Document:

Exhibit 10.2

 

SEPARATION
AGREEMENT & RELEASE

 

This is an Agreement between The Home Depot, Inc.
(the “Company”) and Robert P. DeRodes
(the “Executive”).

 

WHEREAS, Company and Executive intend the terms
and conditions of this Agreement to govern all issues related to Executive’s
employment and termination from Company and its subsidiaries and, except as
otherwise expressly provided herein, is intended to supersede and replace the
provisions set forth in any of his employment letters, including but not limited
to the letter agreement dated February 5, 2002; and

 

WHEREAS, Executive acknowledges that he has been
given a reasonable period of time, up to and including twenty-one (21) days, to
consider the terms of this Agreement; and

 

WHEREAS, Company advises Executive to consult
with a lawyer before signing this Agreement; and

 

WHEREAS, Executive acknowledges that the
consideration provided him under this Agreement is sufficient to support the
releases provided by him under this Agreement; and

 

WHEREAS, Executive represents that he has not
filed any charges, claims or lawsuits against Company involving any aspect of
his employment which have not been terminated as of the date of this Agreement;
and

 

WHEREAS, Executive understands that Company
regards the representations by him as material and that Company is relying on
these representations in entering into this Agreement,

 

NOW, THEREFORE, Company and Executive agree as follows:

 

1.                                       Employment
Status and Termination Date.  Executive will continue his employment with
Company through January 2, 2009. 
Executive will maintain his current salary and benefits during this
time. Executive warrants that in performing his duties he shall use his best
efforts in a diligent manner and shall dedicate such time as necessary to perform
them on a timely basis. Executive’s last day of employment (“Termination Date”) shall be January 2,
2009, or Company’s earlier termination of Executive’s employment, at Company’s
sole discretion. If Company determines that the Termination Date will precede January 2,
2009, Executive shall receive payment at his current salary rate for the period
of time between the Termination Date and January 2, 2009, subject to
applicable tax withholding. Payments are due on the first day of each month
following the Termination Date. Payment of all such monthly payments shall be
completed no later than January 31, 2009. Each such monthly payment shall
constitute a separate payment for purpose of Section 409A of the Internal
Revenue Code (the “Code”).
Executive shall not accrue any vacation days or credit subsequent to the
Termination Date.

 

2.                                       Separation
Payments.  Executive
shall receive twelve (12) monthly separation payments of $62,666.67 each,
payable on the first business day of each month following January 2, 2009.
All payments are subject to applicable tax withholding. Each monthly payment
shall constitute a separate payment for purposes of Code Section 409A. It
is intended that the exemption provided by Treas. Reg. §1.409A-1(b)(9)(iii)(A)(2) shall
apply to that portion of the monthly payments not in excess of two times the
maximum amount that may be taken into account under a qualified plan pursuant
to Code Section 401(a)(17).

 

 

 

 

3.                                       Bonuses.

 

(a)           Fiscal
2008 MIP. Executive  will
participate in the Management Incentive Plan (“MIP”)
for Fiscal 2008, and will receive a prorated payment of 91.67% of his MIP
payout if pre-established performance goals are achieved, as determined by
Company in its sole discretion. Any bonus payment earned will be payable at the
same time other officers receive their bonuses for such year, but in no event
later than April 15, 2009, subject to applicable tax withholding.

 

(b)           Fiscal 2009 MIP.  Executive  will not be eligible to participate in
the MIP for Fiscal Year 2009 or beyond. Notwithstanding the foregoing, Executive will receive a guaranteed single sum
payment of $752,000, less applicable tax withholding, representing his target
MIP bonus for Fiscal 2009, payable to Executive at the same time other officers
receive their Fiscal 2009 bonuses for such year but in no event later than April 30,
2010.  This Section 3(b) is
carried forward from Executive’s February 5, 2002 employment letter with
the Company and it is intended to be an unmodified grandfathered contract
benefit under Rev. Rul. 2008-13.

 

(c)           LTIP.  Executive
will not be eligible to participate in any Long Term Incentive Program (“LTIP”) after the date of this
Agreement and forfeits all rights to payment under any outstanding LTIP cycle.

 

(d)           Other Bonuses.  Executive will not be eligible for bonus payments of any kind, except
as provided in this Section 3.

 

4.                                       Benefits.  Executive’s benefits (including the
Supplemental Executive Choice Program and executive life insurance and leased
car programs) shall end on the Termination Date, pursuant to the terms of such
plans and applicable law.  Executive
shall receive a monthly payment (subject to applicable tax withholding), due on
the first day of each month following the Termination Date, in an amount
necessary to continue his healthcare coverage through COBRA, less the employee
share of the premium for said coverage, through the earlier of: (a) twelve
(12) months from the Termination Date, or (b) Executive’s acceptance of
other employment with comparable healthcare eligibility. Company will authorize
Executive’s eligibility for retiree healthcare coverage through
UnitedHealthcare (or current insurance provider at such time) after expiration
of his COBRA coverage and before he attains age sixty (60), provided, however,
that Executive’s coverage under such plan is contingent upon the consent and
agreement of UnitedHealthcare (or current insurance provider at such time) to
provide said coverage to Executive. Executive shall not be entitled to any
other benefits except as expressly provided for in this Agreement.

 

5.                                       Stock
Options/Restricted Stock.

 

(a)          All of
Executive’s options to purchase Company’s common stock (“Options”)
that vest before the Termination Date will be cancelled and forfeited unless
exercised by April 2, 2010. Executive’s 40,461 outstanding, unvested
Options that are originally scheduled to vest after January 2, 2009 but
before January 3, 2010 (comprised of 12,500 Options granted on March 17,
2004 that were originally scheduled to vest on March 17, 2009; 15,000
Options granted on March 23, 2005 that were originally scheduled on March 23,
2009; and 12,961 Options that were granted on March 21, 2007 that were
originally scheduled to vest on March 21, 2009) are hereby amended to vest
on the Termination Date.  These 40,461
Options may not be exercised until the following dates: 20,230 Options may be
exercised as of the Termination Date; 5,231 Options may be exercised as of March 21,
2009; and 15,000 Options may be exercised as of March 23, 2009. Any
portion of the 40,461 Options not exercised by April 2, 2010 will be
cancelled and forfeited.  All 40,461
Options are subject to forfeiture for 

 

 

2

 

 

any
earlier breach as provided in Paragraph 10. All other unvested Options shall be
forfeited on the Termination Date.

 

(b)         The
restrictions on Executive’s 176,896 outstanding shares of restricted shares of
Company’s common stock (“Restricted Shares”),
originally scheduled to lapse after January 2, 2009 (comprised of 10,000
Restricted Shares granted on August 21, 2003 and originally scheduled to
vest on August 21, 2009; 22,000 Restricted Shares granted on March 17,
2004 and originally scheduled to vest on March 17, 2009; 22,000 Restricted
Shares granted on March 23, 2005 and originally scheduled to vest on March 23,
2010; 49,000 Restricted Shares granted on March 20, 2006 and originally
scheduled to vest on March 20, 2011; 12,500 Restricted Shares granted on March 20,
2006 and originally scheduled to vest on March 20, 2009; 8,131 Restricted
Shares granted on March 20, 2006 and originally scheduled to vest on March 20,
2009; 28,265 Restricted Shares granted on March 21, 2007 and originally
scheduled to vest on March 21, 2012; and 25,000 Restricted Shares granted
on March 20, 2006 and originally scheduled to vest on September 5,
2010), are hereby amended to lapse instead on the Termination Date. All other
shares of Executive’s Restricted Shares shall be forfeited on the Termination
Date.  The 176,896 Restricted Shares may
not be transferred until the following dates: 88,448 Restricted Shares may be
transferred as of the Termination Date; and the remaining 88,448 Restricted
Shares may be transferred as of January 3, 2011. Executive and Company
agree that Company shall not be required to issue any share to Executive before
the date the share may be transferred, as set forth in this Paragraph 5(b),
except to accommodate the sales of shares for tax purposes as set forth in
Paragraph 5(c), below. All 176,896 Restricted Shares are subject to forfeiture
for any earlier breach as provided in Paragraph 10.  If Company determines that the Termination
Date will precede January 2, 2009, the restrictions on Executive’s 27,500
outstanding shares of restricted shares of Company’s common stock (“Restricted Shares”), comprised of
12,500 Restricted Shares granted on August 18, 2005 and originally
scheduled to vest on August 18, 2008; and 15,000 Restricted Shares granted
on August 26, 2002 and originally scheduled to vest on August 26,
2008, are hereby amended to lapse instead on the Termination Date.  The 27,500 Restricted Shares may not be
transferred until the following dates: 12,500 Restricted Shares may be
transferred as of August 18, 2008; and 15,000 Restricted Shares may be
transferred as of August 26, 2008.

 

(c)          Executive and
Company acknowledge that the shares referenced in Paragraph 5(b) shall
constitute taxable income to Executive at the time of vesting on the
Termination Date; and that the vested stock options referenced in Paragraph 5(a) shall
be taxable to Executive when such options are exercised. Accordingly, Executive
acknowledges his obligations to pay all related applicable federal, state and
local income and employment taxes, and that Company is required to withhold
applicable taxes with respect to these shares and vested options. Accordingly,
Executive hereby authorizes Company to withhold and surrender to Company a
sufficient number of shares necessary to satisfy said withholding obligations.

 

(d)         Executive shall
not be eligible to receive any other equity-based awards.

 

(e)          Executive is
solely responsible for ensuring that his equity awards are properly credited,
exercised and handled as provided by the terms of the awards as modified by
this Agreement.  Executive acknowledges
that he may not rely on the Merrill Lynch website in determining the exercise
or expiration dates of his equity awards. Executive should direct any inquiries
to the Atlanta Branch of Merrill Lynch at 404-264-7274; however, Company is not
responsible for any incorrect information Executive might receive from Merrill
Lynch.

 

 

3

 

 

6.                                       Release of
Claims. Executive and his heirs, assigns, and agents release, waive and
discharge Company, its past and present parents, subsidiaries, affiliates and
related entities, and their respective past and present predecessors,
successors, assigns, representatives, directors, officers, employees, and
agents from each and every claim, action or right of any sort, known or
unknown, arising on or before the Effective Date.

 

(a)          The foregoing
release includes, but is not limited to, any claim of discrimination on the
basis of race, sex, religion, sexual orientation, national origin, disability,
age, or citizenship status; any other claim based on any local, state, or
federal prohibition, including but not limited to claims under Title VII of the
Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act
of 1967, as amended, or the Americans With
Disabilities Act; any claim arising out of or related to any alleged
express or implied employment contract, any other alleged contract affecting
terms and conditions of employment, or an alleged covenant of good faith and
fair dealing; or any claim for severance
pay, bonus, salary, sick leave, stocks, attorneys’ fees, holiday pay, vacation
pay, life insurance, health or medical insurance or any other employee or
fringe benefit, workers’ compensation or disability.

 

(b)         Executive represents that he
understands the foregoing release, that rights and claims under the Age
Discrimination in Employment Act of 1967, as amended, are among the rights and
claims against Company he is releasing, and that he understands that he is not
presently releasing any future rights or claims that might arise after the Effective
Date.

 

(c)          Executive
further agrees never to sue Company or its past and present directors,
officers, employees, parents, subsidiaries, affiliates, related entities, and
agents or cause Company or its past and present directors, officers, employees,
parents, subsidiaries, affiliates, related entities, and agents to be sued
regarding any matter within the scope of the above release. If Executive
violates this Paragraph 6, Company may recover all damages as allowed by law,
including all costs and expenses, including reasonable attorneys’ fees,
incurred in defending against the suit.

 

(d)         Nothing herein
is intended to or shall in any manner release, diminish or impair Executive’s
rights under this Agreement, and rights, if any, that Executive may have to: (i) indemnification
or advancement of expenses under Company’s certificate of incorporation or
bylaws, or Delaware law, and (ii) coverage under directors’ and officers’
liability insurance maintained by Company or its affiliates.

 

7.                                       Additional
Release of Claims. 
Notwithstanding any other provision of this Agreement, Executive shall
not be entitled to any payment or benefit pursuant to Paragraphs 3, 4 or 5
unless Executive has delivered to Company a second release of claims, in the
form shown on Exhibit A, that is
signed by Executive at least twenty-one (21) days after the Termination Date
and is not revoked by Executive, as permitted by the express terms in Exhibit A.

 

8.                                       Confidential
Information and Trade Secrets.

 

(a)          Executive acknowledges that through his employment with Company he has
acquired and had access to Confidential Information of Company, its parents,
subsidiaries, affiliates or related entities.  Executive further acknowledges that he has
not published, disclosed or used any of this Confidential Information except in
accordance with his duties for Company. 
Executive agrees that, for a period of three years after the Effective
Date, he will hold in confidence all Confidential Information of Company, its
parents, subsidiaries, affiliates or related entities and will not disclose, publish or make use of such Confidential
Information, unless compelled by law and then only after written notice to
Company’s Executive Vice President, Human Resources.  

 

 

4

 

 

Executive further
agrees to return all documents, disks, or any other item or source containing
Confidential Information, or any other property of Company, its parents,
subsidiaries, affiliates or related entities,
to Company on or before the Effective Date. 
If Executive has any question regarding what data or information
would be considered by Company to be Confidential Information, Executive agrees
to contact the Executive Vice President, Human Resources for written
clarification.  “Confidential Information”
shall include any data or information, other than trade secrets, that is
valuable to Company, its parents, subsidiaries, affiliates or related
entities and not generally known to
competitors or outsiders, regardless of whether the confidential information is
in printed, written, or electronic form, retained in Executive’s memory, or has
been compiled or created by Executive. 
This includes, but is not limited to: information technology, computer
systems, marketing, advertising, technical, financial, personnel, staffing,
payroll, merchandising, strategic planning, product, vendor, supplier, customer
or store planning data, construction, trade secrets, or other information
similar to the foregoing.

 

(b)         Executive
also acknowledges that through his employment with Company he has acquired and
had access to Company’s Trade Secrets, its parents, subsidiaries,
affiliates or related entities.  Executive further acknowledges that Company, its
parents, subsidiaries, affiliates or related entities have made reasonable efforts under the circumstances to maintain the
secrecy of their Trade Secrets. 
Executive agrees to hold in confidence all Trade Secrets of Company, its
parents, subsidiaries, affiliates or related entities that came into his knowledge during employment by Company and shall
not disclose, publish, or make use of at any time such Trade Secrets for so
long as the information remains a Trade Secret. 
“Trade Secret” means
information, without regard to form, including, but not limited to, any technical
or non-technical data, formula, pattern, compilation, program, device, method,
technique, drawing, process, financial data, financial plans, technology plans
or strategy, company software or programs, strategic plans, product plans, or
list of actual or potential customers or suppliers which is not commonly known
by or available to the public and which information: (i) derives economic
value, actual or potential, from not being generally known to, and not being
readily ascertainable by proper means by, other persons who can derive economic
value from its disclosure or use and (ii) is the subject of efforts that
are reasonable under the circumstances to maintain its secrecy.

 

(c)          Executive
further acknowledges that his breach of any of the covenants in this Paragraph
8 would result in immediate and irreparable harm to Company, its parents, subsidiaries, affiliates or
related entities that cannot be adequately or reasonably compensated at
law.  Accordingly, Executive agrees that
Company shall be entitled, if any such breach shall occur or be threatened or
attempted, if it so elects, to seek from a court a temporary, preliminary, and
permanent injunction, without being required to post a bond, enjoining and
restraining such breach or threatened or attempted breach by Executive.

 

9.                                       Non-Competition
and Non-Solicitation.

 

(a)          Executive
acknowledges that during his employment he provided services to Company, its
parents, subsidiaries, affiliates, and related entities in all locations that
these entities conduct business.  These
services necessarily required Company to disclose the Confidential Information
and Trade Secrets of these entities to Executive.  Executive further acknowledges that his
position allowed him to develop a personal relationship with certain customers,
suppliers and vendors of Company, its parents, subsidiaries, affiliates, and
related entities, and to acquire knowledge of the affairs and requirements of
these customers, suppliers and vendors. The customers, suppliers and vendors
with whom Executive has had business dealings with on behalf of these entities
are located throughout the world.   As a
result, Executive agrees that he will not, before January 3, 2011, enter
into or maintain an 

 

 

5

 

 

employment, contractual, or
other relationship, either directly or indirectly, to provide information
technology or executive services in the same or similar manner as he did for
Company to any company or entity engaged in any way in a business that competes
directly or indirectly with Company, its parents, subsidiaries, affiliates or
related entities, in the United States, Mexico, China, Canada, Puerto Rico,
Virgin Islands, Guam, other country or territory where Company does business
before January 3, 2011, without the prior written consent of Company’s
Executive Vice President, Human Resources. Businesses that compete with Company
specifically include, but are not limited to, the following entities and each
of their subsidiaries, affiliates, assigns, or successors in interest: Lowe’s
Companies, Inc. (including, but not limited to, Eagle Hardware and
Garden); Sears Holding Corp. (including, but not limited to, Orchard Supply and
Hardware Company); Wal-Mart; RONA Inc.; B&Q; Ace Hardware; True Value
Company; Reno Depot; OBI; Kent; Home Hardware; Orient Home; Home First; Leroy
Merlin; La Maison; Home Mart; No. 9; and Menard, Inc.

 

(b)   For the period through January 3, 2011, to
the extent Executive has an employment, contractual, directorship, or affiliate
(as defined by SEC Rules) relationship with another company, Executive shall
give advance written notice to Company in the event Executive becomes aware
that such other company intends to enter into bid or other business
negotiations with Company; provided that this advance-notice obligation shall
not apply to the extent it would be inconsistent with Executive’s fiduciary
duties to such other company or its shareholders, in which case Executive shall
give written notice to Company within one (1) business day of submission of any
such bid or entering into business negotiations with Company. In addition, for
the period through January 3, 2011, Executive shall not, whether through an
employment, contractual, directorship, affiliate, or other relationship: (i)
participate in communications, negotiations or bids between any other company
and Company and will refrain from any oversight or advisory services with
respect thereto;  or (ii) interfere with,
solicit on behalf of such other company or attempt to entice away from Company
(or any affiliate or subsidiary of Company) (x) any project, financing or
customer that, to the knowledge of Executive or upon notice to Executive from
Company, Company (or any affiliate or subsidiary of Company) has under contract
(including unfulfilled purchase orders), or any letter of supply or other
supplier contract or arrangement that, to the knowledge of Executive or upon
notice to Executive
from Company, has been entered into by Company (or any affiliate or subsidiary
of Company), and all extensions, renewals and re-solicitations of such
contracts or arrangements, (y) any contract, agreement or arrangement that, to
the knowledge of Executive or upon notice to Executive from Company, Company
(or any affiliate or subsidiary of Company) is actively negotiating with any
other party, or (z) any prospective business opportunity that, to the knowledge
of Executive or upon notice to Executive from Company, Company (or any
affiliate or subsidiary of Company) has identified.

 

(c)          In the event
Executive wishes to enter into any relationship or employment before January 3,
2011 which would violate  the above
non-compete provision, Executive agrees to request written permission from
Company’s Executive Vice President, Human Resources before entering any such
relationship or employment. Company may approve or not approve of the
relationship or employment at its absolute discretion.

 

(d)         Executive
agrees that before January 3, 2012, he will not directly or indirectly, on
behalf of himself or any other entity or person, solicit or encourage any
person who is an employee of Company, its
parents, subsidiaries, affiliates or related entities to terminate his or her
relationship with Company, its
parents, subsidiaries, affiliates or related entities, or to refer any such
employee to anyone, without prior written approval from Company’s Executive
Vice President, Human Resources.

 

 

6

 

 

(e)          Executive
acknowledges that the covenants in this Paragraph 9:  (i) are necessary for the protection of
the legitimate business interests of Company, its parents, subsidiaries,
affiliates, and related entities; (ii) are reasonable in terms of time,
geographic scope, and activities restricted; (iii) are designed to prevent
unfair competition and not to stifle the inherent skill and experience of
Executive; (iv) will not interfere with Executive’s ability to earn a
livelihood; and (v) do not confer a benefit upon Company disproportionate
to the detriment to Executive.  Executive
acknowledges that if he were to breach any of the covenants in this Paragraph
9, such breach would result in immediate and irreparable harm to Company that
cannot be adequately or reasonably compensated at law.  Accordingly, Executive agrees that Company
shall be entitled, if any such breach shall occur or be threatened or
attempted, if it so elects, to a seek from a court a temporary, preliminary,
and permanent injunction, without being required to post a bond, enjoining and
restraining such breach or threatened or attempted breach by Executive.

 

10.                                 Breach by
Executive.  Company’s
obligations to Executive under this Agreement are contingent on Executive’s
performance of his obligations under this Agreement. Any breach by Executive of
this Agreement will result in the immediate cancellation of all Executive’s
outstanding stock options and restricted stock, as well as entitle Company to
all its other remedies allowed in law or equity, including but not limited to
the return of any payments that it made to Executive under this Agreement and
the return to Company of any proceeds Executive received from stock options
exercised or restricted stock sold after April 1, 2008, to the extent
permitted under federal, state and local law.

 

11.                                 Board Service.  Company will waive application of its
internal policy, and, subject to Executive’s compliance with the requirements
of Paragraph 9, it shall not be considered a breach of this Agreement, if
Executive serves on more than one external board of directors for other
companies (“Other Company”) before the Termination Date, provided that such
Other Company board service does not unreasonably interfere with Executive’s
duties and obligations to Company pursuant to this Agreement, as determined by
Company in its sole discretion, and Executive complies with the following
requirements:

 

(a)          At any time before the Termination Date
and for a period of two (2) years following the Termination Date, Executive
shall not participate in any board meetings, discussions, or other
communications regarding Company.

 

(b)         Executive shall comply with all
requirements as set forth in Paragraph 9 above. 
No language in this Paragraph 11 shall be read to limit the rights of
the Company or the obligations of the Executive to the Company as set forth in
Paragraph 9 above.

 

12.                                 Termination for
“Cause” or Voluntary Resignation.  Executive will not receive any of the
payments or benefits specified in this Agreement if he is terminated for “cause”
or voluntarily resigns from employment before January 2, 2009.  “Cause” for
termination shall mean: (a) harassment of or discrimination against
associates, customers, or vendors; (b) unethical conduct (including, but
not limited to, accepting bribes, disclosure of Confidential Information,
etc.); (c) falsification of Company records or documents; (d) violation
of Company’s Conflict of Interest policy; (e) theft; (f) violation of
Company’s Mutual Attraction policy; (g) violation of Company’s Substance
Abuse policy; or (h) violation of Company’s Securities Law Policy.  Executive will not be considered to have
voluntarily resigned from employment if, before January 2, 2009, Executive
resigns because: (i) he is assigned a role outside the Atlanta
metropolitan area, or (ii) his base salary is decreased; or (iii) he
is assigned to a position other than Executive Vice President, or to a position
that does not report to either the Chief Executive Officer or to a Chief
Information Officer other than Executive (“Resignation Events”),
provided that Executive 

 

 

7

 

 

provides written notice to Company within 90 days of being notified of
a Resignation Event of his intent to resign, whereupon Company shall have 30
days thereafter remedy the condition.

 

13.                                 Executive
Availability.  Executive agrees
to make himself reasonably available to Company to respond to requests by
Company for information pertaining to or relating to Company and its
affiliates, subsidiaries, agents, officers, directors or employees which may be
within the knowledge of Executive. Executive agrees to cooperate fully with
Company in connection with any and all existing or future litigation, charges,
or investigations brought by or against Company or any of its past or present
affiliates, agents, officers, directors or employees, whether administrative,
civil or criminal in nature, in which and to the extent Company deems Executive’s
cooperation necessary.  In conjunction
with Executive’s commitments under this Paragraph 13, Company will reimburse
Executive for reasonable out-of-pocket expenses incurred as a result of such
cooperation.  The amount of expenses
reimbursable by Company under this Section 13 in any one calendar year
shall not affect the amount reimbursable in any other calendar year, and the
reimbursement of an eligible expense shall be made within sixty (60) days after
Executive’s written request for reimbursement accompanied with such evidence of
expenses incurred as Company may reasonably require, but in any event no later
than December 31 of the year after the year in which the expense was
incurred.  This Section 13 shall
expire on Executive’s death and shall not be subject to liquidation or exchange
for another benefit.

 

14.                                 Non-Disparagement. Except as may
be required by law or subpoena, Executive agrees that he will not  directly or indirectly publish, communicate, make or cause
to be made any statements or opinions that disparage, criticize or that would
be derogatory to or otherwise harm the business or reputation of Company, its
parents, subsidiaries, affiliates, or related entities, and their respective
past and present predecessors, successors, assigns, representatives, directors,
officers, employees, and agents to anyone, including but not limited to the
media, internet blogs, public interest groups and publishing companies.
Disparagement shall not include disparaging, criticizing or derogatory
statements made in Executive’s name as a result of bona fide identify theft,
provided that Executive cooperates with Company and takes steps reasonably
requested by Company to immediately correct and address such statements and
prevent their future occurrence.

 

15.                                 Insider
Trading.  Executive
acknowledges that for a period of six (6) months after the Termination
Date, he will remain subject to the restrictions of Company’s Securities Laws
Policy applicable to Directors, Officers, and Designated Associates, which
permits trading only during designated window periods.  After expiration of said six-month period,
the Securities Law Policy will no longer apply to Executive. However, Executive
acknowledges that through his employment with Company he may have learned
material, non-public information regarding Company.  The federal securities laws prohibit trading
by persons while aware of material, non-public information.  Executive should seek advice of his legal
counsel before conducting any transactions in Company’s stock if Executive
thinks he may possess such information.

 

16.                                 Future
Employment.  Executive
hereby understands and agrees that he will not be re-employed by Company in the
future and that Executive will never knowingly apply to Company, its
subsidiaries, affiliates, parents or divisions for any job or position in the
future.

 

17.                                 Severability of
Provisions. In the event that any provision in this Agreement
is determined to be legally invalid or unenforceable by any court of competent
jurisdiction, and cannot be modified to be enforceable, the affected provision
shall be stricken from the Agreement, and the remaining terms of the Agreement
and its enforceability shall remain unaffected.

 

18.                                 Right to Revoke
this Agreement. Executive may revoke this Agreement in writing
within seven (7) days of signing it by sending written notice of
revocation to Company’s Executive Vice President, 

 

 

8

 

 

Human Resources.  The Agreement
will not take effect until the Effective Date. If Executive revokes this
Agreement, all of its provisions shall be void and unenforceable.

 

19.                                 Effective Date. The “Effective Date” shall be the day
after the end of the revocation period described in Paragraph 18.

 

20.                                 Non-Assignment.  Executive
represents and warrants that as of the date of this Agreement he has not
assigned or transferred, or purported to assign or transfer, to any person,
firm, corporation, association or entity whatsoever any released claim.  Executive hereby agrees to indemnify and hold
Company harmless against, without any limitation, any and all rights, claims,
warranties, demands, debts, obligations, liabilities, costs, court costs, expenses,
including attorneys’ fees, causes of action or judgments based on or arising
out of any such assignment or transfer.

 

21.                                 Code Section 409A.  Company makes no representation or warranty
to Executive or other person regarding compliance with, or exemption from, Section 409A
of the Internal Revenue Code with respect to any payment or benefit provided by
this Agreement.  Executive agrees that he shall bear sole and
exclusive responsibility for any and all federal, state, local or other tax
consequences (including, without limitation, any and all tax liability under Section 409A)
of this Agreement, and fully indemnifies and holds the Company harmless
therefor.  Executive should consult with his own tax advisor in
connection with this Agreement and its tax consequences.

 

22.                                 Entire
Agreement. This Agreement constitutes the entire understanding
between the parties. The parties have not relied on any oral statements that
are not included in this Agreement. Any modifications to this Agreement must be
in writing and signed by Company’s Executive Vice President, Human Resources.

 

23.                                 Governing Law.  This Agreement shall be construed,
interpreted and applied in accordance with the law of the State of Delaware,
without giving effect to the choice of law provisions thereof.  Executive and Company hereby irrevocably
submit any dispute arising out of or relating to this Agreement to the
exclusive concurrent jurisdiction of the state and federal courts located in
Delaware.  Executive and Company also
both irrevocably waive, to the fullest extent permitted by applicable law, any
objection either may now or hereafter have to the laying of venue of any such
dispute brought in such court or any defense of inconvenient forum for the
maintenance of such dispute, and both parties agree to accept service of legal
process from the courts of Delaware.

 

24.                                 Notices.  All
notices and other communications hereunder shall be in writing and may be given
by any of the following methods:  hand delivery, overnight courier,
facsimile, email, or certified U.S. mail, return receipt requested and postage
prepaid, addressed as follows:

 

	
   

  	
  If
  to the Executive:

  	
   

  	
  Robert
  P. DeRodes

  

 

 

9

 

 

	
   

  	
  If
  to the Company:

  	
   

  	
  The
  Home Depot, Inc.

  
	
   

  	
   

  	
   

  	
  2455
  Paces Ferry Road

  
	
   

  	
   

  	
   

  	
  Atlanta,
  Georgia 30339

  
	
   

  	
   

  	
   

  	
  Attn:
  Executive Vice President, Human Resources

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  With
  copy to:

  
	
   

  	
   

  	
   

  	
  Jack
  A. VanWoerkom

  
	
   

  	
   

  	
   

  	
  Executive
  Vice President-General Counsel

  
	
   

  	
   

  	
   

  	
  and
  Corporate Secretary

  
	
   

  	
   

  	
   

  	
  2455
  Paces Ferry Road

  
	
   

  	
   

  	
   

  	
  Atlanta,
  Georgia 30339

  

 

 

or
to such other address as either of the parties shall have furnished to the
other in writing in accordance herewith.  Notice and communications shall
be effective when dispatched by any of the above methods, as reflected by the
applicable post-mark or other indicator (fax delivery confirmation for
facsimile and “delivered receipt” for email), as to the date and time of
dispatch.

 

                Executive
understands and acknowledges the significance and consequences of this
Agreement, that the consideration provided herein is fair and adequate, and
represents that the terms of this Agreement are fully understood and
voluntarily accepted.

 

	
  THE HOME DEPOT, INC.

  	
   

  	
  EXECUTIVE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Timothy M. Crow

  	
   

  	
  By:

  	
  /s/ Robert P. DeRodes

  
	
   

  	
  Timothy M. Crow

  	
   

  	
   

  	
  Robert P. DeRodes

  
	
   

  	
  EVP — Human Resources

  	
   

  	
   

  	
  EVP — Chief Information Officer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date Signed: May 27, 2008

  	
   

  	
  Date Signed: May 27, 2008

  

 

 

10

 

 

Exhibit A

RELEASE OF CLAIMS

 

This Release of Claims is executed by Robert P.
DeRodes (the “Executive”) in consideration
for certain promises by The Home Depot, Inc. (the “Company”)
contained in the
                                    ,
2008 Agreement and Release between Executive and Company.

 

WHEREAS, Executive executed a Agreement &
Release (“Agreement”) on
                                    
releasing Company from each and every claim, action or right of any sort, known
or unknown, that Executive may have against Company arising on or before the
Effective Date of the Agreement; and,

 

WHEREAS, Company and Executive agree that
Executive will execute this separate Release of Claims for each and every
claim, action or right of any sort, known or unknown, that Executive may have
against Company arising after the Effective Date of the Agreement but before
the Termination Date as defined in Paragraph 1 of the Agreement; and,

 

WHEREAS, the consideration for this Release of
Claims is set forth in Paragraph 7 of the Agreement; and

 

WHEREAS, Executive acknowledges that he has been
given a reasonable period of time, up to and including twenty-one (21) days, to
consider the terms of this Release of Claims; and

 

WHEREAS, Company advises Executive to consult
with a lawyer before signing this Release of Claims; and

 

WHEREAS, this Release of Claims shall be signed by
Executive at least twenty-one (21) days after the Termination Date; and

 

WHEREAS, Executive acknowledges that the
consideration provided for this Release of Claims is sufficient to support the
release of claims; and

 

WHEREAS, Executive represents that he has not
filed any charges, claims or lawsuits against Company involving any aspect of
his employment which have not been terminated as of the date of this Release of
Claims.

 

NOW, THEREFORE, Executive agrees as follows:

 

1.             Release of Claims.
Executive and his heirs, assigns, and agents release, waive and discharge
Company and its past and present directors, officers, employees, parents,
subsidiaries, affiliates, related entities, and agents from each and every
claim, action or right of any sort, known or unknown, arising on or before the
Termination Date.

 

 

11

 

 

(a)          The foregoing
release includes, but is not limited to, any claim of discrimination on the
basis of race, sex, religion, sexual orientation, national origin, disability,
age, or citizenship status; any other claim based on any local, state, or
federal prohibition, including but not limited to claims under Title VII of the
Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act
of 1967, as amended (“ADEA”), or the Americans With Disabilities Act; any
claim arising out of or related to any alleged express or implied employment
contract, any other alleged contract affecting terms and conditions of
employment, or an alleged covenant of good faith and fair dealing; or any claim for severance pay, bonus, salary,
sick leave, stocks, attorneys’ fees, holiday pay, vacation pay, life insurance,
health or medical insurance or any other employee or fringe benefit, workers’
compensation or disability.

 

(b)         Executive
represents that he understands the foregoing release, that rights and claims
under ADEA are among the rights and claims against Company that he is
releasing, and that he understands that he is not presently releasing any
future rights or claims that might arise after the Termination Date.

 

(c)          Executive
further agrees never to sue Company or its past and present directors,
officers, employees, parents, subsidiaries, affiliates, related entities, and
agents or cause Company or its past and present directors, officers, employees,
parents, subsidiaries, affiliates, related entities, and agents to be sued
regarding any matter within the scope of the above release. If Executive
violates this Paragraph 1, Company may recover all damages as allowed by law,
including all costs and expenses, including reasonable attorneys’ fees,
incurred in defending against the suit.

 

(e)          Nothing herein
is intended to or shall in any manner release, diminish or impair Executive’s
rights under the Agreement, and rights, if any, that Executive may have to: (i) indemnification
or advancement of expenses under Company’s certificate of incorporation or
bylaws, or Delaware law, and (ii) coverage under directors’ and officers’
liability insurance maintained by Company or its affiliates.

 

2.             Executive
may revoke this Release of Claims in writing within seven (7) days of
signing it by sending written notice of revocation to Company’s Executive Vice
President, Human Resources.  This Release
of Claims will not take effect until eighth day after it is delivered to
Company, and only if the release is not revoked by Executive during the
revocation period.

 

3.             Executive represents and warrants that, as of the
date of this Release of Claims, he has not assigned or transferred, or
purported to assign or transfer, to any person, firm, corporation, association
or entity whatsoever any released claim. 
Executive hereby agrees to indemnify and hold Company harmless against, without
any limitation, any and all rights, claims, warranties, demands, debts,
obligations, liabilities, costs, court costs, expenses, including attorneys’
fees, causes of action or judgments based on or arising out of any such
assignment or transfer.

 

 

	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Robert P. DeRodes

  	
   

  	
  Date Signed

  

 

 

12WARRANT

     

    THE
      SECURITIES EVIDENCED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE U.S.
      SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
      ACT”),
      OR
      ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON
      AN
      EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH
      OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
      HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED,
      HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE
      REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION
      WHICH IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.

     

    May
      22, 2008

     

    Warrant
      to Purchase up to 825,000 shares of Common Stock of Discovery Laboratories,
      Inc.
      (the “Company”).

     

    In
      consideration for Kingsbridge Capital Limited (the “Investor”)
      agreeing to enter into that certain Common Stock Purchase Agreement, dated
      as of
      the date hereof, between the Investor and the Company (the “Agreement”),
      the
      Company hereby agrees that the Investor or any other Warrant Holder (as defined
      below) is entitled, on the terms and conditions set forth below, to purchase
      from the Company at any time during the Exercise Period (as defined below)
      up to
      825,000 fully paid and non-assessable shares of common stock, par value $0.001
      per share, of the Company (the “Common
      Stock”)
      at the
      Exercise Price (as defined below), as the same may be adjusted from time to
      time
      pursuant to Section 6 hereof. The resale of the shares of Common Stock or
      other securities issuable upon exercise or exchange of this Warrant is subject
      to the provisions of the Registration Rights Agreement. Capitalized terms used
      herein and not otherwise defined shall have the meanings given them in the
      Agreement.

     

    Section
      1. Definitions.

     

    “Affiliate”
shall
      mean any Person that, directly or indirectly through one or more intermediaries,
      controls or is controlled by, or is under direct or indirect common control
      with
      any other Person. For the purposes of this definition, “control,”
when
      used with respect to any Person, means the power to direct the management and
      policies of such Person, directly or indirectly, whether through the ownership
      of voting securities, by contract or otherwise, and the term “controls”
and
      “controlled”
have
      meanings correlative to the foregoing.

     

    “Closing
      Price”
as
      of
      any particular day shall mean the closing price per share of the Company’s
      Common Stock as reported by the Principal Market on such day.

     

    “Exercise
      Period”
shall
      mean that period beginning six months after the date of this Warrant and
      continuing until the earlier of (i) the expiration of the five-year period
      thereafter or (ii) a Funding Default, subject in each case to earlier
      termination in accordance with Section 6 hereof.

     

    “Exercise
      Price”
as
      of
      the date hereof shall mean $2.506 .

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

      
        Execution
          Copy

         

      

    

    “Funding
      Default”
shall
      mean a failure by Investor to accept a Draw Down Notice made by the Company
      and
      to acquire and pay for the Shares in accordance therewith within three (3)
      Trading Days following the delivery of such Shares to the Investor, provided
      such Draw Down Notice was made in accordance with the terms and conditions
      of
      the Agreement (including the satisfaction or waiver of the conditions to the
      obligation of the Investor to accept a Draw Down set forth in Article VII of
      the
      Agreement), provided further, that such failure was reasonably within the
      control of the Investor.

     

    “Per
      Share Warrant Value”
shall
      mean the difference resulting from subtracting the Exercise Price from the
      Closing Price on the Trading Day immediately preceding the Exercise
      Date.

     

    “Person”
shall
      mean an individual, a corporation, a partnership, a limited liability company,
      an association, a trust or other entity or organization, including a government
      or political subdivision or an agency or instrumentality thereof.

     

    “Principal
      Market”
shall
      mean the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ
      Capital Market, the American Stock Exchange or the New York Stock Exchange,
      whichever is at the time the principal trading exchange or market for the Common
      Stock.

     

    “SEC”
shall
      mean the United States Securities and Exchange Commission.

     

    “Trading
      Day”
shall
      mean any day other than a Saturday or a Sunday on which the Principal Market
      is
      open for trading in equity securities.

     

    “Warrant
      Holder”
shall
      mean the Investor or any permitted assignee or permitted transferee of all
      or
      any portion of this Warrant.

     

    “Warrant
      Shares”
shall
      mean those shares of Common Stock received or to be received upon exercise
      of
      this Warrant.

     

    Section
      2. Exercise.

     

    (a) Method
      of Exercise.
      This
      Warrant may be exercised in whole or in part (but not as to a fractional share
      of Common Stock), at any time and from time to time during the Exercise Period,
      by the Warrant Holder by surrender of this Warrant, with the form of exercise
      attached hereto as Exhibit A
      completed and duly executed by the Warrant Holder (the “Exercise
      Notice”),
      to
      the Company at the address set forth in Section 10.4 of the Agreement,
      accompanied by payment of the Exercise Price multiplied by the number of shares
      of Common Stock for which this Warrant is being exercised (the “Aggregate
      Exercise Price”).
      The
      later of the date on which an Exercise Notice or payment of the Exercise Price
      (unless this Warrant is exercised in accordance with Section 2(c) below) is
      received by the Company in accordance with this clause (a) shall be deemed
      an “Exercise
      Date.”

     

    (b) Payment
      of Aggregate Exercise Price.
      Subject
      to paragraph (c) below, payment of the Aggregate Exercise Price shall be
      made by wire transfer of immediately available funds to an account designated
      by
      the Company. If the amount of the payment received by the Company is less than
      the Aggregate Exercise Price, the Warrant Holder will be notified of the
      deficiency and shall make payment in that amount within three (3) Trading Days.
      In the event the payment exceeds the Aggregate Exercise Price, the Company
      will
      refund the excess to the Warrant Holder within five (5) Trading Days of
      receipt.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

       

      Execution
        Copy

       

    

    (c) Cashless
      Exercise.
      In the
      event that the Warrant Shares to be received by the Warrant Holder upon exercise
      of the Warrant may not be resold pursuant to an effective registration statement
      or an exemption to the registration requirements of the Securities Act of 1933,
      as amended (“Securities Act”), and applicable state laws, the Warrant Holder
      may, as an alternative to payment of the Aggregate Exercise Price upon exercise
      in accordance with paragraph (b) above, elect to effect a cashless exercise
      by so indicating on the Exercise Notice and including a calculation of the
      number of shares of Common Stock to be issued upon such exercise in accordance
      with the terms hereof (a “Cashless
      Exercise”).
      If a
      registration statement on Form S-3 under the Securities Act or such other form
      as deemed appropriate by counsel to the Company for the registration of the
      resale by the Warrant Holder of (x) the shares of Common Stock of the Company
      that may be purchased under the Agreement, (y) the Warrant Shares, or (z) any
      securities issued or issuable with respect to any of the foregoing by way of
      exchange, stock dividend or stock split or in connection with a combination
      of
      shares, recapitalization, merger, consolidation or other reorganization or
      otherwise, has been declared effective by the SEC and remains effective,
the
      Company may, in its sole discretion,
      require
      the Warrant Holder to pay the Exercise Price of the Warrant Shares being
      purchased by the Warrant Holder under this Warrant. The Company may, in its
      sole
      discretion, permit the Warrant Holder to effect a Cashless Exercise at any
      time.
      In the event of a Cashless Exercise, the Warrant Holder shall receive that
      number of shares of Common Stock determined by (i) multiplying the number
      of Warrant Shares for which this Warrant is being exercised by the Per Share
      Warrant Value and (ii) dividing the product by the average Closing Price of
      the Common Stock during the five (5) Trading Days immediately preceding the
      Exercise Date, rounded to the nearest whole share. The Company shall cancel
      the
      total number of Warrant Shares equal to the excess of the number of the Warrant
      Shares for which this Warrant is being exercised over the number of Warrant
      Shares to be received by the Warrant Holder pursuant to such Cashless
      Exercise.

     

    (d) Replacement
      Warrant.
      In the
      event that the Warrant is not exercised in full, the number of Warrant Shares
      shall be reduced by the number of such Warrant Shares for which this Warrant
      is
      exercised, and the Company, at its expense, shall forthwith issue and deliver
      to
      or upon the order of the Warrant Holder a new Warrant of like tenor in the
      name
      of the Warrant Holder, reflecting such adjusted number of Warrant
      Shares.

     

    Section
      3. Ten
      Percent Limitation.
      The
      Warrant Holder may not exercise this Warrant such that the number of Warrant
      Shares to be received pursuant to such exercise aggregated with all other shares
      of Common Stock that are then beneficially owned or deemed to be beneficially
      owned by the Warrant Holder would result in (i) the Warrant Holder owning more
      than 9.9% of all of such Common Stock as would be outstanding on such Exercise
      Date, as determined in accordance with Section 13(d) of the Exchange Act or
      (ii) the Company being required to file any notification or report forms under
      the Hart Scott Rodino Antitrust Improvements Act of 1976, as
      amended.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

       

      Execution
        Copy

       

    

    Section
      4. Delivery
      of Warrant Shares.

     

    (a) Subject
      to the terms and conditions of this Warrant, as soon as practicable after the
      exercise of this Warrant in full or in part, and in any event within ten (10)
      Trading Days thereafter, the Company at its expense (including, without
      limitation, the payment by it of any applicable issue taxes) will cause to
      be
      issued in the name of and delivered to the Warrant Holder, or as the Warrant
      Holder may lawfully direct, a certificate or certificates for, or make deposit
      with the Depositary Trust Company via book-entry of, the number of validly
      issued, fully paid and non-assessable Warrant Shares to which the Warrant Holder
      shall be entitled on such exercise, together with any other stock or other
      securities or property (including cash, where applicable) to which the Warrant
      Holder is entitled upon such exercise in accordance with the provisions
      hereof.

     

    (b) This
      Warrant may not be exercised as to fractional shares of Common Stock. In the
      event that the exercise of this Warrant, in full or in part, would result in
      the
      issuance of any fractional share of Common Stock, then in such event the Warrant
      Holder shall receive the number of shares rounded to the nearest whole
      share.

     

    Section
      5. Representations,
      Warranties and Covenants of the Company.

     

    (a) The
      Warrant Shares, when issued in accordance with the terms hereof, will be duly
      authorized and, when paid for or issued in accordance with the terms hereof,
      shall be validly issued, fully paid and non-assessable.

     

    (b) The
      Company shall take all commercially reasonable action and proceedings as may
      be
      required and permitted by applicable law, rule and regulation for the legal
      and
      valid issuance of this Warrant and the Warrant Shares to the Warrant
      Holder.

     

    (c) The
      Company has authorized and reserved for issuance to the Warrant Holder the
      requisite number of shares of Common Stock to be issued pursuant to this
      Warrant. The Company shall at all times reserve and keep available, solely
      for
      issuance and delivery as Warrant Shares hereunder, such shares of Common Stock
      as shall from time to time be issuable as Warrant Shares.

     

    (d) From
      the
      date hereof through the last date on which this Warrant is exercisable, the
      Company shall take all steps commercially reasonable to ensure that the Common
      Stock remains listed or quoted on the Principal Market.

     

    Section
      6. Adjustment
      of the Exercise Price.
      The
      Exercise Price and, accordingly, the number of Warrant Shares issuable upon
      exercise of the Warrant, shall be subject to adjustment from time to time upon
      the happening of certain events as follows:

     

    (a) Reclassification,
      Consolidation, Merger, Mandatory Share Exchange, Sale or
      Transfer.

     

    (i) Upon
      occurrence of any of the events specified in subsection (a)(ii) below (the
      “Adjustment
      Events”)
      while
      this Warrant is unexpired and not exercised in full, the Warrant Holder may
      in
      its sole discretion require the Company, or any successor or purchasing
      corporation, as the case may be, without payment of any additional consideration
      therefor, upon surrender by the Warrant Holder of the Warrant to be replaced,
      to
      execute and deliver to the Warrant Holder a new Warrant providing that the
      Warrant Holder shall have the right to exercise such new Warrant (upon terms
      not
      less favorable to the Warrant Holder than those then applicable to this Warrant)
      and to receive upon such exercise, in lieu of each share of Common Stock
      theretofore issuable upon exercise of this Warrant, the kind and amount of
      shares of stock, other securities, money or property receivable upon such
      Adjustment Event by the holder of one share of Common Stock issuable upon
      exercise of this Warrant had this Warrant been exercised immediately prior
      to
      such Adjustment Event. Such new Warrant shall provide for adjustments that
      shall
      be as nearly equivalent as may be practicable to the adjustments provided for
      in
      this Section 6.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

       

      Execution
        Copy

       

    

    (ii) The
      Adjustment Events shall be (1) any reclassification or change of Common Stock
      (other than a change in par value, as a result of a subdivision or combination
      of Common Stock or in connection with an Excluded Merger or Sale) and (2) any
      consolidation, merger or mandatory share exchange of the Company with or into
      another corporation (other than a merger or mandatory share exchange with
      another corporation in which the Company is a continuing corporation and which
      does not result in any reclassification or change other than a change in par
      value or as a result of a subdivision or combination of Common Stock), other
      than (each of the following referred to as an “Excluded
      Merger or Sale”)
      a
      transaction involving (A) sale of all or substantially all of the assets of
      the Company or (B) any merger, consolidation or similar transaction where
      the consideration payable to the stockholders of the Company by the acquiring
      Person consists substantially of cash or publicly traded securities, or a
      combination thereof, or where the acquiring Person does not agree to assume
      the
      obligations of the Company under outstanding warrants (including this Warrant).
      In the event of an Excluded Merger or Sale, the Company shall deliver a notice
      to the Warrant Holder at least 10 days before the consummation of such Excluded
      Merger or Sale, the Warrant Holder may exercise this Warrant at any time before
      the consummation of such Excluded Merger or Sale (and such exercise may be
      made
      contingent upon the consummation of such Excluded Merger or Sale), and any
      portion of this Warrant that has not been exercised before consummation of
      such
      Excluded Merger or Sale shall terminate and expire, and shall no longer be
      outstanding.

     

    (b) Subdivision
      or Combination of Shares.
      If the
      Company, at any time while this Warrant is unexpired and not exercised in full,
      shall subdivide its Common Stock, the Exercise Price shall be proportionately
      reduced as of the effective date of such subdivision, or, if the Company shall
      take a record of holders of its Common Stock for the purpose of so subdividing
      its Common Stock, as of such record date, whichever is earlier. If the Company,
      at any time while this Warrant is unexpired and not exercised in full, shall
      combine its Common Stock, the Exercise Price shall be proportionately increased
      as of the effective date of such combination, or, if the Company shall take
      a
      record of holders of its Common Stock for the purpose of so combining its Common
      Stock, as of such record date, whichever is earlier.

     

    (c) Stock
      Dividends.
      If the
      Company, at any time while this Warrant is unexpired and not exercised in full,
      shall pay a stock dividend or other distribution in shares of Common Stock
      to
      all holders of Common Stock, then the Exercise Price shall be adjusted, as
      of
      the date the Company shall take a record of the holders of its Common Stock
      for
      the purpose of receiving such dividend or other distribution (or if no such
      record is taken, as at the date of such payment or other distribution), to
      that
      price determined by multiplying the Exercise Price in effect immediately prior
      to such payment or other distribution by a fraction: (i) the numerator of
      which shall be the total number of shares of Common Stock outstanding
      immediately prior to such dividend or distribution, and (ii) the
      denominator of which shall be the total number of shares of Common Stock
      outstanding immediately after such dividend or distribution. The provisions
      of
      this subsection (c) shall not apply under any of the circumstances for
      which an adjustment is provided in subsections (a) or (b).

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

       

      Execution
        Copy

       

    

    (d) Liquidating
      Dividends, Etc.
      If the
      Company, at any time while this Warrant is unexpired and not exercised in full,
      makes a distribution of its assets or evidences of indebtedness to the holders
      of its Common Stock as a dividend in liquidation or by way of return of capital
      or other than as a dividend payable out of earnings or surplus legally available
      for dividends under applicable law or any distribution to such holders made
      in
      respect of the sale of all or substantially all of the Company’s assets (other
      than under the circumstances provided for in the foregoing subsections
      (a) through (c)), then the Warrant Holder shall be entitled to receive upon
      exercise of this Warrant in addition to the Warrant Shares receivable in
      connection therewith, and without payment of any consideration other than the
      Exercise Price, the kind and amount of such distribution per share of Common
      Stock multiplied by the number of Warrant Shares that, on the record date for
      such distribution, are issuable upon such exercise of the Warrant (with no
      further adjustment being made following any event which causes a subsequent
      adjustment in the number of Warrant Shares issuable), and an appropriate
      provision therefor shall be made a part of any such distribution. The value
      of a
      distribution that is paid in other than cash shall be determined in good faith
      by the Board of Directors of the Company. Notwithstanding the foregoing, in
      the
      event of a proposed dividend in liquidation or distribution to the stockholders
      made in respect of the sale of all or substantially all of the Company’s assets,
      the Company shall deliver a notice to the Warrant Holder at least 10 days before
      the date on which the Company shall take a record of the holders of its Common
      Stock for the purpose of receiving such dividend or other distribution (or
      if no
      such record is taken, at least 10 days before the date of such payment or other
      distribution), the Warrant Holder may exercise this Warrant at any time before
      such record date or the date of such payment or other distribution, as
      applicable, (and such exercise may be made contingent upon such payment or
      other
      distribution), and any portion of this Warrant that has not been exercised
      before such record date or the date of such payment or other distribution,
      as
      applicable, shall terminate and expire, and shall no longer be
      outstanding.

     

    (e) Adjustment
      for Spin Off.
      If, for
      any reason, prior to the exercise of this Warrant in full, the Company spins
      off
      or otherwise divests itself of a part of its business or operations or disposes
      all or a part of its assets in a transaction (a “Spin
      Off”)
      in
      which the Company does not receive compensation for such business, operations
      or
      assets, but causes securities of another entity (“Spin
      Off Securities”)
      to be
      issued to all or substantially all holders of Common Stock, then the Company
      shall cause (i) to be reserved Spin Off Securities equal to the number thereof
      which would have been issued to the Warrant Holder in the event that the entire
      unexercised portion of this Warrant outstanding on the record date (the
“Record
      Date”)
      for
      determining the number of Spin Off Securities to be issued to holders of Common
      Stock had been exercised by the Warrant Holder as of the close of business
      on
      the Trading Day immediately prior to the Record Date (the “Reserved
      Spin Off Shares”),
      and
      (ii) to be issued to the Warrant Holder on the exercise of all or any
      unexercised portion of this Warrant, such amount of the Reserved Spin Off Shares
      equal to (x) the Reserved Spin Off Shares multiplied by (y) a fraction, of
      which
      (I) the numerator is the unexercised portion of this Warrant then being
      exercised, and (II) the denominator is the aggregate amount of the unexercised
      portion of this Warrant. 

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

       

      Execution
        Copy

       

    

    Section
      7. Notice
      of Adjustments.
      Whenever the Exercise Price or number of Warrant Shares shall be adjusted
      pursuant to Section 6 hereof, the Company shall promptly prepare a
      certificate signed by its Chief Executive Officer or Chief Financial Officer
      setting forth in reasonable detail the event requiring the adjustment, the
      amount of the adjustment, the method by which such adjustment was calculated
      (including a description of the basis on which the Company’s Board of Directors
      made any determination hereunder), and the Exercise Price and number of Warrant
      Shares purchasable at that Exercise Price after giving effect to such
      adjustment, and shall promptly cause copies of such certificate to be delivered
      to the Warrant Holder by a means set forth in Section 10.4 of the
      Agreement.

     

    Section
      8. No
      Impairment.
      The
      Company will not, by amendment of its Charter or Bylaws or through any
      reorganization, transfer of assets, consolidation, merger, dissolution or issue
      or sale of securities, willfully avoid or seek to avoid the observance or
      performance of any of the terms of this Warrant, but will at all times in good
      faith assist in the carrying out of all such terms and in the taking of all
      such
      action as may be necessary or appropriate in order to protect the rights of
      the
      Warrant Holder against wrongful impairment. Without limiting the generality
      of
      the foregoing, the Company (a) will not increase the par value of any
      Warrant Shares above the amount payable therefor on such exercise, and
      (b) will take all such action as may be reasonably necessary or appropriate
      in order that the Company may validly and legally issue fully paid and
      non-assessable Warrant Shares on the exercise of this Warrant. Notwithstanding
      the foregoing, nothing in this Section 8 shall restrict or impair the Company’s
      right to effect any changes to the rights, preferences, privileges or
      restrictions associated with the Warrant Shares so long as such changes do
      not
      affect the rights, preferences, privileges or restrictions associated with
      the
      Warrant Shares in a manner adversely different from the effect that such changes
      have generally on the rights, preferences, privileges or restrictions associated
      with all other shares of Common Stock.

     

    Section
      9. Rights
      As Stockholder.
      Except
      as set forth in Section 6 above, prior to exercise of this Warrant, the
      Warrant Holder shall not be entitled to any rights as a stockholder of the
      Company with respect to the Warrant Shares, including (without limitation)
      the
      right to vote such shares, receive dividends or other distributions thereon
      or
      be notified of stockholder meetings.

     

    Section
      10. Replacement
      of Warrant.
      Upon
      receipt of evidence reasonably satisfactory to the Company of the loss, theft,
      destruction or mutilation of the Warrant and, in the case of any such loss,
      theft or destruction of the Warrant, upon delivery of an indemnity agreement
      or
      security reasonably satisfactory in form and amount to the Company or, in the
      case of any such mutilation, on surrender and cancellation of such Warrant,
      the
      Company at its expense will execute and deliver, in lieu thereof, a new Warrant
      of like tenor.

     

    Section
      11. Choice
      of Law.
      This
      Warrant shall be construed under the laws of the State of New York.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

       

      Execution
        Copy

       

    

    Section
      12. Entire
      Agreement; Amendments.
      Except
      for any written instrument concurrent or subsequent to the date hereof executed
      by the Company and the Investor, this Warrant, the Agreement and the
      Registration Rights Agreement contain the entire understanding of the parties
      with respect to the matters covered hereby and thereby. No provision of this
      Warrant may be waived or amended other than by a written instrument signed
      by
      the party against whom enforcement of any such amendment or waiver is
      sought.

     

    Section
      13. Restricted
      Securities.

     

    (a) Registration
      or Exemption Required.
      This
      Warrant has been issued in a transaction exempt from the registration
      requirements of the Securities Act in reliance upon the provisions of
      Section 4(2) thereof and Regulation D promulgated thereunder, and/or upon
      such other exemption from the registration requirements of the Securities Act
      as
      may be available with respect to this Warrant. This Warrant and the Warrant
      Shares issuable upon exercise of this Warrant may not be resold except pursuant
      to an effective registration statement or an exemption to the registration
      requirements of the Securities Act and applicable state laws.

     

    (b) Legend.
      Any
      replacement Warrants issued pursuant to Section 2 and Section 10
      hereof and, unless a registration statement has been declared effective by
      the
      SEC and remains effective in accordance with the Securities Act with respect
      thereto, any Warrant Shares issued upon exercise hereof, shall bear the
      following legend:

     

    “THE
      SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      U.S.
      SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
      ACT”),
      OR
      ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON
      AN
      EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH
      OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
      HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED,
      HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE
      REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION
      WHICH IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.”

     

    (c) No
      Other Legend or Stock Transfer Restrictions.
      No
      legend other than the one specified in Section 13(b) has been or shall be
      placed on the share certificates representing the Warrant Shares and no
      instructions or “stop
      transfer orders”
(so
      called “stock
      transfer restrictions”)
      or
      other restrictions have been or shall be given to the Company’s transfer agent
      with respect thereto other than as expressly set forth in this
      Section 13.

     

    (d) Assignment.
      Assuming the conditions of Section 13(a) above regarding registration or
      exemption have been satisfied, the Warrant Holder may sell, transfer, assign,
      pledge or otherwise dispose of this Warrant (each of the foregoing, a
“Transfer”),
      in
      whole or in part, but only to an Affiliate of the Warrant Holder. The Warrant
      Holder shall deliver a written notice to Company,
      substantially in the form of the Assignment attached hereto as Exhibit B,
      indicating the person or persons to whom the Warrant shall be Transferred and
      the respective number of Warrant Shares to be covered by the warrants to be
      Transferred to each assignee. The Company shall effect the Transfer within
      ten
      (10) days, and shall deliver to the Transferee(s) designated by the Warrant
      Holder a Warrant or Warrants of like tenor and terms for the appropriate number
      of shares. In connection with and as a condition of any such proposed Transfer,
      the Company may require
      (i)
      the
      Warrant Holder to provide an opinion of counsel to the Warrant Holder in form
      and substance reasonably satisfactory to the Company to the effect that the
      proposed Transfer complies with all applicable federal and state securities
      laws
      and (ii)
      any such Transferee to provide customary representations and warranties
      attendant to the acquisition of unregistered securities, including without
      limitation the transferee’s investment intent and status as an “accredited
      investor” within the meaning of Regulation D.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

       

      Execution
        Copy

       

    

    (e) Investor’s
      Compliance.
      Nothing
      in this Section 13 shall affect in any way the Investor’s obligations under
      any agreement to comply with all applicable securities laws upon resale of
      the
      Common Stock.

     

    Section
      14. Notices.
      All
      notices, demands, requests, consents, approvals, and other communications
      required or permitted hereunder shall be given in accordance with
      Section 10.4 of the Agreement.

     

    Section
      15. Miscellaneous.
      This
      Warrant and any term hereof may be changed, waived, discharged or terminated
      only by an instrument in writing signed by the party against which enforcement
      of such change, waiver, discharge or termination is sought. The headings in
      this
      Warrant are for purposes of reference only, and shall not limit or otherwise
      affect any of the terms hereof. The invalidity or unenforceability of any
      provision hereof shall in no way affect the validity or enforceability of any
      other provision.

     

    Section
      16. Company
      Call Right.

     

    (a) If
      a
      Funding Default occurs, the Company shall have the right to demand the surrender
      of this Warrant or any remaining portion thereof, Warrant Shares and/or cash
      from the Investor as follows (the “Call
      Right”):

     

    (i) If
      the
      Investor has not previously exercised this Warrant in full, then the Company
      shall have a right to demand the surrender of this Warrant, or remaining portion
      thereof, from the Investor without compensation, and the Investor shall promptly
      surrender this Warrant, or remaining portion thereof. Following such demand
      for
      surrender, this Warrant shall automatically be deemed to have been canceled
      and
      shall have no further force or effect.

     

    (ii) If,
      prior
      to receiving a Call Right Notice (as defined below), the Investor has previously
      exercised this Warrant with respect to some or all of the Warrant Shares, and
      the Investor has not previously sold such Warrant Shares, then the
      Company
      shall have a right to purchase from the Investor that number of shares of Common
      Stock equal to the number of shares of Common Stock issued in connection with
      the exercise(s) of the Warrant, at a repurchase price per share equal to the
      price per share paid by the Investor in connection with such exercise(s). For
      greater certainty, (a) if Warrant Shares were exercised for cash, the
      purchase price per share under the Call Right shall be equal to the Exercise
      Price, (b) if Warrant Shares were exercised in a Cashless Exercise, the
      purchase price per share for such Warrant Shares under the Call Right shall
      be
      zero, and (c) if such Warrant Shares were exercised on both a cash and
      Cashless Exercise basis, the purchase price per share under the Call Right
      shall
      be equal to the total amount of cash paid in connection with such cash
      exercise(s) divided by the total number of shares of Common Stock issued in
      connection with all exercises of the Warrant (whether on a cash or Cashless
      Exercise basis).

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

       

      Execution
        Copy

       

    

    (iii) If,
      prior
      to receiving a Call Right Notice, the Investor has previously exercised this
      Warrant with respect to some or all of the Warrant Shares, and the Investor
      subsequently sold such Warrant Shares, then the Investor shall remit to the
      Company the excess, if any, of (x) the proceeds received by Investor through
      the
      sale of such Warrant Shares, over (y) the aggregate Exercise Price for such
      Warrant Shares. In the event that the Investor obtained such Warrant Shares
      through a Cashless Exercise, then the Investor shall instead remit to the
      Company all proceeds received by the Investor through the sale of such Warrant
      Shares. For the avoidance of doubt, in the event that the Investor has sold
      some
      or all of the Warrant Shares prior to receiving a Call Right Notice, then the
      right set forth in this paragraph (iii) shall constitute the sole Call
      Right of the Company with respect to such Warrant Shares which have been
      sold.

     

    (b) The
      Company
      may exercise the Call Right by delivering a notice (the “Call
      Right Notice”)
      to the
      Investor within thirty (30) days after the occurrence of a Funding Default.
      On
      the tenth (10th)
      business day
      following delivery of the Call Right Notice to the Investor, the
      Company
      shall tender the purchase price, if any, and the Investor shall tender shares
      of
      Common Stock, if any, to be sold to the
      Company
      pursuant to the Call Right Notice, immediately following which the
      Company
      and
      the
      Investor
      shall consummate such purchase and sale. The Call Right shall survive both
      the
      assignment of the Warrant by the Investor and the disposition of the Warrant
      Shares by the Investor following exercise of the Warrant.

     

    [Remainder
      of Page Intentionally Left Blank. Signature Page Follows.]

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    Execution
      Copy

     

    IN
      WITNESS WHEREOF, this Warrant was duly executed by the undersigned, thereunto
      duly authorized, as of the date first set forth above.

     

    
      	 	 	 
	 	
              DISCOVERY
                LABORATORIES, INC.

            
	 
 	 
 	 
 
	 	By:  	/s/ John G. Cooper
	 	
              

              Name:
                John G. Cooper

            
	 	Title:
              Executive Vice President and Chief Financial
              Officer

    

     

    Investor
      acknowledges and agrees to the terms and conditions of this
      Warrant.

     

      
      

    
      	 	 	 
	 	
              KINGSBRIDGE
                CAPITAL LIMITED

            
	 
 	 
 	 
 
	 	By:  	/s/ Tony Gardner-Hillman
	 	
              

              Tony
                Gardner-Hillman 

            
	 	
              Director

            

    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    

    EXHIBIT
      A TO THE WARRANT

     

    EXERCISE
      FORM

     

    DISCOVERY
      LABORATORIES, INC.

     

    The
      undersigned hereby irrevocably exercises the right to purchase _______________
      shares of Common Stock of Discovery Laboratories, Inc., a Delaware corporation
      (the “Company”),
      evidenced by the attached Warrant, and (CIRCLE EITHER (i) or (ii))
      (i) tenders herewith payment of the Aggregate Exercise Price with respect
      to such shares in full, in the amount of $__________, in cash, by certified
      or
      official bank check or by wire transfer for the account of the Company or
      (ii) elects, pursuant to Section 2(c) of the Warrant, to convert such
      Warrant into shares of Common Stock of the Company on a cashless exercise basis,
      all in accordance with the conditions and provisions of said
      Warrant.

     

    The
      undersigned requests that stock certificates for such Warrant Shares be issued,
      and a Warrant representing any unexercised portion hereof be issued, pursuant
      to
      this Warrant, in the name of the registered Warrant Holder and delivered to
      the
      undersigned at the address set forth below.

     

    Dated:_______________________________________

    

    
      	    
	 
	
              Signature
                of Registered Holder

            	 
	  
	 
	
              Name
                of Registered Holder (Print)

            	 
	  
	 
	
              Address

            	 

    

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    

    EXHIBIT
      B TO THE WARRANT

     

    ASSIGNMENT

     

    (To
      be
      executed by the registered Warrant Holder desiring to transfer the
      Warrant)

     

    FOR
      VALUED RECEIVED, the undersigned Warrant Holder of the attached Warrant hereby
      sells, assigns and transfers unto the persons below named the right to purchase
      _______________ shares of Common Stock of Discovery Laboratories, Inc. (the
      “Company”)
      evidenced by the attached Warrant and does hereby irrevocably constitute and
      appoint _______________ attorney to transfer the said Warrant on the books
      of
      the Company, with full power of substitution in the premises.

     

    Dated:_____________________

    

    
      	 	 
	
              Signature

            	 
	 
	
              Fill
                in for new Registration of Warrant:

            
	  
	 
	
              Name

            	 
	  
	 
	
              Address

            	 
	  
	 
	
              Please
                print name and address of assignee (including zip code
                number)

            

    

     

    
      
        
        

      

      
        13

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00143-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00143-of-00352.parquet"}]]