Document:

Exhibit
10.8

    (English
Translation)

    

    Contract
Index:

    

    Technology
Transfer (Technology Secret) Agreement

    

    
      
        
          
            	
                    Name
      :

                  	
                    A Type of Lead-free Soft Solder Mixed with Rare
      Earth and its Preparation Method

                  
	 
      	 
      
	
                    Transferee
      (Party A)

                  	
                    Liaoning Creative Bellows Co.,
      Ltd.

                  
	 
      	 
      
	
                    Transferor
      (Party B)

                  	
                    Shenyang Industry University Xingke Middle and
      Small Business Service Center

                  
	 
      	 
      
	
                    Date
      of Signature

                  	
                    August 15, 2008.

                  
	 
      	 
      
	
                    Place
      of Signature

                  	
                    Shenyang.

                  
	 
      	 
      
	
                    Valid
      Period

                  	
                    Till December 31, 2013.

                  

          

        

      

    

    

    Printed
by the Science and Technology Department of P.R.China

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Filling
Instruction

    

    
      
        	
                One

              	
                This
      is a model agreement printed by the Science and Technology Department of
      the P.R.China for technology (technology secret) transfer. Any technology
      agreement registry can recommend the party to a technology agreement to
      use it as a reference.

              
	 
      	 
      
	
                Two

              	
                This
      model agreement can be used to create an agreement for licensor to
      transfer his technology secret to a licensee, define each party’s right to
      use and transfer, as well as the payment for royalty.

              
	 
      	 
      
	
                Three

              	
                If
      multiple parties exist on either side, they shall be listed under the
      respective subject “transferor,” “transferee” (additional page) as a joint
      licensor or licensee in accordance with their role in the
      contract.

              
	 
      	 
      
	
                Four

              	
                Any
      item that is not exhausted by this model contract shall be agreed upon
      between parties on additional page and consisting part of this
      contract.

              
	 
      	 
      
	
                Five

              	
                Any
      unfilled clause as agreed by parties when using this model contract shall
      be indicated as “None”.

              

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Technology
Transfer (Technology Secret) Agreement

    

    
      
        
          
            	
                    Transferee
      (Party A)

                  	
                    Liaoning Creative Bellows Co.,
      Ltd.

                  
	 
      	 
      
	
                    Place
      of Business

                  	
                    Maoshan Industrial Garden C Qu, Tieling City
      Economy Developing Zone, Liaoning
      Province

                  
	 
      	 
      
	
                    Representative

                  	
                    Lu, Bei

                  
	 
      	 
      
	
                    Contact
      Person:

                  	
                    Lu, Dianfu

                  
	 
      	 
      
	
                    Tel:

                  	
                    13804906792
        0410-6129601

                  
	 
      	 
      
	
                    Address

                  	
                    Economy Developing Zone Committee, Room
      904

                  
	 
      	
                    Tieling City, Liaoning
    Province

                  
	 
      	 
      
	
                    Tel:

                  	
                    0410 -6129601

                  	
                    Facsimile:

                  	
                    0410-6129933

                  
	 
      	 
      
	
                    Transferor
      (Party B)

                  	
                    Shenyang Industry University Xingke Middle and
      Small Business Service Center

                  
	 
      	 
      
	
                    Place
      of Business

                  	
                    111 Shenliaoxi Road, Shenyang Economy and
      Technology Developing Zone

                  
	 
      	 
      
	
                    Corporate
      Representative

                  	
                    Sun, Guanggui

                  
	 
      	 
      
	
                    Contact
      Person:

                  	
                    Wang, Zongjie

                  
	 
      	 
      
	
                    Contact:

                  	______________________________________________________________ 
      
	 
      	 
      
	
                    Address:

                  	
                    111 Shenliaoxi Road, Shenyang Economy and
      Technology Developing Zone

                  
	 
      	 
      
	
                    Tel:

                  	
                    024-25499991

                  	
                    Facsimile:

                  	
                    024-25496768

                  

          

        

      

    

    

    Party B shall transfer right to use (right
to use, right to transfer) of its technology secret of A Type of Lead-free Soft
Solder Mixed with Rare Earth and its Preparation Method to Party A, and
Party A shall pay for the right to use accordingly. Upon negotiation and based
on true and adequate freedom of will, in accordance with Contract Law of the
People’s Republic of China, both parties enter this agreement and shall hereby
comply.

    

    Clause
One

    

    The
transferring technology secret by Party B contains:

    

    
      	
               
      

            	
              1.

            	
              The
      content: A Type
      of Lead-free Soft Solder Mixed with Rare Earth and its preparation
      method.

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      	
               
      

            	
              2.

            	
              Technical
      indicators and parameters: tensile strength of
      solder no less than 70Mpa; wetting area no less than 80 mm2 (approx
      0.3g).

            

    

    

    
      	
               
      

            	
              3.

            	
              Degree
      of industrialization and development for this technology secret: considerable patent
      promising, substantial economic
benefit.

            

    

    

    Clause
Two

    

    In order
to assure Party A make a best appropriation of this technology secret, Party B
shall deliver the following technical materials:

    

    
      	
               
      

            	
              1.

            	
              entire patent
      documents;

            

    

    

    
      	
               
      

            	
              2.

            	
                                                               .

            

    

    

    Clause
Three

    

    Time,
Place and Manner of Delivery

    

    
      
        
          
            	
                    1.

                  	
                    Time
      of Delivery

                  	
                    Within 10 days subsequent to the effectiveness of
      contract.

                  
	 
      	 
      	 
      
	
                    2.

                  	
                    Place
      of Delivery

                  	
                    Shenyang.

                  
	 
      	 
      	 
      
	
                    3.   

                  	
                    Manner
      of Delivery

                  	
                    In person.

                  

          

        

      

    

    

    Clause
Four

    

    Developing and Transferring Status of
Party B’s technology secret prior to this agreement are as below :

    

    
      	
               
      

            	
              1.

            	
              Developing
      Status of Party B’s technology secret (time, place, form and
      scale):

            

    

    Technology
matured.

    

    
      	
               
      

            	
              2.

            	
              Transferring
      Status of Party B’s technology secret (time, place form and
      scale):

            

    

    Never
transferred.

    

    Clause
Five

    

    Party A shall make use of this
technology secret pursuant to the following scope, form and term:

    

    
      
        
          
            
              
                
                  	
                          1.

                        	
                          Scope
      of Use

                        	
                          Global
      Manufacture and Sale.

                        
	
                           
      

                        	 
      	 
      
	
                          2.

                        	
                          Form
      of Use

                        	
                          Manufacture,
      Sale.

                        
	 
      	 
      	 
      
	
                          3.   

                        	
                          Term
      of Use

                        	
                          till December 31,
      2013.

                        

                

              

            

          

        

      

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    Clause
Six

    

    Party B
shall guarantee the practicability and reliability of this technology secret,
and shall prevent it away from infringing any third party’s legal right. In any
event that Party A’s use of said technology secret is alleged to have infringed
a third party’s rights, Party B shall explain.

    

    Clause
Seven

    

    During
the contract performance, any disclosure of said technology secret (except for
the Patent Publication) by a third party shall prompt either party to notify the
other within 7
days of such event to release the contract. Any delayed notification which also
results in the damage to the other party shall entitle the other party to claim
for such damage.  The specific damage shall be negotiated.

    

    Clause
Eight

    

    The
confidentiality duty to each party is defined as below :

    

    Party
A:

    

    
      	
               
      

            	
              1.

            	
              Duty
      of Confidentiality (including technology information and business
      information): at
      any time within or beyond the term of contract none of the technology
      secret shall be disclosed to any third party other than the parties to
      this agreement.

            

    

    

    
      	
               
      

            	
              2.

            	
              Classified
      Staff: any
      employee of Party A who is in close contact with said technology secret
      shall sign and comply with a non-disclosure
    agreement.

            

    

    

    
      	
               
      

            	
              3.

            	
              Confidentiality
      Period: The term
      of Patent.

            

    

    

    
      	
               
      

            	
              4.

            	
              Disclosure
      Liability: ¥30,000 liquidated
      damage.

            

    

    

    Party
B:

    

    
      	
               
      

            	
              1.

            	
              Duty
      of Confidentiality (including technology information and business
      information) : at any time within the
      Term of Patent none of technology shall be transferred to any third
      party.

            

    

    

    
      	
               
      

            	
              2.

            	
              Classified
      Staff: Inventor.

            

    

    

    
      	
               
      

            	
              3.

            	
              Confidentiality
      Period: till
      December 31, 2013.

            

    

    

    
      	
               
      

            	
              4.

            	
              Disclosure
      Liability: ¥20,000 liquidated
      damage.

            

    

    

    Clause
Nine

    

    Both
parties hereby agree that any other form of publication of said technology
secret shall be approved by Party A.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    Clause
Ten

    

    In order
to effective implement said technology secret, Party B shall provide Party A
with the following technical service and guidance:

    

    
      	
               
      

            	
              1.

            	
              Content
      of Technical Service and Guidance: Implementation of
      Patented Technology.

            

    

    

    
      	
               
      

            	
              2.

            	
              Form
      of Technical Service and Guidance: Training.

            

    

    

    Clause
Eleven

    

    Party A shall pay for the transfer of
said technology secret to Party B. The form of payment is as below:

    

    
      	
               
      

            	
              1.

            	
              Total
      Amount of Use of Technology Secret CNY 100,000
      including: Technical Service and
      Guidance Fee.

            

    

    

    
      	
               
      

            	
              2.

            	
              The
      Payment for Use of Technology Secret shall be made by Party A by Installment
      (lump sum, installment or
commission)

            

    

    

    The form and time of payment are
specified as below:

    

    (1) 15 days after each party
signs this licensing contract, Party A shall make a payment for ¥60,000 (Sixty
Thousand Yuan Even)

    

    (2) The sales commission which rate is
to be determined by the implementation of patent, starting from January of 2013,
shall become due every three month, but in no event shall be later than the end
of each year and is up to ¥100,000.

    

    (3) ¥60,000 is payable in a lump
sum and the rest shall be sales commission payable by
installment

    

    The name,
address and account number of Party B’s account opening bank are :

    

    
      
        
          
            
              
                	
                        Bank

                      	 
      	 
	 
      	 
      	 
	
                        Address

                      	 
      	 
	 
      	 
      	 
	
                        Account
      No.   

                      	 
      	 

              

            

          

        

      

    

    

    
      	
               
      

            	
              3.

            	
              Both
      party hereby affirms that Party B shall have right to review bills
      of account in respect of any sales commission from the Party A’s
      profit of technology secret
implementation.

            

    

    

    Clause
Twelve

    

    Both
parties hereby affirms that Party B’s transferring technology secret, as well as
providing technical service and guidance to Party A shall be inspected in terms
of following form and standard :

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      
        
          	
                  1.

                	
                  indicators and
parameters

                
	 
      	 
      
	
                  2.

                	_____________________ 
	 
      	 
      
	
                  3.  

                	_____________________ 
      

        

      

    

    

    Clause
Thirteen

    

    Party A
shall start implementing said technology secret within 30 days subsequent to
the effectiveness of contract, if any delay, shall notify Party B promptly with
a reasonable explanation subject to Party B’s acceptance. Any delay exceeding
365 without an explanation, which is to affect Party B’s interest in the sales
commission, shall entitle Party B for liquidated damage or other
damage.

    

    Clause
Fourteen

    

    Both
parties hereby affirm, during the performance of contract, either party shall
not place a restrain on the other’s technology competition and development
except for:

    
       

      1.   Patent Licensing Agreement
so provided.

      

      2.   _________________________________________.

      

      3.   _________________________________________.

    

    
       

    

    Clause
Fifteen

    

    Both parties agree:

    

    1.      Party
A shall have right to any subsequent adjustment based on the technology secret
transferred from Party B. Any resulting substantial or creative derivative work
shall be jointly owned by both parties. (Party
A, both parties) The distribution of any interest generated therefrom is to be
determined by the following: negotiation by both
parties.

    

    2.      Party
B shall have right to any subsequent adjustment based on the technology secret
transferred to Party A. Any resulting substantial or creative derivative work
shall be jointly owned by both parties. (Party
A, both parties) The distribution of any interest generated therefrom is to be
determined by the following: negotiation by both
parties.

    

    Clause
Sixteen

    

    Any
modification to this agreement shall be in written and subject to both parties’
mutual agreement, unless in the following event, either party shall be able to
request a modification to the agreement, which will be deem accepted by the
other if its response is not given within 10 days of such
request :

    

    
      	
               
      

            	
              1.

            	
              None

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      	
               
      

            	
              2.

            	
              None

            

    

    

    
      	
               
      

            	
              3.

            	
              None

            

    

    

    
      	
               
      

            	
              4.

            	
              None

            

    

    

    
      	
               
      

            	
              5.

            	
              None

            

    

    

    Clause
Seventeen

    

    Both parties agree to the following
liability occurred from  respective breach of contract:

    

    
      	
               
      

            	
              1.

            	
              If
      Party A
      breaches Clause
      Eleven of this agreement, it shall be liable for liquidated damage for
      ¥30,000 (computation of liquidated
  damage).

            

    

    

    
      	
               
      

            	
              2.

            	
              If
      Party B
      breaches Clause
      Two of this agreement, it shall be liable for
      liquidated damage for ¥20,000 (computation of liquidated
      damage).

            

    

    

    Clause
Eighteen

    

    Both
parties agree, during the term of contract, Lu, Dianfu is the
project contact person for Party A and Wang, Zongjie is the
appointed project contact person for Party B. Project contact person shall
assume the following responsibility:

    

    
      	
               
      

            	
              1.

            	
              Communicate and
      contact regarding patent
implementation.

            

    

    

    Either party shall promptly notify the
other in writing any change to its project contact person. Otherwise, any
party’s failure to do so which effects the performance or result in any damage
shall be held liable for such consequence.

    

    Clause
Nineteen

    

    Both
parties agree that any event in the following, which results in impossibility or
impracticability of performance, shall release both parties from this
contract:

    

    
      (1)
Force
majeure;

    

    

    
      (2)
_________________________________________________________

    

    

    Clause
Twenty

    

    Any
dispute arising out of the performance to this contract shall be resolved
through negotiation and mediation, if fails, shall resolved through Approach
2:

    

    
      	
               
      

            	
              1.

            	
              Submit
      to ______________________ Arbitration Commission for
      arbitration.

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      	
               
      

            	
              2.

            	
              Resort
      to the People’s Court .

            

    

    

    Clause
Twenty-One

    

    Both
parties hereby agree that any words and technical terms in this agreement and
its appendix shall be defined and explained by the following:

    

    
      	
               
      

            	
              1.

            	
              None.

            

    

    

    Clause
Twenty-Two

    

    Any
document listed as below, upon both parties’ affirmation, None of them shall
consist part of this agreement:

    

    
      	
               
      

            	
              1.

            	
              Technical
      background information:
      ____________________________________________;

            

    

    

    
      	
               
      

            	
              2.

            	
              Feasibility
      report:
      __________________________________________________________;

            

    

    

    
      	
               
      

            	
              3.

            	
              Technical
      evaluation report:
      __________________________________________________;

            

    

    

    
      	
               
      

            	
              4.

            	
              Technical
      standard and specification:
      ___________________________________________;

            

    

    

    
      	
               
      

            	
              5.

            	
              Original
      design and engineering documents:
      ______________________________________;

            

    

    

    
      	
               
      

            	
              6.

            	
              Other:
      ____________________________________________________________________;

            

    

    

    Clause
Twenty-Three:

    

    Any other issue pertaining
to this contract agreed by both parties is this contract and the patent
licensing agreement have identical legal effect.

    

    Clause
Twenty-Four

    

    This agreement has 8 identical original
copies, each of them having identical legal effect.

    

    Clause
Twenty-Five

    

    This agreement takes effect after it is
signed and stamped by both parties.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Party
A:        Liaoning Creative Bellows
Co., Ltd. (Stamp)

    

    
      
        
          	
                  Corporate Representative/Authorized Agent: 

                	
                  /s/ Dianfu Lu
      (Signature)

                
	 
      	
                  August
      15, 2008

                

        

      

    

    

    Stamp
in Circle

    

    Party
B:         Shenyang Industrial
University Xingke Middle and Small Business Services Center
(Stamp)

    

    
      
        
          	
                  Corporate Representative/Authorized Agent: 

                	
                  /s/ Guanggui
      Sun (Signature)

                
	 
      	
                  2008.8.15

                

        

      

    

    

    
      
        
          	
                  Stamp
      in Circle

                	
                  Shenyang
      Industry University Xingke Middle and Small Business Service Center Stamp
      For Technology Agreement
OnlyDISCOVERY
LABORATORIES, INC.

    

    WARRANT
TO PURCHASE COMMON STOCK

    

    Warrant
No.: ___

    Number of
Shares of Common Stock: 1,190,476

    Date of
Issuance: October 14, 2010 (“Issuance Date”)

    

    Discovery
Laboratories, Inc., a Delaware corporation (the “Company”), hereby certifies
that, for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, PharmaBio Development Inc., a North Carolina
corporation, the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject
to the terms set forth below, to purchase from the Company, at the Exercise
Price (as defined below) then in effect, upon surrender of this Warrant to
Purchase Common Stock (including any Warrants to Purchase Common Stock issued in
exchange, transfer or replacement hereof, the “Warrant”), at any time or
times on or after the Issuance Date, but not after 11:59 p.m., New York time, on
the Expiration Date (as defined below), 1,190,476 (One
Million, One Hundred and Ninety Thousand, Four Hundred and Seventy-Six) fully paid nonassessable
shares of Common Stock (as defined below) (the “Warrant Shares”). Except
as otherwise defined herein, capitalized terms in this Warrant shall have the
meanings set forth in Section 16. This Warrant is the Warrant to purchase
Common Stock (this “Warrant”) issued pursuant to
(i) Section 2(c) of that certain Securities Purchase Agreement (the “Securities Purchase
Agreement”), dated as of October 12, 2010 (the “Pricing Date”), by and between
the Company and PharmaBio Development Inc. and (ii) the Company’s Registration
Statement on Form S-3 (File number 333-151654) (the “Registration Statement”).

    

    1. EXERCISE
OF WARRANT.

    

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

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (b) Exercise
Price. For purposes of this Warrant, “Exercise Price” means $0.273
subject to adjustment as provided herein.

    

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

    

    

    (d) Cashless
Exercise.  Notwithstanding anything
contained herein to the contrary, if, but only if, (i) a registration statement
covering the issuance of the Warrant Shares that are the subject of the Exercise
Notice (the “Unavailable
Warrant Shares”) is not effective and (ii) in the written opinion of
counsel to the Holder addressed to the Company, which is satisfactory in form
and substance to the Company and its counsel, an exemption from registration for
the issuance and resale of such Unavailable Warrant Shares would only be
available if the exercise of the Warrant is effected pursuant to a Cashless
Exercise pursuant to this Section 1(d), then the Holder may exercise this
Warrant in whole or in part and, in lieu of making the cash payment otherwise
contemplated to be made to the Company upon such exercise in payment of the
Aggregate Exercise Price, elect instead to receive upon such exercise the “Net
Number” of shares of Common Stock determined according to the following formula
(a “Cashless
Exercise”):

    

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                	
                                        Net
      Number =

                                      	      
                                        (A x B) - (A x
      C)

                                      	 
	      
                                         

                                      	
                                        B

                                      	 
	      
                                        For
      purposes of the foregoing
formula:

                                      

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    

    
      	
              A=

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

            

    

    

    
      	
              B=

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

            

    

    

    
      	
              C=

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

            

    

    

    For sake
of clarity, regardless of whether an effective registration statement or an
exemption from registration is or is not available, there is no circumstance
that requires the Company to effect a net cash settlement of the
Warrants.

    

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

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    (f) Disputes. In
the case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares, the Company shall promptly issue
to the Holder the number of Warrant Shares that are not disputed, and all such
disputes shall be resolved pursuant to Section 13.

    

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

    

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

    

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

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

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

    

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

    

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

    

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

    

    4. PURCHASE
RIGHTS; FUNDAMENTAL TRANSACTIONS.

    

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

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

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

    

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

    

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

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    7. REISSUANCE
OF WARRANTS.

    

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

    

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

    

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

    

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

    

    8. OPTIONAL
REDEMPTION.  At any time within 20 days following the occurrence of a
Trading Threshold (as defined in Section 16(q)), the Company shall be entitled
to redeem the Warrants, or any of them, at a per Warrant Share redemption price
of $0.001 (the “Redemption
Price”), upon 20 days’ written notice to the Holder. Hereinafter such
20-day period, as it may be extended pursuant to this Section 8, is referred to
as the “Redemption
Period.”  Upon the expiration of the Redemption Period (the
“Redemption Date”), all
Warrants noticed for redemption that have not theretofore been exercised by the
Holder shall, upon payment of the aggregate Redemption Price therefor, cease to
represent the right to purchase any shares of Common Stock and shall be deemed
cancelled and void and of no further force or effect without any further act or
deed on the part of the Company.  The Holder undertakes to return the
certificate representing any redeemed Warrants to the Company upon their
redemption and to indemnify the Company with respect to any losses, claims,
damages or liabilities arising from the Holder’s failure to return such
certificate.  In the event the certificate so returned represents a
number of Warrants in excess of the number being redeemed, the Company shall as
promptly as practicable issue to the Holder a new certificate for the number of
unredeemed Warrants.  If at any time during a Redemption Period that
begins prior to the 181st day
that follows the Issuance Date, the prospectus used in connection with the
disposition of the Warrant Shares pursuant to the Registration Statement may not
be used by the Holder for the resale of the Warrant Shares because the
Registration Statement is not effective, then the Redemption Period shall be
extended by the period of time that the Holder may not so use the prospectus
plus 20 days.

    

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

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    
      	 	
              (a) 

            	
              if
      to the Company, to:

            

    

    

    Discovery
Laboratories, Inc.

    2600
Kelly Road

    Warrington,
Pennsylvania 18976

    Attention: John
G. Cooper

    Facsimile: 215-488-9301

    

    with
copies to:

    

    SNR
Denton US LLP

    Two World
Financial Center

    225
Liberty Street

    New York,
NY  10281-2699

    Attention:  Ira
L. Kotel, Esq.

    Fax:
212-768-6800

    

    
      	 	
              (b)

            	
              if
      to the Holder, to:

            

    

    

    PharmaBio
Development Inc.

    c/o
Quintiles Transnational Corp.

    4820
Emperor Blvd

    Durham,
NC 27703

    Attn:  President

    Facsimile:  (919)
998-2090

    

    with
copies to:

    

    Smith,
Anderson, Blount, Dorsett,

       Mitchell
& Jernigan, L.L.P.

    2500
Wachovia Capitol Center

    Raleigh,
NC 27601

    Attn:
Christopher B. Capel

    Facsimile:
(919) 821-6800,

    

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

    

    10. 
AMENDMENT AND WAIVER. Except as otherwise provided herein, the provisions
of this Warrant may be amended only with the written consent of the Company and
the Holder, and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only with the written
consent of the Holder.

    

    11. 
GOVERNING LAW. This Warrant shall be governed by and construed and enforced
in accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Warrant shall be governed by, the
internal laws of the State of Delaware, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of Delaware or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of Delaware.

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

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

    

    13. 
DISPUTE RESOLUTION. In the case of a dispute as to the determination of the
Exercise Price or the arithmetic calculation of the Warrant Shares, the Company
shall submit the disputed determinations or arithmetic calculations via
facsimile or electronic mail within two (2) Business Days of receipt of the
Exercise Notice giving rise to such dispute, as the case may be, to the
Holder. If the Holder and the Company are unable to agree upon such
determination or calculation of the Exercise Price or the Warrant Shares within
three Business Days of such disputed determination or arithmetic calculation
being submitted to the Holder, then the Company shall, within two (2) Business
Days submit via facsimile or electronic mail (a) the disputed determination of
the Exercise Price to an independent, reputable investment bank selected by the
Company and approved by the Holder or (b) the disputed arithmetic calculation of
the Warrant Shares to the Company’s independent, outside accountant. The
Company shall cause at its expense the investment bank or the accountant, as the
case may be, to perform the determinations or calculations and notify the
Company and the Holder of the results no later than ten Business Days from the
time it receives the disputed determinations or calculations. Such
investment bank’s or accountant’s determination or calculation, as the case may
be, shall be binding upon all parties absent demonstrable error.

    

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

    

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

    

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

    

    (a)   “Bloomberg” means Bloomberg
Financial Markets.

    

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

    

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

    

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

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

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

    

    (f)   RESERVED

    

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

    

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

    

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

    

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

    

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

    

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

    

    

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

    

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

    

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

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

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

    

    (q) 
A “Trading Threshold”
shall be deemed to occur on any date that the reported Weighted Average Price
for any five (5) out of seven (7) consecutive Trading Days immediately prior to
such date, exceeds $0.45 with a minimum average daily trading volume for such
seven (7) day period of at least 500,000 shares of Common Stock as reported by
the Principal Market for such period (with such price and volume criteria being
appropriately adjusted for any share dividend, share split or other similar
transaction that may occur on or after the Issuance Date).

    

    (r)  
“Weighted Average Price”
means, for any security as of any date, the dollar volume-weighted average price
for such security on the Principal Market (or, if the Principal Market is not
the principal trading market for the Common Stock, then on the principal
securities exchange or securities market or electronic quotations system on
which the shares of Common Stock are then traded) during the period beginning at
9:30:01 a.m., New York City time, and ending at 4:00:00 p.m., New York City
time, as reported by Bloomberg through its “Volume at Price” function or, if the
foregoing does not apply, the dollar volume-weighted average price of such
security in the over-the-counter market on the electronic bulletin board for
such security during the period beginning at 9:30:01 a.m., New York City time,
and ending at 4:00:00 p.m., New York City time, as reported by Bloomberg, or, if
no dollar volume-weighted average price is reported for such security by
Bloomberg for such hours, the average of the highest closing bid price and the
lowest closing ask price of any of the market makers for such security as
reported in the “pink sheets” by Pink Sheets LLC (formerly the National
Quotation Bureau, Inc.). If the Weighted Average Price cannot be calculated
for such security on such date on any of the foregoing bases, the Weighted
Average Price of such security on such date shall be the fair market value as
mutually determined by the Company and the Holder. If the Company and the
Holder are unable to agree upon the fair market value of such security, then
such dispute shall be resolved pursuant to Section 13 with the term
“Weighted Average Price” being substituted for the term “Exercise Price.” All
such determinations shall be appropriately adjusted for any share dividend,
share split or other similar transaction during such period.

    

    [Signature
Page Follows]

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

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

    

    
      
        
          	 
      	
                  DISCOVERY
      LABORATORIES, INC.

                
	 
      	 
      
	 
      	
                  By:

                	 
      
	 
      	
                  Name: John
      G. Cooper

                
	 
      	
                  Title: President
      and Chief Financial
Officer

                

        

      

    

    

    
      
        
          	 
      	
                  PHARMABIO
      DEVELOPMENT INC.

                
	 
      	 
      
	 
      	
                  By:

                	 
      
	 
      	
                  Name: John
      L. Bradley, Jr.

                
	 
      	
                  Title:    Vice
      President

                

        

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
A

    

    EXERCISE
NOTICE

    

    TO
BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

    WARRANT
TO PURCHASE COMMON STOCK

    

    DISCOVERY
LABORATORIES, INC.

    

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

    

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

    

    
      	 
      	
              ____________

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

            

    

    

    
      	 
      	
              ____________

            	
              a
      “Cashless Exercise” with respect to _______________ Warrant Shares
      (provided the conditions for cashless exercise set forth in Section
      1(d) of the Warrant are satisfied).

            

    

    

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

    

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

    

    _______________________________

    

    _______________________________

    

    _______________________________

    

    Date:
_______________ __, ______

    

    
      
        	
                  

              	 
      
	
                Name
      of Registered Holder

              

      

    

    

    
      
        
          	
                  By:

                	
                    

                	 
      
	 
      	
                  Name:

                
	 
      	
                  Title:

                

        

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    ACKNOWLEDGMENT

    

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

    

    
      
        	 
      	
                DISCOVERY
      LABORATORIES, INC

              
	 
      	 
      
	 
      	
                By:

              	
                  

              
	 
      	 
      	
                Name:

              
	 
      	 
      	
                Title:

              

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
B

    

    ASSIGNMENT
FORM

    

    (To
assign the foregoing warrant, execute

    this form
and supply required information.

    Do not
use this form to exercise the warrant.)

    

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

    

    _______________________________________________
whose address is

    

    _______________________________________________________________.

    

    _______________________________________________________________

    

    Dated: ______________,
_______

    

    
      
        
          
            
              	 
      	
                      Holder’s
      Signature:

                    	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	
                      Holder’s
      Address:

                    	 
      	 
      
	 
      	 
      	 
      	 
      

            

          

        

      

    

     

    
      
        
          	
                  Signature
      Guaranteed:

                	 
      	 
      

        

      

    

    

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

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