
        tax returns that are required to be filed or has requested extensions thereof
        (except in any case in which the failure so to file would not have a Material
        Adverse Effect, except as set forth in the Base Prospectus) and has paid
        all
        taxes required to be paid by it and any other assessment, fine or penalty
        levied
        against it, to the extent that any of the foregoing is due and payable, except
        for any such assessment, fine or penalty that is currently being contested
        in
        good faith or as would not have a Material Adverse Effect, except as set
        forth
        in the Base Prospectus.

       

      (z)
         The
        principal executive officer and principal financial officer of the Company
        have
        made all certifications required by the Sarbanes-Oxley Act of 2002 and the
        rules
        and regulations promulgated in connection therewith (the “Sarbanes-Oxley
        Act”),
        and
        the statements contained in any such certification are complete and correct.
        The
        Company maintains “disclosure controls and procedures” (as defined in Rule
        13a-14(c) under the Exchange Act), and such controls and procedures are designed
        (i) to ensure that information required to be disclosed by the Company in
        the
        reports that it files or submits under the Exchange Act is recorded, processed,
        summarized and reported, within the time periods specified in the Commission's
        rules and forms and (ii) to ensure that information required to be disclosed
        by
        the Company in the reports that it files or submits under the Exchange Act
        is
        accumulated and communicated to the Company's management, including its
        principal executive officer and principal financial officer, as appropriate
        to
        allow timely decisions regarding required disclosure. There has been no fraud,
        whether or not material, that involves management or other employees who
        have a
        significant role in the Company's internal controls. The Company is otherwise
        in
        compliance in all respects with all applicable effective provisions of the
        Sarbanes-Oxley Act and the rules and regulations promulgated by the Commission
        (and intends to comply with all applicable provisions that are not yet effective
        upon effectiveness).

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      (aa) The
        Company maintains a system of internal accounting controls sufficient to
        provide
        reasonable assurance 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
        generally accepted accounting principles and to maintain accountability of
        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 the existing assets at reasonable intervals and
        appropriate action is taken with respect to any differences.

       

      (bb) Each
        of
        the Company and its Subsidiary (i) is in compliance in all material respects
        with any and all applicable foreign, federal, state and local laws and
        regulations relating to the protection of human health and safety, the
        environment or hazardous or toxic substances or wastes, pollutants or
        contaminants (“Environmental
        Laws”),
        (ii)
        has received and is in compliance with all permits, licenses or other approvals
        required of it under applicable Environmental Laws to conduct its business
        and
        (iii) has not received notice of any actual or potential liability for the
        investigation or remediation of any disposal or release of hazardous or toxic
        substances or wastes, pollutants or contaminants, except where such
        non-compliance with Environmental Laws, failure to receive required permits,
        licenses or other approvals, or liability would not, individually or in the
        aggregate, have a Material Adverse Effect, whether or not arising from
        transactions in the ordinary course of business, except as set forth in or
        contemplated by the Base Prospectus (exclusive of any supplement thereto).
        To
        the best of its knowledge, the Company has not been named as a “potentially
        responsible party”
        under
        the Comprehensive Environmental Response, Compensation, and Liability Act
        of
        1980, as amended.

       

      (cc) In
        the
        ordinary course of its business, the Company periodically reviews the effect
        of
        Environmental Laws on the business, operations and properties of each of
        the
        Company and its Subsidiary, in the course of which it identifies and evaluates
        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 any permit, license or approval, any
        related constraints on operating activities and any potential liabilities
        to
        third parties). On the basis of such review, the Company has reasonably
        concluded that such associated costs and liabilities would not, singularly
        or in
        the aggregate, have a Material Adverse Effect, whether or not arising from
        transactions in the ordinary course of business, except as set forth in or
        contemplated by the Base Prospectus.

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      (dd) Each
        of
        the Company and its Subsidiary own, possess, license or have other rights
        to use
        all foreign and domestic patents, patent applications, trade and service
        marks,
        trade and service mark registrations, trade names, copyrights, licenses,
        inventions, trade secrets, technology, Internet domain names, know-how and
        other
        intellectual property (collectively, the “Intellectual
        Property”)
        necessary for the conduct of the Company’s business as now conducted or as
        proposed in the Base Prospectus, the Time of Sale Prospectus, if any, or
        the
        Prospectus Supplement, to be conducted. Except as set forth in the Base
        Prospectus (a) there are no rights of third parties to any such
        Intellectual Property; (b) to the Company’s knowledge, there is no infringement
        by third parties of any such Intellectual Property; (c) there is no pending
        or,
        to the Company’s knowledge, threatened action, suit, proceeding or claim by
        others challenging each of the Company’s and its Subsidiary’s rights in or to
        any such Intellectual Property, and the Company is unaware of any facts which
        would form a reasonable basis for any such claim; (d) there is no pending
        or, to
        the best of the Company’s knowledge, threatened action, suit, proceeding or
        claim by others challenging the validity or scope of any such Intellectual
        Property; (e) there is no pending or, to the best of the Company’s knowledge,
        threatened action, suit, proceeding or claim by others that the Company and
        its
        Subsidiary infringe or otherwise violate any patent, trademark, copyright,
        trade
        secret or other proprietary rights of others, and the Company is unaware
        of any
        other fact which would form a reasonable basis for any such claim; (f) to
        the
        Company’s knowledge, there is no third-party U.S. patent or published U.S.
        patent application which contains claims for which an Interference Proceeding
        could be commenced against any patent or patent application that is described
        in
        the Base Prospectus, the Time of Sale Prospectus, if any, and the Prospectus
        Supplement as being owned by or licensed the Company, except for Interference
        Proceedings based on claims under any such patents or published patent
        applications as could not have a Material Adverse Effect; (g) there is no
        pending or, to the Company’s knowledge, threatened action, suit, proceeding or
        claim by others claiming the ownership of and interest in the Intellectual
        Property; and (h) each of the Company and its Subsidiary have taken all steps
        necessary to perfect its ownership of and interest in the Intellectual
        Property.

       

      (ee) The
        clinical, pre-clinical and other studies and tests conducted by or on behalf
        of
        or sponsored by the Company and its Subsidiary were and, if still pending,
        are
        being conducted in accordance with all material statutes, laws, rules and
        regulations, as applicable (including, without limitation, those administered
        by
        the FDA or by any foreign, federal, state or local governmental or regulatory
        authority performing functions similar to those performed by the FDA). The
        descriptions of the results of such studies and tests included or incorporated
        by reference in the Registration Statement, the Base Prospectus, the Time
        of
        Sale Prospectus and the Prospectus Supplement are accurate and complete in
        all
        material respects and fairly present the published data derived from such
        studies and tests, and the Company has no knowledge of other studies or tests
        the results of which are materially inconsistent with or otherwise call into
        question in any material respect the results described or referred to in
        the
        Base Prospectus. Neither the Company nor its Subsidiary has received any
        notices
        or other correspondence from the FDA or any other foreign, federal, state
        or
        local governmental or regulatory authority performing functions similar to
        those
        performed by the FDA with respect to any ongoing clinical or pre-clinical
        studies or tests requiring the termination, suspension or modification of
        such
        studies or tests.

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      (ff) Neither
        the Company nor its Subsidiary has failed to file with the applicable regulatory
        authorities (including, without limitation, the FDA or any foreign, federal,
        state or local governmental or regulatory authority performing functions
        similar
        to those performed by the FDA) any material filing, declaration, listing,
        registration, report or submission; all such filings, declarations, listings,
        registrations, reports or submissions were in compliance with applicable
        laws
        when filed, except where the failure to be in compliance did not, singularly
        or
        in the aggregate, have a Material Adverse Effect, and, except as described
        in
        the Base Prospectus, the Company has not been notified that any material
        deficiencies have been asserted by any applicable regulatory authority
        (including, without limitation, the FDA or any foreign, federal, state or
        local
        governmental or regulatory authority performing functions similar to those
        performed by the FDA) with respect to any such filings, declarations, listings,
        registrations, reports or submissions.

       

      (gg) No
        relationship, direct or indirect, exists between or among the Company on
        the one
        hand and the directors, officers, stockholders, customers or suppliers of
        the
        Company on the other hand which is required to be described in the Base
        Prospectus and the Prospectus Supplement and which is not so
        described.

       

      (hh) Neither
        the Company nor any other person associated with or acting on behalf of the
        Company including, without limitation, any director, officer, agent or employee
        of the Company or its Subsidiary, has, directly or indirectly, while acting
        on
        behalf of the Company or its Subsidiary (i) used any corporate funds for
        unlawful contributions, gifts, entertainment or other unlawful expenses,
        or
        received or retained any funds, relating to political activity; (ii) made
        any
        unlawful payment from corporate funds to, or received or retained any unlawful
        funds from, foreign or domestic government officials or employees or to or
        from
        foreign or domestic political parties or campaigns; (iii) violated any provision
        of the Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any
        other
        unlawful payment or received or retained any other unlawful funds.

       

      (ii) Neither
        the Company nor its Subsidiary is or, after giving effect to the offering
        and
        sale of the Stock and the application of the proceeds thereof as described
        in
        the Base Prospectus, the Time of Sale Prospectus, if any, and the Prospectus
        Supplement, will become an “investment
        company”
        as
        defined in the Investment Company Act of 1940, as amended.

       

      (jj) Other
        than as contemplated by this Agreement, neither the Company nor its Subsidiary
        is a party to any contract, agreement or understanding with any person 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 Stock.

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      (kk) Neither
        the Company nor its Subsidiary has sustained, since the date of the latest
        audited financial statements included in the Base Prospectus or the Registration
        Statement, or incorporated by reference therein, as the case may be, any
        material loss or interference with its business from fire, explosion, flood,
        terrorist act 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 or contemplated by the Base Prospectus.

       

      (ll) Except
        as
        set forth in or as otherwise contemplated by the Registration Statement and
        the
        Base Prospectus, subsequent to the respective dates as of which information
        is
        given in the Registration Statement and the Base Prospectus, there has not
        been
        (i) any material adverse change, or any development that would reasonably
        be
        expected to result in a material adverse change, in the business, properties,
        management, financial condition or results of operations of the Company taken
        as
        a whole, (ii) any transaction which is material to the Company taken as a
        whole,
        (iii) any obligation, direct or contingent (including any off-balance sheet
        obligations), incurred by the Company outside the ordinary course of business,
        which is material to the Company taken as a whole, (iv) any change in the
        capital stock (other than the issuance of shares of Common Stock upon exercise
        of stock options and warrants disclosed as outstanding in the Registration
        Statement and the Base Prospectus and the grant of options in the ordinary
        course of business consistent with past practice or under existing stock
        option
        plans described in the Registration Statement and the Base Prospectus) or
        outstanding indebtedness of the Company or (v) any dividend or distribution
        of
        any kind declared, paid or made on the capital stock of the
        Company.

       

      (mm) Any
        statistical and market-related data included in the Registration Statement,
        the
        Base Prospectus, the Time of Sale Prospectus, if any, or the Prospectus
        Supplement are based on or derived from sources that the Company believes
        to be
        reliable and accurate.

       

      (nn) The
        Stock
        is registered under the Exchange Act and is duly listed and admitted and
        authorized for trading, subject to official notice of issuance, on the Nasdaq
        National Market and the Company has taken no action designed to terminate,
        or
        likely to have the effect of terminating the registration of the Common Stock
        under the Exchange Act or delisting or suspending from trading the Common
        Stock
        on the Nasdaq National Market, nor has the Company received any information
        from
        the Commission or Nasdaq suggesting that it is contemplating terminating
        or
        suspending such registration or listing.

       

      (oo) The
        Company has not taken and will not take, and will cause its affiliates (within
        the meaning of Rule 144 promulgated under the Securities Act) not to take,
        directly or indirectly, any action which constitutes or is designed to cause
        or
        result in, or which could reasonably be expected to constitute, cause or
        result
        in, the stabilization or manipulation of the price of any security to facilitate
        the sale or resale of the Stock in violation of Regulation M under the Exchange
        Act.

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      (pp) There
        are
        no affiliations with Nasdaq among the Company’s officers, directors or, to the
        best of the knowledge of the Company, any five percent or greater stockholder
        of
        the Company, except as set forth in the Base Prospectus and the Registration
        Statement or otherwise disclosed in writing to the Placement Agent.

       

      (qq) The
        Company satisfies the pre-1992 eligibility requirements for the use of a
        registration statement on Form S-3 in connection with the Offering contemplated
        thereby (the pre-1992 eligibility requirements for the use of the registration
        statement on Form S-3 include (i) having a non-affiliate, public common equity
        float of at least $150 million or a non-affiliate, public common equity float
        of
        at least $100 million and annual trading volume of at least three million
        shares
        and (ii) having been subject to the Exchange Act reporting requirements for
        a
        period of 36 months).

       

      (rr) The
        Company has taken all necessary actions to ensure that it will be in compliance
        with all applicable corporate governance requirements set forth in the Nasdaq
        Marketplace Rules that are then in effect and is actively taking steps to
        ensure
        that it will be in compliance with other applicable corporate governance
        requirements set forth in the Nasdaq Marketplace Rules not currently in effect
        upon and all times after the effectiveness of such requirements.

       

      (ss) No
        approval of the shareholders of the Company under the rules and regulations
        of
        any trading market (including Rule 4350 of the Nasdaq Marketplace Rules)
        is
        required for the Company to issue and deliver the Stock to the Purchasers.
        

       

      Any
        certificate signed by any officer of the Company and delivered to the Placement
        Agent or counsel for the Placement Agent in connection with the offering
        of the
        Stock shall be deemed a representation and warranty by the Company and its
        Subsidiary, as to the matters covered thereby, to the Placement Agent and
        the
        Purchasers.

       

      3. THE
        CLOSING.
        The
        time and date of closing and delivery of the documents required to be delivered
        to the Placement Agent pursuant to Section
        6
        hereof
        shall be at 10:00 A.M., local time, on December 19, 2005 (the “Closing
        Date”)
        at the
        office of Dickstein Shapiro Morin & Oshinsky LLP, 1177 Avenue of the
        Americas, 47th Floor, New York, New York.

       

      4. FURTHER
        AGREEMENTS OF THE COMPANY.
        The
        Company agrees with the Placement Agent and the Purchasers:

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

       

      (a)
        (i)
        to make no further amendment or supplement prior to the Closing Date to the
        Registration Statement or any amendment or supplement to the Prospectus
        Supplement, without the consent of the Placement Agent, which consent shall
        not
        be unreasonably withheld; (ii) for so long as the delivery of a prospectus
        is
        required in connection with the offering or sale of the Stock, to advise
        the
        Placement Agent promptly after it receives notice thereof, of the time when
        any
        amendment to the Registration Statement has been filed or becomes effective
        or
        any supplement to the Prospectus Supplement or any amended Prospectus Supplement
        has been filed and to furnish the Placement Agent with copies thereof;
        (iii)
        subsequent to the date of the Prospectus Supplement and for so long as the
        delivery of a prospectus is required in connection with the offering or sale
        of
        the Stock, to use its reasonable best efforts, to file promptly all reports
        and
        any definitive proxy or information statements required to be filed by the
        Company with the Commission and Nasdaq pursuant to Section 13(a), 15 or 15(d)
        of
        the Exchange Act subsequent to the date of the Prospectus Supplement;
        (iv)
        subsequent to the date of any Time of Sale Prospectus and for so long as
        the
        delivery of a prospectus is required in connection with the offering or sale
        of
        the Stock, to use its reasonable best efforts, to file promptly all reports
        and
        any definitive proxy or information statements required to be filed by the
        Company with the Commission and Nasdaq pursuant to Section 13(a), 15 or 15(d)
        of
        the Exchange Act subsequent to the date of the Prospectus Supplement; (iv)
        to
        advise the Placement Agent, promptly after it receives notices thereof, (x)
        of
        any request by the Commission to amend the Registration Statement or to amend
        or
        supplement the Prospectus Supplement or for additional information and (y)
        of
        the issuance by the Commission, of any stop order suspending the effectiveness
        of the Registration Statement or any post-effective amendment thereto or
        any
        order directed at any Incorporated Document or any amendment or supplement
        thereto or any order preventing or suspending the use of the Base Prospectus
        or
        the Prospectus Supplement or any amendment or supplement thereto, of the
        suspension of the qualification of the Stock for offering or sale in any
        jurisdiction, of the institution 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 or Prospectus Supplement or for additional
        information; and, (v) in the event of the issuance of any stop order or of
        any
        order preventing or suspending the use of the Base Prospectus or Prospectus
        Supplement or suspending any such qualification, promptly to use its reasonable
        best efforts to obtain the withdrawal of such order. 

       

      (b) To
        comply
        with the Securities Act and the Exchange Act, and the Rules and Regulations
        thereunder, so as to permit the completion of the distribution of the Stock
        as
        contemplated in this Agreement and the Prospectus Supplement. If during the
        period in which a prospectus is required by law to be delivered by a Placement
        Agent or a dealer in connection with the distribution of Stock contemplated
        by
        the Prospectus Supplement, any event shall occur as a result of which, in
        the
        judgment of the Company or in the reasonable opinion of the Placement Agent
        or
        counsel for the Placement Agent, it becomes necessary to amend or supplement
        the
        Prospectus Supplement in order to make the statements therein, in the light
        of
        the circumstances existing at the time the Prospectus Supplement is delivered
        to
        a purchaser, not misleading, or, if it is necessary at any time to amend
        or
        supplement the Prospectus Supplement to comply with any law, the Company
        promptly will prepare and file with the Commission, and furnish at its own
        expense to the Placement Agent and to dealers, an appropriate amendment to
        the
        Registration Statement or supplement to the Prospectus Supplement so that
        the
        Prospectus Supplement as so amended or supplemented will not, in the light
        of
        the circumstances when it is so delivered, be misleading, or so that the
        Prospectus Supplement will comply with such law. Before amending the
        Registration Statement or supplementing the Base Prospectus in connection
        with
        the Offering, the Company will furnish the Placement Agent with a copy of
        such
        proposed amendment or supplement and will not file such amendment or supplement
        to which the Placement Agent reasonably objects. 

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

       

      (c) Upon
        request, to furnish promptly to the Placement Agent and to counsel for the
        Placement Agent a copy of the Registration Statement as originally filed
        with
        the Commission, and each amendment thereto filed with the Commission, including
        all consents and exhibits filed therewith.

       

      (d) To
        deliver promptly to the Placement Agent 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 and each
        amendment thereto (in each case excluding exhibits), (ii) the Base Prospectus,
        (iii) the Prospectus Supplement (not later than 3:00 P.M., New York time,
        on the
        Business Day following the execution and delivery of this Agreement) and
        any
        amendment or supplement thereto (not later than 3:00 P.M., New York City
        time,
        on the Business Day following the date of such amendment or supplement);
        (iv) the Time of Sale Prospectus, if any, and (v) any document incorporated
        by reference in the Base Prospectus, the Time of Sale Prospectus, if any,
        or the
        Prospectus Supplement. The Company will pay the expenses of printing or other
        production of all documents relating to the Offering.

       

      (e) To
        the
        extent not available on EDGAR, to make generally available to its stockholders
        as soon as practicable, but in any event not later than eighteen months after
        the effective date of the Registration Statement (as defined in Rule 158(c)
        under the Securities Act), an earnings statement of the Company (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).

       

      (f) To
        promptly take from time to time such actions as the Placement Agent may
        reasonably request to qualify the Stock for offering and sale under the
        securities, or blue sky, laws of such jurisdictions (including without
        limitation any post-filing requirements) as the Placement Agent may designate
        and to continue such qualifications in effect for so long as required for
        the
        distribution of the Stock, and the Company will pay the fee of Nasdaq in
        connection with its review of the Offering, if applicable. The Company shall
        not
        be obligated to qualify as a foreign corporation in any jurisdiction in which
        it
        is not so qualified or to file a general consent to service of process in
        any
        jurisdiction.

       

      
        
          
          

        

        
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      (g) Not
        to
        directly or indirectly 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 for a period of 90 days
        from the date of the Prospectus Supplement without the prior written consent
        of
        SG Cowen, other than the Company’s sale of the Stock and shares or options to
        purchase shares in connection with or pursuant to joint ventures, collaborative
        arrangements, strategic alliances or similar transactions with unaffiliated
        third parties, stock option plans, currently outstanding equity facilities,
        options, warrants or rights, and the issuance of Common Stock, stock options,
        stock appreciation rights or other securities or rights pursuant to the
        Company's currently existing employee benefit or equity compensation plans
        or as
        initial or inducement grants to new employees, directors or consultants in
        the
        ordinary course consistent with past practice. The Company will cause each
        of
        its executive officers and directors to furnish to the Placement Agent, prior
        to
        the Closing Date, a letter, substantially in the form of Exhibit
        B
        attached
        hereto, pursuant to which each such person shall agree not to directly or
        indirectly 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 for a period of 90 days from
        the
        date of the Prospectus Supplement, without the prior written consent of SG
        Cowen. 

       

      If
        (i)
        the Company issues an earnings release or material news or a material event
        relating to the Company occurs during the last 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 16-day period beginning on the
        last
        day of the lock-up period, the restrictions imposed by this Section
        4(g)
        shall
        continue to apply until the expiration of the 18-day period beginning on
        the
        issuance of the earnings release or the occurrence of the material news or
        material event; provided, however, that this paragraph shall not apply if,
        at
        the time an event listed in clause (i) or (ii) above occurs, the Company
        has
“actively traded securities” as defined in Rule 101(c)(1) of Regulation M of the
        Exchange Act.

       

      (h) 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 or incorporated by reference in the Base Prospectus,
        the
        Prospectus Supplement, the Time of Sale Prospectus, if any, or the Registration
        Statement.

       

      (i) 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. In such event, the Company shall consult with the Placement
        Agent as to the contents of such press release.

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

       

      (j) To
        apply
        the net proceeds from the sale of the Stock as set forth in the Prospectus
        Supplement under the heading “Use
        of Proceeds.”

       

      (k)
         To
        comply
        in all material respects with all applicable securities and other applicable
        laws, rules and regulations, including, without limitation, the Sarbanes-Oxley
        Act, and use its best efforts to cause the Company’s directors and officers, in
        their capacities as such, to comply with such laws, rules and regulations,
        including, without limitation, the provisions of the Sarbanes-Oxley
        Act.

       

      (l) To
        engage
        and maintain, at its expense, a registrar and transfer agent for the
        Stock.

       

      (m) To
        not
        take any action prior to the Closing Date which would require the Prospectus
        Supplement to be amended or supplemented pursuant to Section
        4(b).

       

      (n) 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 Stock under the Securities Act.

       

      (o) The
        Company will use its best efforts to ensure that the Stock is quoted on the
        Nasdaq National Market at the Closing Date.

       

      (p) To
        furnish to the Placement Agent a copy of each proposed free writing prospectus
        related to the Offering to be prepared by or on behalf of, used by, or referred
        to by the Company and not use or refer to any such free writing prospectus
        to
        which the Placement Agent reasonably objects.

       

      (q) Not
        to
        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) under the
        Securities Act 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.

       

      (r) If
        the
        Time of Sale Prospectus, if any, is being used and any event shall occur
        or
        condition exist as a result of which it is necessary to amend or supplement
        the
        Time of Sale Prospectus in writing in order to make the statements therein,
        not
        misleading, or if in the reasonable opinion of counsel to the Placement Agent,
        it is necessary to amend or supplement the Time of Sale Prospectus to comply
        with applicable law, forthwith to prepare, file with the Commission and furnish,
        at its own expense, to the Placement Agent upon request, either amendments
        or
        supplements to the Time of Sale Prospectus so that the statements in the
        Time of
        Sale Prospectus as so amended or supplemented will not, in light of the
        circumstances when the Time of Sale Prospectus is delivered to a prospective
        purchaser, be misleading or so that the Time of Sale Prospectus, as amended
        or
        supplemented, will comply with law.

       

      
        
          
          

        

        
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      5. PAYMENT
        OF EXPENSES.
        The
        Company agrees with the Placement Agent to pay (a) the costs incident to
        the
        authorization, issuance, sale, preparation and delivery of the Stock to the
        Purchasers and any taxes payable in that connection; (b) the costs incident
        to
        the Registration of the Stock under the Securities Act; (c) the costs incident
        to the preparation, printing and distribution of the Registration Statement,
        Base Prospectus, the Time of Sale Prospectus, if any, and Prospectus Supplement
        and any amendments and exhibits thereto or any document incorporated by
        reference therein, and the costs of printing, reproducing and distributing,
        this
        Agreement by mail, telex or other means of communication; (d) the fees and
        expenses (including related reasonable fees and expenses of counsel for the
        Placement Agent) incurred in connection with filings, if any, made with Nasdaq,
        if applicable; (e) any applicable listing or other fees; (f) the fees and
        expenses of qualifying the Stock under the securities laws of the several
        jurisdictions as provided in Section
        4(f)
        and of
        preparing, printing and distributing Blue Sky Memoranda (including related
        reasonable fees and expenses of counsel to the Placement Agent, which fees
        and
        disbursements shall not exceed $5,000 without the prior written consent of
        the
        Company); (g) all fees and expenses of the registrar and transfer agent of
        the
        Stock; (h) the reasonable fees and expenses of counsel for the Placement
        Agent
        in an amount not to exceed $30,000 in the aggregate; and (i) all other costs
        and
        expenses incident to 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 “roadshow”
        including, without limitation, any expenses advanced by the Placement Agent
        on
        the Company’s behalf (which will be promptly reimbursed)); provided
        that,
        except as otherwise provided in this Section
        5
        and in
Sections
        7
        and
9,
        the
        Placement Agent shall pay its own costs and expenses, including the fees
        and
        expenses of its counsel.

       

      6. Conditions
        to the Obligations of the Placement Agent and the Purchasers, and the Sale
        of
        the Stock.
        The
        respective obligations of the Placement Agent and the Purchasers, and the
        closing of the sale of the Stock hereunder are subject to the accuracy, when
        made and on the Closing Date, of the representations and warranties of the
        Company contained herein, to the accuracy of the statements of the Company
        and
        its Subsidiary made in any certificates pursuant to the provisions hereof,
        to
        the performance by the Company and its Subsidiary of their obligations
        hereunder, and to each of the following additional terms and
        conditions:

       

      (a) No
        stop
        order suspending the effectiveness of the Registration Statement shall have
        been
        issued and no proceedings for that purpose shall have been initiated or
        threatened by the Commission, and any request for additional information
        on the
        part of the Commission (to be included in the Registration Statement, the
        Base
        Prospectus, the Time of Sale Prospectus, if any, or the Prospectus Supplement
        or
        otherwise) shall have been complied with to the reasonable satisfaction of
        the
        Placement Agent. Any filings required to be made by the Company in accordance
        with Section
        4(a)
        shall
        have been timely filed with the Commission.

       

      
        
          
          

        

        
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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, the Base Prospectus,
        the Time of Sale Prospectus, if any, or the Prospectus Supplement or any
        amendment or supplement thereto contains an untrue statement of a fact which,
        in
        the reasonable opinion of counsel for the Placement Agent, is material or
        omits
        to state any fact which, in the reasonable opinion of such counsel, is material
        and is required to be stated therein or is necessary to make the statements
        therein (in the case of the Base Prospectus, the Time of Sale Prospectus,
        if
        any, and the Prospectus Supplement in light of the circumstances under which
        they were made) not misleading.

       

      (c) All
        corporate proceedings and other legal matters incident to the authorization,
        form, execution, delivery and validity of each of this Agreement, the Stock,
        the
        Registration Statement, the Base Prospectus, the Time of Sale Prospectus,
        if
        any, and the Prospectus Supplement 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) The
        Placement Agent shall have received from each of (i) Dickstein Shapiro Morin
        & Oshinsky LLP, corporate counsel for the Company and (ii) Woodcock Washburn
        LLP, intellectual property counsel for the Company, such counsel’s written
        opinion, addressed to the Placement Agent and the Purchasers and dated as
        of the
        Closing Date, in form and substance reasonably satisfactory to the Placement
        Agent as set forth in Exhibits
        C-1
        and
C-2
        attached
        hereto, respectively.

       

      Dickstein
        Shapiro Morin & Oshinsky LLP shall also have furnished to the Placement
        Agent a written statement, addressed to the Placement Agent and the Purchasers
        and dated the Closing Date, in form and substance reasonably satisfactory
        to the
        Placement Agent as set forth in Exhibit
        D
        attached
        hereto. 

       

      (e) The
        Placement Agent shall have received from Brown Raysman Millstein Felder &
        Steiner LLP, such opinion or opinions, dated the Closing Date and addressed
        to
        the Placement Agent, with respect to the issuance and sale of the Stock,
        the
        Registration Statement, the Base Prospectus, the Time of Sale Prospectus,
        if
        any, the Prospectus Supplement (together with any supplement thereto) and
        other
        related matters as the Placement Agent may reasonably require, and the Company
        shall have furnished to such counsel such documents as they request for the
        purpose of enabling them to pass upon such matters.

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

       

      (f) The
        Company shall have furnished to the Placement Agent and the Purchasers a
        certificate, dated as of the Closing Date, executed by its Chief Executive
        Officer and its Chief Financial Officer stating that (i) such officers have
        carefully examined the Registration Statement, the Base Prospectus, the Time
        of
        Sale Prospectus, if any, and the Prospectus Supplement and, in their opinion,
        each of the Registration Statement (including the Base Prospectus) as of
        its
        effective date, the Time of Sale Prospectus, if any, and the Prospectus
        Supplement, as of each such effective 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 (in the case of
        the
        Base Prospectus, the Time of Sale Prospectus, if any, and the Prospectus
        Supplement in light of the circumstances under which they were made) not
        misleading, (ii) since the effective date of the Registration Statement no
        event
        has occurred which should have been set forth in a supplement or amendment
        to
        the Registration Statement, the Base Prospectus or the Prospectus Supplement,
        (iii) to the best of their knowledge after reasonable investigation, as of
        the
        Closing Date, the representations and warranties of the Company and its
        Subsidiary in this Agreement are true and correct and the Company and its
        Subsidiary have complied with all agreements and covenants contained in this
        Agreement and satisfied all conditions on its part to be performed or satisfied
        hereunder at or prior to the Closing Date, (iv) subsequent to the date of
        the
        most recent financial statements included or incorporated by reference in
        the
        Base Prospectus, the Time of Sale Prospectus, if any, and the Prospectus
        Supplement, there has been no change in the financial position or results
        of
        operation of the Company and its Subsidiary that could have a Material Adverse
        Effect, or any change, or any development including a prospective change,
        in or
        affecting the condition (financial or otherwise), results of operations,
        business or prospects of the Company and its Subsidiary taken as a whole,
        except
        as set forth in the Base Prospectus, and (v) the Registration Statement became
        effective on October 24, 2005, and to their knowledge, as of the Closing
        Date
        (I) no stop order suspending the effectiveness of the Registration Statement
        has
        been issued and no proceedings for that purpose have been commenced or are
        pending before or are contemplated by the Commission and (II) no action has
        been
        taken by any governmental agency, body or official, and no injunction,
        restraining order or order of any nature by any federal or state court has
        been
        issued, which would prevent the issuance of the Stock. 

       

      (g) At
        the
        Execution Time, the Placement Agent shall have received from Ernst & Young
        LLP a letter, addressed to the Placement Agent and dated such date, in form
        and
        substance satisfactory to the Placement Agent (i) confirming that they are
        independent certified public accountants with respect to the Company within
        the
        meaning of the Securities Act and the Rules and Regulations and (ii) stating
        the
        conclusions and findings of such firm with respect to the financial statements
        and certain financial information contained or incorporated by reference
        in the
        Base Prospectus, the Time of Sale Prospectus, if any, and the Prospectus
        Supplement.

       

      (h) 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 Base Prospectus and the
        Prospectus Supplement as of a date not more than three Business Days prior
        to
        the date of the bring-down letter), the conclusions and findings of such
        firm
        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 Section
        6(g).

       

      
        
          
          

        

        
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      (i) (i)
        Neither the Company nor its Subsidiary shall have sustained since the date
        of
        the latest audited financial statements included or incorporated by reference
        in
        the Base Prospectus any loss or interference with its business from fire,
        explosion, flood, terrorist act 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 or contemplated by the Base Prospectus,
        and (ii) since such date there shall not have been any change in the capital
        stock or long-term debt of the Company or its Subsidiary or any change, or
        any
        development involving a prospective change, in or affecting the business,
        general affairs, management, financial position, stockholders’ equity, results
        of operations or prospects of the Company and its Subsidiary, otherwise than
        as
        set forth in or contemplated by the Base Prospectus, the effect of which,
        in any
        such case described in clause (i) or (ii), 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 Stock on the terms and in the manner
        contemplated by the Base Prospectus, the Time of Sale Prospectus, if any,
        and
        the Prospectus Supplement.

       

      (j) The
        Stock
        is registered under the Exchange Act and, as of the Closing Date, the Stock
        shall be listed and admitted and authorized for trading, subject to notice
        of
        issuance, on the Nasdaq National Market, and satisfactory evidence of such
        actions shall have been provided to the Placement Agent. The Company shall
        have
        taken no action designed to, or likely to have the effect of terminating
        the
        registration of the Stock under the Exchange Act or delisting or suspending
        from
        trading the Stock on the Nasdaq National Market, nor has the Company received
        any information suggesting that the Commission or Nasdaq is contemplating
        terminating such registration or listing.

       

      (k) At
        the
        Execution Time, the Company shall have furnished to the Placement Agent a
        letter
        substantially in the form of Exhibit
        B
        hereto
        from each executive officer and director of the Company.

       

      (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, the Nasdaq National Market 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
        minimum
        or maximum prices or maximum ranges for prices shall have been established
        on
        any such exchange or such market by the Commission, by such exchange 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, there
        shall have been an escalation in hostilities in which it is not already engaged
        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 any
        other calamity or crisis or any change in general economic, political or
        financial conditions in the United States or elsewhere, if the effect of
        any
        such event in clause (iii) or (iv) makes it, in the sole judgment of the
        Placement Agent, impracticable or inadvisable to proceed with the sale or
        delivery of the Stock on the terms and in the manner contemplated by the
        Base
        Prospectus and the Prospectus Supplement.

       

      
        
          
          

        

        
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      (m) No
        action
        shall have been taken and no statute, rule, regulation or order shall have
        been
        enacted, adopted or issued by any governmental agency or body which would,
        as of
        the Closing Date, prevent the issuance or sale of the Stock; and no injunction,
        restraining order or order of any other nature by any federal or state court
        of
        competent jurisdiction shall have been issued as of the Closing Date which
        would
        prevent the issuance or sale of the Stock.

       

      (n) The
        Company shall have prepared and filed with the Commission a Current Report
        on
        Form 8-K with respect to the Offering, including as an exhibit thereto this
        Agreement and any other documents relating thereto.

       

      (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) Prior
        to
        the Closing Date, the Company shall have furnished to SG Cowen such further
        information, certificates and documents as SG Cowen may reasonably
        request.

       

      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.

       

      7. Indemnification
        and Contribution.

       

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

      
         

        (a) The
          Company shall indemnify and hold harmless the Placement Agent, its officers,
          employees, representatives and agents and each person, if any, who controls
          the
          Placement Agent within the meaning of the Securities Act (collectively
          the
“Placement
          Agent Indemnified Parties” and
          each
          a “Placement
          Agent Indemnified Party”)
          against any loss, claim, damage or liability, joint or several, or any
          action in
          respect thereof, to which that Placement Agent Indemnified Party may become
          subject, under the Securities Act or otherwise, insofar as such loss, claim,
          damage, liability or action arises out of or is based upon (i) any untrue
          statement or alleged untrue statement of a material fact contained in the
          Base
          Prospectus, the Registration Statement, the Time of Sale Prospectus, if
          any, or
          the Prospectus Supplement or in any amendment or supplement thereto, (ii)
          the
          omission or alleged omission to state in the Base Prospectus, the Registration
          Statement, the Time of Sale Prospectus, if any, or the Prospectus Supplement
          or
          in any amendment or supplement thereto a material fact required to be stated
          therein or necessary to make the statements therein not misleading, or
          (iii) any
          breach of the representations and warranties of the Company contained herein,
          and shall reimburse each Placement Agent Indemnified Party promptly upon
          demand
          for any legal 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 connection with
          any
          such loss, claim, damage, liability or action as such 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, liability or action arises out of or is based upon an untrue
          statement or alleged untrue statement in or omission or alleged omission
          from
          the Base Prospectus, the Registration Statement, the Time of Sale Prospectus,
          if
          any, or the Prospectus Supplement or any such amendment or supplement in
          reliance upon and in conformity with written information furnished to the
          Company by or on behalf of 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
          15).
          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.

      

       

      (b) The
        Placement Agent shall indemnify and hold harmless the Company its officers,
        employees, representatives and agents, each of its directors and each person,
        if
        any, who controls the Company within the meaning of the Securities Act
        (collectively the “Company
        Indemnified Parties”
        and
        each a “Company
        Indemnified Party”)
        against any loss, claim, damage or liability, joint or several, or any action
        in
        respect thereof, to which the Company Indemnified Parties may become subject,
        under the Securities Act or otherwise, insofar as such loss, claim, damage,
        liability or action arises out of or is based upon (i) any untrue statement
        or
        alleged untrue statement of a material fact contained in the Base Prospectus,
        the Registration Statement, the Time of Sale Prospectus, if any, or the
        Prospectus Supplement or in any amendment or supplement thereto or (ii) the
        omission or alleged omission to state therein 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 or on behalf
        of
        the Placement Agent specifically for use therein, and shall reimburse the
        Company Indemnified Parties for any legal or other expenses reasonably incurred
        by such parties 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 or action as such expenses are incurred;
        provided
        that the
        parties hereto hereby agree that such written information provided by the
        Placement Agent consists solely of the Placement Agent’s Information. This
        indemnity agreement is not exclusive and will be in addition to any liability,
        which the Placement Agent and the Purchasers might otherwise have and shall
        not
        limit any rights or remedies which may otherwise be available at law or in
        equity to the Company Indemnified Parties. Notwithstanding the provisions
        of
        this Section
        7(b),
        in no
        event shall any indemnity by the Placement Agent under this Section
        7(b)
        exceed
        the total compensation received by such Placement Agent in accordance with
        Section
        1(e).
        

       

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

       

      (c) Promptly
        after receipt by an indemnified party under this Section
        7
        of
        notice of any claim or the commencement of any action, the indemnified party
        shall, if a claim in respect thereof is to be made against the indemnifying
        party under this Section
        7,
        notify
        the indemnifying party in writing of the claim or 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
        7
        except
        to the extent it has been materially prejudiced by such failure; and,
provided, further,
        that the
        failure to notify the indemnifying party shall not relieve it from any liability
        which it may have to an indemnified party otherwise than under this Section
        7.
        If any
        such claim or 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 thereof with
        counsel reasonably satisfactory to the indemnified party. After notice from
        the
        indemnifying party to the indemnified party of its election to assume the
        defense of such claim or action, the indemnifying party shall not be liable
        to
        the indemnified party under this Section
        7
        for any
        legal or other expenses subsequently incurred by the indemnified party in
        connection with the defense thereof 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 thereof but the fees and expenses
        of
        such counsel shall be at the expense of such indemnified party unless (i)
        the
        employment thereof has been specifically authorized by the indemnifying party
        in
        writing, (ii) such indemnified party shall have been advised by such 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 and in the
        reasonable judgment of such counsel it is advisable for such indemnified
        party
        to employ separate counsel or (iii) the indemnifying party has failed to
        assume
        the defense of such action in accordance with the terms hereof and employ
        counsel reasonably satisfactory to the indemnified party, 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 such
        action
        on behalf of such indemnified party, it being understood, 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, which firm shall be designated in
        writing
        by the Placement Agent, if the indemnified parties under this Section
        7
        consist
        of any Placement Agent Indemnified Party, or by the Company if the indemnified
        parties under this Section
        7
        consist
        of any Company Indemnified Parties. Each indemnified party, as a condition
        of
        the indemnity agreements contained in Sections
        7(a)
        and
7(b)
        shall
        use all reasonable efforts to cooperate with the indemnifying party in the
        defense of any such action or claim. Subject to the provisions of Section
        7(d)
        below,
        no indemnifying party shall be liable for any settlement, compromise or consent
        to the entry of judgment in connection with any such action effected without
        its
        written consent (which consent shall not be unreasonably withheld), but if
        settled with its written consent or if there be a final judgment for the
        plaintiff in any such action (other than a judgment entered with the consent
        of
        such indemnified party), 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.

       

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

      

       

      (d) 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 by this Section
        7
        effected
        without its written consent if (i) such settlement is entered into more than
        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 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.

       

      (e) If
        the
        indemnification provided for in this Section
        7
        is
        unavailable or insufficient to hold harmless an indemnified party under
Section
        7(a)
        or
7(b),
        then
        each indemnifying party shall, in lieu of indemnifying such indemnified party,
        contribute to the amount paid or payable by such indemnified party as a result
        of such loss, claim, damage or liability, or action in respect thereof, (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
        from the offering of the Stock or (ii) if the allocation provided by clause
        (i)
        above is not permitted by applicable law, in such proportion as is appropriate
        to reflect not only the relative benefits referred to in clause (i) above
        but
        also the relative fault of the Company on the one hand and the Placement
        Agent
        on the other with respect to the statements or omissions which resulted in
        such
        loss, claim, damage or liability, or action 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 Stock purchased under this Agreement (before
        deducting expenses) received by the Company bears to the total compensation
        received by the Placement Agent with respect to the Stock purchased under
        this
        Agreement. The relative fault 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 or omission;
provided
        that the
        parties hereto agree that the written information furnished to the Company
        by
        the Placement Agent for use in the Prospectus Supplement consists solely
        of the
        Placement Agent’s Information. The Company and the Placement Agent agree that it
        would not be just and equitable if contributions pursuant to this Section
        7(e)
        were to
        be determined by pro rata allocation or by any other method of allocation
        which
        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 or liability, or action in respect thereof, referred to above in this
        Section
        7(e)
        shall be
        deemed to include, for purposes of this Section
        7(e),
        any
        legal or other expenses reasonably incurred by such indemnified party in
        connection with investigating or defending any such action or claim.
        Notwithstanding the provisions of this Section
        7(e),
        the
        Placement Agent shall not be required to contribute any amount in excess
        of the
        total compensation received by such Placement Agent in accordance with
Section
        1(e)
        less the
        amount of any damages which such Placement Agent has otherwise paid or become
        liable to pay by reason of any untrue or alleged untrue statement or omission
        or
        alleged omission. 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.

       

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

       

      8. 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 (including
        electronic delivery) of and payment for the Stock if, prior to that time,
        any of
        the events described in Sections
        6(i)
        or
6(l)
        have
        occurred or if the Purchasers shall decline to purchase the Stock for any
        reason
        permitted under this Agreement or the Subscription Agreements.

       

      9. Reimbursement
        of Placement Agent’s Expenses. If
        the
        sale of the Stock provided for herein is not consummated because any condition
        to the obligations of the Placement Agent and the Purchasers set forth in
        Section
        6
        hereof
        is not satisfied, because of any termination pursuant to Section
        8
        hereof
        or because of any refusal, inability or failure on the part of the Company
        to
        perform any agreement herein or comply with any provision hereof other than
        by
        reason of a default by the Placement Agent, the Company will reimburse the
        Placement Agent upon demand for all reasonable out-of-pocket expenses (including
        reasonable fees and disbursements of counsel and any expenses advanced by
        the
        Placement Agent on the Company’s behalf) that shall have been incurred by the
        Placement Agent in connection with this Agreement and the proposed purchase
        and
        sale of the Stock and, upon demand, the Company shall pay the full amount
        thereof to SG Cowen. 

       

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

      

       

      10. Successors;
        Persons Entitled to Benefit of Agreement.
        This
        Agreement shall inure to the benefit of and be binding upon the Placement
        Agent,
        the Purchasers, the Company, and their respective successors. 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 sentence 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 also be for the
        benefit of the Company Indemnified Parties. It is understood that the Placement
        Agent’s responsibilities to the Company are 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.

       

      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 sale of the Stock and no fiduciary or advisory 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 has advised or is advising the Company on other matters;
        

       

      (b)  the
        price
        of the Stock to be sold in the Offering was established by the Company following
        discussions and arm’s-length negotiations with the Purchasers, 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;
        

       

      (c)  the
        Company has been advised that the Placement Agent and its 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)  the
        Company 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.

       

      12. 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
        Stock.

       

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

       

      13. 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 or facsimile
        transmission to SG Cowen & Co., LLC, 1221 Avenue of the Americas, New York,
        New York 10020, Attention: Michelle Bowe (Fax: 212-278-7995), with a copy
        to:
        Brown Raysman Millstein Felder & Steiner LLP, 900 Third Avenue, New York,
        New York 10022, Attention: Stuart Bressman, Esq. (Fax:
        212-895-2900).

       

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


       

      14. Definitions
        of Certain Terms. The
        terms
        which follow, when used in this Agreement, shall have the meanings
        indicated.

       

      “Business
        Day”
        shall
        mean any day other than a Saturday, a Sunday, a legal holiday, a day on which
        banking institutions or trust companies are authorized or obligated by law
        to
        close in New York City or any day on which the Nasdaq National Market is
        not
        open for trading.

       

      “Effective
        Date”
        shall
        mean each date and time that the Registration Statement (and any post-effective
        amendment or amendments thereto) became or becomes effective.

       

      “Execution
        Time”
        shall
        mean the date and time that this Agreement is executed and delivered by the
        parties hereto.

       

      “Interference
        Proceeding”
        shall
        have the meaning set forth in 35 U.S.C. § 135.

       

      “To
        the Company’s knowledge”
        and
        words of similar import shall mean that which the Company knows or should
        have
        known using the exercise of reasonable due diligence.

       

      15. Governing
        Law.
        This
        Agreement shall be governed by and construed in accordance with the laws
        of the
        State of New York.

       

      
        
          
          

        

        
          31

          
            

          

        

        
          
          

        

      

       

      16. 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 statements concerning
        the Placement Agent contained in the third paragraph under the heading “Plan of
        Distribution” in the Prospectus Supplement.

       

      17. Partial
        Unenforceability.
        The
        invalidity or unenforceability of any Section, paragraph or provision of
        this
        Agreement shall not affect the validity or enforceability of any other Section,
        paragraph or provision hereof. If any Section, paragraph 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.

       

      18. 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.

       

      19. 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.

       

      
        
          
          

        

        
          32

          
            

          

        

        
          
          

        

      

       

      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/ John
                G. Cooper
	 	
                
Name:
                John G. Cooper
	 	Title:
                EVP/CFO


      

       

      
        
          	
                  Accepted
                    as of

                  the
                    date first above written:

                   

                  SG
                    COWEN & CO., LLC

                	 	 	 
	 	 	 	 
	 	 	 	 
	
                  By:     /s/ Richard
                    E. Gormley

                	 	 	 
	
                  

                   Name:
                    Richard E. Gormley

                   Title:
                    Managing Director

                	 	 	
                
	
                   

                	 	 	 


        



      
        
          
          

        

        
          33

          
            

          

        

        
          
          

        

      

       

      Exhibit
        A

       

      Form
        of Subscription Agreement

       

       

      
        
          
          

        

        
          34

          
            

          

        

        
          
          

        

      

       

      Exhibit
        B

       

      Form
        of Lock-Up Agreement

       

       

      
        
          
          

        

        
          35

          
            

          

        

        
          
          

        

      

       

      Exhibit
        C-1

       

      Legal
        Opinion of Dickstein Shapiro Morin & Oshinsky LLP

      


      


      
        
          
          

        

        
          36

          
            

          

        

        
          
          

        

      

       

      Exhibit
        C-2

       

      Legal
        Opinion of Woodcock Washburn LLP

       

       

      
        
          
          

        

        
          37

          
            

          

        

        
          
          

        

      

       

      Exhibit
        D

      


      Written
        Statement of Dickstein Shapiro Morin & Oshinsky LLP

      


      


      
        
          
          

        

        
          38