Document:

Exhibit
      10.1

    

    Execution
      Copy

     

     

     

    

      COMMON
        STOCK PURCHASE AGREEMENT

       

      by
        and between

       

      KINGSBRIDGE
        CAPITAL LIMITED

       

      and

       

      DISCOVERY
        LABORATORIES, INC.

       

      dated
        as of April 17, 2006

       

       

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

        TABLE
          OF CONTENTS

        Page

      

      
        	
                ARTICLE
                  I

              	
                DEFINITIONS

              	
                2

              

      

      
        	 	
                Section
                  1.01.

              	
                “2004
                  Registration Rights Agreement”

              	
                2

              
	 	
                Section
                  1.02.

              	
                “2004
                  Stock Purchase Agreement”

              	
                2

              
	 	
                Section
                  1.03.

              	
                “2004
                  Warrant”

              	
                2

              
	 	
                Section
                  1.04.

              	
                “Blackout
                  Amount”

              	
                2

              
	 	
                Section
                  1.05.

              	
                “Blackout
                  Shares”

              	
                2

              
	 	
                Section
                  1.06.

              	
                “Certificate”

              	
                2

              
	 	
                Section
                  1.07.

              	
                “Closing
                  Date”

              	
                2

              
	 	
                Section
                  1.08.

              	
                “Commission”

              	
                2

              
	 	
                Section
                  1.09.

              	
                “Commission
                  Documents”

              	
                2

              
	 	
                Section
                  1.10.

              	
                “Commitment
                  Period”

              	
                2

              
	 	
                Section
                  1.11.

              	
                “Common
                  Stock”

              	
                2

              
	 	
                Section
                  1.12.

              	
                “Condition
                  Satisfaction Date”

              	
                2

              
	 	
                Section
                  1.13.

              	
                “Convertible
                  Security”

              	
                2

              
	 	
                Section
                  1.14.

              	
                “Conversion
                  Price”

              	
                3

              
	 	
                Section
                  1.15.

              	
                “Damages”

              	
                3

              
	 	
                Section
                  1.16.

              	
                “Draw
                  Down”

              	
                3

              
	 	
                Section
                  1.17.

              	
                “Draw
                  Down Amount”

              	
                3

              
	 	
                Section
                  1.18.

              	
                “Draw
                  Down Discount Price”

              	
                3

              
	 	
                Section
                  1.19.

              	
                “Draw
                  Down Notice”

              	
                3

              
	 	
                Section
                  1.20.

              	
                “Draw
                  Down Pricing Period”

              	
                3

              
	 	
                Section
                  1.21.

              	
                “DTC”

              	
                3

              
	 	
                Section
                  1.22.

              	
                “Effective
                  Date”

              	
                3

              
	 	
                Section
                  1.23.

              	
                “Exchange
                  Act”

              	
                3

              
	 	
                Section
                  1.24.

              	
                “Excluded
                  Merger or Sale”

              	
                3

              
	 	
                Section
                  1.25.

              	
                “Knowledge”

              	
                3

              
	 	
                Section
                  1.26.

              	
                “LIBOR”

              	
                3

              
	 	
                Section
                  1.27.

              	
                “Make
                  Whole Amount”

              	
                3

              
	 	
                Section
                  1.28.

              	
                “Market
                  Capitalization”

              	
                4

              
	 	
                Section
                  1.29.

              	
                “Material
                  Adverse Effect”

              	
                4

              
	 	
                Section
                  1.30.

              	
                “Maximum
                  Commitment Amount”

              	
                4

              
	 	
                Section
                  1.31.

              	
                “Maximum
                  Draw Down Amount”

              	
                4

              
	 	
                Section
                  1.32.

              	
                “NASD”

              	
                4

              

      

       

      
        
          
          

        

        
          i

          
            

          

        

        
          
          

        

      

       

      
        TABLE
          OF CONTENTS

        (Continued)

        Page

      

      
        	 	
                Section
                  1.33.

              	
                “Permitted
                  Transaction”

              	
                4

              
	 	
                Section
                  1.34.

              	
                “Person”

              	
                4

              
	 	
                Section
                  1.35.

              	
                “Principal
                  Market”

              	
                4

              
	 	
                Section
                  1.36.

              	
                “Prohibited
                  Transaction”

              	
                4

              
	 	
                Section
                  1.37.

              	
                “Prospectus”

              	
                4

              
	 	
                Section
                  1.38.

              	
                “Registrable
                  Securities”

              	
                5

              
	 	
                Section
                  1.39.

              	
                “Registration
                  Rights Agreement”

              	
                5

              
	 	
                Section
                  1.40.

              	
                “Registration
                  Statement”

              	
                5

              
	 	
                Section
                  1.41.

              	
                “Regulation
                  D”

              	
                5

              
	 	
                Section
                  1.42.

              	
                “Section4(2)”

              	
                5

              
	 	
                Section
                  1.43.

              	
                “Securities
                  Act”

              	
                5

              
	 	
                Section
                  1.45.

              	
                “Shares”

              	
                5

              
	 	
                Section
                  1.46.

              	
                “Trading
                  Day”

              	
                5

              
	 	
                Section
                  1.47.

              	
                “VWAP”

              	
                5

              
	 	
                Section
                  1.48.

              	
                “Warrant”

              	
                5

              
	 	
                Section
                  1.49.

              	
                “Warrant
                  Shares”

              	
                6

              

      

      
        	
                ARTICLE
                  II

              	
                PURCHASE
                  AND SALE OF COMMON STOCK; TERMINATION OF 2004 STOCK PURCHASE
                  AGREEMENT

              	
                6

              

      

      
        
          	 	
                  Section
                    2.01.

                	
                  Purchase
                    and Sale of Stock

                	
                  6

                
	 	
                  Section
                    2.02.

                	
                  Closing

                	
                  6

                
	 	
                  Section
                    2.03.

                	
                  Registration
                    Statement and Prospectus

                	
                  6

                
	 	
                  Section
                    2.04.

                	
                  Warrant

                	
                  6

                
	 	
                  Section
                    2.05.

                	
                  Blackout
                    Shares

                	
                  6

                
	 	
                  Section
                    2.06.

                	
                  Termination
                    of 2004 Stock Purchase Agreement

                	
                  6

                

        

      

      
        	
                ARTICLE
                  III

              	
                DRAW
                  DOWN TERMS

              	
                7

              

      

      
        	 	
                Section
                  3.01.

              	
                Draw
                  Down Notice

              	
                7

              
	 	
                Section
                  3.02.

              	
                Number
                  of Shares

              	
                7

              
	 	
                Section
                  3.03.

              	
                Limitation
                  on Draw Downs

              	
                7

              
	 	
                Section
                  3.04.

              	
                Trading
                  Cushion

              	
                7

              
	 	
                Section
                  3.05.

              	
                Settlement

              	
                7

              
	 	
                Section
                  3.06.

              	
                Delivery
                  of Shares; Payment of Draw Down Amount

              	
                7

              
	 	
                Section
                  3.07.

              	
                Failure
                  to Deliver Shares

              	
                8

              

      

       

      
        
          
          

        

        
          ii

          
            

          

        

        
          
          

        

      

       

      
        TABLE
          OF CONTENTS

        (Continued)

        Page

      

      
        	
                ARTICLE
                  IV

              	
                REPRESENTATIONS
                  AND WARRANTIES OF THE COMPANY

              	
                9

              

      

      
        	 	
                Section
                  4.01.

              	
                Organization,
                  Good Standing and Power

              	
                9

              
	 	
                Section
                  4.02.

              	
                Authorization;
                  Enforcement

              	
                9

              
	 	
                Section
                  4.03.

              	
                Capitalization

              	
                9

              
	 	
                Section
                  4.04.

              	
                Issuance
                  of Shares

              	
                10

              
	 	
                Section
                  4.05.

              	
                No
                  Conflicts

              	
                10

              
	 	
                Section
                  4.06.

              	
                Commission
                  Documents, Financial Statements

              	
                11

              
	 	
                Section
                  4.07.

              	
                No
                  Material Adverse Change

              	
                11

              
	 	
                Section
                  4.08.

              	
                No
                  Undisclosed Liabilities

              	
                11

              
	 	
                Section
                  4.09.

              	
                No
                  Undisclosed Events or Circumstances

              	
                11

              
	 	
                Section
                  4.10.

              	
                Actions
                  Pending

              	
                12

              
	 	
                Section
                  4.11.

              	
                Compliance
                  with Law

              	
                12

              
	 	
                Section
                  4.12.

              	
                Certain
                  Fees

              	
                12

              
	 	
                Section
                  4.13.

              	
                Disclosure

              	
                12

              
	 	
                Section
                  4.14.

              	
                Material
                  Non-Public Information

              	
                12

              
	 	
                Section
                  4.15.

              	
                Exemption
                  from Registration; Valid Issuances

              	
                12

              
	 	
                Section
                  4.16.

              	
                No
                  General Solicitation or Advertising in Regard to this
                  Transaction

              	
                13

              
	 	
                Section
                  4.17.

              	
                No
                  Integrated Offering

              	
                13

              
	 	
                Section
                  4.18.

              	
                Acknowledgment
                  Regarding Investor’s Purchase of Shares

              	
                13

              

      

      
        	
                ARTICLE
                  V

              	
                REPRESENTATIONS,
                  WARRANTIES AND COVENANTS OF THE INVESTOR

              	
                13

              

      

      
        	 	
                Section
                  5.01.

              	
                Organization
                  and Standing of the Investor

              	
                13

              
	 	
                Section
                  5.02.

              	
                Authorization
                  and Power

              	
                13

              
	 	
                Section
                  5.03.

              	
                No
                  Conflicts

              	
                14

              
	 	
                Section
                  5.04.

              	
                Financial
                  Capability

              	
                14

              
	 	
                Section
                  5.05.

              	
                Information

              	
                14

              
	 	
                Section
                  5.06.

              	
                Trading
                  Restrictions

              	
                15

              
	 	
                Section
                  5.07.

              	
                Statutory
                  Underwriter Status

              	
                15

              
	 	
                Section
                  5.08.

              	
                Not
                  an Affiliate

              	
                15

              
	 	
                Section
                  5.09.

              	
                Manner
                  of Sale

              	
                15

              
	 	
                Section
                  5.10.

              	
                Prospectus
                  Delivery

              	
                15

              

      

      
        	
                ARTICLE
                  VI

              	
                COVENANTS
                  OF THE COMPANY

              	
                15

              

      

      
        	 	
                Section
                  6.01.

              	
                Securities

              	
                15

              
	 	
                Section
                  6.02.

              	
                Reservation
                  of Common Stock

              	
                15

              

      

       

      
        
          
          

        

        
          iii

          
            

          

        

        
          
          

        

      

       

      
        TABLE
          OF CONTENTS

        (Continued)

        Page

      

      
        	 	
                Section
                  6.03.

              	
                Registration
                  and Listing

              	
                16

              
	 	
                Section
                  6.04.

              	
                Registration
                  Statement

              	
                16

              
	 	
                Section
                  6.05.

              	
                Compliance
                  with Laws

              	
                16

              
	 	
                Section
                  6.06.

              	
                Other
                  Financing

              	
                16

              
	 	
                Section
                  6.07.

              	
                Prohibited
                  Transactions

              	
                17

              
	 	
                Section
                  6.08.

              	
                Corporate
                  Existence

              	
                17

              
	 	
                Section
                  6.09.

              	
                Non-Disclosure
                  of Non-Public Information

              	
                17

              
	 	
                Section
                  6.10.

              	
                Notice
                  of Certain Events Affecting Registration; Suspension of Right to
                  Request a
                  Draw Down

              	
                18

              
	 	
                Section
                  6.11.

              	
                Amendments
                  to the Registration Statement

              	
                18

              
	 	
                Section
                  6.12.

              	
                Prospectus
                  Delivery

              	
                18

              

      

      
        	
                ARTICLE
                  VII

              	
                CONDITIONS
                  TO THE OBLIGATION OF THE INVESTOR TO ACCEPT A DRAW DOWN

              	
                18

              

      

      
        	 	
                Section
                  7.01.

              	
                Accuracy
                  of the Company’s Representations and Warranties

              	
                19

              
	 	
                Section
                  7.02.

              	
                Performance
                  by the Company

              	
                19

              
	 	
                Section
                  7.03.

              	
                Compliance
                  with Law

              	
                19

              
	 	
                Section
                  7.04.

              	
                Effective
                  Registration Statement

              	
                19

              
	 	
                Section
                  7.05.

              	
                No
                  Knowledge

              	
                19

              
	 	
                Section
                  7.06.

              	
                No
                  Suspension

              	
                19

              
	 	
                Section
                  7.07.

              	
                No
                  Injunction

              	
                19

              
	 	
                Section
                  7.08.

              	
                No
                  Proceedings or Litigation

              	
                19

              
	 	
                Section
                  7.09.

              	
                Sufficient
                  Shares Registered for Resale

              	
                19

              
	 	
                Section
                  7.10.

              	
                Warrant

              	
                20

              
	 	
                Section
                  7.11.

              	
                Opinion
                  of Counsel

              	
                20

              
	 	
                Section
                  7.12.

              	
                Accuracy
                  of Investor’s Representation and Warranties

              	
                20

              
	 	
                Section
                  7.13.

              	
                Payment
                  of Fees

              	
                20

              

      

      
        	
                ARTICLE
                  VIII

              	
                TERMINATION

              	
                20

              

      

      
        	 	
                Section
                  8.01.

              	
                Term

              	
                20

              
	 	
                Section
                  8.02.

              	
                Other
                  Termination

              	
                20

              
	 	
                Section
                  8.03.

              	
                Effect
                  of Termination

              	
                21

              
	 	
                Section
                  9.01.

              	
                Indemnification

              	
                21

              
	 	
                Section
                  9.02.

              	
                Notification
                  of Claims for Indemnification

              	
                22

              

      

       

      
        
          
          

        

        
          iv

          
            

          

        

        
          
          

        

      

       

      
        TABLE
          OF CONTENTS

        (Continued)

        Page

      

      
        	
                ARTICLE
                  X

              	
                MISCELLANEOUS

              	
                23

              

      

      
        	 	
                Section
                  10.01.

              	
                Fees
                  and Expenses

              	
                23

              
	 	
                Section
                  10.02.

              	
                Reporting
                  Entity for the Common Stock

              	
                24

              
	 	
                Section
                  10.03.

              	
                Brokerage

              	
                24

              
	 	
                Section
                  10.04.

              	
                Notices

              	
                24

              
	 	
                Section
                  10.05.

              	
                Assignment

              	
                26

              
	 	
                Section
                  10.06.

              	
                Amendment;
                  No Waiver

              	
                26

              
	 	
                Section
                  10.07.

              	
                Entire
                  Agreement

              	
                26

              
	 	
                Section
                  10.08.

              	
                Severability

              	
                26

              
	 	
                Section
                  10.09.

              	
                Title
                  and Subtitles

              	
                26

              
	 	
                Section
                  10.10.

              	
                Counterparts

              	
                26

              
	 	
                Section
                  10.11.

              	
                Choice
                  of Law

              	
                27

              
	 	
                Section
                  10.12.

              	
                Specific
                  Enforcement, Consent to Jurisdiction

              	
                27

              
	 	
                Section
                  10.13.

              	
                Survival

              	
                27

              
	 	
                Section
                  10.14.

              	
                Publicity

              	
                27

              
	 	
                Section
                  10.15.

              	
                Further
                  Assurances

              	
                28

              

      

      

      
        
          
          

        

        
          v

          
            

          

        

        
          
          

        

         

      

      COMMON
        STOCK PURCHASE AGREEMENT

       

      by
        and between

       

      KINGSBRIDGE
        CAPITAL LIMITED

       

      and

       

      DISCOVERY
        LABORATORIES, INC.

       

      dated
        as
        of April 17, 2006

       

      This
        COMMON STOCK PURCHASE AGREEMENT (this “Agreement”)
        is
        entered into as of the 17th day of April, 2006, by and between KINGSBRIDGE
        CAPITAL LIMITED,
        an
        entity organized and existing under the laws of the British Virgin Islands
        (the
“Investor”)
        and
        DISCOVERY LABORATORIES, INC., a corporation organized and existing under
        the
        laws of the State of Delaware (the “Company”).

      

      WHEREAS,
        the parties desire that, upon the terms and subject to the conditions and
        limitations set forth herein, the Company may issue and sell to the Investor,
        from time to time as provided herein, and the Investor shall purchase from
        the
        Company, up to $50 million worth of shares of Common Stock (as defined below);
        and

       

      WHEREAS,
        such investments will be made in reliance upon the provisions of
        Section 4(2) (“Section 4(2)”)
        and
        Regulation D (“Regulation
        D”)
        of the
        United States Securities Act of 1933, as amended and the rules and regulations
        promulgated thereunder (the “Securities
        Act”),
        and/or upon such other exemption from the registration requirements of the
        Securities Act as may be available with respect to any or all of the investments
        in Common Stock to be made hereunder; and

       

      WHEREAS,
        the parties hereto are concurrently entering into a Registration Rights
        Agreement in the form of Exhibit A hereto (the “Registration
        Rights Agreement”)
        pursuant to which the Company shall register the Common Stock issued and
        sold to
        the Investor under this Agreement and under the Warrant (as defined below),
        upon
        the terms and subject to the conditions set forth therein; and

       

      WHEREAS,
        in consideration for the Investor’s execution and delivery of, and its
        performance of its obligations under, this Agreement, the Company is
        concurrently issuing to the Investor a Warrant in the form of Exhibit B hereto
        (the “Warrant”)
        pursuant to which the Investor may purchase from the Company up to 490,000
        shares of Common Stock, upon the terms and subject to the conditions set
        forth
        therein;

       

      NOW,
        THEREFORE, the parties hereto agree as follows:

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      ARTICLE
        I

       

      DEFINITIONS

       

      Section
        1.01. “2004
        Registration Rights Agreement”
shall
        mean that certain Registration Rights Agreement dated as of July 7, 2004,
        by and
        between the Company and the Investor.

       

      Section
        1.02. “2004
        Stock Purchase Agreement”
shall
        mean that certain Common Stock Purchase Agreement dated as of July 7, 2004
        by
        and between the Company and the Investor.

       

      Section
        1.03. “2004
        Warrant”
shall
        mean that certain warrant dated July 7, 2004, entitling the Investor (or
        any
        other warrant holder under the 2004 Warrant), on the terms and conditions
        and at
        the exercise price set forth therein, to purchase from the Company at any
        time
        during the exercise period (as defined in the 2004 Warrant) up to 375,000
        shares
        of Common Stock.

       

      Section
        1.04. “Blackout
        Amount”
shall
        have the meaning assigned to such term in the Registration Rights
        Agreement.

       

      Section
        1.05. “Blackout
        Shares”
shall
        have the meaning assigned to such term in the Registration Rights
        Agreement.

       

      Section
        1.06. “Certificate”
shall
        have the meaning assigned to such term in Section 4.03 hereof.

       

      Section
        1.07. “Closing
        Date”
means
        the date on which this Agreement is executed and delivered by the Company
        and
        the Investor.

       

      Section
        1.08. “Commission”
means
        the United States Securities Exchange Commission.

       

      Section
        1.09. “Commission
        Documents”
shall
        have the meaning assigned to such term in Section 4.06 hereof.

       

      Section
        1.10. “Commitment
        Period”
means
        the period commencing on the Effective Date and expiring on the earliest
        to
        occur of (i) the date on which the Investor shall have purchased Shares
        pursuant to this Agreement for an aggregate purchase price equal to the Maximum
        Commitment Amount, (ii) the date this Agreement is terminated pursuant to
        Article VIII hereof, and (iii) the date occurring thirty-six (36)
        months from the Effective Date.

       

      Section
        1.11. “Common
        Stock”
means
        the common stock of the Company, par value $0.001 per share.

       

      Section
        1.12. “Condition
        Satisfaction Date”
shall
        have the meaning assigned to such term in Article VII hereof.

       

      Section
        1.13. “Convertible
        Security”
shall
        have the meaning assigned to such term in Section 6.07 hereof.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

         

      

      Section
        1.14. “Conversion
        Price”
shall
        have the meaning assigned to such term in Section 6.07 hereof.

       

      Section
        1.15. “Damages”
means
        any loss, claim, damage, liability, reasonable costs and expenses (including,
        without limitation, reasonable attorneys’ fees and expenses and costs and
        expenses of expert witnesses and investigation).

       

      Section
        1.16. “Draw
        Down”
shall
        have the meaning assigned to such term in Section 3.01 hereof.

       

      Section
        1.17. “Draw
        Down Amount”
means
        the actual amount of a Draw Down paid to the Company.

       

      Section
        1.18. “Draw
        Down Discount Price”
means
        (i) 90% of the VWAP on any Trading Day during the Draw Down Pricing Period
        when
        the VWAP equals to or exceeds $2.00 but is less than or equal to $7.00, (ii)
        92%
        of the VWAP on any Trading Day during the Draw Down Pricing Period when the
        VWAP
        exceeds $7.00 but is less than or equal to $10.50 and (iii) 94% of the VWAP
        on any Trading Day during the Draw Down Pricing Period when the VWAP exceeds
        $10.50.

       

      Section
        1.19. “Draw
        Down Notice”
shall
        have the meaning assigned to such term in Section 3.01 hereof.

       

      Section
        1.20. “Draw
        Down Pricing Period”
shall
        mean, with respect to each Draw Down, a period of eight (8) consecutive Trading
        Days beginning on the first Trading Day specified in a Draw Down
        Notice.

       

      Section
        1.21. “DTC”
shall
        mean the Depository Trust Company, or any successor thereto.

       

      Section
        1.22. “Effective
        Date”
means
        the first Trading Day immediately following the date on which the Registration
        Statement is declared effective by the Commission.

       

      Section
        1.23. “Exchange
        Act”
means
        the U.S. Securities Exchange Act of 1934, as amended, and the rules and
        regulations promulgated thereunder.

       

      Section
        1.24. “Excluded
        Merger or Sale”
shall
        have the meaning assigned to such term in the Warrant.

       

      Section
        1.25. “Knowledge”
with
        respect to the Company, means the actual knowledge of the Company’s Chief
        Executive Officer, Chief Financial Officer or any Senior or Executive Vice
        President.

       

      Section
        1.26. “LIBOR”
means
        the offered rate for twelve-month U.S. dollar deposits that appears on Moneyline
        Telerate Page 3750 (or such other page as may replace such Moneyline Telerate
        Page 3750 for the purpose of displaying comparable rates), as of 11:00 a.m.
        (London time) two (2) business days prior to the beginning of the relevant
        period.

       

      Section
        1.27. “Make
        Whole Amount”
shall
        have the meaning specified in Section 3.07.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

         

      

      Section
        1.28. “Market
        Capitalization”
means,
        as of any Trading Day, the product of (i) the closing sale price of Common
        Stock as reported by Bloomberg L.P. using the AQR function and (ii) the
        number of outstanding shares of Common Stock of the Company as reported by
        Bloomberg L.P. using the DES function.

       

      Section
        1.29. “Material
        Adverse Effect”
means
        any continuing effect on the business, operations, properties or financial
        condition of the Company and its subsidiaries that is material and adverse
        to
        the Company and such subsidiaries, taken as a whole, and/or any condition,
        circumstance, or situation that would prohibit or otherwise interfere with
        the
        ability of the Company to perform any of its obligations under this Agreement,
        the Registration Rights Agreement or the Warrant in any material respect;
        provided,
        that
        none of the following shall constitute a “Material Adverse Effect”: (i) the
        effects of conditions or events that are generally applicable to the capital,
        financial, banking or currency markets or the biotechnology or pharmaceutical
        industries, (ii) any changes or effects resulting from the announcement or
        consummation of the transactions contemplated by this Agreement, including,
        without limitation, any changes or effects associated with any particular
        Draw
        Down, and (iii) changes in the market price of the Common
        Stock.

       

      Section
        1.30. “Maximum
        Commitment Amount”
means
        the lesser of (i) $50 million in aggregate Draw Down Amounts or (ii)
        that number of shares of Common Stock (as adjusted for stock splits, stock
        combinations, stock dividends and recapitalizations that occur on or after
        the
        date of this Agreement) that equals the sum of 11,677,047 minus the number
        of
        Blackout Shares, if any, delivered to the Investor under the Registration
        Rights
        Agreement, provided,
        however, that the Maximum Commitment Amount shall not exceed that number
        of
        shares of Common Stock which the Company may issue pursuant to the Agreement
        and
        the transactions contemplated herein, without breaching the Company’s
        obligations under the rules and regulations of the Primary Market.

       

      Section
        1.31. “Maximum
        Draw Down Amount”
means
        the lesser of (i) 2.5% of the Company’s Market Capitalization at the time of the
        Draw Down, or (ii) $10 million.

       

      Section
        1.32. “NASD”
means
        the National Association of Securities Dealers, Inc.

       

      Section
        1.33. “Permitted
        Transaction”
shall
        have the meaning assigned to such term in Section 6.06 hereof.

       

      Section
        1.34. “Person”
means
        any individual, corporation, partnership, limited liability company,
        association, trust or other entity or organization, including any government
        or
        political subdivision or an agency or instrumentality thereof.

       

      Section
        1.35. “Principal
        Market”
means
        the Nasdaq
        National Market,
        the
        Nasdaq SmallCap 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.

       

      Section
        1.36. “Prohibited
        Transaction”
shall
        have the meaning assigned to such term in Section 6.07 hereof.

       

      Section
        1.37. “Prospectus”
as
        used
        in this Agreement means the prospectus in the form included in the Registration
        Statement, as supplemented from time to time pursuant to Rule 424(b) of the
        Securities Act (including, without limitation, any information that may have
        been omitted from such prospectus pursuant to Rules 430(a), 430(b) and 430(c)
        of
        the Securities Act).

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

         

      

      Section
        1.38. “Registrable
        Securities”
means
        (i) the Shares, (ii) the Warrant Shares, and (iii) 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.
        As
        to any particular Registrable Securities, once issued such securities shall
        cease to be Registrable Securities when (w) the Registration Statement has
        been
        declared effective by the Commission and such Registrable Securities have
        been
        disposed of pursuant to the Registration Statement, (x) such Registrable
        Securities have been sold under circumstances under which all of the applicable
        conditions of Rule 144 (or any similar provision then in force) under the
        Securities Act (“Rule
        144”)
        are
        met, (y) such time as such Registrable Securities have been otherwise
        transferred to holders who may trade such shares without restriction under
        the
        Securities Act, and the Company has delivered a new certificate or other
        evidence of ownership for such securities not bearing a restrictive legend
        or
        (z) in the opinion of inside or outside counsel to the Company such
        Registrable Securities may be sold without registration and pursuant to Rule
        144(k), without any time, volume or manner limitations of Rule 144 (or any
        similar provision then in effect) under the Securities Act.

       

      Section
        1.39. “Registration
        Rights Agreement”
shall
        have the meaning set forth in the recitals of this Agreement.

       

      Section
        1.40. “Registration
        Statement”
shall
        have the meaning assigned to such term in the Registration Rights
        Agreement.

       

      Section
        1.41. “Regulation
        D”
shall
        have the meaning set forth in the recitals of this Agreement.

       

      Section
        1.42. “Section 4(2)”
shall
        have the meaning set forth in the recitals of this Agreement.

       

      Section
        1.43. “Securities
        Act”
shall
        have the meaning set forth in the recitals of this Agreement.

       

      Section
        1.44. “Settlement
        Date”
shall
        have the meaning assigned to such term in Section 3.05 hereof.

       

      Section
        1.45. “Shares”
means
        the shares of Common Stock that are and/or may be purchased
        hereunder.

       

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

       

      Section
        1.47. “VWAP”
means
        the volume weighted average price (the aggregate sales price of all trades
        of
        Common Stock during each Trading Day divided by the total number of shares
        of
        Common Stock traded during such Trading Day) of the Common Stock during any
        Trading Day as reported by Bloomberg, L.P. using the AQR function. 

       

      Section
        1.48. “Warrant”
shall
        have the meaning set forth in the recitals of this Agreement.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

         

      

      Section
        1.49. “Warrant
        Shares”
means
        the shares of Common Stock issuable to the Investor upon exercise of the
        Warrant.

       

      ARTICLE
        II

       

      PURCHASE
        AND SALE OF COMMON STOCK; TERMINATION OF 2004 STOCK PURCHASE
        AGREEMENT

       

      Section
        2.01. Purchase
        and Sale of Stock.
        Upon
        the terms and subject to the conditions set forth in this Agreement, the
        Company
        shall, to the extent it elects to make Draw Downs in accordance with
        Article III hereof, issue and sell to the Investor and the Investor shall
        purchase from the Company Common Stock for an aggregate (in Draw Down Amounts)
        of up to the Maximum Commitment Amount, consisting of purchases based on
        Draw
        Downs in accordance with Article III hereof.

       

      Section
        2.02. Closing.
        In
        consideration of and in express reliance upon the representations, warranties,
        covenants, terms and conditions of this Agreement, the Company agrees to
        issue
        and sell to the Investor, and the Investor agrees to purchase from the Company,
        that number of the Shares to be issued in connection with each Draw Down.
        The
        execution and delivery of this Agreement (the “Closing”)
        shall
        take place on April 17, 2006 (the “Closing
        Date”).
        Each
        party shall deliver at or prior to the Closing all documents, instruments
        and
        writings required to be delivered at the Closing by such party pursuant to
        this
        Agreement.

       

      Section
        2.03. Registration
        Statement and Prospectus.
        The
        Company shall prepare and file with the Commission the Registration Statement
        (including the Prospectus) in accordance with the provisions of the Securities
        Act and the Registration Rights Agreement.

       

      Section
        2.04. Warrant.
        On the
        Closing Date, the Company shall issue and deliver the Warrant to the
        Investor.

       

      Section
        2.05. Blackout
        Shares.
        The
        Company shall deliver any Blackout Amount or issue and deliver any Blackout
        Shares to the Investor in accordance with Section 1(e) of the Registration
        Rights Agreement.

       

      Section
        2.06. Termination
        of 2004 Stock Purchase Agreement.
        Effective on the date on which the Registration Statement is declared effective
        by the Commission, the Investor and the Company agree that the 2004 Stock
        Purchase Agreement shall terminate and shall become void and of no further
        force
        and effect. Notwithstanding termination of the 2004 Stock Purchase Agreement,
        the 2004 Warrant, the 2004 Registration Rights Agreement and the registration
        statement of the Company that was filed pursuant to the 2004 Stock Purchase
        Agreement (the “2004
        Registration Statement”)
        shall
        continue in full force and effect. Upon the occurrence of the earlier of
        (a) the
        date on which the Shares registered under the 2004 Registration Statement
        shall
        cease to be Registrable Securities under the 2004 Registration Rights Agreement
        and (b) such time as the Investor shall have completed the distribution of
        all
        shares of Common Stock issued to the Investor under the 2004 Stock Purchase
        Agreement, including the shares issued under the 2004 Warrant, the Company
        shall
        withdraw and terminate such 2004 Registration Statement and, upon such
        withdrawal, the 2004 Registration Rights Agreement shall terminate and be
        of no
        further force and effect, except that Article III of the 2004 Registration
        Rights Agreement shall survive such termination. The Investor shall notify
        the
        Company in writing within ten (10) Trading Days after the Investor shall
        have
        completed the distribution of all shares of Common Stock purchased under
        the
        2004 Stock Purchase Agreement or issued to the Investor pursuant to the 2004
        Warrant.

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

         

      

      ARTICLE
        III

       

      DRAW
        DOWN TERMS

       

      Subject
        to the satisfaction of the conditions hereinafter set forth in this Agreement,
        the parties agree as follows:

       

      Section
        3.01. Draw
        Down Notice.
        The
        Company may, in its sole discretion, issue a Draw Down Notice (defined below)
        specifying the dollar amount it elects to raise by selling Shares to the
        Investor (each such election a “Draw
        Down”)
        up to
        a Draw Down Amount equal to the Maximum Draw Down Amount, which Draw Down
        the
        Investor will be obligated to accept. The Company shall inform the Investor
        in
        writing, via e-mail to the addresses set forth in Section 10.04 and via
        facsimile transmission to the number set forth in Section 10.04, with a copy
        to
        the Investor’s counsel, as to such Draw Down Amount before commencement of
        trading on the first Trading Day of the related Draw Down Pricing Period
        (the
“Draw
        Down Notice”).
        In
        addition to the Draw Down Amount, each Draw Down Notice shall designate the
        first Trading Day of the Draw Down Pricing Period. In no event shall any
        Draw
        Down Amount exceed the Maximum Draw Down Amount. Each Draw Down Notice shall
        be
        accompanied by a certificate, signed by the Chief Executive Officer or Chief
        Financial Officer and dated, as of the date of such Draw Down Notice, in
        the
        form of Exhibit C
        hereof.

       

      Section
        3.02. Number
        of Shares.
        Subject
        to Section 3.06(b), the number of Shares to be issued in connection with
        each Draw Down shall be equal to the sum of the number of shares issuable
        on
        each Trading Day of the Draw Down Pricing Period. Subject to Section 3.06(b),
        the number of shares issuable on a Trading Day during a Draw Down Pricing
        Period
        shall be equal to the quotient of one eighth (1/8th)
        of the
        Draw Down Amount divided by the Draw Down Discount Price for such Trading
        Day.

       

      Section
        3.03. Limitation
        on Draw Downs.
        Only
        one Draw Down shall be permitted for each Draw Down Pricing Period.

       

      Section
        3.04. Trading
        Cushion.
        Unless
        the parties agree in writing otherwise, there shall be a minimum of three
        (3)
        Trading Days between the expiration of any Draw Down Pricing Period and the
        beginning of the next succeeding Draw Down Pricing Period.

       

      Section
        3.05. Settlement.
        Subject
        to Section 3.06(b), the number of Shares purchased by the Investor in any
        Draw
        Down shall be determined and settled on two separate dates. Shares purchased
        by
        the Investor during the first four Trading Days of any Draw Down Pricing
        Period
        shall be determined and settled no later than the sixth Trading Day of such
        Draw
        Down Pricing Period. Shares purchased by the Investor during the second four
        Trading Days of any Draw Down Pricing Period shall be determined and settled
        no
        later than the second Trading Day after the last Trading Day of such Draw
        Down
        Pricing Period. Each date on which settlement of the purchase and sale of
        Shares
        occurs hereunder being referred to as a “Settlement
        Date.”
The
        Investor shall provide the Company with delivery instructions for the Shares
        to
        be issued at each Settlement Date at least two Trading Days in advance of
        such
        Settlement Date. The number of Shares actually issued shall be rounded to
        the
        nearest whole number of Shares.

       

      Section
        3.06. Delivery
        of Shares; Payment of Draw Down Amount.
        

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

         

      

      (a) On
        each
        Settlement Date, the Company shall deliver the Shares purchased by the Investor
        to the Investor or its designees exclusively via book-entry through the DTC
        to
        an account designated by the Investor, and upon receipt of the Shares, the
        Investor shall cause payment therefor to be made to the Company's designated
        account by wire transfer of immediately available funds, if the Shares are
        received by the Investor no later than 1:00 p.m. (Eastern Time), or next
        day
        available funds, if the Shares are received thereafter. Upon the request
        of the
        Company, the Investor will cause its bank or other liquidity provider to
        provide
        to the Company confirmation that it has received irrevocable instructions
        from
        the Investor to cause payment for the Shares to be made as set forth above
        immediately following confirmation by such bank or other liquidity provider
        that
        such Shares have been delivered through the DTC in unrestricted
        form.

       

      (b) 
        For each
        Trading Day during a Draw Down Pricing Period that the VWAP is less than
        the
        greater of (i) 85% of the Closing Price of the Company’s Common Stock on
        the Trading Day immediately preceding the commencement of such Draw Down
        Pricing
        Period, or (ii) $2.00, such Trading Day shall not be used in calculating
        the number of Shares to be issued in connection with such Draw Down, and
        the
        Draw Down Amount in respect of such Draw Down Pricing Period shall be reduced
        by
        one eighth (1/8th)
        of the
        initial Draw Down Amount specified in the Draw Down Notice. If trading in
        the
        Company’s Common Stock is suspended for any reason for more than three (3)
        consecutive or non-consecutive hours during any Trading Day during a Draw
        Down
        Pricing Period, such Trading Day shall not be used in calculating the number
        of
        Shares to be issued in connection with such Draw Down, and the Draw Down
        Amount
        in respect of such Draw Down Pricing Period shall be reduced by one eighth
        (1/8th) of the initial Draw Down Amount specified in the Draw Down
        Notice.

       

      Section
        3.07. Failure
        to Deliver Shares.
        If, on
        any Settlement Date, the Company fails to take all actions within the reasonable
        control of the Company to cause the delivery of the Shares purchased by the
        Investor, and such failure is not cured within two (2) Trading Days following
        such Settlement Date, the Company shall pay to the Investor on demand in
        cash by
        wire transfer of immediately available funds to an account designated by
        the
        Investor the “Make
        Whole Amount”
(as
        defined below); provided,
        however,
        that in
        the event that the Company is prevented from delivering Shares in respect
        of any
        such Settlement Date in a timely manner by any fact or circumstance that
        is
        reasonably within the control of, or directly attributable to, the Investor,
        then such two (2) Trading Day period shall be automatically extended until
        such
        time as such fact or circumstance is cured. As used herein, the Make Whole
        Amount shall be an amount equal to the sum of (i) the Draw Down Amount actually
        paid by the Investor in respect of such Shares plus (ii) an amount equal
        to the
        actual loss suffered by the Investor in respect of sales to subsequent
        purchasers, pursuant to transactions entered into before the Settlement Date,
        of
        the Shares that were required to be delivered by the Company, which shall
        be
        based upon documentation reasonably satisfactory to the Company demonstrating
        the difference (if greater than zero) between (A) the price per share paid
        by
        the Investor to purchase such number of shares of Common Stock necessary
        for the
        Investor to meet its share delivery obligations to such subsequent purchasers
        minus (B) the average Draw Down Discount Price during the applicable Draw
        Down
        Pricing Period in respect of such Settlement Date. In the event that the
        Make
        Whole Amount is not paid within two (2) Trading Days following a demand therefor
        from the Investor, the Make Whole Amount shall accrue interest compounded
        daily
        at a rate of LIBOR plus 300 basis points, per annum up to and including the
        date
        on which the Make Whole Amount is actually paid. Notwithstanding anything
        to the
        contrary set forth in this Agreement, in the event that the Company pays
        the
        Make Whole Amount (plus interest, if applicable) in respect of any Settlement
        Date in accordance with this Section 3.07, such payment shall be the Investor’s
        sole remedy in respect of the Company’s failure to deliver Shares in respect of
        such Settlement Date, and the Company shall not be obligated to deliver such
        Shares.

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

         

      

      ARTICLE
        IV

       

      REPRESENTATIONS
        AND WARRANTIES OF THE COMPANY

       

      The
        Company hereby makes the following representations and warranties to the
        Investor:

       

      Section
        4.01. Organization,
        Good Standing and Power.
        The
        Company is a corporation duly organized, validly existing and in good standing
        under the laws of the State of Delaware and has all requisite power and
        authority to own, lease and operate its properties and to carry on its business
        as now being conducted. Except as set forth in the Commission Documents (as
        defined below), as of the date hereof the Company does not own more than
        fifty
        percent (50%) of the outstanding capital stock of or control any other business
        entity, other than any wholly-owned subsidiary that is not “significant” within
        the meaning of Regulation S-X promulgated by the Commission. The Company
        is duly
        qualified as a foreign corporation to do business and is in good standing
        in
        every jurisdiction in which the nature of the business conducted or property
        owned by it makes such qualification necessary, other than those in which
        the
        failure so to qualify or be in good standing would not have a Material Adverse
        Effect.

       

      Section
        4.02. Authorization;
        Enforcement.
        (i) The Company has the requisite corporate power and authority to enter
        into and perform its obligations under this Agreement, the Registration Rights
        Agreement and the Warrant and to issue the Shares, the Warrant, the Warrant
        Shares and any Blackout Shares; (ii) the execution and delivery of this
        Agreement and the Registration Rights Agreement, and the execution, issuance
        and
        delivery of the Warrant, by the Company and the consummation by it of the
        transactions contemplated hereby and thereby have been duly authorized by
        all
        necessary corporate action and no further consent or authorization of the
        Company or its Board of Directors or stockholders is required (other than
        as
        contemplated by Section 6.05); and (iii) each of this Agreement and
        the Registration Rights Agreement has been duly executed and delivered, and
        the
        Warrant has been duly executed, issued and delivered, by the Company and
        constitutes a valid and binding obligation of the Company enforceable against
        the Company in accordance with its terms, except as such enforceability may
        be
        limited by applicable bankruptcy, securities, insolvency, or similar laws
        relating to, or affecting generally the enforcement of, creditors’ rights and
        remedies, or indemnification or by other equitable principles of general
        application.

       

      Section
        4.03. Capitalization.
        The
        authorized capital stock of the Company and the shares thereof issued and
        outstanding as of December 31, 2005 are set forth in the Commission Documents.
        All of the outstanding shares of Common Stock have been duly and validly
        authorized and issued, and are fully paid and non-assessable. Except as set
        forth in this Agreement or in the Commission Documents, as of December 31,
        2005,
        no shares of Common Stock were entitled to preemptive rights or registration
        rights, and there were no outstanding options, warrants, scrip, rights issued
        by
        the Company to subscribe to, call or commitments of any character whatsoever
        issued by the Company relating to, or securities or rights convertible into
        or
        exchangeable for or giving any right to subscribe for, any shares of capital
        stock of the Company. Except as set forth in this Agreement, or in the
        Commission Documents, as of December 31, 2005, there were no contracts,
        commitments, understandings, or arrangements by which the Company is or may
        become bound to issue additional shares of the capital stock of the Company
        or
        options, securities or rights convertible into or exchangeable for or giving
        any
        right to subscribe for any shares of capital stock of the Company. Except
        as
        described in the Commission Documents, as of the date hereof the Company
        is not
        a party to any agreement granting registration rights to any Person with
        respect
        to any of its equity or debt securities. Except as set forth in the Commission
        Documents or as previously disclosed to the Investor in writing, as of the
        date
        hereof the Company is not a party to, and it has no Knowledge of, any agreement
        restricting the voting or transfer of any shares of the capital stock of
        the
        Company. The offer and sale of all capital stock, convertible securities,
        rights, warrants, or options of the Company issued during the twenty-four
        month
        period immediately prior to the Closing complied in all material respects
        with
        all applicable federal and state securities laws, and no stockholder has
        a right
        of rescission or damages with respect thereto that could reasonably be expected
        to have a Material Adverse Effect. The Company has furnished or made available
        to the Investor true and correct copies of the Company’s Certificate of
        Incorporation, as amended and in effect on the date hereof (the “Certificate”),
        and
        the Company’s Bylaws, as amended and in effect on the date hereof (the
“Bylaws”).

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

         

      

      Section
        4.04. Issuance
        of Shares.
        Subject
        to Section 6.05, the Shares, the Warrant and the Warrant Shares have been,
        and
        any Blackout Shares will be, duly authorized by all necessary corporate action
        and, when issued and paid for in accordance with the terms of this Agreement,
        the Registration Rights Agreement and the Warrant, and subject to, and in
        reliance on, the representations, warranties and covenants made herein by
        the
        Investor, the Shares and the Warrant Shares shall be validly issued and
        outstanding, fully paid and non-assessable, and the Investor shall be entitled
        to all rights accorded to a holder of shares of Common Stock.

       

      Section
        4.05. No
        Conflicts.
        The
        execution, delivery and performance of this Agreement, the Registration Rights
        Agreement, the Warrant and any other document or instrument contemplated
        hereby
        or thereby, by the Company and the consummation by the Company of the
        transactions contemplated hereby and thereby do not: (i) violate any
        provision of the Certificate or Bylaws, (ii) conflict with, or constitute a
        default (or an event which with notice or lapse of time or both would become
        a
        default) under, or give to others any rights of termination, amendment,
        acceleration or cancellation of, any material agreement, mortgage, deed of
        trust, indenture, note, bond, license, lease agreement, instrument or obligation
        to which the Company is a party where such default or conflict would constitute
        a Material Adverse Effect, (iii) create or impose a lien, charge or
        encumbrance on any property of the Company under any agreement or any commitment
        to which the Company is a party or by which the Company is bound or by which
        any
        of its respective properties or assets are bound which would constitute a
        Material Adverse Effect, (iv) result in a violation of any federal, state,
        local or foreign statute, rule, regulation, order, writ, judgment or decree
        (including federal and state securities laws and regulations) applicable
        to the
        Company or any of its subsidiaries or by which any property or asset of the
        Company or any of its subsidiaries are bound where such violation would
        constitute a Material Adverse Effect, or (v) require any consent of any
        third-party that has not been obtained pursuant to any material contract
        to
        which the Company is a party or to which any of its assets, operations or
        management may be bound where the failure to obtain any such consent would
        constitute a Material Adverse Effect. The Company is not required under federal,
        state or local law, rule or regulation to obtain any consent, authorization
        or
        order of, or make any filing or registration with, any court or governmental
        agency in order for it to execute, deliver or perform any of its obligations
        under this Agreement, the Registration Rights Agreement or the Warrant, or
        issue
        and sell the Shares, the Warrant Shares or the Blackout Shares in accordance
        with the terms hereof and thereof (other than any filings that may be required
        to be made by the Company with the Commission, the NASD/Nasdaq or state
        securities commissions subsequent to the Closing, and, any registration
        statement (including any amendment or supplement thereto) or any other filing
        or
        consent which may be filed pursuant to this Agreement, the Registration Rights
        Agreement or the Warrant); provided
        that,
        for purposes of the representation made in this sentence, the Company is
        assuming and relying upon the accuracy of the relevant representations and
        agreements of the Investor herein.

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

         

      

      Section
        4.06. Commission
        Documents, Financial Statements.
        The
        Common Stock is registered pursuant to Section 12(b) or 12(g) of the
        Exchange Act, and since December 31, 2004 the Company has timely filed all
        reports, schedules, forms, statements and other documents required to be
        filed
        by it with the Commission pursuant to the reporting requirements of the Exchange
        Act, including material filed pursuant to Section 13(a) or 15(d) of the
        Exchange Act (all of the foregoing, including filings incorporated by reference
        therein, being referred to herein as the “Commission
        Documents”).
        Except as previously disclosed to the Investor in writing, since December
        31,
        2004 the Company has maintained all requirements for the continued listing
        or
        quotation of its Common Stock, and such Common Stock is currently listed
        or
        quoted on the Nasdaq National Market. To the extent not available on the
        Commission’s EDGAR filing system, the Company has made available to the Investor
        true and complete copies of the Commission Documents filed with the Commission
        since December 31, 2004 and prior to the Closing Date. As of its date, the
        Company’s Form 10-K for the year ended December 31, 2005 complied in
        all material respects with the requirements of the Exchange Act and the rules
        and regulations of the Commission promulgated thereunder applicable to such
        document, and, as of its date, after giving effect to the information disclosed
        and incorporated by reference therein, to the Company’s Knowledge such
        Form 10-K did not contain any untrue statement of a material fact or omit
        to state a material fact required to be stated therein or necessary in order
        to
        make the statements therein, in light of the circumstances under which they
        were
        made, not misleading. As of their respective dates, to the Company’s Knowledge
        the financial statements of the Company included in the Commission Documents
        filed with the Commission since December 31, 2004 complied as to form and
        substance in all material respects with applicable accounting requirements
        and
        the published rules and regulations of the Commission or other applicable
        rules
        and regulations with respect thereto. Such financial statements have been
        prepared in accordance with generally accepted accounting principles in the
        United States (“GAAP”)
        applied on a consistent basis during the periods involved (except (i) as
        may be otherwise indicated in such financial statements or the notes thereto
        or
        (ii) in the case of unaudited interim statements, to the extent they may
        not include footnotes or may be condensed or summary statements), and fairly
        present in all material respects the financial position of the Company and
        its
        subsidiaries as of the dates thereof and the results of operations and cash
        flows for the periods then ended (subject, in the case of unaudited statements,
        to normal year-end audit adjustments). 

       

      Section
        4.07. No
        Material Adverse Change.
        Except
        as disclosed in the Commission Documents, since December 31, 2005 no event
        or
        series of events has or have occurred that would, individually or in the
        aggregate, have a Material Adverse Effect on the Company. 

       

      Section
        4.08. No
        Undisclosed Liabilities.
        To the
        Company’s Knowledge, neither the Company nor any of its subsidiaries has any
        liabilities, obligations, claims or losses (whether liquidated or unliquidated,
        secured or unsecured, absolute, accrued, contingent or otherwise) that would
        be
        required to be disclosed on a balance sheet of the Company or any subsidiary
        (including the notes thereto) in conformity with GAAP and are not disclosed
        in
        the Commission Documents, other than those incurred in the ordinary course
        of
        the Company’s or its subsidiaries respective businesses since December 31, 2005
        or which, individually or in the aggregate, do not or would not have a Material
        Adverse Effect on the Company. 

       

      Section
        4.09. No
        Undisclosed Events or Circumstances.
        To the
        Company’s Knowledge, no event or circumstance has occurred or exists with
        respect to the Company or its subsidiaries or their respective businesses,
        properties, operations or financial condition, which, under applicable law,
        rule
        or regulation, requires public disclosure or announcement by the Company
        but
        which has not been so publicly announced or disclosed and which, individually
        or
        in the aggregate, would have a Material Adverse Effect on the
        Company.

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

         

      

      Section
        4.10. Actions
        Pending.
        There
        is no action, suit, claim, investigation or proceeding pending or, to the
        Knowledge of the Company, threatened against the Company or any subsidiary
        which
        questions the validity of this Agreement or the transactions contemplated
        hereby
        or any action taken or to be taken pursuant hereto or thereto. Except as
        set
        forth in the Commission Documents, there is no action, suit, claim,
        investigation or proceeding pending or, to the Knowledge of the Company,
        threatened against or involving the Company, any subsidiary or any of their
        respective properties or assets that could be reasonably expected to have
        a
        Material Adverse Effect on the Company. Except as set forth in the Commission
        Documents or as previously disclosed to the Investor in writing, no judgment,
        order, writ, injunction or decree or award has been issued by or, to the
        Knowledge of the Company, requested of any court, arbitrator or governmental
        agency which could be reasonably expected to result in a Material Adverse
        Effect.

       

      Section
        4.11. Compliance
        with Law.
        The
        businesses of the Company and its subsidiaries have been and are presently
        being
        conducted in accordance with all applicable federal, state and local
        governmental laws, rules, regulations and ordinances, except as set forth
        in the
        Commission Documents or such that would not reasonably be expected to cause
        a
        Material Adverse Effect. Except as set forth in the Commission Documents,
        the
        Company and each of its subsidiaries have all franchises, permits, licenses,
        consents and other governmental or regulatory authorizations and approvals
        necessary for the conduct of its business as now being conducted by it, except
        for such franchises, permits, licenses, consents and other governmental or
        regulatory authorizations and approvals, the failure to possess which,
        individually or in the aggregate, could not reasonably be expected to have
        a
        Material Adverse Effect.

       

      Section
        4.12. Certain
        Fees.
        Except
        as expressly set forth in this Agreement, no brokers, finders or financial
        advisory fees or commissions will be payable by the Company or any of its
        subsidiaries in respect of the transactions contemplated by this
        Agreement.

       

      Section
        4.13. Disclosure.
        To the
        Company’s Knowledge, neither this Agreement nor any other documents,
        certificates or instruments filed with the Commission or furnished to the
        Investor by or on behalf of the Company or any subsidiary in connection with
        the
        transactions contemplated by this Agreement contain any untrue statement
        of a
        material fact or omit to state a material fact necessary in order to make
        the
        statements made herein or therein, in the light of the circumstances under
        which
        they were made herein or therein, not misleading.

       

      Section
        4.14. Material
        Non-Public Information.
        Except
        for this Agreement and the transactions contemplated hereby, neither the
        Company
        nor its employees have disclosed to the Investor, any material non-public
        information that, according to applicable law, rule or regulation, should
        have
        been disclosed publicly by the Company prior to the date hereof but which
        has
        not been so disclosed.

       

      Section
        4.15. Exemption
        from Registration; Valid Issuances.
        Subject
        to, and in reliance on, the representations, warranties and covenants made
        herein by the Investor, the issuance and sale of the Shares, the Warrant,
        the
        Warrant Shares and any Blackout Shares in accordance with the terms and on
        the
        bases of the representations and warranties set forth in this Agreement,
        may and
        shall be properly issued pursuant to Section 4(2), Regulation D and/or any
        other applicable federal and state securities laws. Neither the sales of
        the
        Shares, the Warrant, the Warrant Shares or any Blackout Shares pursuant to,
        nor
        the Company’s performance of its obligations under, this Agreement, the
        Registration Rights Agreement, or the Warrant shall (i) result in the
        creation or imposition of any liens, charges, claims or other encumbrances
        upon
        the Shares, the Warrant Shares, any Blackout Shares or any of the assets
        of the
        Company, or (ii) except as previously disclosed to the Investor in writing,
        entitle the holders of any outstanding shares of capital stock of the Company
        to
        preemptive or other rights to subscribe to or acquire the shares of Common
        Stock
        or other securities of the Company. 

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

         

      

      Section
        4.16. No
        General Solicitation or Advertising in Regard to this
        Transaction.
        Except
        for the Registration Statement, neither the Company nor any of its affiliates
        or
        any person acting on its or their behalf (i) has conducted any general
        solicitation (as that term is used in Rule 502(c) of Regulation D) or general
        advertising with respect to any of the Shares, the Warrant, the Warrant Shares
        or any Blackout Shares or (ii) has made any offers or sales of any security
        or solicited any offers to buy any security under any circumstances that
        would
        require registration of the Shares under the Securities Act.

       

      Section
        4.17. No
        Integrated Offering.
        Neither
        the Company, nor any of its affiliates, nor any person acting on its or their
        behalf has, directly or indirectly, made any offers or sales of any security
        or
        solicited any offers to buy any security, other than pursuant to this Agreement
        and employee benefit plans, under circumstances that would require integration
        under the Securities Act of shares of the Common Stock issuable hereunder
        with
        any other offers or sales of securities of the Company.

       

      Section
        4.18. Acknowledgment
        Regarding Investor’s Purchase of Shares.
        The
        Company acknowledges and agrees that the Investor is acting solely in the
        capacity of an arm’s length investor with respect to this Agreement and the
        transactions contemplated hereunder. The Company further acknowledges that
        the
        Investor is not acting as a financial advisor or fiduciary of the Company
        (or in
        any similar capacity) with respect to this Agreement and the transactions
        contemplated hereunder, and any advice given by the Investor or any of its
        representatives or agents in connection with this Agreement and the transactions
        contemplated hereunder is merely incidental to the Investor’s purchase of the
        Shares.

       

      ARTICLE
        V

       

      REPRESENTATIONS,
        WARRANTIES AND COVENANTS OF THE INVESTOR

       

      The
        Investor hereby makes the following representations, warranties and covenants
        to
        the Company:

       

      Section
        5.01. Organization
        and Standing of the Investor.
        The
        Investor is a company duly organized, validly existing and in good standing
        under the laws of the British Virgin Islands.

       

      Section
        5.02. Authorization
        and Power.
        The
        Investor has the requisite power and authority to enter into and perform
        its
        obligations under this Agreement, the Warrant and the Registration Rights
        Agreement and to purchase the Shares, the Warrant and the Warrant Shares
        in
        accordance with the terms hereof and thereof. The execution, delivery and
        performance of this Agreement, the Warrant and the Registration Rights Agreement
        by Investor and the consummation by it of the transactions contemplated hereby
        or thereby have been duly authorized by all necessary corporate action, and
        no
        further consent or authorization of the Investor, its Board of Directors
        or
        stockholders is required. Each of this Agreement and the Registration Rights
        Agreement has been duly executed and delivered by the Investor and constitutes
        a
        valid and binding obligation of the Investor enforceable against the Investor
        in
        accordance with its terms, except as such enforceability may be limited by
        applicable bankruptcy, insolvency, reorganization, moratorium, liquidation,
        conservatorship, receivership, or similar laws relating to, or affecting
        generally the enforcement of creditor’s rights and remedies or by other
        equitable principles of general application.

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

         

      

      Section
        5.03. No
        Conflicts.
        The
        execution, delivery and performance of this Agreement, the Registration Rights
        Agreement, the Warrant and any other document or instrument contemplated
        hereby,
        by the Investor and the consummation of the transactions contemplated thereby
        do
        not (i) violate any provision of the Investor’s charter documents or
        bylaws, (ii) conflict with, or constitute a default (or an event which with
        notice or lapse of time or both would become a default) under, or give to
        others
        any rights of termination, amendment, acceleration or cancellation of, any
        material agreement, mortgage, deed of trust, indenture, note, bond, license,
        lease agreement, instrument or obligation to which the Investor is a party,
        (iii) create or impose a lien, charge or encumbrance on any property of the
        Investor under any agreement or any commitment to which the Investor is a
        party
        or by which the Investor is bound or by which any of its respective properties
        or assets are bound, (iv) result in a violation of any federal, state,
        local or foreign statute, rule, regulation, order, writ, judgment or decree
        (including federal and state securities laws and regulations) applicable
        to the
        Investor or by which any property or asset of the Investor are bound or
        affected, or (v) require the consent of any third-party that has not been
        obtained pursuant to any material contract to which Investor is subject or
        to
        which any of its assets, operations or management may be subject. The Investor
        is not required under federal, state, foreign or local law, rule or regulation
        to obtain any consent, authorization or order of, or make any filing or
        registration with, any court or governmental agency in order for it to execute,
        deliver or perform any of its obligations under this Agreement or to purchase
        the Shares or the Warrant in accordance with the terms hereof, provided
        that,
        for purposes of the representation made in this sentence, the Investor is
        assuming and relying upon the accuracy of the relevant representations and
        agreements of the Company herein.

       

      Section
        5.04. Financial
        Capability.
        The
        Investor has the financial capability to perform all of its obligations under
        this Agreement, including the capability to purchase the Shares, the Warrant
        and
        the Warrant Shares in accordance with the terms hereof. The Investor has
        such
        knowledge and experience in business and financial matters that it is capable
        of
        evaluating the merits and risks of an investment in Common Stock. The Investor
        is an “accredited investor” as defined in Regulation D. The Investor is a
“sophisticated investor” as described in Rule 506(b)(2)(ii) of Regulation
        D. The Investor acknowledges that an investment in the Common Stock and the
        Warrant is speculative and involves a high degree of risk.

       

      Section
        5.05. Information.
        The
        Investor and its advisors, if any, have been furnished with all materials
        relating to the business, finances and operations of the Company and materials
        relating to the offer and sale of the Shares, the Warrant and the Warrant
        Shares
        which have been requested by the Investor. The Investor has reviewed or received
        copies of the Commission Documents. The Investor and its advisors, if any,
        have
        been afforded the opportunity to ask questions of the Company. The Investor
        has
        sought such accounting, legal and tax advice as it has considered necessary
        to
        make an informed investment decision with respect to its acquisition of the
        Shares, the Warrant and the Warrant Shares. Except for this Agreement and
        the
        transactions contemplated hereby, the Company has not disclosed to the Investor
        any material non-public information that, according to applicable law, rule
        or
        regulation, should have been disclosed publicly by the Company prior to the
        date
        hereof but which has not been so disclosed. The Investor understands that
        it
        (and not the Company) shall be responsible for its own tax liabilities that
        may
        arise as a result of this investment or the transactions contemplated by
        this
        Agreement.

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

         

      

      Section
        5.06. Trading
        Restrictions.
        The
        Investor covenants that neither the Investor nor any of its affiliates nor
        any
        entity managed or controlled by the Investor will, or cause or assist any
        Person
        to, enter into or execute any “short sale” (as such term is defined in Rule 200
        of Regulation SHO, or any successor regulation, promulgated by the Commission
        under the Exchange Act) of any securities of the Company.

       

      Section
        5.07. Statutory
        Underwriter Status.
        The
        Investor acknowledges that, pursuant to the Commission’s current interpretations
        of the Securities Act, the Investor will be disclosed as an “underwriter” within
        the meaning of the Securities Act in the Registration Statement (and amendments
        thereto) and in any Prospectus contained therein to the extent required by
        applicable law.

       

      Section
        5.08. Not
        an
        Affiliate.
        The
        Investor is not an officer, director or “affiliate” (as defined in Rule 405 of
        the Securities Act) of the Company.

       

      Section
        5.09. Manner
        of Sale.
        At no
        time was Investor presented with or solicited by or through any leaflet,
        public
        promotional meeting, television advertisement or any other form of general
        solicitation or advertising.

       

      Section
        5.10. Prospectus
        Delivery.
        The
        Investor agrees that unless the Shares and Warrant Shares are eligible for
        resale pursuant to all the conditions of Rule 144, it will resell the Shares
        and
        Warrant Shares only pursuant to the Registration Statement, in a manner
        described under the caption “Plan of Distribution” in the Registration
        Statement, and in a manner in compliance with all applicable securities laws,
        including, without limitation, the prospectus delivery requirements of the
        Securities Act and the insider trading restrictions of the Exchange Act.
        

       

      ARTICLE
        VI

       

      COVENANTS
        OF THE COMPANY

       

      The
        Company covenants with the Investor as follows, which covenants are for the
        benefit of the Investor and its permitted assignees (as defined
        herein):

       

      Section
        6.01. Securities.
        The
        Company shall notify the Commission and the Principal Market, if and as
        applicable, in accordance with their rules and regulations, of the transactions
        contemplated by this Agreement, and shall use commercially reasonable efforts
        to
        take all other necessary action and proceedings as may be required and permitted
        by applicable law, rule and regulation, for the legal and valid issuance
        of the
        Shares, the Warrant Shares and the Blackout Shares, if any, to the
        Investor.

       

      Section
        6.02. Reservation
        of Common Stock.
        As of
        the date hereof, the Company has available and the Company shall reserve
        and
        keep available at all times, free of preemptive rights and other similar
        contractual rights of stockholders, shares of Common Stock for the purpose
        of
        enabling the Company to satisfy any obligation to issue the Shares in connection
        with all Draw Downs contemplated hereunder and the Warrant Shares. The number
        of
        shares so reserved from time to time, as theretofore increased or reduced
        as
        hereinafter provided, may be reduced by the number of shares actually delivered
        hereunder.

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

         

      

      Section
        6.03. Registration
        and Listing.
        During
        the Commitment Period, the Company shall use commercially reasonable efforts:
        (i) to take all action necessary to cause its Common Stock to continue to
        be registered under Section 12(b) or 12(g) of the Exchange Act,
        (ii) to comply in all material respects with its reporting and filing
        obligations under the Exchange Act, (iii) to prevent the termination or
        suspension of such registration, or the termination or suspension of its
        reporting and filing obligations under the Exchange Act or Securities Act
        (except as expressly permitted herein). The Company shall use commercially
        reasonable efforts to maintain the listing and trading of its Common Stock
        and
        the listing of the Shares purchased by Investor hereunder on the Principal
        Market (including, without limitation, maintaining sufficient net tangible
        assets) and to comply in all material respects with the Company’s reporting,
        filing and other obligations under the bylaws or rules of the NASD and the
        Principal Market. The Company will not be required to carry out any action
        pursuant to this Agreement, the Registration Rights Agreement or the Warrant
        that would adversely impact the listing of the Company’s securities on the
        Principal Market as now in effect, and as may be changed by the Company in
        the
        future in the Company’s discretion.

       

      Section
        6.04. Registration
        Statement.
        Without
        the prior written consent of the Investor, the Registration Statement shall
        be
        used solely in connection with the transactions between the Company and the
        Investor contemplated hereby.

       

      Section
        6.05. Compliance
        with Laws.

       

      (a) The
        Company shall comply, and cause each subsidiary to comply, with all applicable
        laws, rules, regulations and orders, noncompliance with which could reasonably
        be expected to have a Material Adverse Effect.

       

      (b) Without
        the consent of its stockholders in accordance with NASD rules, the Company
        will
        not be obligated to issue, and the Investor will not be obligated to purchase,
        any Shares or Blackout Shares which would result in the issuance under this
        Agreement, the Warrant and the Registration Rights Agreement of Shares, Warrant
        Shares and Blackout Shares (collectively) representing more than the applicable
        percentage under the rules of the NASD, including, without limitation, NASD
        Rule
        4350(i), that would require stockholder approval of the issuance thereof.
        

       

      Section
        6.06. Other
        Financing.
        

       

      (a) Nothing
        in this Agreement shall be construed to restrict the right of the Company
        to
        offer, sell and/or issue securities of any kind whatsoever, provided such
        transaction is not a Prohibited Transaction (as defined below) (any such
        transaction that is not a Prohibited Transaction is referred to in this
        Agreement as a “Permitted
        Transaction”).
        Without limiting the generality of the preceding sentence, the Company may,
        without the prior written consent of the Investor, (i) establish stock
        option or award plans or agreements (for directors, employees, consultants
        and/or advisors), and issue securities thereunder, and amend such plans or
        agreements, including increasing the number of shares available thereunder,
        (ii) issue equity securities to finance, or otherwise in connection with,
        the acquisition of one or more other companies, equipment, technologies or
        lines
        of business, (iii) issue shares of Common Stock and/or Preferred Stock in
        connection with the acquisition of products, licenses, equipment or other
        assets
        and strategic partnerships or joint ventures; (iv) issue shares of Common
        and/or Preferred Stock to consultants and/or advisors as consideration for
        services rendered or to be rendered, (v) issue and sell equity or debt
        securities in a public offering, (vi) issue and sell and equity or debt
        securities in a private placement (other than in connection with any Prohibited
        Transaction), (vii) issue equity securities to equipment lessors, equipment
        vendors, banks or similar lending institutions in connection with leases
        or
        loans, or in connection with strategic commercial or licensing transactions,
        (viii) issue securities in connection with any stock split, stock dividend,
        recapitalization, reclassification or similar event by the Company, and
        (ix) issue shares of Common Stock to the Investor under any other agreement
        entered into between the Investor and the Company. 

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

         

      

      (b) Notwithstanding
        the foregoing, other than in the ordinary course of the Company’s business, the
        Company shall not engage in any Permitted Transaction involving the issuance,
        sale, disposition or other transaction in the capital markets (whether public
        or
        private) involving the Common Stock or any other capital or debt securities
        of
        the Company during any Draw Down Pricing Period.

       

      Section
        6.07. Prohibited
        Transactions.
        During
        the term of this Agreement, the Company shall not enter into any Prohibited
        Transaction without the prior written consent of the Investor, which consent
        may
        be withheld at the sole discretion of the Investor. For the purposes of this
        Agreement, the term “Prohibited
        Transaction”
shall
        refer to the issuance by the Company of any “future priced securities,” which
        shall mean the issuance of shares of Common Stock or securities of any type
        whatsoever that are, or may become, convertible or exchangeable into shares
        of
        Common Stock where the purchase, conversion or exchange price for such Common
        Stock is determined using any floating discount or other post-issuance
        adjustable discount to the market price of Common Stock, including, without
        limitation, pursuant to any equity line or other financing that is substantially
        similar to the financing provided for under this Agreement, provided
        that any
        future issuance by the Company of a convertible security ("Convertible
        Security")
        that
        contains provisions that adjust the conversion price of such Convertible
        Security ("Conversion
        Price")
        in the
        event of stock splits, dividends, distributions or similar events or pursuant
        to
        anti-dilution provisions shall not be a Prohibited Transaction for purposes
        of
        this Section 6.07 so long as such Convertible Security does not contain a
        provision that adjusts the Conversion Price as a result of any decline in
        the
        market price of the Common Stock after the issue date of the Convertible
        Security, other than a decline resulting directly from stock splits, dividends,
        distributions or similar events including, without limitation, the type of
        conversion price adjustments customarily found in a firm commitment Rule
        144A offering to qualified institutional buyers. 

       

      Section
        6.08. Corporate
        Existence.
        The
        Company shall take all steps necessary to preserve and continue the corporate
        existence of the Company; provided,
        however,
        that
        nothing in this Agreement shall be deemed to prohibit the Company from engaging
        in any Excluded Merger or Sale with another Person provided that in the event
        of
        an Excluded Merger or Sale, if the surviving, successor or purchasing Person
        does not agree to assume the obligations under the Warrant, then the Company
        shall deliver a notice to the Investor at least ten (10) days before the
        consummation of such Excluded Merger or Sale, the Investor may exercise the
        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 the Warrant that has not been exercised
        before consummation of such Excluded Merger or Sale shall terminate and expire,
        and shall no longer be outstanding.

       

      Section
        6.09. Non-Disclosure
        of Non-Public Information.
        Except
        as otherwise expressly provided in this Agreement, including Section 6.10
        hereof, the Registration Rights Agreement or the Warrant, none of the Company,
        its officers, directors, employees nor agents shall disclose material non-public
        information to the Investor, its advisors or representatives.

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

         

      

      Section
        6.10. Notice
        of Certain Events Affecting Registration; Suspension of Right to Request
        a Draw
        Down.
        The
        Company shall promptly notify the Investor upon the occurrence of any of
        the
        following events in respect of the Registration Statement or the Prospectus
        related to the offer, issuance and sale of the Shares and the Warrant Shares
        hereunder: (i) receipt of any request for additional information by the
        Commission or any other federal or state governmental authority during the
        period of effectiveness of the Registration Statement for amendments or
        supplements to the Registration Statement or the Prospectus; (ii) the
        issuance by the Commission or any other federal or state governmental authority
        of any stop order suspending the effectiveness of the Registration Statement
        or
        the initiation of any proceedings for that purpose; and (iii) receipt of
        any notification with respect to the suspension of the qualification or
        exemption from qualification of any of the Registrable Securities for sale
        in
        any jurisdiction or the initiation or threatening of any proceeding for such
        purpose. The Company shall not be required to disclose to the Investor the
        substance or specific reasons of any of the events set forth in clauses (i)
        through (ii) of the previous sentence, only that the event has occurred.
        The
        Company shall not request a Draw Down during the continuation of any of the
        foregoing events.

       

      Section
        6.11. Amendments
        to the Registration Statement.
        When
        the Registration Statement is declared effective by the Commission (i) the
        Company shall not file any amendment to the Registration Statement or make
        any
        amendment or supplement to the Prospectus of which the Investor shall not
        previously have been advised and (ii) so long as, in the reasonable opinion
        of counsel for the Investor, a Prospectus is required to be delivered in
        connection with sales of the Shares by the Investor, if the Company files
        any
        information, documents or reports that are incorporated by reference in the
        Registration Statement pursuant to the Exchange Act, the Company shall, if
        requested in writing by the Investor, deliver a copy of such information,
        documents or reports to the Investor promptly following such
        filing.

       

      Section
        6.12. Prospectus
        Delivery.
        From
        time to time for such period as in the reasonable opinion of counsel for
        the
        Investor a prospectus is required by the Securities Act to be delivered in
        connection with sales by the Investor, the Company will expeditiously deliver
        to
        the Investor, without charge, as many copies of the Prospectus (and of any
        amendment or supplement thereto) as the Investor may reasonably request.
        The
        Company consents to the use of the Prospectus (and of any amendment or
        supplement thereto) in accordance with the provisions of the Securities Act
        and
        state securities laws in connection with the offering and sale of the Shares
        and
        the Warrant Shares for such period of time thereafter as the Prospectus is
        required by the Securities Act to be delivered in connection with sales of
        the
        Shares and the Warrant Shares.

       

      ARTICLE
        VII

       

      CONDITIONS
        TO THE OBLIGATION OF THE INVESTOR TO ACCEPT A DRAW DOWN

       

      The
        obligation of the Investor hereunder to accept a Draw Down Notice and to
        acquire
        and pay for the Shares in accordance therewith is subject to the satisfaction
        or
        waiver, at each Condition Satisfaction Date, of each of the conditions set
        forth
        below. Other than those conditions set forth in Section 7.12 which are for
        the Company’s sole benefit and may be waived by the Company at any time in its
        sole discretion, the conditions are for the Investor’s sole benefit and may be
        waived by the Investor at any time in its sole discretion. As used in this
        Agreement, the term “Condition
        Satisfaction Date”
shall
        mean, with respect to each Draw Down, the date on which the applicable Draw
        Down
        Notice is delivered to the Investor and each Settlement Date in respect of
        the
        applicable Draw Down Pricing Period.

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

         

      

      Section
        7.01. Accuracy
        of the Company’s Representations and Warranties.
        Each of
        the representations and warranties of the Company shall be true and correct
        in
        all material respects as of the date when made as though made at that time
        except for representations and warranties that are expressly made as of a
        particular date.

       

      Section
        7.02. Performance
        by the Company.
        The
        Company shall have, in all material respects, performed, satisfied and complied
        with all covenants, agreements and conditions required by this Agreement,
        the
        Registration Rights Agreement and the Warrant to be performed, satisfied
        or
        complied with by the Company.

       

      Section
        7.03. Compliance
        with Law.
        The
        Company shall have complied in all respects with all applicable federal,
        state
        and local governmental laws, rules, regulations and ordinances in connection
        with the execution, delivery and performance of this Agreement and the
        consummation of the transactions contemplated hereby except for any failures
        to
        so comply which would not reasonably be expected to have a Material Adverse
        Effect.

       

      Section
        7.04. Effective
        Registration Statement.
        Upon
        the terms and subject to the conditions set forth in the Registration Rights
        Agreement, the Registration Statement shall have previously become effective
        and
        shall remain effective and (i) neither the Company nor the Investor shall
        have received notice that the Commission has issued or intends to issue a
        stop
        order with respect to the Registration Statement or that the Commission
        otherwise has suspended or withdrawn the effectiveness of the Registration
        Statement, either temporarily or permanently, or intends or has threatened
        to do
        so (unless the Commission’s concerns have been addressed and the Investor is
        reasonably satisfied that the Commission no longer is considering or intends
        to
        take such action), and (ii) no other suspension of the use or withdrawal of
        the effectiveness of the Registration Statement or the Prospectus shall
        exist.

       

      Section
        7.05. No
        Knowledge.
        The
        Company shall have no Knowledge of any event that could reasonably be expected
        to have the effect of causing the Registration Statement with respect to
        the
        resale of the Registrable Securities by the Investor to be suspended or
        otherwise ineffective (which event is reasonably likely to occur within eight
        Trading Days following the Trading Day on which a Draw Down Notice is delivered)
        as of the Settlement Date.

       

      Section
        7.06. No
        Suspension.
        Trading
        in the Company’s Common Stock shall not have been suspended by the Commission,
        the Principal Market or the NASD and trading in securities generally as reported
        on the Principal Market shall not have been suspended or limited.

       

      Section
        7.07. No
        Injunction.
        No
        statute, rule, regulation, executive order, decree, ruling or injunction
        shall
        have been enacted, entered, promulgated or endorsed by any court or governmental
        authority of competent jurisdiction which prohibits the consummation of any
        of
        the transactions contemplated by this Agreement.

       

      Section
        7.08. No
        Proceedings or Litigation.
        No
        action, suit or proceeding before any arbitrator or any governmental authority
        shall have been commenced, and, to the Knowledge of the Company no investigation
        by any governmental authority shall have been threatened, against the Company
        or
        any subsidiary, or any of the officers, directors or affiliates of the Company
        or any subsidiary seeking to enjoin, prevent or change the transactions
        contemplated by this Agreement.

       

      Section
        7.09. Sufficient
        Shares Registered for Resale.
        The
        Company shall have sufficient Shares, calculated using the closing trade
        price
        of the Common Stock as of the Trading Day immediately preceding such Draw
        Down
        Notice, registered under the Registration Statement to issue and sell such
        Shares in accordance with such Draw Down Notice.

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

         

      

      Section
        7.10. Warrant.
        The
        Warrant shall have been duly executed, delivered and issued to the Investor
        on
        the Closing Date, and the Company shall not be in default in any material
        respect under any of the provisions thereof, provided that any refusal by
        or
        failure of the Company to issue and deliver Warrant Shares in respect of
        any
        exercise (in whole or in part) thereof shall be deemed to be material for
        the
        purposes of this Section 7.10.

       

      Section
        7.11. Opinion
        of Counsel.
        The
        Investor shall have received the form of opinion agreed to between the parties
        on the Closing Date.

       

      Section
        7.12. Accuracy
        of Investor’s Representation and Warranties.
        The
        representations and warranties of the Investor shall be true and correct
        in all
        material respects as of the date when made as though made at that time except
        for representations and warranties that are made as of a particular
        date.

       

      Section
        7.13. Payment
        of Fees.
        The
        Company shall be current on all undisputed expense invoices that the Company
        is
        required to pay pursuant to Section 10.01.

       

      ARTICLE
        VIII

       

      TERMINATION

       

      Section
        8.01. Term.
        Unless
        otherwise terminated in accordance with Section 8.02 below, this Agreement
        shall terminate upon the earlier to occur of (i) the expiration of the
        Commitment Period or (ii) the issuance of Shares pursuant to this Agreement
        in
        an amount equal to the Maximum Commitment Amount.

       

      Section
        8.02. Other
        Termination.

       

      (a) The
        Investor may terminate this Agreement upon (x) one (1) business day’s
        notice if the Company enters into any Prohibited Transaction as set forth
        in
        Section 6.07 without the Investor’s prior written consent, or (y) one
        (1) business day’s notice if the Investor provides written notice of a Material
        Adverse Effect to the Company, and such Material Adverse Effect continues
        for a
        period of ten (10) Trading Days after the receipt by the Company of such
        notice.

       

      (b) The
        Investor may terminate this Agreement upon one (1) business day’s notice to the
        Company at any time in the event that the Registration Statement is not
        initially declared effective in accordance with the Registration Rights
        Agreement, provided, however, that in the event the Registration Statement
        is
        declared effective prior to the delivery of such notice, the Investor shall
        thereafter have no right to terminate this Agreement pursuant to this Section
        8.02(b).

       

      (c) The
        Investor may terminate this Agreement upon ten (10) business days’ notice to the
        Company at any time in the event that following the first twelve (12) month
        period of the term, the Company fails to make cumulative Draw Downs of at
        least
        $2 million during any consecutive twelve (12) month period during the term.
        For
        the avoidance of doubt, this provision shall not entitle the investor to
        terminate this Agreement prior to the end of the tenty-fourth (24th)
        month
        of the term. 

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

         

      

      (d) The
        Company may terminate this Agreement upon one (1) business day’s notice;
provided,
        however,
        that
        the Company shall not terminate this Agreement pursuant to this Section 8.02(d)
        during
        any Draw Down Pricing Period; provided further;
        that,
        in the event of any termination of this Agreement by the Company hereunder,
        so
        long as the Investor owns Shares purchased hereunder and/or Warrant Shares,
        unless all of such shares of Common Stock may be resold by the Investor without
        registration and without any time, volume or manner limitations pursuant
        to Rule
        144(k) (or any similar provision then in effect) under the Securities Act,
        the
        Company shall not suspend or withdraw the Registration Statement or otherwise
        cause the Registration Statement to become ineffective, or voluntarily delist
        the Common Stock from, the Principal Market without listing the Common Stock
        on
        another Principal Market.

       

      (e) Each
        of
        the parties hereto may terminate this Agreement upon one (1) day’s notice if the
        other party has breached a material representation, warranty or covenant
        to this
        Agreement and such breach is not remedied within ten (10) Trading Days after
        notice of such breach is delivered to the breaching party.

       

      Section
        8.03. Effect
        of Termination.
        In the
        event of termination by the Company or the Investor, written notice thereof
        shall forthwith be given to the other party and the transactions contemplated
        by
        this Agreement shall be terminated without further action by either party.
        If
        this Agreement is terminated as provided in Section 8.01 or 8.02 herein,
        this Agreement shall become void and of no further force and effect, except
        as
        provided in Section 10.13. Nothing in this Section 8.03 shall be
        deemed to release the Company or the Investor from any liability for any
        breach
        under this Agreement occurring prior to such termination, or to impair the
        rights of the Company and the Investor to compel specific performance by
        the
        other party of its obligations under this Agreement arising prior to such
        termination.

       

      ARTICLE
        IX

       

      INDEMNIFICATION

       

      Section
        9.01. Indemnification.

       

      (a) Except
        as
        otherwise provided in this Article IX, unless disputed as set forth in
        Section 9.02, the Company agrees to indemnify, defend and hold harmless the
        Investor and its affiliates and their respective officers, directors, agents,
        employees, subsidiaries, partners, members and controlling persons (each,
        an
“Investor
        Indemnified Party”),
        to
        the fullest extent permitted by law from and against any and all Damages
        directly resulting from or directly arising out of any breach of any
        representation or warranty, covenant or agreement by the Company in this
        Agreement, the Registration Rights Agreement or the Warrant; provided,
        however,
        that
        the Company shall not be liable under this Article IX to an Investor
        Indemnified Party to the extent that such Damages resulted or arose from
        the
        breach by an Investor Indemnified Party of any representation, warranty,
        covenant or agreement of an Investor Indemnified Party contained in this
        Agreement, the Registration Rights Agreement or the Warrant or the negligence,
        recklessness, willful misconduct or bad faith of an Investor Indemnified
        Party.
        The parties intend that any Damages subject to indemnification pursuant to
        this
        Article IX will be net of insurance proceeds (which the Investor
        Indemnified Party agrees to use commercially reasonable efforts to recover).
        Accordingly, the amount which the Company is required to pay to any Investor
        Indemnified Party hereunder (a “Company
        Indemnity Payment”)
        will
        be reduced by any insurance proceeds actually recovered by or on behalf of
        any
        Investor Indemnified Party in reduction of the related Damages. In addition,
        if
        an Investor Indemnified Party receives a Company Indemnity Payment required
        by
        this Article IX in respect of any Damages and subsequently receives any
        such insurance proceeds, then the Investor Indemnified Party will pay to
        the
        Company an amount equal to the Company Indemnity Payment received less the
        amount of the Company Indemnity Payment that would have been due if the
        insurance proceeds had been received, realized or recovered before the Company
        Indemnity Payment was made.

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

         

      

      (b) Except
        as
        otherwise provided in this Article IX, unless disputed as set forth in
        Section 9.02, the Investor agrees to indemnify, defend and hold harmless
        the Company and its affiliates and their respective officers, directors,
        agents,
        employees, subsidiaries, partners, members and controlling persons (each,
        a
“Company
        Indemnified Party”),
        to
        the fullest extent permitted by law from and against any and all Damages
        directly resulting from or directly arising out of any breach of any
        representation or warranty, covenant or agreement by the Investor in this
        Agreement, the Registration Rights Agreement or the Warrant; provided,
        however,
        that
        the Investor shall not be liable under this Article IX to a Company
        Indemnified Party to the extent that such Damages resulted or arose from
        the
        breach by a Company Indemnified Party of any representation, warranty, covenant
        or agreement of a Company Indemnified Party contained in this Agreement,
        the
        Registration Rights Agreement or the Warrant or negligence, recklessness,
        willful misconduct or bad faith of a Company Indemnified Party. The parties
        intend that any Damages subject to indemnification pursuant to this
        Article IX will be net of insurance proceeds (which the Company agrees to
        use commercially reasonable efforts to recover). Accordingly, the amount
        which
        the Investor is required to pay to any Company Indemnified Party hereunder
        (an
“Investor
        Indemnity Payment”)
        will
        be reduced by any insurance proceeds theretofore actually recovered by or
        on
        behalf of any Company Indemnified Party in reduction of the related Damages.
        In
        addition, if a Company Indemnified Party receives an Investor Indemnity Payment
        required by this Article IX in respect of any Damages and subsequently
        receives any such insurance proceeds, then the Company Indemnified Party
        will
        pay to the Investor an amount equal to the Investor Indemnity Payment received
        less the amount of the Investor Indemnity Payment that would have been due
        if
        the insurance proceeds had been received, realized or recovered before the
        Investor Indemnity Payment was made.

       

      Section
        9.02. Notification
        of Claims for Indemnification.
        Each
        party entitled to indemnification under this Article IX (an “Indemnified
        Party”)
        shall,
        promptly after the receipt of notice of the commencement of any claim against
        such Indemnified Party in respect of which indemnity may be sought from the
        party obligated to indemnify such Indemnified Party under this Article IX
        (the “Indemnifying
        Party”),
        notify the Indemnifying Party in writing of the commencement thereof. Any
        such
        notice shall describe the claim in reasonable detail. The failure of any
        Indemnified Party to so notify the Indemnifying Party of any such action
        shall
        not relieve the Indemnifying Party from any liability which it may have to
        such
        Indemnified Party (a) other than pursuant to this Article IX or (b) under
        this Article IX unless, and only to the extent that, such failure results
        in the Indemnifying Party’s forfeiture of substantive rights or defenses or the
        Indemnifying Party is prejudiced by such delay. The procedures listed below
        shall govern the procedures for the handling of indemnification
        claims.

       

      (a) Any
        claim
        for indemnification for Damages that do not result from a Third Party Claim
        as
        defined in the following paragraph, shall be asserted by written notice given
        by
        the Indemnified Party to the Indemnifying Party. Such Indemnifying Party
        shall
        have a period of thirty (30) days after the receipt of such notice within
        which
        to respond thereto. If such Indemnifying Party does not respond within such
        thirty (30) day period, such Indemnifying Party shall be deemed to have refused
        to accept responsibility to make payment as set forth in Section 9.01. If
        such Indemnifying Party does not respond within such thirty (30) day period
        or
        rejects such claim in whole or in part, the Indemnified Party shall be free
        to
        pursue such remedies as specified in this Agreement.

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

         

      

      (b) If
        an
        Indemnified Party shall receive notice or otherwise learn of the assertion
        by a
        person or entity not a party to this Agreement of any threatened legal action
        or
        claim (collectively a “Third
        Party Claim”),
        with
        respect to which an Indemnifying Party may be obligated to provide
        indemnification, the Indemnified Party shall give such Indemnifying Party
        written notice thereof within twenty (20) days after becoming aware of such
        Third Party Claim.

       

      (c) An
        Indemnifying Party may elect to defend (and, unless the Indemnifying Party
        has
        specified any reservations or exceptions, to seek to settle or compromise),
        at
        such Indemnifying Party’s own expense and by such Indemnifying Party’s own
        counsel, any Third Party Claim. Within thirty (30) days after the receipt
        of
        notice from an Indemnified Party (or sooner if the nature of such Third Party
        Claim so requires), the Indemnifying Party shall notify the Indemnified Party
        whether the Indemnifying Party will assume responsibility for defending such
        Third Party Claim, which election shall specify any reservations or exceptions.
        If such Indemnifying Party does not respond within such thirty (30) day period
        or rejects such claim in whole or in part, the Indemnified Party shall be
        free
        to pursue such remedies as specified in this Agreement. In case any such
        Third
        Party Claim shall be brought against any Indemnified Party, and it shall
        notify
        the Indemnifying Party of the commencement thereof, the Indemnifying Party
        shall
        be entitled to assume the defense thereof at its own expense, with counsel
        satisfactory to such Indemnified Party in its reasonable judgment; provided,
        however, that any Indemnified Party may, at its own expense, retain separate
        counsel to participate in such defense at its own expense. Notwithstanding
        the
        foregoing, in any Third Party Claim in which both the Indemnifying Party,
        on the
        one hand, and an Indemnified Party, on the other hand, are, or are reasonably
        likely to become, a party, such Indemnified Party shall have the right to
        employ
        separate counsel and to control its own defense of such claim if, in the
        reasonable opinion of counsel to such Indemnified Party, either (x) one or
        more significant defenses are available to the Indemnified Party that are
        not
        available to the Indemnifying Party or (y) a conflict or potential conflict
        exists between the Indemnifying Party, on the one hand, and such Indemnified
        Party, on the other hand, that would make such separate representation
        advisable; provided,
        however,
        that in
        such circumstances the Indemnifying Party (i) shall not be liable for the
        fees and expenses of more than one counsel to all Indemnified Parties and
        (ii) shall reimburse the Indemnified Parties for such reasonable fees and
        expenses of such counsel incurred in any such Third Party Claim, as such
        expenses are incurred, provided that the Indemnified Parties agree to repay
        such
        amounts if it is ultimately determined that the Indemnifying Party was not
        obligated to provide indemnification under this Article IX. The
        Indemnifying Party agrees that it will not compromise or consent to the entry
        of
        any judgment in any pending or threatened claim relating to the matters
        contemplated hereby (if any Indemnified Party is a party thereto or has been
        actually threatened to be made a party thereto) unless such settlement,
        compromise or consent includes an unconditional release of such Indemnified
        Party from all liability arising or that may arise out of such claim. The
        rights
        accorded to an Indemnified Party hereunder shall be in addition to any rights
        that any Indemnified Party may have at common law, by separate agreement
        or
        otherwise; provided,
        however,
        that
        notwithstanding the foregoing or anything to the contrary contained in this
        Agreement, nothing in this Article IX shall restrict or limit any rights
        that any Indemnified Party may have to seek equitable relief.

       

      ARTICLE
        X

       

      MISCELLANEOUS

       

      Section
        10.01. Fees
        and Expenses.
        

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

         

      

      (a) Each
        of
        the Company and the Investor agrees to pay its own expenses incident to the
        performance of its obligations hereunder, except that the Company shall be
        solely responsible for (i)  all reasonable attorneys fees and expenses
        incurred by the Investor in connection with the preparation, negotiation,
        execution and delivery of this Agreement, the Registration Rights Agreement
        and
        the Warrant, and review of the Registration Statement, and in connection
        with
        any amendments, modifications or waivers of this Agreement, including, without
        limitation, all reasonable attorneys fees and expenses, and (ii) all reasonable
        fees and expenses incurred in connection with the Investor’s enforcement of this
        Agreement, including, without limitation, all reasonable attorneys fees and
        expenses, and (iii) all stamp or other similar taxes and duties, if any,
        levied
        in connection with issuance of the Shares pursuant hereto; provided,
        however,
        that in
        each of the above instances the Investor shall provide customary supporting
        invoices or similar documentation in reasonable detail describing such expenses
        (however, the Investor shall not be obligated to provide detailed time sheets
        for legal services rendered), and provided further
        that the
        maximum aggregate amount payable by the Company pursuant to clause (i) above
        shall be $75,000 and the Investor shall bear all fees and expenses in excess
        of
        $75,000 incurred in connection with the events described under clause (i)
        above.

       

      (b) If
        any
        action at law or in equity is necessary to enforce or interpret the terms
        of
        this Agreement, the Registration Rights Agreement or the Warrant, the prevailing
        party shall be entitled to reasonable fees, costs and necessary disbursements
        in
        addition to any other relief to which such party may be entitied. 

       

      Section
        10.02. Reporting
        Entity for the Common Stock.
        The
        reporting entity relied upon for the determination of the trading price or
        trading volume of the Common Stock on any given Trading Day for the purposes
        of
        this Agreement shall be Bloomberg, L.P. or any successor thereto. The written
        mutual consent of the Investor and the Company shall be required to employ
        any
        other reporting entity.

       

      Section
        10.03. Brokerage.
        Each of
        the parties hereto represents that it has had no dealings in connection with
        this transaction with any finder or broker who will demand payment of any
        fee or
        commission from the other party. The Company, on the one hand, and the Investor,
        on the other hand, agree to indemnify the other against and hold the other
        harmless from any and all liabilities to any Persons claiming brokerage
        commissions or finder’s fees on account of services purported to have been
        rendered on behalf of the indemnifying party in connection with this Agreement
        or the transactions contemplated hereby.

       

      Section
        10.04. Notices.
        All
        notices, demands, requests, consents, approvals, and other communications
        required or permitted hereunder shall be in writing and, unless otherwise
        specified herein, shall be (i) personally served, (ii) deposited in
        the mail, registered or certified, return receipt requested, postage prepaid,
        (iii) delivered by reputable air courier service with charges prepaid, or
        (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set
        forth below or to such other address as such party shall have specified most
        recently by written notice given in accordance herewith, in each case with
        a
        copy to the e-mail address set forth beside the facsimile number for the
        addressee below. Any notice or other communication required or permitted
        to be
        given hereunder shall be deemed effective (a) upon hand delivery or delivery
        by
        facsimile, with accurate confirmation generated by the transmitting facsimile
        machine, at the address or number designated below (if delivered on a business
        day during normal business hours where such notice is to be received), or
        the
        first business day following such delivery (if delivered other than on a
        business day during normal business hours where such notice is to be received)
        or (b) on the second business day following the date of mailing by express
        courier service, fully prepaid, addressed to such address, or upon actual
        receipt of such mailing, whichever shall first occur. The addresses for such
        communications shall be:

       

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

         

      

      If
        to the
        Company:

       

      Discovery
        Laboratories, Inc.

      2600
        Kelly Rd, Suite 100

      Warrington,
        Pennsylvania 18976-3622

      Telephone:
        (215) 448-9300

      Facsimile:
        (215) 448-9557

      E-mail:
        jcooper@discoverylabs.com
        and
        dlopez@discoverylabs.com 

      Attention:  Chief
        Financial Officer and General Counsel

       

      with
        a
        copy (which shall not constitute notice) to:

       

      Dickstein
        Shapiro Morin & Oshinsky LLP

      1177
        Avenue of the Americas, 41st Floor

      New
        York,
        NY 10036-2714

      Telephone:
        (212) 835-1400

      Facsimile:
        (212) 997-9880

      E-mail:
        KotelI@dsmo.com

      Attention:
        Ira L. Kotel

      

      if
        to the
        Investor:

       

      Kingsbridge
        Capital Limited

      Attention:
        Tony Hillman

      PO
        Box
        1075

      Elizabeth
        House

      9
        Castle
        Street

      St
        Helier

      Jersey

      JE42QP

      Channell
        Islands

      Tel:
        To
        be provided

      Fax:
        To
        be provided

      Email:
        admin@kingsbridgecap.com

      

      with
        a
        copy to:

      

      Kingsbridge
        Corporate Services Limited

      Kingsbridge
        House, New Abbey

      Kilcullen,
        County Kildare

      Republic
        of Ireland

      Facsimile:
        011-353-45-482-0030

      E-mail:
        adamgurney@eircom.net;
        emmagalway@eircom.net

      Attention:
        Adam Gurney, Managing Director

       

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

         

      

      with
        an
        additional copy (which shall not constitute notice) to:

       

      Clifford
        Chance US LLP

      31
        West
        52nd
        Street

      New
        York,
        NY 10019

      Facsimile:
        (212) 878-8375

      E-mail:
        keith.andruschak@cliffordchance.com

      Attention:
        Keith M. Andruschak, Esq.

       

      Either
        party hereto may from time to time change its address or facsimile number
        for
        notices under this Section by giving at least ten (10) days’ prior
        written notice of such changed address or facsimile number to the other party
        hereto.

       

      Section
        10.05. Assignment.
        Neither
        this Agreement nor any rights of the Investor or the Company hereunder may
        be
        assigned by either party to any other Person.

       

      Section
        10.06. Amendment;
        No Waiver.
        No
        party shall be liable or bound to any other party in any manner by any
        warranties, representations or covenants except as specifically set forth
        in
        this Agreement, the Warrant and the Registration Rights Agreement. Except
        as
        expressly provided in this Agreement, neither this Agreement nor any term
        hereof
        may be amended, waived, discharged or terminated other than by a written
        instrument signed by both parties hereto. The failure of the either party
        to
        insist on strict compliance with this Agreement, or to exercise any right
        or
        remedy under this Agreement, shall not constitute a waiver of any rights
        provided under this Agreement, nor estop the parties from thereafter demanding
        full and complete compliance nor prevent the parties from exercising such
        a
        right or remedy in the future.

       

      Section
        10.07. Entire
        Agreement.
        This
        Agreement, the Registration Rights Agreement and the Warrant set forth the
        entire agreement and understanding of the parties relating to the subject
        matter
        hereof and supersede all prior and contemporaneous agreements, negotiations
        and
        understandings between the parties, both oral and written, relating to the
        subject matter hereof.

       

      Section
        10.08. Severability.
        If any
        provision of this Agreement becomes or is declared by a court of competent
        jurisdiction to be illegal, unenforceable or void, this Agreement shall continue
        in full force and effect without said provision; provided
        that, if
        the severance of such provision materially changes the economic benefits
        of this
        Agreement to either party as such benefits are anticipated as of the date
        hereof, then such party may terminate this Agreement on five (5) business
        days
        prior written notice to the other party.  In such event, the Registration
        Rights Agreement will terminate simultaneously with the termination of this
        Agreement; provided that in the event that this Agreement is terminated by
        the
        Company in accordance with this Section 10.08 and the Warrant Shares either
        have
        not been registered for resale by the Investor in accordance with the
        Registration Rights Agreement or are otherwise not freely tradable (if and
        when
        issued) in accordance with applicable law, then the Registration Rights
        Agreement in respect of the registration of the Warrant Shares shall remain
        in
        full force and effect.

       

      Section
        10.09. Title
        and Subtitles.
        The
        titles and subtitles used in this Agreement are used for the convenience
        of
        reference and are not to be considered in construing or interpreting this
        Agreement.

       

      Section
        10.10. Counterparts.
        This
        Agreement may be executed in multiple counterparts, each of which may be
        executed by less than all of the parties and shall be deemed to be an original
        instrument which shall be enforceable against the parties actually executing
        such counterparts and all of which together shall constitute one and the
        same
        instrument.

       

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

         

      

      Section
        10.11. Choice
        of Law.
        This
        Agreement shall be construed under the laws of the State of New
        York.

       

      Section
        10.12. Specific
        Enforcement, Consent to Jurisdiction.

       

      (a) The
        Company and the Investor acknowledge and agree that irreparable damage would
        occur in the event that any of the provisions of this Agreement were not
        performed in accordance with their specific terms or were otherwise breached.
        It
        is accordingly agreed that the parties shall be entitled to an injunction
        or
        injunctions to prevent or cure breaches of the provisions of this Agreement
        and
        to enforce specifically the terms and provisions hereof or thereof, this
        being
        in addition to any other remedy to which any of them may be entitled by law
        or
        equity.

       

      (b) Each
        of
        the Company and the Investor (i) hereby irrevocably submits to the
        jurisdiction of the United States District Court and other courts of the
        United
        States sitting in the State of New York for the purposes of any suit, action
        or
        proceeding arising out of or relating to this Agreement and (ii) hereby
        waives, and agrees not to assert in any such suit, action or proceeding,
        any
        claim that it is not personally subject to the jurisdiction of such court,
        that
        the suit, action or proceeding is brought in an inconvenient forum or that
        the
        venue of the suit, action or proceeding is improper. Each of the Company
        and the
        Investor consents to process being served in any such suit, action or proceeding
        by mailing a copy thereof to such party at the address in effect for notices
        to
        it under this Agreement and agrees that such service shall constitute good
        and
        sufficient service of process and notice thereof. Nothing in this
        Section shall affect or limit any right to serve process in any other
        manner permitted by law.

       

      Section
        10.13. Survival.
        The
        representations and warranties of the Company and the Investor contained
        in
        Articles IV and V and the covenants contained in Article V and
        Article VI shall survive the execution and delivery hereof and the Closing
        until the termination of this Agreement, and the agreements and covenants
        set
        forth in Article VIII and Article IX of this Agreement shall survive
        the execution and delivery hereof and the Closing hereunder.

       

      Section
        10.14. Publicity.
        Except
        as otherwise required by applicable law or regulation, or Nasdaq rule or
        judicial process, prior to the Closing, neither the Company nor the Investor
        shall issue any press release or otherwise make any public statement or
        announcement with respect to this Agreement or the transactions contemplated
        hereby or the existence of this Agreement. In the event the Company is required
        by law, regulation, Nasdaq rule or judicial process, based upon reasonable
        advice of the Company’s counsel, to issue a press release or otherwise make a
        public statement or announcement with respect to this Agreement prior to
        the
        Closing, the Company shall consult with the Investor on the form and substance
        of such press release, statement or announcement. Promptly after the Closing,
        each party may issue a press release or otherwise make a public statement
        or
        announcement with respect to this Agreement or the transactions contemplated
        hereby or the existence of this Agreement; provided
        that,
        prior to issuing any such press release, making any such public statement
        or
        announcement, the party wishing to make such release, statement or announcement
        consults and cooperates in good faith with the other party in order to formulate
        such press release, public statement or announcement in form and substance
        reasonably acceptable to both parties.

       

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

         

      

      Section
        10.15. Further
        Assurances.
        From
        and after the date of this Agreement, upon the request of the Investor or
        the
        Company, each of the Company and the Investor shall execute and deliver such
        instruments, documents and other writings as may be reasonably necessary
        or
        desirable to confirm and carry out and to effectuate fully the intent and
        purposes of this Agreement.

       

      [Remainder
        of this page intentionally left blank]

       

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

      IN
        WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
        executed by their respective authorized officer as of the date first
        written.

       

      KINGSBRIDGE
        CAPITAL LIMITED

       

      By: /s/
        Adam Gurney

      Adam
        Gurney

      Chief
        Executive Officer

       

      

      DISCOVERY
        LABORATORIES, INC.

       

      By: /s/
        John G. Cooper 

      John
        G.
        Cooper

      Executive
        Vice President and Chief
        Financial Officer

      

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

         

      

      Exhibit
        A

       

      Form
        of
        Registration Rights Agreement

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      Exhibit
        B

       

      Form
        of
        Warrant

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      Exhibit
        C

       

      Officer’s
        Certificate

       

      I,
        [NAME
        OF OFFICER], do hereby certify to Kingsbridge Capital Limited (the “Investor”),
        with respect to the common stock of Discovery Laboratories, Inc. (the “Company”)
        issuable in connection with the Draw Down Notice, dated _____________ (the
        “Notice”) attached hereto and delivered pursuant to Article III of the
        Common Stock Purchase Agreement, dated April 17, 2006 (the “Agreement”), by and
        between the Company and the Investor, as follows (capitalized terms used
        but
        undefined herein have the meanings given to such terms in the
        Agreement):

       

      1.
         I
        am the
        duly elected [OFFICER] of the Company.

       

      2.
         The
        representations and warranties of the Company set forth in Article IV of
        the Agreement are true and correct in all material respects as though made
        on
        and as of the date hereof (except for such representations and warranties
        that
        are made as of a particular date).

       

      3.
         The
        Company has performed in all material respects all covenants and agreements
        to
        be performed by the Company on or prior to the date hereof related to the
        Notice
        and has satisfied each of the conditions to the obligation of the Investor
        set
        forth in Article VII of the Agreement.

       

      4. The
        Shares issuable in respect of the Notice will be delivered without restrictive
        legend via book entry through the Depositary Trust Company to an account
        designated by the Investor.

       

      The
        undersigned has executed this Certificate this ____ day of ________,
        200[_].

       

      _______________________

      Name:

      Title:Exhibit
      10.2

    

    Execution
      Copy

    

      REGISTRATION
        RIGHTS AGREEMENT

       

      This
        REGISTRATION RIGHTS AGREEMENT (this "Agreement"),
        dated
        as of April 17, 2006, is by and between DISCOVERY LABORATORIES, INC. (the
        "Company")
        and
        KINGSBRIDGE CAPITAL LIMITED, an entity organized and existing under the laws
        of
        the British Virgin Islands (the "Investor").
        

       

      WHEREAS,
        the Company and the Investor have entered into that certain Common Stock
        Purchase Agreement, dated as of the date hereof (the "Purchase
        Agreement"),
        pursuant to which the Company may issue, from time to time, to the Investor
        up
        to $50 million worth of shares of Common Stock as provided for
        therein;

       

      WHEREAS,
        pursuant to the terms of, and in partial consideration for the Investor entering
        into, the Purchase Agreement, the Company has issued to the Investor a warrant,
        exercisable from time to time within five (5) years following the six-month
        anniversary of the date of issuance (the "Warrant")
        for
        the purchase of an aggregate of up to 490,000 shares of Common Stock at a
        price
        specified in such Warrant;

       

      WHEREAS,
        pursuant to the terms of, and in partial consideration for, the Investor's
        agreement to enter into the Purchase Agreement, the Company has agreed to
        provide the Investor with certain registration rights with respect to the
        Registrable Securities (as defined in the Purchase Agreement) as set forth
        herein;

       

      NOW,
        THEREFORE, in consideration of the premises, the representations, warranties,
        covenants and agreements contained herein, in the Warrant, and in the Purchase
        Agreement, and for other good and valuable consideration, the receipt and
        sufficiency of which is hereby acknowledged, intending to be legally bound
        hereby, the parties hereto agree as follows (capitalized terms used herein
        and
        not defined herein shall have the respective meanings ascribed to them in
        the
        Purchase Agreement):

       

      ARTICLE
        I

      REGISTRATION
        RIGHTS

       

      Section
        1.1. Registration
        Statement.

       

      (a) Filing
        of the Registration Statement.
        Upon
        the terms and subject to the conditions set forth in this Agreement, the
        Company
        shall file with the Commission within sixty (60) calendar days after the
        Closing
        Date 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
        for
        the resale by the Investor of the Registrable Securities (the "Registration
        Statement").

       

      (b) Effectiveness
        of the Registration Statement.
        The
        Company shall use commercially reasonable efforts (i) to have the Registration
        Statement declared effective by the Commission as soon as reasonably
        practicable, but in any event no later than one hundred eighty (180) calendar
        days after the Closing Date and (ii) to ensure that the Registration Statement
        remains in effect throughout the term of this Agreement as set forth in Section
        4.2, subject to the terms and conditions of this Agreement.

       

      (c) Regulatory
        Disapproval.
        The
        contemplated effective date for the Registration Statement as described in
        Section 1.1(b) shall be extended without default or liquidated damages hereunder
        or under the Purchase Agreement in the event that the Company's failure to
        obtain the effectiveness of the Registration Statement on a timely basis
        results
        from (i)
        the
        failure of the Investor to timely provide the Company with information requested
        by the Company and necessary to complete the Registration Statement in
        accordance with the requirements of the Securities Act, or (ii) the
        Commission’s
        disapproval of the structure of the transactions contemplated by the Purchase
        Agreement,
        or
        (iii)
        events or circumstances that are not in any way attributable to the Company.
        In
        the
        event
        of
        clause (ii) above,
        the
        parties agree to cooperate with one another in good faith to arrive at a
        resolution acceptable to the Commission.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

         

      

      (d) Failure
        to Maintain Effectiveness of Registration Statement.
        In
        the
        event the Company fails to maintain the effectiveness of the Registration
        Statement (or the Prospectus) throughout the period set forth in Section
        4.2,
        other than temporary suspensions as set forth in Section 1.1(e) and the Investor
        holds any Registrable Securities at any time during the period of such
        ineffectiveness (an “Ineffective
        Period”),
        the
        Company shall pay to the Investor in immediately available funds into an
        account
        designated by the Investor an amount equal to the product of (x) the total
        number of Registrable Securities issued to the Investor under the Purchase
        Agreement (which, for the avoidance of doubt, shall not include any Warrant
        Shares) and owned by the Investor at any time during such Ineffective Period
        (and
        not
        otherwise sold, hypothecated or transferred) and
        (y)
        the result, if greater than zero, obtained by subtracting the VWAP on the
        Trading Day immediately following the last day of such Ineffective Period
        from
        the VWAP on the Trading Day immediately preceding the day on which any such
        Ineffective Period began; provided, however, that (i)
        the
        foregoing payments shall not apply in respect of Registrable Securities
(A)
        that
        are
        otherwise freely tradable by the Investor,
        including pursuant to Rule 144 under the Securities Act (as such Rule may
        be
        amended from time to time, "Rule 144") or (B) if the Company offers to
        repurchase from the Investor such Registrable Securities for a per share
        purchase price equal to the VWAP on the Trading Day immediately preceding
        the
        day on which any such Ineffective Period began and (ii) that the Company
        shall
        be under no obligation to supplement the Prospectus to reflect the issuance
        of
        any Shares pursuant to a Draw Down at any time prior to the day following
        the
        Settlement Date with respect to such Shares and that the failure to supplement
        the Prospectus prior to such time shall not be deemed a failure to maintain
        the
        effectiveness of the Registration Statement (or Prospectus) for purposes
        of this
        Agreement (including this Section 1.1(d)).

       

      (e) Deferral
        or Suspension During a Blackout Period.
        Notwithstanding the provisions of Section 1.1(d),
        if in the good faith judgment of the Company, following consultation with
        internal or external legal counsel, it would be detrimental to the Company
        or
        its stockholders for the Registration Statement to be filed or for resales
        of
        Registrable Securities to be made pursuant to the Registration Statement
        due to
        (i) the
        existence of a material development or potential material development involving
        the Company that the Company would be obligated to disclose in the Registration
        Statement, which disclosure would be premature or otherwise inadvisable at
        such
        time or would have a Material Adverse Effect on the Company or its stockholders,
        or (ii) a
        filing
        of a Company-initiated registration of any class of its equity securities,
        which, in the good faith judgment of the Company, because such filing of
        the
        Registration Statement or continued resale would adversely affect or require
        premature disclosure of the filing of such Company-initiated registration
        (notice thereof, a “Blackout
        Notice”),
        the
        Company shall have the right to (A) immediately
        defer such filing for a period of not more than sixty (60) days beyond the
        date
        by which such Registration Statement was otherwise required hereunder to
        be
        filed or (B) suspend
        use of such Registration Statement for a period of not more than thirty (30)
        days (any such deferral or suspension period, a “Blackout
        Period”).
        The
        Investor acknowledges that it would be seriously detrimental to the Company
        and
        its stockholders for such Registration Statement to be filed (or remain in
        effect) during a Blackout Period and therefore essential to defer such filing
        (or suspend the use thereof) during such Blackout Period and agrees to cease
        any
        disposition of the Registrable Securities during such Blackout Period. The
        Company may not utilize any of its rights under this Section 1.1(e)
        to
        defer the filing of a Registration Statement (or suspend its effectiveness)
        more
        than six (6) times in any twelve (12) month period. In the event that, within
        fifteen (15) Trading Days following any Settlement Date, the Company gives
        a
        Blackout Notice to the Investor and the VWAP on the Trading Day immediately
        preceding such Blackout Period (“Old
        VWAP”)
        is
        greater than the VWAP on the first Trading Day following such Blackout Period
        that the Investor may sell its Registrable Securities pursuant to an effective
        Registration Statement (“New
        VWAP”),
        then
        the Company shall pay to the Investor, by wire transfer of immediately available
        funds to an account designated by the Investor, the
        “Blackout
        Amount.”
For
        the purposes of this Agreement, Blackout Amount means a percentage equal
        to:
        (1) seventy-five percent (75%) if such Blackout Notice is delivered
        prior to the fifth (5th) Trading Day following such Settlement Date;
        (2) fifty percent (50%) if such Blackout Notice is delivered on or after
        the fifth (5th) Trading Day following such Settlement Date, but prior to
        the
        tenth (10th) Trading Day following such Settlement Date; (3) twenty-five
        percent (25%) if such Blackout Notice is delivered on or after the tenth
        (10th)
        Trading Day following such Settlement Date, but prior to the fifteenth (15th)
        Trading Day following such Settlement Date; and (4) zero percent (0%)
        thereafter of: the product of (i) the
        number of Registrable Securities purchased by the Investor pursuant to the
        most
        recent Draw Down and actually held by the Investor (and not otherwise sold,
        hypothecated or transferred) immediately prior to the Blackout
        Period
        and
        (ii) the result, if greater than zero, obtained by subtracting the New VWAP
        from the Old VWAP;
        provided, however, that no Blackout Amount shall be payable in respect of
        Registrable Securities (A) that are otherwise freely tradable by the Investor,
        including under Rule 144, during the Blackout Period, or (B) if the Company
        offers to repurchase from the Investor such Registrable Securities for a
        per
        share purchase price equal to the VWAP on the Trading Day immediately preceding
        the day on which any such Ineffective Period began.
        For any
        Blackout Period in respect of which a Blackout Amount becomes due and payable,
        rather than paying the Blackout Amount, the Company may at its
        sole
        discretion, issue to the Investor shares of Common Stock with an aggregate
        market value determined as of the first Trading Day following such Blackout
        Period equal to the Blackout Amount (“Blackout
        Shares”).

       

      
        
           

        

        
          2

          
            

          

        

        
           

        

         

      

      (f) Liquidated
        Damages;
        Sole
        Remedy.
        The
        Company and the Investor hereto acknowledge and agree that the amounts payable
        under Sections 1.1(d) and 1.1(e) (including
        any Blackout Shares) (i)
        shall
        constitute the Investor’s sole remedy with respect to the Company’s failure to
        maintain the effectiveness, or for any deferral or suspension, of the
        Registration Statement, and (ii)
        shall
        constitute liquidated damages and not penalties. The parties further acknowledge
        that (A)
        the
        amount of loss or damages likely to be incurred by the Investor is incapable
        or
        is difficult to precisely estimate, (B)
        the
        amounts specified in such subsections bear a reasonable proportion and are
        not
        plainly or grossly disproportionate to the probable loss likely to be incurred
        in connection with any failure by the Company to obtain or maintain the
        effectiveness of the Registration Statement, (C)
        one of
        the reasons for the Company and the Investor reaching an agreement as to
        such
        amounts was the uncertainty and cost of litigation regarding the question
        of
        actual damages, and (D)
        the
        Company and the Investor are sophisticated business parties and have been
        represented by sophisticated and able legal and financial counsel and negotiated
        this Agreement at arm's length.
        The
        Investor further agrees that, if the Company makes the payments provided
        for in
        Section 1.1(e), the Company’s deferral or suspension of the Registration
        Statement pursuant to Section 1.1(e) shall not constitute a material breach
        or
        default of any obligation of the Company to the Investor.

       

      (g) Additional
        Registration Statements.
        In the
        event and to the extent that the Registration Statement fails to register
        a
        sufficient amount of Common Stock necessary for the Company to issue and
        sell to
        the Investor and the Investor to purchase from the Company all of the
        Registrable Securities to be issued, sold and purchased under the Purchase
        Agreement and the Warrant, the Company shall, upon a timetable mutually
        agreeable to both the Company and the Investor, prepare and file with the
        Commission an additional registration statement or statements in order to
        effectuate the purpose of this Agreement, the Purchase Agreement, and the
        Warrant. 

       

      
        
           

        

        
          3

          
            

          

        

        
           

        

         

      

      ARTICLE
        II

      REGISTRATION
        PROCEDURES

       

      Section
        2.1. Filings;
        Information.
        The
        Company shall effect the registration with respect to the sale of the
        Registrable Securities by the Investor in accordance with the intended methods
        of disposition thereof. Without limiting the foregoing, the Company in each
        such
        case will do the following as expeditiously as possible, but in no event
        later
        than the deadline, if any, prescribed therefor in this Agreement:

       

      (a) Subject
        to Section 1.1(e), the Company shall (i) prepare and file with the Commission
        the Registration Statement; (ii) use commercially reasonable efforts to cause
        such filed Registration Statement to become and to remain effective (pursuant
        to
        Rule 415 under the Securities Act or otherwise); (iii) prepare and file with
        the
        Commission such amendments and supplements to the Registration Statement
        and the
        Prospectus used in connection therewith as may be necessary to keep such
        Registration Statement effective for the time period prescribed by Section
        4.2
        and in order to effectuate the purpose of this Agreement, the Purchase
        Agreement, and the Warrant; and (iv) comply with the provisions of the
        Securities Act with respect to the disposition of all securities covered
        by such
        Registration Statement during such period in accordance with the intended
        methods of disposition by the Investor set forth in such Registration Statement;
        provided,
        however,
        that
        the Investor shall be responsible for the delivery of the Prospectus to the
        Persons to whom the Investor sells the Shares and the Warrant Shares, and
        the
        Investor agrees to dispose of Registrable Securities in compliance with the
        plan
        of distribution described in the Registration Statement and otherwise in
        compliance with applicable federal and state securities laws.

       

      (b) After
        the
        filing of the Registration Statement, the Company shall promptly notify the
        Investor of any stop order issued or threatened by the Commission in connection
        therewith and take all commercially reasonable actions required to prevent
        the
        entry of such stop order or to remove it if entered.

       

      (c) The
        Company shall use commercially reasonable efforts to (i) register or qualify
        the
        Registrable Securities under such other securities or blue sky laws of each
        jurisdiction in the United States as the Investor may reasonably (in light
        of
        its intended plan of distribution) request, and (ii) cause the Registrable
        Securities to be registered with or approved by such other governmental agencies
        or authorities in the United States as may be necessary by virtue of the
        business and operations of the Company and do any and all other customary
        acts
        and things that may be reasonably necessary or advisable to enable the Investor
        to consummate the disposition of the Registrable Securities; provided,
        however,
        that
        the Company will not be required to qualify generally to do business in any
        jurisdiction where it would not otherwise be required to qualify but for
        this
        Section 2.1(c), subject itself to taxation in any such jurisdiction, consent
        or
        subject itself to general service of process in any such jurisdiction, change
        any existing business practices, benefit plans or outstanding securities
        or
        amend or otherwise modify the Charter or Bylaws.

       

      (d) The
        Company shall make available to the Investor (and will deliver to Investor's
        counsel), (A) subject to restrictions imposed by the United States federal
        government or any agency or instrumentality thereof, copies of all public
        correspondence between the Commission and the Company concerning the
        Registration Statement and will also make available for inspection by the
        Investor and any attorney, accountant or other professional retained by the
        Investor (collectively, the "Inspectors"),
        (B)
        upon reasonable advance notice during normal business hours all financial
        and
        other records, pertinent corporate documents and properties of the Company
        (collectively, the "Records")
        as
        shall be reasonably necessary to enable them to exercise their due diligence
        responsibility, and cause the Company's officers and employees to supply
        all
        information reasonably requested by any Inspectors in connection with the
        Registration Statement; provided,
        however,
        that
        any such Inspectors must agree in writing for the benefit of the Company
        not to
        use or disclose any such Records except as provided in this Section 2.1(d).
        Records that the Company determines, in good faith, to be confidential and
        that
        it notifies the Inspectors are confidential shall not be disclosed by the
        Inspectors unless the disclosure or release of such Records is requested
        or
        required pursuant to oral questions, interrogatories, requests for information
        or documents or a subpoena or other order from a court of competent jurisdiction
        or other judicial or governmental process; provided,
        however,
        that
        prior to any disclosure or release pursuant to the immediately preceding
        clause,
        the Inspectors shall provide the Company with prompt notice of any such request
        or requirement so that the Company may seek an appropriate protective order
        or
        waive such Inspectors' obligation not to disclose such Records; and,
provided,
        further,
        that if
        failing the entry of a protective order or the waiver by the Company permitting
        the disclosure or release of such Records, the Inspectors, upon advice of
        counsel, are compelled to disclose such Records, the Inspectors may disclose
        that portion of the Records that counsel has advised the Inspectors that
        the
        Inspectors are compelled to disclose; provided,
        however,
        that
        upon any such required disclosure, such Inspector shall use his or her best
        efforts to obtain reasonable assurances that confidential treatment will
        be
        afforded such information. The Investor agrees that information obtained
        by it
        solely as a result of such inspections (not including any information obtained
        from a third party who, insofar as is known to the Investor after reasonable
        inquiry, is not prohibited from providing such information by a contractual,
        legal or fiduciary obligation to the Company) shall be deemed confidential
        and
        shall not be used for any purposes other than as indicated above or by it
        as the
        basis for any market transactions in the securities of the Company or its
        affiliates unless and until such information is made generally available
        to the
        public. The Investor further agrees that it will, upon learning that disclosure
        of such Records is sought in a court of competent jurisdiction, give notice
        to
        the Company and allow the Company, at its expense, to undertake appropriate
        action to prevent disclosure of the Records deemed confidential.

       

      
        
           

        

        
          4

          
            

          

        

        
           

        

         

      

      (e) The
        Company shall otherwise comply, in all material respects, with the applicable
        rules and regulations of the Commission, including, without limitation,
        compliance with applicable reporting requirements under the Exchange
        Act.

       

      (f) The
        Company shall appoint a transfer agent and registrar for all of the Registrable
        Securities covered by such Registration Statement not later than the effective
        date of such Registration Statement.

       

      (g) The
        Investor shall cooperate with the Company, as reasonably requested by the
        Company, in connection with the preparation and filing of any Registration
        Statement hereunder. The Company may require the Investor to promptly furnish
        in
        writing to the Company such information as may be required in connection
        with
        such registration including, without limitation, all such information as
        may be
        requested by the Commission or the NASD or any state securities commission
        and
        all such information regarding the Investor, the Registrable Securities held
        by
        the Investor and the intended method of disposition of the Registrable
        Securities. The Investor agrees to provide such information requested in
        connection with such registration within five (5) business days after receiving
        such written request and the Company shall not be responsible for any delays
        in
        obtaining or maintaining the effectiveness of the Registration Statement
        caused
        by the Investor's failure to timely provide such information.

       

      (h) Upon
        receipt of a Blackout Notice from the Company, the Investor shall immediately
        discontinue disposition of Registrable Securities pursuant to the Registration
        Statement covering such Registrable Securities until (i) the Company advises
        the
        Investor that the Blackout Period has terminated and (ii) the Investor receives
        copies of a supplemented or amended prospectus, if necessary. If so directed
        by
        the Company, the Investor will deliver to the Company (at the expense of
        the
        Company) or destroy (and deliver to the Company a certificate of destruction)
        all copies in the Investor's possession (other than a limited number of file
        copies) of the prospectus covering such Registrable Securities that is current
        at the time of receipt of such notice.

       

      
        
           

        

        
          5

          
            

          

        

        
           

        

         

      

      Section
        2.2. Registration
        Expenses.
        Except
        as set forth in Section 10.01 of the Purchase Agreement, the Company shall
        pay
        all registration expenses incurred in connection with the Registration Statement
        (the "Registration
        Expenses"),
        including, without limitation: (i) all registration, filing, securities exchange
        listing and fees required by the National Association of Securities Dealers,
        (ii) all registration, filing, qualification and other fees and expenses
        of
        compliance with securities or blue sky laws (including reasonable fees and
        disbursements of counsel in connection with blue sky qualifications of the
        Registrable Securities), (iii) all word processing, duplicating, printing,
        messenger and delivery expenses, (iv) the Company's internal expenses
        (including, without limitation, all salaries and expenses of its officers
        and
        employees performing legal or accounting duties), (v) the fees and expenses
        incurred by the Company in connection with the listing of the Registrable
        Securities, (vi) reasonable fees and disbursements of counsel for the Company
        and customary fees and expenses for independent certified public accountants
        retained by the Company (including the expenses of any special audits or
        comfort
        letters or costs associated with the delivery by independent certified public
        accountants of such special audit(s) or comfort letter(s), (vii)
        the
        fees and expenses of any special experts retained by the Company in connection
        with such registration and amendments and supplements to the Registration
        Statement and Prospectus, and (viii) premiums and other costs of the Company
        for
        policies of insurance against liabilities of the Company arising out of any
        public offering of the Registrable Securities being registered to the extent
        the
        Company in its discretion elects to obtain and maintain such insurance. Any
        fees
        and disbursements of underwriters, broker-dealers or investment bankers,
        including without limitation underwriting fees, discounts, transfer taxes
        or
        commissions, and any other fees or expenses (including legal fees and expenses)
        if any, attributable to the sale of Registrable Securities, shall be payable
        by
        each holder of Registrable Securities pro
        rata
        on the
        basis of the number of Registrable Securities of each such holder that are
        included in a registration under this Agreement.

       

      ARTICLE
        III

      INDEMNIFICATION

       

      Section
        3.1. Indemnification.
        The
        Company agrees to indemnify and hold harmless the Investor, its partners,
        affiliates, officers, directors, employees and duly authorized agents, and
        each
        Person or entity, if any, who controls the Investor within the meaning of
        Section 15 of the Securities Act or Section 20 of the Exchange Act, together
        with the partners, affiliates, officers, directors, employees and duly
        authorized agents of such controlling Person or entity (collectively, the
        "Controlling
        Persons") (each
        of
the
        Investor, its partners, affiliates, officers, directors, employees and duly
        authorized agents, and the
        Investor’s Controlling Persons, an “Investor Indemnified Person”),
        from
        and against any loss, claim, damage, liability, costs and expenses (including,
        without limitation, reasonable attorneys' fees and disbursements and costs
        and
        expenses of investigating and defending any such claim) (collectively,
        "Damages"), joint or several, and any action or proceeding in respect thereof
        to
        which an
        Indemnified Investor Person
        may
        become subject under the Securities Act or otherwise, as incurred, insofar
        as
        such Damages (or actions or proceedings in respect thereof) arise out of,
        or are
        based upon, any untrue statement or alleged untrue statement of a material
        fact
        contained in any Registration Statement, or in any preliminary prospectus,
        final
        prospectus, summary prospectus, amendment or supplement relating to the
        Registrable Securities or arises out of, or are based upon, any omission
        or
        alleged omission to state therein a material fact required to be stated therein
        or necessary to make the statements therein under the circumstances not
        misleading, and shall reimburse such
        Investor Indemnified Person
        for any
        legal and other expenses reasonably incurred by the Investor, its partners,
        affiliates, officers, directors, employees and duly authorized agents, or
        any
        such Controlling Person, as incurred, in investigating or defending or preparing
        to defend against any such Damages or actions or proceedings; provided,
        however,
        that
        the Company shall not be liable to the extent that any such Damages arise
        out of
or
        are
        based upon an untrue statement or alleged untrue statement or omission or
        alleged omission made in such Registration Statement, or any such preliminary
        prospectus, final prospectus, summary prospectus, amendment or supplement
        in
        reliance upon and in conformity with written information furnished to the
        Company by or on behalf of the Investor or any other person who participates
        as
        an underwriter in the offering or sale of such securities, in either case,
        specifically stating that it is for use in the preparation thereof. In
        connection with any Registration Statement with respect to which the Investor
        is
        participating, the Investor will indemnify and hold harmless, to the same
        extent
        and in the same manner as set forth in the preceding paragraph, the Company,
        each of its partners, affiliates, officers, directors, employees and
        duly
        authorized agents and
        each
        of the Company’s Controlling Persons (each
        a
        "Company
        Indemnified Person")
        against any Damages to which any Company Indemnified Person may become subject
        under the Securities Act, the Exchange Act or otherwise, insofar as such
        Damages
        arise out of or are based upon (a) any untrue statement or alleged untrue
        statement of a material fact contained in any Registration Statement, or
        in any
        preliminary prospectus, final prospectus, summary prospectus, amendment or
        supplement relating to the Registrable Securities or arise out of, or are
        based
        upon, any omission or alleged omission to state therein a material fact required
        to be stated therein or necessary to make the statements therein under the
        circumstances not misleading to the extent that such violation occurs in
        reliance upon and in conformity with written information furnished to the
        Company by the Investor or on behalf of the Investor expressly for use in
        connection with such Registration Statement, or (b) any failure by the Investor
        to comply with prospectus delivery requirements of the Securities Act, the
        Exchange Act or any other law or legal requirement applicable to sales under
        the
        Registration Statement.

       

      
        
           

        

        
          6

          
            

          

        

        
           

        

         

      

      Section
        3.2. Conduct
        of Indemnification Proceedings.
        All
        claims for indemnification under Section 3.1 shall be asserted and resolved
        in
        accordance with the provisions of Section 9.02 and 9.03 of the Purchase
        Agreement.

       

      Section
        3.3. Additional
        Indemnification.
        Indemnification
        similar to that specified in the preceding paragraphs of this Article 3 (with
        appropriate modifications) shall be given by the Company and
        the
        Investor with
        respect to any required registration or other qualification of securities
        under
        any federal or state law or regulation of any governmental authority other
        than
        the Securities Act. The provisions of this Article III shall be in addition
        to
        any other rights to indemnification, contribution or other remedies which
        an
Investor
        Indemnified
        Person
        or a
        Company Indemnified Person may have pursuant to law, equity, contract or
        otherwise.

       

      To
        the
        extent that any indemnification provided for herein is prohibited or limited
        by
        law, the indemnifying party will make the maximum contribution with respect
        to
        any amounts for which it would otherwise be liable under this Article III
        to the
        fullest extent permitted by law. However, (a) no contribution will be made
        under
        circumstances where maker of such contribution would not have been required
        to
        indemnify the indemnified party under the fault standards set forth in this
        Article III, (b) if the Investor is guilty of fraudulent misrepresentation
        (within the meaning of Section 11(f) of the Securities Act),
        no
        Investor
        Indemnified Person
        will
        be
        entitled to contribution from any Person who is not guilty of such fraudulent
        misrepresentation, and (c) contribution (together with any indemnification
        obligations under this Agreement) by the Investor will be limited in amount
        to
        the proceeds received by the Investor from sales of Registrable
        Securities.

       

      ARTICLE
        IV

      MISCELLANEOUS

       

      Section
        4.1. No
        Outstanding Registration Rights.
        Except
        as otherwise disclosed in accordance with the Purchase Agreement or in the
        Commission Documents, the Company represents and warrants to the Investor
        that
        there is not in effect on the date hereof any agreement by the Company pursuant
        to which any holders of securities of the Company have a right to cause the
        Company to register or qualify such securities under the Securities Act or
        any
        securities or blue sky laws of any jurisdiction.

       

      
        
           

        

        
          7

          
            

          

        

        
           

        

         

      

      Section
        4.2. Term.
        The
        registration rights provided to the holders of Registrable Securities hereunder,
        and the Company's obligation to keep the Registration Statement effective,
        shall
        terminate at the earlier of (i) such time that is two years following the
        termination of the Purchase Agreement, (ii) such time as all Registrable
        Securities have been issued and have ceased to be Registrable Securities,
        or
        (iii) upon the consummation of an "Excluded Merger or Sale" as defined in
        the
        Warrant. Notwithstanding the foregoing, paragraphs
        (d)
        and
        (f)
        of
        Section 1.1, Article III, Section 4.7, Section 4.8, Section 4.9, Section
        4.10
        and Section 4.13 shall survive the termination of this Agreement.

       

      Section
        4.3. Rule
        144.
        The
        Company will, at its expense, promptly take such action as holders of
        Registrable Securities may reasonably request to enable such holders of
        Registrable Securities to sell Registrable Securities without registration
        under
        the Securities Act within the limitation of the exemptions provided by (a)
        Rule
144,
        or (b)
        any similar rule or regulation hereafter adopted by the Commission;
        provided, that such holders of Registrable Securities may not make any such
        request more than once in any calendar quarter during the term of this
        Agreement.
        If at
        any time the Company is not required to file such reports, it will, at its
        expense, forthwith upon the written request of any holder of Registrable
        Securities, make available adequate current public information with respect
        to
        the Company within the meaning of paragraph (c)(2) of Rule 144 or such other
        information as necessary to permit sales pursuant to Rule 144. Upon the request
        of the Investor, the Company will deliver to the Investor a written statement,
        signed by the Company's principal financial officer, as to whether it has
        complied with such requirements.

       

      Section
        4.4. Certificate.
        The
        Company will, at its expense, forthwith upon the request of any holder of
        Registrable Securities, deliver to such holder a certificate, signed by the
        Company's principal financial officer, stating (a) the Company's name, address
        and telephone number (including area code), (b) the Company's Internal Revenue
        Service identification number, (c) the Company's Commission file number,
        (d) the
        number of shares of each class of Stock outstanding as shown by the most
        recent
        report or statement published by the Company, and (e) whether the Company
        has
        filed the reports required to be filed under the Exchange Act for a period
        of at
        least ninety (90) days prior to the date of such certificate and in addition
        has
        filed the most recent annual report required to be filed
        thereunder.

       

      Section
        4.5. Amendment
        And Modification.
        Any
        provision of this Agreement may be waived, provided that such waiver is set
        forth in a writing executed by both parties to this Agreement. The provisions
        of
        this Agreement, including the provisions of this sentence, may be amended,
        modified or supplemented, and waivers or consents to departures from the
        provisions hereof may be given, with the written consent of the Investor
        and the
        Company. No course of dealing between or among any Person having any interest
        in
        this Agreement will be deemed effective to modify, amend or discharge any
        part
        of this Agreement or any rights or obligations of any person under or by
        reason
        of this Agreement.

       

      Section
        4.6. Successors
        and Assigns; Entire Agreement.
        This
        Agreement and all of the provisions hereof shall be binding upon and inure
        to
        the benefit of the parties hereto and their respective successors and permitted
        assigns. The Company may assign this Agreement at any time in connection
        with a
        sale or acquisition of the Company, whether by merger, consolidation, sale
        of
        all or substantially all of the Company’s assets, or similar transaction,
        without the consent of the Investor, provided that the successor or acquiring
        Person or entity agrees in writing to assume all of the Company’s rights and
        obligations under this Agreement. Investor may assign its rights and obligations
        under this Agreement only with the prior written consent of the Company,
        and any
        purported assignment by the Investor absent the Company’s consent shall be null
        and void. This Agreement, together with the Purchase Agreement and the Warrant,
        sets forth the entire agreement and understanding between the parties as
        to the
        subject matter hereof and merges and supersedes all prior discussions,
        agreements and understandings of any and every nature among them.

       

      
        
           

        

        
          8

          
            

          

        

        
           

        

         

      

      Section
        4.7. Severability.
        If
        any
        provision of this Agreement becomes or is declared by a court of competent
        jurisdiction to be illegal, unenforceable or void, this Agreement shall continue
        in full force and effect without said provision; provided
        that, if
        the severance of such provision materially changes the economic benefits
        of this
        Agreement to either party as such benefits are anticipated as of the date
        hereof, then such party may terminate this Agreement on five (5) business
        days
        prior written notice to the other party.  In such event, the Purchase
        Agreement will terminate simultaneously with the termination of this
        Agreement.

       

      Section
        4.8. Notices.
        All
        notices, demands, requests, consents, approvals, and other communications
        required or permitted hereunder shall be given in accordance with Section
        10.04
        of the Purchase Agreement.

       

      Section
        4.9. Governing
        Law; Dispute Resolution.
        This
        Agreement shall be construed under the laws of the State of New York.

       

      Section
        4.10. Headings.
        The
        headings in this Agreement are for convenience of reference only and shall
        not
        constitute a part of this Agreement, nor shall they affect their meaning,
        construction or effect.

       

      Section
        4.11. Counterparts.
        This
        Agreement may be executed in multiple counterparts, each of which shall be
        deemed to be an original instrument and all of which together shall constitute
        one and the same instrument.

       

      Section
        4.12. Further
        Assurances.
        Each
        party shall cooperate and take such action as may be reasonably requested
        by
        another party in order to carry out the provisions and purposes of this
        Agreement and the transactions contemplated hereby.

       

      Section
        4.13. Absence
        of Presumption.
        This
        Agreement shall be construed without regard to any presumption or rule requiring
        construction or interpretation against the party drafting or causing any
        instrument to be drafted.

       

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

      IN
        WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
        by
        the undersigned, thereunto duly authorized, as of the date first set forth
        above.

       

      KINGSBRIDGE
        CAPITAL LIMITED

       

       

      
        	
              	By:	
                /s/
                  Adam Gurney   

              

        	 	 	Adam Gurney

        	 	 	Chief Executive
                Officer

      

       

       

      DISCOVERY
        LABOARATORIES, INC.

      

      

      
        
          	
                	By:	
                  /s/
                    John G. Cooper     

                

          	 	 	John G. Cooper

          	 	 	Executive Vice President and Chief
                  Financial
                  Officer

        

         

        
          
             

          

          
            10

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00102-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00102-of-00352.parquet"}]]