Document:

EXHIBIT 10.1

Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked by [***], have been
separately filed with the Securities and Exchange Commission.

                           COMMERCIALIZATION AGREEMENT

                                      AMONG

                          DISCOVERY LABORATORIES, INC.

                                       and

                       QUINTILES TRANSNATIONAL CORPORATION

<PAGE>

                                TABLE OF CONTENTS

                                                                            PAGE

ARTICLE 1         SERVICES OVERVIEW; QUINTILES EXCLUSIVITY....................1

         1.1      Definitions.................................................1

         1.2      Overview; Discovery Engagement of Quintiles.................1

         1.3      Quintiles Exclusive Rights..................................1

         1.4      Retained Rights by Discovery................................1

ARTICLE 2         COMMITTEES..................................................2

         2.1      Joint Commercialization Committee ("JCC")...................2

         2.1.1    Formation; Purposes and Principles..........................2

         2.1.2    Membership..................................................2

         2.1.3    Meetings....................................................3

         2.2      Agendas and Minutes for the JCC.............................3

         2.3      No Authority to Modify Agreement............................3

ARTICLE 3         MARKETING PLAN; DETERMINATION OF FULLY LOADED COST..........4

         3.1      Marketing Plan..............................................4

         3.2      Plan Contents...............................................4

         3.3      Determination of Fully Loaded Cost..........................4

         3.3.1    Baseline for Fully Loaded Cost of Sales Force...............5

ARTICLE 4         QUINTILES RESPONSIBILITIES..................................5

         4.1      Covenant to Operate under the Agreement; General Diligence
                  Requirement.................................................5

         4.2      Marketing Services..........................................5

         4.2.1    Marketing Representative....................................5

         4.3      Hiring Sales Force..........................................5

         4.4      Fully Dedicated or Syndicated Sales Force...................6

         4.5      Training Requirements.......................................6

         4.6      Quintiles Responsibilities..................................6

         4.7      Records and Reports Regarding Promotional Activities........7

         4.8      Performance Audits..........................................7

ARTICLE 5         DISCOVERY'S RESPONSIBILITIES AND OBLIGATIONS................7
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         5.1      Regulatory Affairs...........................................7

         5.2      Minimum Pre-Launch Marketing Commitment......................7

         5.3      Minimum Sales  Force Expenditure.............................7

         5.4      Obligation to Provide Samples................................8

         5.5      Sales and Distribution.......................................8

         5.5.1    Pricing......................................................8

         5.5.2    Booking Sales; Distribution..................................8

         5.5.3    Product Returns..............................................8

         5.6      Discovery Responsibilites....................................8

ARTICLE 6         TRAINING; ADVERTISING AND PROMOTIONAL MATERIALS..............8

         6.1      Training Programs............................................8

         6.1.1    Content......................................................8

         6.1.2    Cost.........................................................9

         6.2      Advertising and Promotional Materials........................9

         6.2.1    Creation and Use.............................................9

         6.2.2    Ownership; FDA Approval......................................9

         6.2.3    Discovery Logos..............................................9

ARTICLE 7         REGULATORY ISSUES AND COMPLAINTS.............................9

         7.1      Ownership of Regulatory Filings and Compliance...............9

         7.2      Communication with the FDA and Other Regulatory Agencies....10

         7.3      New Developments Relating to Product........................10

         7.4      Product Recalls.............................................10

         7.5      Adverse Event Reporting Procedures..........................10

         7.6      Product Inquiries; Complaints...............................10

         7.7      Database of Clinical Trial Data.............................11

ARTICLE 8         ACCOUNTING; INVOICING AND PAYMENT...........................11

         8.1      Accounting..................................................11

         8.2      Payment Schedule ...........................................11
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         8.3      Payment of Invoices.........................................11

         8.3.1    Wiring Instructions.........................................11

         8.4      Penalty for Late Payment....................................11

         8.5      Record Keeping and Financial Audits.........................11

ARTICLE 9         REPRESENTATIVES AND COVENANTS ..............................12

         9.1      Mutual Authority............................................12

         9.1.1    Corporate Power.............................................12

         9.1.2    Due Authorization...........................................12

         9.1.3    Binding Agreement...........................................12

         9.1.4    Grant of Rights; Maintenance of Agreements..................12

         9.1.5    Validity....................................................13

         9.2      Conformance with Laws.......................................13

         9.3      Rights in Product...........................................13

         9.4      Record Maintenance..........................................13

         9.5      Firewall....................................................14

         9.6      No Use fo Names or Trademarks...............................14

         9.7      NDA Filing..................................................14

         9.8      Independent Contractor......................................14

ARTICLE 10        CONFIDENTIALITY.............................................14

         10.1     Confidential Information....................................14

         10.2     Ownership of Data; No License...............................14

         10.3     Survival....................................................15

ARTICLE 11        INDEMNIFICATION.............................................15

         11.1     Indemnification by Discovery................................15

         11.2     Indemnification by Quintiles................................15

         11.3     Procedure...................................................15

         11.4     No Consequential Damages....................................16

         11.5     Discovery Responsibility for Product Description............16
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         11.6     Insurance...................................................16

ARTICLE 12        TERM AND TERMINATION........................................16

         12.1     Term........................................................16

         12.2     Renewal.....................................................16

         12.3     Material Breach.............................................16

         12.4     No Product Launch...........................................17

         12.5     Bankruptcy..................................................17

         12.6     Accrued Rights .............................................17

         12.7     Right to Receive Data.......................................18

         12.8     Survival....................................................18

ARTICLE 13        SALES FORCE CONVERSION......................................18

         13.1     Right to Convert Sales Force................................18

         13.2     Transition Plan.............................................18

         13.3     Discovery Determination.....................................18

         13.4     Proprietary Information.....................................18

ARTICLE 14        DISPUTE RESOLUTION..........................................19

         14.1     Disputes....................................................19

         14.2     Governing Law...............................................19

ARTICLE 15        MISCELLANEOUS...............................................19

         15.1     Return of Materials.........................................19

         15.2     Nonsolicitation of Employees................................19

         15.3     Entire Agreement; Amendment.................................20

         15.4     Force Majeure...............................................20

         15.5     Notices.....................................................20

         15.6     Consents Not Unreasonably Witheld or Delayed................21

         15.7     Maintenance of Records......................................21

         15.8     United States Dollars.......................................21

         15.9     No Strict Construction......................................21
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         15.10    Assignment..................................................21

         15.11    Performance by Affiliates...................................22

         15.12    Counterparts................................................22

         15.13    Further Actions.............................................22

         15.14    Severability................................................22

         15.15    Ambiguities.................................................22

         15.16    Headings....................................................22

         15.18    No waiver...................................................22
<PAGE>

EXHIBIT A
    DEFINITIONS.............................................................A-1

EXHIBIT B
    MARKETING PLAN OUTLINE..................................................B-1

SCHEDULE I
    QUINTILES RESPONSIBILITIES.............................................SI-1

SCHEDULE II
    DISCOVERY RESPONSIBILITIES & OBLIGATIONS, DISCOVERY SALES PROJECT.....SII-1

SCHEDULE III
    ROLE DEFINITIONS.....................................................SIII-1

                                       1.
<PAGE>

                           COMMERCIALIZATION AGREEMENT

THIS Commercialization Agreement (the "Agreement") is made effective as of the
10th day of December, 2001 (the "Effective Date"), by and between Discovery
Laboratories, Inc., a corporation organized and existing under the laws of
Delaware, having its principal place of business at 350 South Main Street, Suite
307 Doylestown, PA 18901-4874 ("Discovery"), and Quintiles Transnational Corp.,
a corporation organized and existing under the laws of North Carolina, with its
principal place of business at 4709 Creekstone Drive, Suite 200, Durham, NC
27703 ("Quintiles"), each on behalf of itself and its Affiliates. Discovery and
Quintiles are sometimes referred to herein individually as a "Party" and
collectively as the "Parties."

      In consideration of the following covenants, promises and obligations,
Discovery and Quintiles agree as follows.

                                    ARTICLE 1

                    SERVICES OVERVIEW; QUINTILES EXCLUSIVITY

      1.1 Definitions. Capitalized terms used but not defined in the text of
this Agreement shall have the meanings ascribed to them on Exhibit A hereto.

      1.2 Overview; Discovery Engagement of Quintiles. Pursuant to this
Agreement, and subject to the terms and conditions of, the Parties shall
collaborate to develop and sustain a market for and promote Surfaxin(R) (the
"Product", as further defined on Exhibit A) in the Territory. Subject to the
terms and conditions of this Agreement, Discovery shall engage Quintiles and/or
Quintiles Affiliates to provide (i) pre- and post-launch marketing activities
("Marketing Services") and (ii) the recruitment, deployment and management of a
dedicated Sales Force ("Sales Force Services" and, together with any Marketing
Services, "Services") for the Product in the Territory, on a preferred basis all
as provided herein. In recognition of the various undertakings provided to
Discovery herein and conditioned upon the performance of the payment obligations
of PharmaBio Development, Inc. ("PharmaBio") as set forth in the (X) Investment
and Commission Agreement (herein so called) and (Y) Loan Agreement (herein so
called) between Discovery and PharmaBio, as appropriate, executed on the date
hereof, Discovery shall pay Quintiles the compensation as set forth herein.
While the Parties have allocated their respective responsibilities under this
Agreement, the Parties intend this program to be broadly collaborative, and seek
to achieve consensus-based decision making to the extent practical, with the
common objective of maximizing the short-term and long-term commercial success
of the Product in the Territory, subject to the terms and conditions of this
Agreement. The Parties further intend to consider appropriate commercialization
constructs with respect to jointly commercializing other neonatal products and
the Product for other indications.

      1.3 Quintiles Exclusive Rights. Subject to the terms and conditions of
this Agreement, during the Term, Quintiles (either itself or through an
Affiliate) shall have the exclusive right to provide Sales Force Services for
the Product in the Territory. Except as otherwise provided herein, Quintiles
shall not have any rights with respect to the Product inside or outside of the
Territory.

                                       2.
<PAGE>

      1.4 Retained Rights by Discovery. Except as otherwise expressly provided
in Section 1.3, Discovery shall retain all right, title and interest in and to
the Product including, but not limited to, owning all clinical trial data and
designs, protocols, regulatory filings, applications, and approvals for the
Product and data in support thereof, and all manufacturing, distribution of
finished products to designated third party distributor, patent, copyright,
trade secret and trademark rights relating to the Product. Discovery shall be
responsible for conducting all activities for clinical development of the
Product. No license is granted to Quintiles hereunder, either directly or by
implication. Quintiles acknowledges that any study sponsored by or under the
direction of Discovery is a proprietary program of Discovery, containing
trademarks, trade secrets and other intellectual property of Discovery, whether
or not such rights are utilized in the marketing, promotion or sale of the
Product.

                                    ARTICLE 2

                                   COMMITTEES

      2.1 Joint Commercialization Committee ("JCC").

            2.1.1 Formation; Purposes and Principles. The JCC shall have overall
responsibility for the success of the matters related to the Product in the
Territory as established by this Agreement, including without limitation: (i) to
review and approve the pre- and post-launch Marketing Plan as well as any other
matters required for the sales and promotion of the Product in the Territory,
except to the extent that certain matters are solely the responsibility of a
single Party under this Agreement; (ii) to determine the overall strategy for
marketing, promotion and sales of the Product in the Territory; (iii) to advise,
provide input and determine strategy for future clinical and/or marketing
studies; (iv) to plan and coordinate the Parties' activities hereunder related
to sales and marketing of the Product in the Territory; (v) to adopt and approve
plans and budgets for the Services under this Agreement, including the Marketing
Plan, consistent with the maximization of short-term and long-term profits
derived from the sale of the Product in the Territory and any other activities
related to sales and marketing of the Product in the Territory that the JCC
deems appropriate to achieve the Parties' objectives under this Agreement; (vi)
to request the creation of sales, pricing, and financial reports pertaining to
pre- and post-launch Services and other marketing activities that may be
provided by third parties, and to review such reports in preparation for making
recommendations; (vii) facilitate the flow of information among the Parties,
including coordinating sales activity with manufacturing schedules and
distribution; and (viii) to promptly resolve disputes of the Parties, subject to
Article 14.

            2.1.2 Membership. The JCC will be comprised of an equal number of
Discovery and Quintiles representatives, not exceeding three representatives of
each Party unless otherwise mutually agreed. The JCC shall be chaired by one of
the Discovery representatives. The representatives of Discovery shall
collectively be entitled to 1 vote and the representatives of Quintiles shall
collectively be entitled to 1 vote. The JCC shall to the extent practicable seek
to operate by consensus, provided that Discovery (through its chairperson) will
have the tie-breaking vote on all JCC decisions and further provided, however,
that Discovery shall not be entitled to use such tie-breaking vote to
unilaterally amend the Agreement or make decisions materially impacting

                                       3.
<PAGE>

the [***] pursuant to Article 3. To the extent the JCC is not unanimous with
respect to any of the matters set forth in the preceding sentence, the process
outlined in Section 14 of this Agreement shall be followed. Either Party may
appoint, substitute or replace members of the JCC to serve as their
representatives upon notice to the other Party. The Parties shall appoint the
initial members of the JCC within twenty (20) days after the Effective Date.

            2.1.3 Meetings. The JCC shall meet in person, by video or by
teleconference (as mutually agreed by the Parties from time to time) on a
quarterly basis or more frequently as may be agreed upon, to exercise its
responsibilities as set forth in Section 2.1.1 of this Agreement, and to review
the progress of the Parties in performing the functions and obligations under
this Agreement. Each Party will be responsible for its own travel and related
costs to attend and host JCC meetings. Location of meetings shall alternate
between Discovery headquarters in Doylestown and Quintiles headquarters in
Research Triangle Park, or at such other locations as may be mutually agreed by
the Parties. In order for a meeting of the JCC to be convened, such meeting must
include at least one (1) committee member of each Party and, provided this
condition is met, an unanimous action taken at such meeting shall have been duly
and validly taken by the JCC. The first meeting of the JCC shall be convened
within [***] from the execution of this Agreement. An immediate task for the JCC
shall be to set forth an initial [***] plan including the setting of a deadline
for the development of the Marketing Plan.

      2.2 Agendas and Minutes for the JCC. Unless otherwise decided by the JCC,
each Party will use reasonable efforts to disclose to the chair all proposed
agenda items along with appropriate background or supporting information at
least twenty (20) working days in advance of a JCC meeting. The chair will use
reasonable efforts to will present an agenda with appropriate background or
supporting information at least ten (10) working days in advance of a JCC
meeting. After each meeting of the JCC, the Party whose turn it was hosting such
meeting will prepare, within ten (10) working days after each meeting (whether
held in person, by video or by telecommunication), the minutes reporting in
reasonable detail the actions taken or to be taken by the JCC, or its designees,
the attendees, the status of goals and achievements as well as issues requiring
resolution, and resolutions of previously reported issues, which minutes shall
set forth all pertinent information presented during the meeting in form and
content reasonably acceptable to the other Party and shall be signed by one of
the JCC representatives from each of the Parties.

      2.3 No Authority to Modify Agreement. The JCC shall have no authority to
amend or waive compliance with the terms and conditions of this Agreement, or to
approve actions of the Parties which are inconsistent with this Agreement. Any
such amendments and waivers or actions shall be implemented by means of Section
15.3.

Information marked by [***] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Securities and Exchange Commission.

                                       4.
<PAGE>

                                    ARTICLE 3

               MARKETING PLAN; DETERMINATION OF FULLY LOADED COST

      3.1 Marketing Plan. The principal mechanism by which the Parties
coordinate their sales and marketing activities will be a Marketing Plan, to be
prepared and periodically updated as set forth below. The Parties shall take
preparatory steps with respect to the Marketing Plan in accordance with Section
2.1.3 but in any event the Marketing Plan shall be complete within the time set
forth in Section 2.1.3, at which time the JCC shall submit the Marketing Plan to
the respective Chief Executive Officers of the Parties (or their designees). In
preparation for submission thereof, a draft Marketing Plan shall be prepared by
members of the JCC or its designees, and submitted to the Chief Executive
Officers for approval. The initial Marketing Plan will cover the year 2002
through the first year following Product Launch. Periodically thereafter, but no
less frequently than annually (according to a schedule to be established by the
JCC), the JCC shall be responsible for causing the preparation or updating of
the Marketing Plan and submitting to the Chief Executive Officers for approval.
Each Marketing Plan shall include at least a two (2) year projection of Product
plans and budgets.

      3.2 Plan Contents. Each Marketing Plan shall include a review of the
marketplace, marketing objectives, strategies, and supporting tactics (with
respective costs, timing, and responsibilities), clinical support plans,
marketing study plans for future clinical and/or marketing studies, Sales Force
effort, pricing, inventory requirements and distribution plans for the Product,
together with sales, revenue and expense forecasts for Product sales in the
Territory. The content of the Marketing Plan shall be determined by the JCC, but
shall generally be in a form consistent with the outline attached hereto as
Exhibit B, and shall include among other items the overall level of anticipated
field sales resource commitments. All budgets contained in the Marketing Plan
shall be based on estimates of the Quintiles Fully Loaded costs and associated
pass-through expenses of the component services contained in the Marketing Plan.

      3.3 Determination of Fully Loaded Cost. Quintiles under this Agreement
shall be paid for by Discovery on the basis of the "Fully Loaded Cost" of such
Services. Fully Loaded Cost means the usual and customary fee charged by
Quintiles (or the Quintiles Affiliate, as the case may be) to Third Parties
under a fee for service arrangement for the type of services rendered by it
pursuant to this Agreement (such fee to be based on services of comparable
volume and comparable quality), inclusive of the service provider's customary
profit margin for such volume and quality of service. Fully Loaded Cost shall be
adjusted on an annual basis for increases or decreases caused by cost of living
adjustments, merit salary increases and similar financial adjustments necessary
to maintain continuity of the personnel and resource commitments or as otherwise
appropriate. Prior to Quintiles providing Marketing Services or Sales Force
Services, the JCC shall execute a work order in form and substance satisfactory
to the Parties (the "Work Order") setting forth the then current Fully Loaded
Cost of such. The JCC shall update such Work Order as needed to reflect changes
in the services being provided and/or changes in the usual and customary fees
charged by Quintiles and Quintiles Affiliates. The Parties (through the JCC)
shall indicate their agreement in advance regarding any new or revised type or
volume of services, or changes to the pricing of such services by executing an
appropriate change order.

                                       5.
<PAGE>

            3.3.1 Sales Force Services. In accordance with Section 4.3,
Schedules I and II, and as otherwise appropriate in the circumstances, Quintiles
will provide to Discovery a Sales Force, at the Fully Loaded Cost, to commence
in a manner consistent with the then most currently approved version of the
Marketing Plan, consisting of such number of Sales Representatives and
management and administrative support as the JCC determines is in the best
interest of the Product. The post-Launch term of the Quintiles Sales Force
Services shall be for 7 years. The JCC may advance the start of the Sales Force
or amend the size of the Sales Force as necessary. In the event a Syndicated
Sales Force (as hereinafter defined) is recommended by the JCC, pursuant to
Section 4.4 of this Agreement, the Fully Loaded Cost shall be determined by
Quintiles, and except as otherwise provided herein, Discovery shall be
responsible for such Fully Loaded Cost, except for such portions of the Fully
Loaded Cost as may be contractually undertaken by one or more third parties,
with the consent of Quintiles, which consent shall not be unreasonably withheld.

                                    ARTICLE 4

                           QUINTILES RESPONSIBILITIES

      4.1 Covenant to Operate under the Agreement; General Diligence
Requirement. Quintiles shall use its commercial best efforts to market and sell
the Product in the Territory in accordance with the Marketing Plan, the
Promotional Materials, this Agreement and all applicable laws, rules and
regulations. Except as expressly set forth in this Agreement, the criteria for
Quintiles performance shall be consistent with the Quintiles standards for sales
and marketing projects of similar size and scope and shall be according to
performance metrics to be established and monitored by the JCC.

      4.2 Marketing Services. Quintiles shall provide all Marketing Services on
a fee-for-service basis, charging the Fully Loaded Cost. Pre- and post-launch
Marketing Services shall be included in the Marketing Plan and shall include the
Fully Loaded Cost of a Product Manager as defined in Section 4.2.1. The fees and
expenses for Marketing Services may be paid by Discovery through advances from
PharmaBio or otherwise.

            4.2.1 Product Manager. An initial activity of the JCC will be the
approval of a Quintiles Personnel as the primary product manager for the Product
(the "Product Manager") to coordinate and/or commence Marketing Services and
other marketing activities, including participation with and supporting the JCC
in the design of the pre- and post-launch Marketing Plan. Quintiles will
recommend for Discovery's approval a qualified employee for this role, who shall
be assigned full-time, unless otherwise agreed by the JCC. The Product Manager
shall report to a Quintiles Personnel of suitable experience and stature within
Quintiles and shall aggressively drive marketing and related pre- and
post-launch recommendations. As appropriate, the Product Manager will recommend
to the JCC when additional resources are needed, on a dedicated or non-dedicated
basis, to optimize marketing results. As a component of pre-launch marketing
activities, the Product Manager will recommend to the JCC solutions on a variety
of ancillary relationships, including, but not limited to distribution
relationships. The Marketing Plan shall include the costs related to the
services of the Product Manager at his or her usual and customary hourly rate
and the reasonable expenses of the Product

                                       6.
<PAGE>

      4.3 Hiring Sales Force. As part of post-launch Marketing Services,
Quintiles shall hire, train and maintain the Sales Force for promotion of the
Product in the Territory on the terms and conditions of this Agreement, which
shall be completed at least one (1) month in advance of the date of the expected
Launch (as communicated by the JCC to Quintiles in writing at least four (4)
months in advance of the expected Launch). The hiring standards for the members
of the Sales Force shall be established by the JCC. The Quintiles Sales Force(s)
size will be determined by the JCC in accordance with the investment recommended
by the JCC as part of the Marketing Plan and at a minimum shall meet the
requirements of the Investment and Commission Agreement, including the Minimum
Sales Force Level, as defined therein. By unanimous agreement, the JCC may
establish a Sales Force Commencement Date different than as set forth herein.

      4.4 Fully Dedicated or Syndicated Sales Force. During the Term, the
primary activity of the Sales Force shall be the marketing and promotion of the
Product in the Territory on a P1 basis, unless otherwise approved in advance by
the JCC. The Sales Force shall be composed of full-time employees of Quintiles.
Quintiles may use the P2 and/or P3 positions to promote non-conflicting
compounds or devices, subject to Discovery consent, which consent shall not be
unreasonably withheld. Discovery shall have the first option to place
Discovery's non-conflicting products, or non-conflicting products Discovery
identifies or acquires, in the P2 and P3 positions as the positions may become
available during the term of this Agreement. In addition, Discovery shall have
the right to take over any P2 or P3 services provided by Quintiles to a third
party on 120 days notice to Quintiles. All P2 and P3 services shall be provided
to Discovery on a fee for service basis based on the Fully Loaded Costs for such
services. Any syndicated team (a "Syndicated Sales Force"), will be branded
consistent with the Product being promoted in the P1 position and any
promotional materials with regard to the Syndicated Sales Force (business cards,
etc.) shall be approved by the JCC after giving due consideration to the
interests of the P2 or P3 third party partner, such approval not to be
unreasonable withheld.

      4.5 Training Requirements. Quintiles shall train all Quintiles Personnel
in accordance with Article 6 hereof.

      4.6 Quintiles Responsibilities. Without limitation a partial list of
responsibilities that shall be performed by Quintiles in providing Sales Force
Services are set forth on Schedule I to this Agreement.

      4.7 Records and Reports Regarding Promotional Activities. Quintiles shall
promptly (and in any event as soon as it is generally available within the
Quintiles organization) provide to Discovery such information regarding ongoing
sales and marketing activities as relate to the plans and budgets hereunder as
Discovery may reasonably request and which are reasonably available to
Quintiles. Additionally, Quintiles will keep complete and accurate records of
all presentations made by the Sales Force in accordance with Quintiles's
customary call reporting procedures (including names of physicians, dates of
presentation and general response to such presentations) as well as other
activities carried out pursuant to the Marketing Plan. Quintiles will make all
such records available to Discovery during regular business hours and upon
reasonable notice, and will, within fifteen (15) days of the end of each month,
provide Discovery a monthly report on sales force activity. Quintiles will
maintain such records for three (3) years following the period to which they

                                       7.
<PAGE>

relate. The record-keeping and access requirements of this Section 4.7 shall
survive the termination of this Agreement for a two (2) year period.

      4.8 Performance Audits. Discovery shall have the right to audit Quintiles'
performance of obligations as set forth in this Article 4, including other
provisions as described in the Schedules attached hereto (generally describing
the activities of the Parties) for the purpose of evaluating and monitoring
conformance with the terms and conditions of this Agreement. Such audits shall
occur during regular business hours and upon reasonable notice, shall not unduly
interfere with Quintiles activities, and shall be conducted at Discovery's sole
expense. In the event an outside auditor is hired to conduct an audit pursuant
to this Section 4.8, such auditor shall be reasonably acceptable to Quintiles
and expressly subject to the same confidentiality provisions as those that apply
to the Parties hereunder.

                                    ARTICLE 5

                  DISCOVERY'S RESPONSIBILITIES AND OBLIGATIONS

      5.1 Regulatory Affairs. Except as otherwise set forth therein, Discovery
shall have the responsibilities for regulatory affairs set forth in Article 7,
and shall keep the JCC informed generally on the status and conduct of all
clinical development activities related to the Product in the Territory.
Discovery shall inform Quintiles of its estimated date of Product Launch, and in
particular shall provide such date for purposes of Quintiles establishment of
the Sales Force under Section 4.3.

      5.2 Minimum Pre-launch Marketing Services Commitment. Discovery shall
spend a minimum of [***] of the cost of all pre-Launch Marketing Services (the
aggregate amount of pre-Launch Marketing Services to be determined by the JCC)
on Services provided by Quintiles. The fees and expenses for such pre-Launch
Marketing Services may be paid by Discovery through advances from PharmaBio or
otherwise.

      5.3 Obligation to Provide Samples. Discovery will provide to Quintiles for
distribution the quantity and configuration of Samples as determined appropriate
by the JCC to support the Sales Force Services, consistent with the Marketing
Plan and forecasts. Distribution of such Samples shall be carried out by
Quintiles consistent with the Marketing Plan and as otherwise set forth on
Schedule I. Except as set forth in the next sentence, the costs related to such
distribution hereunder shall be considered to be "Commercialization Expenses" as
defined in the Investment and Commission Agreement and, as such, may be funded
by Discovery with advances from PharmaBio in accordance therewith or otherwise.
Discovery shall be responsible for the manufacture, packaging and distribution
of Samples to the Sales Force and shall have primary responsibility for
compliance with the requirements of the FDA Final Rule implementing the PDMA (21
CFR Parts 203 & 205), including, but not limited to (a) a sample accountability
and tracking system for use by the Sales Representatives; (b) verification of
licensed practitioners; (c) annual physical inventories and reconciliation
reports; (d) monitoring and investigation of discrepancies, significant losses,
thefts and falsification of sample records; (e) notification and reporting to
FDA; (f) a sample distribution

Information marked by [***] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Securities and Exchange Commission.

                                       8.
<PAGE>

security and audit system, including conducting random and for cause audits of
sales representatives by personnel independent of the sales force; and (g)
training the Sales Force regarding the foregoing. Discovery and Quintiles shall
cooperate in connection with PDMA compliance investigations and audits.
Discovery will provide to Quintiles for review and comment, a copy of any PDMA
compliance report in connection with the Sales Force, prior to filing with the
FDA. Discovery will provide Innovex with results of annual Sales Representative
sample inventories. Discovery shall be responsible for the cost of independent
random audits of Sales Representatives, to be coordinated by Quintiles.

      5.5 Sales and Distribution.

            5.5.1 Pricing. Discovery, with the advice of the JCC, shall set all
      prices and commercial terms for the sale of the Product in the Territory.

            5.5.2 Booking Sales; Distribution. Discovery shall be responsible
      for booking sales, fulfilling orders, and shall warehouse and distribute
      the Product and perform all related services.

            5.5.3 Product Returns. Discovery shall be responsible for handling
      Product returns. The Quintiles Sales Force shall provide assistance as
      reasonably requested by Discovery, to the extent consistent with the
      normal activities of pharmaceutical sales personnel. Product returns shall
      promptly be shipped to the facility responsible for shipment of such
      Product lot or such other location as may be designated by Discovery in
      writing.

      5.6 Additional Discovery Responsibilities. A partial list of certain
additional responsibilities of Discovery responsibilities are set forth on
Schedule II attached to this Agreement.

      5.7 Preferred Provider Relationship. Discovery hereby grants to Quintiles
the first and preferred opportunity to negotiate with Discovery to provide (a)
clinical trial development and/or (b) commercialization services of the type
commonly provided by the Quintiles (or any or its Affiliates), whether related
to the Product or otherwise, that Discovery has, in its sole discretion,
determined to outsource for the period beginning on the date hereof and ending
five years following the Funding Date; provided that, as determined in
Discovery's sole discretion: (i) the applicable services fall with the areas of
recognized expertise of the Quintiles (or its Affiliates), (ii) the Quintiles
(or its Affiliates) provides such services at competitive rates and makes its
proposal on a competitive time schedule, and (iii) the Quintiles (or its
Affiliates) expressly agrees to provide such services to meet Discovery's
timeline. Without limiting the foregoing, Discovery agrees to keep Quintiles
informed of the development of Surfaxin(R) in its present formulation for the
ARDS treatment indication and Discovery shall outsource such work to Quintiles
(or its Affiliates) with regard to the ARDS indication that Quintiles (or its
Affiliates) is capable of performing so long as Quintiles (or its Affiliates)
services can be performed in conformance with subsections (i), (ii) and (iii)
above.

                                       9.
<PAGE>

                                    ARTICLE 6

                 TRAINING; ADVERTISING AND PROMOTIONAL MATERIALS

      6.1 Training Programs.

            6.1.1 Content. Quintiles will develop, subject to JCC approval (not
to be unreasonably withheld), initial and ongoing training programs for the
Sales Force during the Term. Each member of the Sales Force shall be required to
successfully complete such training program before providing services under this
Agreement. The Parties shall mutually agree to a minimum training standard and
pass rate, to be monitored by the JCC. Quintiles shall maintain records of such
training for each individual which shall be maintained by Quintiles in
accordance with Section 4.7 and made available to Discovery in accordance with
applicable law. Quintiles agrees to utilize such training programs on an ongoing
basis. Initial training shall be carried out at a time which is set by the JCC
and which is prior to but reasonably near the date on which Product Launch is
expected. As additional Sales Representatives are added under this Agreement,
training will be given to groups of the newly selected Sales Representatives,
provided that the training of such representatives is intended to occur as soon
as practicable. In addition to Product and selling skills training, training
programs shall include requirements of the Food, Drug and Cosmetic Act,
Medicare/Medicaid Anti-Fraud and Abuse Act, and other applicable laws, rules,
regulations and policies.

            6.1.2 Cost. The cost of developing and delivering the training to
      the Sales Force shall be borne by Discovery. Quintiles shall charge
      Discovery its Fully Loaded Cost for training services as a post-Launch
      Marketing Service.

      6.2 Advertising and Promotional Materials.

            6.2.1 Creation and Use. Discovery shall be responsible for the
      development of all Promotional Materials. Such development shall be part
      of and consistent with the Marketing Plan and budgets approved by the JCC.
      The Quintiles Sales Force shall disseminate only Promotional Materials
      provided by Discovery, for use by the Sales Force. Discovery will engage
      Quintiles or Quintiles Affiliates to assist with the development and
      creation of Promotional Materials.

            6.2.2 Ownership; FDA Approval. Discovery shall own all rights to,
      and title and interest in, the Promotional Material. The final content of
      all Promotional Materials and Product-related training materials shall be
      the legal responsibility of Discovery, including, but not limited to, FDA
      approval thereof if such approval is required.

            6.2.3 Discovery Logos. All written or visual materials related to
      the Product shall display the Discovery logos and Discovery shall be
      presented as the sole owner of the Product, except as required by law.

                                      10.
<PAGE>

                                    ARTICLE 7

                        REGULATORY ISSUES AND COMPLAINTS

      7.1 Ownership of Regulatory Filings and Compliance. Discovery will retain
exclusive right, ownership, authority and responsibility for regulatory filings,
compliance with all regulatory requirements and maintenance of all government
agency contacts relating to the Product; the reporting of any adverse drug
reactions to the FDA (to the extent applicable and required by law or
regulation); the filing of Promotional Materials with the FDA (to the extent
applicable and required by law or regulation); the payment of Medicaid and other
governmental rebates which in Discovery's sole judgment are due and owing; the
pricing of the Product for each customer; and compliance with Medicaid best
price law and the Department of Veterans Affairs Act. The development of each
indication and formulation of the Product shall be determined solely by
Discovery. Neither Party shall be responsible for actions of the other that are
outside the scope of this Agreement or not in accordance with applicable law.

      7.2 Communication with the FDA and Other Regulatory Agencies. Except as
required by law, Quintiles shall not communicate with the Food & Drug
Administration, Office of Inspector General, Health Care Financing
Administration or any state agencies ("Regulatory Agencies") about anything
relating to the Product, except through, or with the prior written consent of
Discovery. If Quintiles is required by law to communicate directly with any
Regulatory Agency or if Quintiles receives any communication from a Regulatory
Agency with respect to the Product, promotion of the Product, Quintiles'
performance under this Agreement or any matter or that could affect Quintiles'
performance under this Agreement, Quintiles shall promptly notify Discovery in
writing. Quintiles shall reasonably cooperate at Discovery's expense with
Discovery in all proper respects in all regulatory matters relating to the
Product, including but not limited to preparation for inspections of Discovery
facilities and/or Quintiles facilities. Quintiles will provide Discovery with
pertinent records in Quintiles' possession which may be necessary to implement
any recall or any other corrective action mandated by a Regulatory Agency or
implemented by Discovery, including but not limited to names and addresses for
"Dear Doctor" letters.

      7.3 New Developments Relating to the Product. Discovery will promptly
inform Quintiles of the following information relating to the Product in the
Territory: (i) new approved indications; (ii) new approved dosages or
administration regimens; (iii) material new studies by the scientific community
that Discovery becomes aware of which relate to the Product or a competitive
product in its therapeutic class; and (iv) any changes in regulations affecting
the Product or Discovery's obligations with respect to this Agreement. Quintiles
will promptly inform Discovery of information relating to changes in regulations
affecting Quintiles's obligations with respect to this Agreement. Based on such
information, and subject to any federal, state or local laws and/or regulations,
the Parties shall use commercially diligent efforts to maintain the training
materials and Promotional Materials supplied to the Sales Force pursuant to this
Agreement current with such new developments or information.

      7.4 Product Recalls or Withdrawal. If either Party believes that a recall
of any Product in the Territory is necessary, such Party shall immediately
notify the other Party. Discovery shall retain sole authority and responsibility
for determining whether a Product recall shall occur. Any

                                      11.
<PAGE>

Product recall shall occur under the direction and control of Discovery, and
Quintiles shall reasonably cooperate in carrying out any such recall or any
regulatory matter, at Discovery's expense and with reasonable expedience.
Discovery shall make available, at Quintiles' request, any records that
Quintiles might reasonably require to assist Discovery in effecting any recall
of the Product.

      7.5 Adverse Event Reporting Procedures. Discovery shall be responsible for
required reporting of adverse events and drug safety issues related to the use
of the Product. Discovery shall advise Quintiles of its standard procedures for
the reporting of adverse events, and the Quintiles Sales Force shall comply with
such procedures. The Discovery procedures for the reporting of adverse events
shall be included in the training program for the Quintiles Sales Force.
Quintiles shall report to Discovery within twenty-four (24) hours any adverse
events of which Quintiles becomes aware reported to it.

      7.6 Product Inquiries; Complaints. Quintiles shall promptly notify
Discovery of any complaint, inquiry or (in compliance with Section 7.5) adverse
event relating to the Product in report form providing reasonable detail of such
complaint, event or inquiry. Discovery shall maintain a unified record of all
complaints it receives. Discovery shall be responsible for medical affairs
services and shall respond to inquiries from physicians and health care
providers. Discovery shall advise Quintiles of its procedures for handling such
inquiries and the Quintiles Sales Force shall be trained by Quintiles on such
procedures.

      7.7 Database of Clinical Trial Data. Discovery shall own and maintain its
own database of clinical trial data accumulated from all clinical trials of the
Product and Discovery shall own and maintain a unified database of complaints
and adverse drug event information for the Product and shall develop and utilize
uniform report forms.

                                    ARTICLE 8

                        ACCOUNTING; INVOICING AND PAYMENT

      8.1 Accounting. Each Party agrees to calculate all costs and expenses
hereunder using its standard accounting procedures, in accordance with
accounting principles generally accepted in the United States, consistently
applied, to the maximum extent practicable.

      8.2 Payment Schedule. Except as may otherwise be expressly provided in a
Work Order, Quintiles will invoice Discovery monthly for Quintiles's actual fees
and pass-through Expenses for the preceding calendar month (each an "Invoice").
Upon termination or expiration of the Services, any fees or pass-through
expenses incurred prior to such termination will be invoiced to Discovery.

      8.3 Payment of Invoices. All Invoices are strictly net of any taxes
imposed on services, and except as otherwise set forth in this Agreement,
payment in full is due within thirty (30) days of the date of receipt of the
Invoice and shall be made by wire transfer.

            8.3.1 If the method of payment is by direct transfer to the
Quintiles bank account, the wire transfer instructions are as follows:

                                      12.
<PAGE>

                    Quintiles Transnational Corporation
                    Accounting Number:
                    ABA Number: 053 101 121
                    Branch Banking & Trust Co., Raleigh, NC

                    Quintiles's Federal Employment ID Number is 56-1714315.

      8.4 Penalty for Late Payment. Discovery and Quintiles agree that unless
there is a bona fide dispute as to amounts payable hereunder, if payment is not
made within 30 days of the due date of the invoice, interest shall accrue on a
daily basis at the lesser of two percent (2%) above the Prime Rate as announced
periodically by First Union National Bank (or its successor) or the maximum rate
permitted by law on any amount overdue from the date payment became due until
payment is made in full. In any event, such interest penalty shall only be
assessed for undisputed and unpaid amounts.

      8.5 Record-Keeping and Financial Audits. Upon the written request (and
expense) of either Party, the other Party, but not more than once in each
calendar year, shall permit an independent certified public accountant appointed
by such Party and reasonably acceptable to the other Party, accompanied by
representatives of the financial department of such Party at reasonable times
and upon reasonable notice, to examine only those records as may be necessary to
determine compliance with this Agreement. The Party requesting the audit shall
bear the full cost of the performance of any such audit, unless such audit
discloses a variance of more than ten percent (10%) from the amount of the
original report, royalty or payment calculation. In such case, the Party being
audited shall bear the full cost of the performance of such audit. Auditors
shall be expressly subject to the same confidentiality obligations as the
Parties are to each other hereunder. This Section 8.5 shall survive for two (2)
years after the termination of this Agreement.

                                    ARTICLE 9

                          REPRESENTATIONS AND COVENANTS

      9.1 Mutual Authority. Each Party represents and warrants to the other
that:

            9.1.1 Corporate Power. It is duly organized and validly existing
under the laws of its state or country of incorporation, and has full corporate
power and authority to enter into this Agreement and to carry out the provisions
hereof.

            9.1.2 Due Authorization. It is duly authorized to execute and
deliver this Agreement and to perform its obligations hereunder, and the person
or persons executing this Agreement on its behalf has been duly authorized to do
so by all requisite corporate action.

            9.1.3 Binding Agreement. This Agreement is legally binding upon it
and enforceable in accordance with its terms. The execution, delivery and
performance of this Agreement by it does not conflict with any agreement,
instrument or understanding, oral or written, to which it is a Party or by which
it may be bound, nor violate any material law or regulation of any court,
governmental body or administrative or other agency having jurisdiction over it.

                                      13.
<PAGE>

            9.1.4 Grant of Rights; Maintenance of Agreements. It has not, and
will not during the term of this Agreement, grant any right to any Third Party
which would conflict with the rights granted to the other Party hereunder or
enter into any agreement which would impair its ability to perform its
obligations under this Agreement. It has (or will have at the time performance
is due) maintained and will maintain and keep in full force and effect all
agreements necessary to perform its obligations hereunder.

            9.1.5 Validity. It is aware of no action, suit or inquiry or
investigation instituted by any governmental agency that questions or threatens
the validity of this Agreement.

      9.2 Conformance with Laws. Quintiles and Discovery agree to undertake all
of their respective obligations under this Agreement in material conformance
with all applicable local, state and federal laws and regulations, as amended,
including, without limitation, the Federal Equal Employment Opportunity Act, the
Fair Labor Standards Act, the Food Drug and Cosmetics Act, Section 1128B(b) of
the Social Security Act, the, the Medicaid Prescription Rebate Act, the Veterans
Health Care Act of 1992, and similar state laws. By entering into this
Agreement, it is not the intent of the Parties to enter into any financial
relationship or arrangement prohibited under state or federal fraud or abuse
regulations, including, but not limited to Sec. 1128B(b) of the Social Security
Act, and any regulations promulgated thereunder, nor do the Parties hereto have
any belief that the relationship and compensation arrangement provided in this
Agreement are prohibited by law or regulation. Neither Party shall assert
against the other that the compensation arrangement provided in this Agreement
is grounds for voiding the Agreement or rendering the Agreement unenforceable.
If either Party is notified by a state or federal agency, or it is alleged in a
qui tam proceeding, that performance of this Agreement is illegal, neither Party
shall be obligated to continue such performance hereof to the extent such
performance is an alleged violation of law. In such event, the Parties shall
proceed as described in the final sentence of Section 15.14.

      9.3 Rights in Product. As of the Effective Date, Discovery warrants and
represents that it is not aware of any valid patent or trademark owned or
controlled by anyone other than Discovery or its licensors or an Affiliate
thereof which covers the Product and which would prevent Discovery from making,
using, or selling the Product or would prevent Discovery or Quintiles from
promoting or marketing the Product in the Territory. Discovery is not aware of
any valid patents or trademarks owned by Third Parties that would be infringed
by the promotion or sale of the Product in the Territory. Discovery is not
pursuing any action against any Third Party that Discovery believes infringes
its trademark, copyright or patent relating to the Product. There are no
actions, suits, claims or proceedings pending against Discovery or any of its
Affiliates in any court or before any agency in the Territory related to alleged
patent, trademark, or copyright infringement in connection with the Product, and
to the best of Discovery's knowledge, no such actions, suits, claims or
proceedings have been threatened. During the term of this Agreement, Discovery
will use commercially reasonable and diligent efforts not to diminish the rights
granted to Quintiles herein, including without limitation by not committing or
permitting any acts or omissions which would cause the material breach of any
agreements between Discovery and Third Parties which provide for intellectual
property rights applicable to the development, manufacture, use or sale of the
Product in the Territory. As of the Effective Date, Discovery is in compliance
in all material respects with any such agreements with Third Parties.

                                      14.
<PAGE>

      9.4 Record Maintenance. Quintiles will (i) maintain all necessary
personnel and payroll records for Quintiles Sales Force and other Quintiles
employees providing Marketing Services and Sales Force Services; (ii) compute
their wages and withhold applicable Federal, State, and local taxes and Federal
FICA payments; (iii) remit employee withholdings to the proper governmental
authorities and make employer contributions for Federal FICA and Federal and
State unemployment insurance payments; (iv) pay net wages and fringe benefits,
if any, directly to its employees; and (v) provide for liability and Workers'
Compensation insurance coverage.

      9.5 Firewall. Quintiles represents and warrants that it shall maintain as
confidential, shall keep separate and shall not share with other parts of the
Quintiles organization (including any Affiliate of Quintiles) that are or may be
engaged in the promotion and/or sales of a competing product, the material and
information supplied and/or generated hereunder for use in accordance with this
Agreement and the promotion and sale of the Product.

      9.6 No Use of Names or Trademarks. Except as otherwise provided in this
Agreement, neither Party will use the other Party's name in connection with any
publication or promotion without the other Party's prior written consent. Nor
shall either Party use the other Party's corporate or product logo or trademark
in any manner without the other Party's prior written consent.

      9.7 NDA Filing. Discovery agrees to continue to exercise diligent efforts
to submit the NDA for the Product to the FDA and to reasonably diligently seek
FDA approval for the Product, to the extent applicable. Upon the approval of
either the MAS or the IRDS indication, Discovery shall continue to use
commercially reasonable efforts to submit the NDA for the other indication to
the FDA and to seek FDA approval of such.

      9.8 Independent Contractors. For the purposes of this Agreement, the
Parties hereto are independent contractors of each other, and nothing contained
in this Agreement shall be construed to place them in the relationship of
partners, principal and agent, employer and employee, licensee and sublicensee
or joint venturers. Neither Party shall have the power or right to bind or
obligate the other Party, nor shall either Party hold itself out as having such
authority. No provision of this Agreement shall be deemed to create or imply any
contract of employment between Discovery and any employee of Quintiles. All
persons performing Services shall be employees of Quintiles, or subcontractors
engaged by Quintiles with prior consent of Discovery, and shall not be entitled
to any benefits applicable to employees of Discovery. Quintiles shall be
responsible for management of all employer obligations in connection with
Quintiles employees who perform the Services. Quintiles employees shall remain
exclusively under the direct authority and control of Quintiles. The employer
obligations of Quintiles shall include: (i) human resource issues, including
establishment of employee policies, and administration of health and benefits
plans, 401K plan, and other employee benefit plans; (ii) work performance and
work behavior issues, including probationary period, periodic and annual
appraisals, employee discipline and termination; (iii) administration of systems
for time-keeping, payroll and employee expense reimbursement; (iv) day to day
management of employment issues in connection with performance of the Services.

                                      15.
<PAGE>

                                   ARTICLE 10

                                 CONFIDENTIALITY

      10.1 Confidential Information. Quintiles and Discovery agree that all
information relating, directly or indirectly, to the Product, or the business
affairs or finances of the other or Affiliates or of any suppliers, agents,
distributors, licensees or customers of the other which comes into possession of
Quintiles or Discovery under this Agreement shall be Confidential Information
("Confidential Information"). This Agreement and related documentation shall
also be treated as Confidential Information. Quintiles agrees to hold
Confidential Information in strict confidence and disclose it only on a
need-to-know basis to Affiliates, subcontractors and employees who are under a
written obligation to maintain the confidentiality of the information.
Notwithstanding the foregoing, Confidential Information does not include,
information:

            10.1.1 which can be shown by written documentation to have been
known by the recipient prior to its receipt from the other;

            10.1.2 which is public or lawfully becomes generally available to
the public through no fault of the recipient;

            10.1.3 which is lawfully acquired from a Third Party without being
made subject to an obligation of confidence by the Third Party provided such
Third Party is not itself under a legal or contractual obligation to keep such
information confidential;

            10.1.4 which by mutual written agreement is released from a
confidential status; or

            10.1.5 which is required to be disclosed under any statutory,
regulatory or judicial requirement, including, but not limited to, any filing
with the Securities Exchange Commission and, in that event, confidentiality will
be preserved and protected to the extent possible and; notice will be provided
to the other Party a reasonable amount of time prior to any such disclosure and
such other Party given a reasonable opportunity to contest or limit such
disclosure.

      10.2 Ownership of Data and Intellectual Property; No License. It is
expressly agreed that neither Party transfers to the other Party by operation of
this Agreement any patent right or license, copyright or other proprietary
right. All data and information generated or derived by Quintiles as the result
of Services performed by Quintiles under this Agreement shall be and remain the
exclusive property of Discovery. Discovery acknowledges that Quintiles possesses
certain inventions, processes, know-how, trade secrets, improvements, other
intellectual properties and other assets, including but not limited to
analytical methods, procedures and techniques, computer technical expertise and
software, and business practices, including, but not limited to the Quintiles
Territory Management System (ITMS), which have been independently developed by
Quintiles (collectively "Quintiles Property"). Discovery and Quintiles agree
that any Quintiles Property or improvements thereto which are used, improved,
modified or developed by Quintiles under or during the term of this Agreement
are the sole and exclusive property of Quintiles.

                                      16.
<PAGE>

      10.3 Publicity. Except as otherwise required by applicable law or by
obligations pursuant to any listing agreement with or rules of any securities
exchange or automated quotation system, each party shall, and shall cause its
respective Affiliates to, not, issue any press release or make any other public
statement relating to, connected with or arising out of this Agreement or the
matters contained herein without the other parties' prior written approval of
the contents and the manner of presentation and publication thereof (which
approval shall not be unreasonably withheld or delayed).

      10.4 Survival. The obligations of Quintiles and Discovery under this
Article 10 shall survive the termination or expiration of this Agreement for a
period of five (5) years.

                                   ARTICLE 11

                                 INDEMNIFICATION

      11.1 Indemnification by Discovery. Discovery shall indemnify, defend,
save, protect, and hold harmless Quintiles, its Affiliates, and its and their
respective directors, officers, employees, and agents ("Quintiles Indemnitees")
against any and all losses, claims, damages, liabilities, costs and expenses
(including reasonable attorneys' fees and expenses and court costs)
(collectively, "Losses") resulting or arising from any Third Party claims,
actions, proceedings, investigations or litigation relating to or arising from
or in connection with: (i) the design, development, manufacture, sale,
distribution or use of the Product; (ii) the breach by Discovery of any of its
obligations under this Agreement; (iii) the negligent or wrongful acts or
omissions of Discovery or any of its directors, officers, employees or agents;
(iv) a violation of any law, rule or regulation by Discovery relating to this
Agreement; (v) the Promotional Materials or any other materials referred to in
Section 6.2; or (vi) the infringement or violation, or alleged infringement or
violation, by Discovery or the Product of any patents or any copyrights,
trademark, trade secret or other intellectual property rights of a third party.
Notwithstanding the foregoing, Discovery shall not be required to indemnify
Quintiles for any Losses to the extent they arise from (a) the negligent or
willful misconduct of Quintiles or any of the Quintiles Indemnitees or (b)
Quintiles's breach of its obligations under this Agreement.

      11.2 Indemnification by Quintiles. Quintiles shall indemnify, defend,
save, protect, and hold harmless Discovery, its Affiliates, and its and their
respective directors, officers, employees, and agents (the "Discovery
Indemnitees") against any and all Losses resulting or arising from any Third
Party claims, actions, proceedings, investigations or litigation relating to or
arising from or in connection with: (i) the marketing, promotion or sale of the
Product by Quintiles in a manner which violates this Agreement; (ii) the breach
by Quintiles of any of its obligations under this Agreement; (iii) the negligent
or wrongful acts or omissions of Quintiles or any of its directors, officers,
employees or agents; (iv) a violation of any law, rule or regulation by
Quintiles relating to this Agreement; or (v) the representations or
misrepresentations by Quintiles relating to the Product which were not
consistent with the labeled claims or Promotional Material. Notwithstanding the
foregoing, Quintiles shall not be required to indemnify Discovery for any Losses
to the extent they arise from (a) the negligent or wrongful acts or omissions of
Discovery or Discovery Indemnitees; (b) the breach by Discovery of its
obligations under this Agreement; (c) a manufacturing or design defect of the
Product; or (d) a strict liability claim related to the Product.

                                      17.
<PAGE>

      11.3 Procedure. The Party seeking indemnification hereunder (the
"Indemnified Party") shall (a) promptly notify the Party obligated to indemnify
(the "Indemnifying Party") of any Losses for which the Indemnified Party seeks
indemnification (provided that the failure to so notify shall not affect or
reduce the Indemnifying Party's obligations hereunder, unless the Indemnifying
Party's ability to defend against such Third Party claim, action, proceeding,
investigation or litigation is materially prejudiced by such failure); (b)
cooperate fully with Indemnifying Party and its legal representatives in the
investigation of any matter that is the subject of indemnification; (c) permit
the Indemnifying Party full control over the defense and settlement of any
matter the subject of indemnification; and (d) not unreasonably withhold its
approval of the settlement of any claim, liability or action by Indemnifying
Party covered by this indemnification provision.

      11.4 No Consequential Damages. Notwithstanding the Parties' rights and
remedies in equity neither Party, nor its Affiliates or their respective
directors, officers, employees or agents shall have any liability to the other
for any special, incidental, indirect or consequential damages, including, but
not limited to the loss of opportunity, use, revenue or profit, in connection
with or arising out of this Agreement, or the Services performed by Quintiles
hereunder, even if such damages were foreseeable.

      11.5 Discovery Responsibility for Product Description. Quintiles shall not
be liable to Discovery for claims or losses arising out of the statements or
representations of the Quintiles Personnel with respect to the Product to the
extent the statements or representations conform to the oral, written or printed
statements or representations made to the Quintiles Personnel by Discovery with
respect to the Product or contained in the Product labeling, Promotional
Materials or other material referred to in Section 6.2, provided all such
materials have been approved in advance in writing by Discovery.

      11.6 Insurance. Quintiles and Discovery shall each, at its own cost and
expense, obtain and maintain in full force and effect, the following insurance
during the Term (and any subsequent renewals thereof): (i) worker's compensation
insurance in accordance with the statutory requirements of each state in which
the Services are to be performed; (ii) employer's liability insurance with a
minimum limit of [***]; (iii) comprehensive general liability insurance,
including contractual liability and professional errors and omissions coverage,
with a minimum limit of [***], combined single limit per occurrence; and (iv)
comprehensive auto liability, covering bodily injury and property damage, for
owned, hired or non-owned automobiles with a minimum limit of [***], combined
single limit per occurrence. In addition, Discovery shall carry product
liability insurance covering the Product in the Territory, in a minimum amount
of [***] per claim at all times following Launch. Each party shall provide the
other party an original signed certificate of insurance evidencing all coverage
herein required, within thirty (30) days after the effective date of this
Agreement. The certificate must provide that thirty (30) days prior written
notice of cancellation or material change in insurance coverage will be
provided. The insurance obligations hereunder may be met by a program of
self-insurance.

Information marked by [***] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Securities and Exchange Commission.

                                      18.
<PAGE>

                                   ARTICLE 12

                              TERM AND TERMINATION

      12.1 Term. The Term of this Agreement will begin on the Effective Date and
continue until the seventh anniversary of the Product Launch Date, unless the
Agreement is terminated earlier, or renewed, in accordance with this Article 12
(together with all extension Terms as set forth in Section 12.2, the "Term").

      12.2 Renewal. This Agreement will terminate at the end of the initial Term
set forth in Article 12.1 unless the Parties agree in writing on terms to renew
this Agreement at least 90 days prior to the end of such initial Term.

      12.3 Material Breach. Either Party may terminate this Agreement by written
notice at any time if the other Party defaults in the performance of any
material obligations under this Agreement. In the event of such default, the
Party declaring the default shall provide the defaulting Party with written
notice setting forth the nature of the default, and the defaulting Party shall
have thirty (30) days to cure the default. If the defaulting Party fails to cure
the default within the 30-day periods, and provided the default is continuing,
the other Party may terminate this Agreement by written notice to the defaulting
Party, which notice shall be effective upon receipt.

      12.4 No Product Launch. Either Party may terminate this Agreement (i) if
Discovery has terminated development of the Product and has determined that it
will market and launch neither the MAS or IRDS indication and provides Quintiles
written notice of such, or (ii) if Launch of the Product for neither the IRDS or
MAS indication occurs prior to [***].

      12.5 Bankruptcy. Either Party may terminate this Agreement by written
notice to the other Party, if the other Party files a petition for bankruptcy,
reorganization or arrangement under any state statute, or makes an assignment
for the benefit of creditors or takes advantage of any insolvency statute or
similar statute, or such filing is made by a Third Party, and such filing is not
withdrawn within sixty (60) days of the filing date, or if a receiver or trustee
is appointed for the property and assets of the Party and the receivership
proceedings are not dismissed within sixty (60) days of such appointment.

      12.6 Accrued Rights. Termination of the Agreement for whatever reason
shall not affect the accrued rights of either Quintiles or Discovery arising
under or out of this Agreement. Termination of this Agreement shall not relieve
the Parties of any liability which accrued hereunder prior to the effective date
of such termination nor preclude either Party from pursuing all rights and
remedies it may have hereunder or at law or in equity with respect to any breach
of this Agreement nor prejudice either Party's right to obtain performance of
any obligation. In particular, upon termination for any reason, Discovery shall
(i) pay Quintiles all fees for Services rendered which are due and owing to
Quintiles because of any completed performance of Quintiles' obligations prior
to

Information marked by [***] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Securities and Exchange Commission.

                                      19.
<PAGE>

the effective date of termination, and (ii) pay all pass-through expenses
actually incurred by Quintiles prior to the effective date of termination; and
(iii) pay any other costs which have been expressly identified as being due upon
termination.

      12.7 Right to Receive Data. Upon termination, and upon full satisfaction
of all outstanding invoices, Discovery shall have the right to receive from
Quintiles all data attendant or related to Services or other sales and marketing
activities under this Agreement.

      12.8 Survival. The following provisions shall survive any expiration or
termination of this Agreement, and if time periods are specified, for the period
of time specified: Sections 1.1,1.4, 4.7, 4.8, 4.9, 5.5.3, 6.2.2, 7.1, 7.2, 7.4,
7.5 (last sentence only), 7.6 (first sentence only), 8.5, 9.2, 9.4, 9.5, 9.6,
12.6, 12.7 and Articles 10, 11, 13, 14 and 15.

      12.9 Loss of Product Rights. Discovery holds the rights to the Product
under an exclusive license from a Third Party. This Agreement shall
automatically terminate if Discovery's license rights to the Product terminate
in the Territory.

                                   ARTICLE 13

                             SALES FORCE CONVERSION

      13.1 Right to Convert Sales Force. Discovery shall have the right to offer
Discovery employment to the Quintiles Personnel who are members of the Sales
Force at the end of the Term, the end of any Extension Term, or earlier upon a
termination of this Agreement by Discovery under Section 12.2 or 12.5. In the
event Discovery desires to convert some or all of the Sales Force to its
employment, it shall provide Quintiles notice of such election at least three
(3) months prior to the end of the Term, or with its notice of termination under
Section 12.3 or 12.5, as the case may be. Discovery shall pay Quintiles a fee of
[***] for each member of the Quintiles Personnel who is a member of the Sales
Force actually hired by Discovery.

      13.2 Transition Plan. In the event Discovery decides to convert the Sales
Force, in accordance with Section 13.1, the Parties shall promptly meet and
determine a transition plan, which shall include a schedule for actions which
will enable a smooth transition date for all Quintiles Personnel: (i) who may be
offered employment by Discovery; (ii) who may not be offered such employment;
and (iii) who may decline such offers. Unless another timetable is established
by the JCC, no later than [***] before the end of the full scheduled Term or
otherwise within [***] from an applicable termination, Discovery shall identify
for Quintiles the names of Quintiles Personnel who have elected to accept
employment offers from Discovery and those who have not been offered employment
or have declined an employment offer.

Information marked by [***] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Securities and Exchange Commission.

                                      20.
<PAGE>

      13.3 Discovery Determination. Discovery shall make an independent
determination regarding the qualifications and suitability of Quintiles
Personnel to be offered employment by Discovery, and the terms of such offers,
if any. Solely to the extent permitted by applicable law or as otherwise may be
lawfully allowed by appropriate prior written consent of the Quintiles Personnel
(which Quintiles shall endeavor to obtain as promptly as reasonably practicable
at Discovery's reasonable expense), relevant information contained in the
personnel files of Quintiles Personnel shall be disclosed to Discovery,
including, without limitation, resumes, applications, performance appraisals or
disciplinary records, or the results of drug screens, motor vehicle or
background reports. Notwithstanding the foregoing, Quintiles shall notify
Discovery of any material violation by any Quintiles Personnel of the PDMA.

      13.4 Proprietary Information. In the event of any Sales Force conversion
under this Article 13, the Quintiles Personnel who become employed by Discovery
may continue to use in their employment by Discovery any and all Product
knowledge that they gained while in the employment of Quintiles, including,
without limitation, knowledge regarding Product customers, competition, selling
techniques, and the like.

                                   ARTICLE 14

                               DISPUTE RESOLUTION

      14.1 Governing Law. This Agreement, including, without limitation, the
interpretation, performance, enforcement, breach or termination thereof and any
remedies relating thereto, shall be governed by and construed in accordance with
the laws of the State of Delaware, United States of America, as applied to
agreements executed and performed entirely in the State of Delaware, without
regard to conflicts of law rules.

      14.2 Internal Review. In the event that a dispute, difference, claim,
action, demand, request, investigation, controversy, threat, discovery request
or request for testimony or information or other question arises pertaining to
any matters which arise under, out of, in connection with, or in relation to
this Agreement (a "Dispute") and either party so requests in writing, prior to
the initiation of any formal legal action, the Dispute will be submitted to the
JCC, which will use its good faith efforts to resolve the Dispute within ten
(10) days. If the JCC is unable to resolve the Dispute in such period, the JCC
will refer the Dispute to the Chief Executive Officers of Discovery and
Quintiles Corp. For all Disputes referred to the Chief Executive Officers, the
Chief Executive Officers shall use their good faith efforts to meet at least two
times in person and to resolve the Dispute within ten (10) days after such
referral.

      14.3 Arbitration.

      (a) If the parties are unable to resolve any Dispute under Section 14.2,
then either party may require the matter to be settled by final and binding
arbitration by sending written notice of such election to the other party
clearly marked "Arbitration Demand". Thereupon such Dispute shall be arbitrated
in accordance with the terms and conditions of this Section 14.3 Notwithstanding
the foregoing, either party may apply to a court of competent jurisdiction for a
temporary restraining

                                      21.
<PAGE>

order, a preliminary injunction, or other equitable relief to preserve the
status quo or prevent irreparable harm.

      (b) The arbitration panel will be composed of three arbitrators, one of
whom will be chosen by Discovery, one by Quintiles, and the third by the two so
chosen. If both or either of Discovery or Quintiles fails to choose an
arbitrator or arbitrators within 14 days after receiving notice of commencement
of arbitration, or if the two arbitrators fail to choose a third arbitrator
within 14 days after their appointment, the American Arbitration Association
shall, upon the request of both or either of the parties to the arbitration,
appoint the arbitrator or arbitrators required to complete the panel. The
arbitrators shall have reasonable experience in the matter under dispute. The
decision of the arbitrators shall be final and binding on the parties, and
specific performance giving effect to the decision of the arbitrators may be
ordered by any court of competent jurisdiction.

      (c) Nothing contained herein shall operate to prevent either party from
asserting counterclaim(s) in any arbitration commenced in accordance with this
agreement, and any such party need not comply with the procedural provisions of
this Section 14.3 in order to assert such counterclaim(s).

      (d) The arbitration shall be filed with the office of the American
Arbitration Association ("AAA") located in Wilmington, Delaware or such other
AAA office as the parties may agree upon (without any obligation to so agree).
The arbitration shall be conducted pursuant to the Commercial Arbitration Rules
of AAA as in effect at the time of the arbitration hearing, such arbitration to
be completed in a sixty (60) day period. In addition, the following rules and
procedures shall apply to the arbitration:

      (e) The arbitrators shall have the sole authority to decide whether or not
any Dispute between the parties is arbitrable and whether the party presenting
the issues to be arbitrated has satisfied the conditions precedent to such
party's right to commence arbitration as required by this Section 14.3.

      (f) The decision of the arbitrators, which shall be in writing and state
the findings the facts and conclusions of law upon which the decision is based,
shall be final and binding upon the parties, who shall forthwith comply after
receipt thereof. Judgment upon the award rendered by the arbitrator may be
entered by any competent court. Each party submits itself to the jurisdiction of
any such court, but only for the entry and enforcement to judgment with respect
to the decision of the arbitrators hereunder.

      (g) The arbitrators shall have the power to grant all legal and equitable
remedies (including, without limitation, specific performance) and award
compensatory damages provided by applicable law, but shall not have the power or
authority to award punitive damages. No party shall seek punitive damages in
relation to any matter under, arising out of, or in connection with or relating
to this Agreement in any other forum.

      (h) The parties shall bear their own costs in preparing for and
participating in the resolution of any Dispute pursuant to this Section 14.3,
and the costs of the arbitrator(s) shall be equally divided between the parties;
provided, however, that each party shall bear the costs incurred in connection

                                      22.
<PAGE>

with any Dispute brought by such party that the arbitrators determine to have
been brought in bad faith.

      (i) Except as provided in the last sentence of Section 14.3(a), the
provisions of this Section 14.3 shall be a complete defense to any suit, action
or proceeding instituted in any federal, state or local court or before any
administrative tribunal with respect to any Dispute arising with regard to this
Agreement. Any party commencing a lawsuit in violation of this Section 14.3
shall pay the costs of the other party, including, without limitation,
reasonable attorney's fees and defense costs.

      14.4 Costs. The parties shall bear their own costs in preparing for and
participating in the resolution of any Dispute, and the costs of mediator(s) and
arbitrator(s) shall be equally divided between the parties.

                                   ARTICLE 15

                                  MISCELLANEOUS

      15.1 Return of Materials. At the completion of the services by Quintiles
or termination pursuant to Article 12, all materials and all other data owned by
Discovery under this Agreement, regardless of the method of storage or
retrieval, shall as promptly as practicable either be delivered to Discovery in
such form as is then currently in the possession of Quintiles or disposed of, at
the direction and written request of Discovery unless such materials are
otherwise required to be stored or maintained by Quintiles as a matter of law or
regulation. Discovery shall pay the reasonable costs associated with either of
the above options.

      15.2 Nonsolicitation of Employees. Except as otherwise provided herein,
during the Term and for a period of [***] thereafter, each Party agrees that
neither it nor any of its Affiliates, divisions or operating groups that
directly participates in or is directly responsible for the development or
commercialization of the Product pursuant to this Agreement shall, directly or
indirectly, recruit, solicit or induce any employee of the other Party to
terminate his or her employment with such other Party, without the express
written consent from the other party.

      15.3 Entire Agreement; Amendment. This Agreement, and the other agreements
referred to herein (or entered into as of the date hereof) between the Parties
(or between Discovery and PharmaBio), set forth the complete, final and
exclusive agreement and all the covenants, promises, agreements, warranties,
representations, conditions and understandings between the Parties hereto and
supersede and terminate all prior agreements and understandings between the
Parties. There are no covenants, promises, agreements, warranties,
representations, conditions or understandings, either oral or written, between
the Parties other than as are set forth herein and therein. No subsequent
alteration, amendment, change or addition to this Agreement shall be binding
upon the Parties unless reduced to writing and signed by an authorized officer
of each Party.

Information marked by [***] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Securities and Exchange Commission.

                                      23.
<PAGE>

      15.4 Force Majeure. Both Parties shall be excused from the performance of
their obligations under this Agreement to the extent that such performance is
prevented by force majeure and the nonperforming Party promptly provides written
notice to the other Party. Such excused performance shall be continued so long
as the condition constituting force majeure continues and the nonperforming
Party takes reasonable efforts to remove the condition. For purposes of this
Agreement, force majeure shall include conditions beyond the control of the
Parties, including without limitation, an act of God, war, civil commotion,
labor strike or lock-out, epidemic, failure or default of public utilities or
common carriers, destruction of production facilities or materials by fire,
earthquake, storm or like catastrophe; provided, however, the payment of
invoices due and owing hereunder at the time of the force majeure shall not be
delayed by the payor because of a force majeure affecting the payor.

      15.5 Notices. Any notice required or permitted to be given under this
Agreement shall be in writing, shall specifically refer to this Agreement and
shall be deemed to have been sufficiently given for all purposes if mailed by
first class certified or registered mail, postage prepaid, express delivery
service or personally delivered. Unless otherwise specified in writing, the
mailing addresses of the Parties shall be as described below.

      For Quintiles:    Quintiles Transnational Corp.
                        4709 Creekstone Drive, Suite 200
                        Durham, NC 27703
                        Attention: Chief Executive Officer
                        Fax: (919) 998-7456
                        Phone: (919) 998-2000

      With a copy to:   General Counsel, Quintiles Transnational Corp.
                        4709 Creekstone Drive, Suite 200
                        Durham, NC 27703
                        Fax: (919) 998-2090
                        Phone: (919) 998-2080

      For Discovery:    Discovery Laboratories, Inc
                        350 South Main Street, Suite 307
                        Doylestown, PA  18901-4874
                        Fax: (215) 340-3940
                        Phone: (215) 340-4699

      With a copy to:   Roberts, Sheridan & Kotel
                        The New York Practice of
                        Dickstein Shapiro's Corporate & Finance Group
                        1177 Avenue of the Americas
                        New York, NY 10036-2714
                        Attn: Ira L. Kotel
                        Phone: (212) 835-1400
                        Fax:

                                      24.
<PAGE>

or to such other destination as either Party may hereafter notify the other
Party in accordance with this section.

      15.6 Consents Not Unreasonably Withheld or Delayed. Whenever provision is
made in this Agreement for either Party to secure the consent or approval of the
other, that consent or approval shall not unreasonably be withheld or delayed,
and whenever in this Agreement provisions are made for one Party to object to or
disapprove a matter, such objection or disapproval shall not unreasonably be
exercised.

      15.7 Maintenance of Records. Each Party shall keep and maintain all
records required of it by law or regulation with respect to the Product and
shall make copies of such records available to the other Party upon request.

      15.8 United States Dollars. References in this Agreement to "Dollars" or
"$" shall mean the legal tender of the United States of America.

      15.9 No Strict Construction. This Agreement has been prepared jointly and
shall not be strictly construed against either Party.

      15.10 Assignment. Neither Party may assign or transfer this Agreement or
any rights or obligations hereunder without the prior written consent of the
other, except that a Party may make such an assignment without the other Party's
consent to Affiliates or to a successor to substantially all of the business of
such Party, whether in a merger, sale of stock, sale of assets or other
transaction. Any permitted successor or assignee of rights and/or obligations
hereunder shall, in a writing to the other Party, expressly assume performance
of such rights and/or obligations. Any permitted assignment shall be binding on
the successors of the assigning Party. Any assignment or attempted assignment by
either Party in violation of the terms of this Section 15.10 shall be null and
void and of no legal effect.

      15.11 Performance by Affiliates. Obligations under this Agreement may be
performed by Affiliates of Quintiles and Discovery only with the prior consent
of the other Party. In the event any such performance is carried out by
Affiliates with the prior consent of the other Party, each of Quintiles and
Discovery guarantees performance of this Agreement by its Affiliates. No
Affiliate of a Party may make decisions inconsistent with this Agreement, amend
the terms of this Agreement or act contrary to its terms in any way.

      15.12 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

      15.13 Further Actions. Each Party agrees to execute, acknowledge and
deliver such further instruments, and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.

                                      25.
<PAGE>

      15.14 Severability. If any one or more of the provisions of this Agreement
is held to be invalid or unenforceable by any court of competent jurisdiction
from which no appeal can be or is taken, the provision shall be considered
severed from this Agreement and shall not serve to invalidate any remaining
provisions hereof. The Parties shall make a good faith effort to replace any
invalid or unenforceable provision with a valid and enforceable one such that
the objectives contemplated by the Parties when entering this Agreement may be
realized.

      15.15 Ambiguities. Ambiguities, if any, in this Agreement shall not be
construed against any Party, irrespective of which Party may be deemed to have
authored the ambiguous provision.

      15.16 Headings. The headings for each article and section in this
Agreement have been inserted for convenience of reference only and are not
intended to limit or expand on the meaning of the language contained in the
particular article or section

      15.17 No Waiver. Any delay in enforcing a Party's rights under this
Agreement or any waiver as to a particular default or other matter shall not
constitute a waiver of such Party's rights to the future enforcement of its
rights under this Agreement, except with respect to an express written and
signed waiver relating to a particular matter for a particular period of time.

                                      26.
<PAGE>

      IN WITNESS WHEREOF, the Parties have executed this Agreement in duplicate
originals by their duly authorized officers as of the date and year first above
written.

DISCOVERY LABORATORIES, INC.

By: /s/ David L. Lopez
    ---------------------------------------------

Print: David L. Lopez
      -------------------------------------------

Title: Vice President and General Counsel
      -------------------------------------------

Date: December 10, 2001
      -------------------------------------------

QUINTILES TRANSNATIONAL CORP.

By: /s/ Thomas C. Perkins
    ---------------------------------------------

Print: Thomas C. Perkins
      -------------------------------------------

Title: Vice President and Deputy General Counsel
      -------------------------------------------

Date: December 10, 2001
      -------------------------------------------

                                      27.
<PAGE>

                                    EXHIBIT A

                                   DEFINITIONS

      The following terms shall have the following meanings as used in this
Agreement:

1.    "Affiliate" means, as to any Party, any corporation or business entity
      controlled by, controlling, or under common control with such Party. For
      this purpose, "control" shall mean direct or indirect beneficial ownership
      of at least fifty percent (50%) of the voting stock or income interest in
      such corporation or other business entity, or such other relationship as,
      in fact, constitutes actual control.

2.    "FDA" means the U.S. Food and Drug Administration.

3.    "Field Manager" means a member of the Sales Force having the
      responsibilities set forth on Schedule III for such job title.

4.    "Fully Loaded Cost" will have the meaning provided in Section 3.3.

5.    "Quintiles Personnel" means any individual who is performing any part of
      the services hereunder on behalf of Quintiles.

6.    "Joint Commercialization Committee" or "JCC" means the joint committee
      formed pursuant to Section 2.1.

7.    "Marketing Plan" means a plan detailing the activities to be performed by
      each Party in the Territory as more fully described in Article 3 hereof.

8.    "Marketing Services" means such pre- and post-launch promotional and
      marketing activities as are included in the Marketing Plan and any other
      activities identified by the JCC in furtherance of the objectives of this
      Agreement, which activities are allowed by the FDA or under the Food Drug
      & Cosmetic Act and its attendant regulations and as may be allowed by
      applicable regulatory authorities and the AMA Guidelines on Gifts to
      Physicians. Such activities may include without limitation, educational
      programs, symposia, poster-sessions, seminars for physicians, market
      research, pricing studies, development of promotional activities and
      advertising agency fees. Such activities may include marketing input into
      clinical strategic planning activities, i.e. protocol development, future
      indications, clinical and/or marketing studies.

9.    "National Sales Manager" means the leader of the Sales Force having the
      responsibilities set forth on Schedule III for such job title.

10.   "PDMA" means the Prescription Drug Marketing Act.

11.   "Product" means the product currently known as Surfaxin, as such name may
      change from time to time, for any and all formulations and delivery
      mechanisms for the indications of (x)

                                      A-1
<PAGE>

      idiopathic respiratory distress syndrome ("IRDS") and (y) meconium
      aspiration syndrome ("MAS").

12.   "Product Launch" or "Launch" means the first date upon which the Product
      is shipped by Discovery in the United States for commercial sale.

13.   "Project Administrator" means the Quintiles employee at the headquarters
      office who will provide administrative support for the National Sales
      Manager.

14.   "Promotional Materials" means written materials generated for the purpose
      of promotion and sale of the Product, in all cases with the prior written
      approval of Discovery.

15.   "Sales Force" means those Quintiles Personnel who shall possess suitable
      expertise and who shall use diligent efforts to promote and sell the
      Product at a level which is consistent with those marketing efforts
      normally used for similar products in the pharmaceutical industry,
      including without limitation Sales Representatives, Field Managers,
      National Sales Manager and Project Administrator who promote the Product
      under this Agreement.

17.   "Sales Force Commencement Date" shall mean the first date upon which
      Quintiles provides Sales Representatives under this Agreement.

18.   "Sales Representative" means an employee of Quintiles: who is responsible
      for meeting with customers and physicians and others who can buy (or
      influence the buying process and decision regarding) the Product. The
      responsibilities of a Sales Representative are set forth on Schedule III.

19.   "Sample" means units of Product distributed by Quintiles, and for
      complimentary distribution to patients by practitioners licensed to
      recommend Product, whether packaged as individual samples or as trade
      packages.

20.   "Term" shall have the meaning provided in section 12.1.

21.   "Territory" means the United States of America (including Puerto Rico).

22.   "Third Party" means any entity or person other than Quintiles or Discovery
      or an Affiliate of either of them.

23.   "Work Order" means a specific order in a form approved by the JCC for
      Marketing Services to be performed by Quintiles or an Affiliate.

                                      A-2
<PAGE>

                                    EXHIBIT B

      MARKETING PLAN OUTLINE (Example only. JCC may use its own format)

I.    Executive Summary

II.   Market Analysis

      o     Market
      o     Products
      o     Future Outlook

III.  Product Profile

      o     Product Description
      o     Indications
      o     Clinical Experience and Program
      o     Formulation, Packaging and Administration

IV.   SWOT Analysis

V.    5 year Sales Forecasts

      o     Units, Dollars, Prescriptions, Market Share

VI.   Objectives

      o     Awareness
      o     Communication
      o     Product Use
      o     Sales
      o     Market Share
      o     Managed Care/Formulary

VII.  Key Issues

VIII. Strategies

      o     Product Positioning
      o     Audiences
      o     Sales Force
      o     Pharmacoeconomics

IX.   Tactics

      o     Pharmacoeconomics
      o     Market Research
      o     Medical Education
      o     Publication Plan
      o     Personal Selling Materials / Program
      o     Clinical Support
      o     Sales Force Support

                                      C-1
<PAGE>

      o     Sampling
      o     Managed Care / Formulary
      o     Territory Sales Force Effort

X.    Budget Following Year

XI.   Timelines

                                      A-2
<PAGE>

                                   SCHEDULE I

                           QUINTILES RESPONSIBILITIES

1.    Quintiles will provide the following Quintiles Personnel to comprise the
      Sales Force:

      (a) Sales Representatives (as certain responsibilities and duties are
defined in Schedule III, Section 1);

      (b) Field Managers (as certain responsibilities and duties are defined in
Schedule III, Section 2);

      (c) National Sales Manager (as certain responsibilities and duties are
defined in Schedule III, Section 3) and

      (d) Project Administrator.

2.    Quintiles will be responsible for recruitment and re-recruitment of the
      Quintiles Personnel. Discovery will not be involved in the interviewing,
      selection or hiring of Quintiles Personnel.

3.    Quintiles will only hire qualified Quintiles Personnel, defined as meeting
      a hiring profile to be established by the JCC.

4.    Quintiles will manage all employer obligations in connection with the
      employment of Quintiles Personnel, including, but not limited to,
      discipline and termination of employees. Quintiles shall provide
      administrative resources for Field Managers, and communication between
      Quintiles and the Quintiles Personnel. Discovery will not be involved in
      the management or supervision of Quintiles Personnel

5.    Training: The JCC will be responsible for developing a POA for training.
      In accordance with Section 6.1 of the Agreement, Quintiles shall be
      responsible for developing and providing training for the Sales Force
      regarding the Promotional Materials, disease and therapeutic areas,
      Product knowledge, Product marketing strategy and regional management in
      the Territory, Product recalls, reporting complaints and adverse events.
      The training will be conducted in a manner so as to meet or exceed the
      minimum training standards agreed to by the Parties and in accordance with
      all laws, rules, regulations and policies, including but not limited to
      the AMA Guidelines on Gifts to Physicians.

6.    Quintiles shall be responsible for equipping the Sales Force with computer
      hardware and software needed to carry out the promotion of the Product.
      All Quintiles Personnel assigned to the Sales Force will receive a laptop
      computer and printer with interface cable. Quintiles shall be responsible
      for appropriate licenses and training, configuration, and replication/data
      line access. Quintiles shall provide upgrades to hardware or software as
      it deems necessary for successful promotion of the Product. In addition,
      Quintiles shall establish and provide help desk support for the hardware
      and software it provides.

                                      SI-1
<PAGE>

7.    Quintiles will provide the Sales Force the Quintiles Territory Management
      System ("ITMS") or other comparable sales force automation system and
      email/voice mail systems which will include components for call reporting,
      expense reporting, physician prescribing, call history, sales and
      market-share reporting, customized reports and communications. Quintiles
      shall also provide a sample tracking and compliance program. These systems
      and programs shall be of similar quality and effectiveness to that which
      Quintiles provides to its other clients. Quintiles may subcontract for all
      or a portion of the sample accountability services. Quintiles will make
      reasonable efforts to enable a reasonable number of Discovery personnel to
      have access to and be able to link into the ITMS and email/voicemail
      systems used by the Sales Force.

8.    Quintiles shall be responsible for equipping the Field Managers with such
      other equipment as needed to carry out the promotion of the Product.

9.    All promotional and detailing activities and obligations undertaken by
      Quintiles Personnel and the Sales Force hereunder shall be performed in
      accordance with the Marketing Plan. No Quintiles Personnel shall create
      Promotional Materials or other written materials relating to the Product
      without first submitting those materials to Discovery for and obtaining
      Discovery's written approval prior to use. Quintiles Personnel and the
      Sales Force shall make no statements, claims or undertakings to any person
      with whom they discuss or promote the Product that are inconsistent with
      the Promotional Materials. Promotional activities shall be in compliance
      with all applicable laws, rules, and regulations and policies. The
      Quintiles Personnel and the Sales Force shall not offer, pay, solicit or
      receive any remuneration to or from physicians or prescribers or health
      facilities, in order to induce referrals of or purchase of the Product.
      The Quintiles Personnel and the Sales Force shall have no direct contact
      with, nor shall the Quintiles Personnel and the Sales Force be involved
      with the delivery of the Product to patients of physicians, other than
      delivery of Samples directly to physicians or practitioners authorized to
      recommend the Product in the Territory. Quintiles shall permit Discovery
      to accompany Sales Representatives on sales calls from time to time with
      reasonable advance notice.

10.   Quintiles shall provide monthly project management reports to Discovery in
      Quintiles' standard form within fifteen (15) business days after the end
      of each month.

11.   Quintiles shall be responsible for organizing and coordinating the Product
      Launch meeting, POA meetings and national, regional or district meetings,
      subject to instructions from the JCC.

12.   Quintiles Sales Representatives shall distribute the Samples provided by
      Discovery as directed in the Marketing Plan.

13.   Quintiles shall administer an incentive bonus plan as determined by the
      JCC and designed to appropriately incent the Sales Representatives to use
      best efforts to promote the Product.

                                      SI-2
<PAGE>

                                   SCHEDULE II

                    DISCOVERY RESPONSIBILITIES & OBLIGATIONS

                             DISCOVERY SALES PROJECT

1.    Discovery shall ensure that the Discovery sales, marketing and medical
      personnel are fully briefed as to the complementary role of the Quintiles
      Personnel and ensure cooperation with the Quintiles Personnel.

2.    Discovery shall be responsible for:

      o     Communications within Discovery and from Discovery to Quintiles.
      o     Handling all aspects of order processing and fulfillment, invoicing
            and collection, (may be accomplished through further Agreement with
            Quintiles or an Affiliate), Product supply, inventory and
            receivables.
      o     Discovery Business Cards.

<PAGE>

                                  SCHEDULE III

                                ROLE DEFINITIONS

1.    Sales Representative

      RESPONSIBILITIES AND DUTIES:

      o     Generates sales within an assigned territorial boundaries.
      o     Maintains current and prospective customer profiles and information.
      o     Keeps current with Product, competitor products, and market
            knowledge.
      o     Maintains a professional image for Discovery and the Product at all
            times.
      o     Organizes territory-planning to meet sales and call goals.
      o     Provides sales presentations: individual one-on-one, groups,
            in-services.
      o     Maintains Sample inventories, distributes Samples, complies with
            Sample accountability procedures and policies.
      o     Participates in all training programs.
      o     Completes and submits in a timely manner all accountability and
            expense reports.
      o     Monitors that Product is appropriately stocked by local distribution
            centers, hospitals and pharmacies.
      o     Monitors that Product is on hospital formularies.
      o     Attends trade shows as directed by National Sales Manager.

      SKILLS:

      o     Initiative
      o     Persuasiveness/Sales ability
      o     Planning and Organizing
      o     Individual Leadership/Influencing
      o     Teamwork/Collaboration
      o     Motivational Fit

2.    Field Manager

      o     Attains sales objectives within assigned districts.
      o     Deploys resources to maximize district sales potential.
      o     Implements Discovery Product strategies within district.
      o     Maintains District budgets and accurate records on all sales
            activities.
      o     Makes regular field visits to develop, train, supervise, motivate
            and monitor Sales Representative performance; completes field
            contact reports.
      o     Makes final hiring decision; training and evaluation of Sales
            Representatives.
      o     Documents and recommends all disciplinary actions to include
            warnings, suspensions, probation, terminations.
      o     Communicates with Discovery management on a regular basis.
      o     Submits a formal monthly report to Quintiles National Sales Manager.
      o     Assists in the planning and delivery of initial training course.

                                      C-3
<PAGE>

      o     Assists in the planning and delivery of POA or trimester meetings.
      o     Monitors that Product is on managed care formularies that are within
            the Field Manager's district.

3.    National Sales Manager

      o     Hires, trains develops and evaluates Field Managers.
      o     Develops, supervises, motivates and monitors performance of Field
            Managers.
      o     Maintains project budgets.
      o     Monitors days worked and directs Field Managers accordingly.
      o     Prepares and submits monthly summary report to Quintiles and
            Discovery management
      o     Serves as key point of contact for Discovery.
      o     Approves all Sales Force disciplinary actions.
      o     Develops initial training program for Sales Representatives and
            Field Managers.
      o     Coordinates POA or trimester meetings; plans and conducts meetings
            with Discovery and its region management.
      o     Coordinates submissions for national managed care formularies.
      o     Directs coordination of Field Manager and Sales Representatives to
            attend trade shows as appropriate.EXHIBIT 10.2

Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked by [***], have been
separately filed with the Securities and Exchange Commission.

                       INVESTMENT AND COMMISSION AGREEMENT

This Investment and Commission Agreement (the "Agreement") is made as of
December 10, 2001, by and between Discovery Laboratories, Inc., a Delaware
corporation ("Discovery"), and PharmaBio Development, Inc., a North Carolina
corporation ("PharmaBio").

Background and Overview

A.    Discovery and Quintiles Transnational Corp. ("Quintiles"), an Affiliate of
      PharmaBio, have executed a Commercialization Agreement (herein so called)
      on the date hereof, pursuant to which Quintiles will provide exclusive
      Commercialization Services in the Territory for the Product.

B.    Discovery and PharmaBio have agreed that PharmaBio will fund the payments
      for the Commercialization Services, pursuant to the terms and conditions
      set forth herein.

For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:

1.0   Definitions.

1.1   "Affiliate" shall mean, as to any person or entity, any corporation or
      business entity controlled by, controlling, or under common control with
      such party or entity. For this purpose, "control" shall mean direct or
      indirect beneficial ownership of at least fifty percent (50%) of the
      voting stock or income interest in such corporation or other business
      entity.

1.2   "Annual Period" shall mean a twelve-month period beginning on the Launch
      Date and each anniversary thereof.

1.3   "Commercialization Expenses" shall mean the fees and expenses payable to
      Quintiles for the Commercialization Services.

1.4   "Commercialization Services" shall mean (i) sales and marketing services
      provided by Quintiles under the Commercialization Agreement after the
      Launch Date (including, but not limited to, services provided after the
      Launch Date related to the deployment and management of a dedicated sales
      force for the promotion of the Product), and (ii) services provided under
      the Commercialization Agreement before the Launch Date for the following
      specific activities: (x) recruitment, hiring and training for the sales
      force; (y) establishing sales force targets, territory alignments, mapping
      and sales
<PAGE>

      force optimization, and validation of practitioner's state license; and
      (z) conducting launch meetings and the national, regional and district
      meetings.

1.5   "Commission Term" means the ten (10) consecutive Annual Periods beginning
      on the Launch Date.

1.6   "FDA" shall mean the US Food and Drug Administration.

1.7   "JCC" shall mean the joint commercialization committee established under
      the Commercialization Agreement. If for any reason the Commercialization
      Agreement is terminated or the JCC is otherwise disbanded under the
      Commercialization Agreement, then Discovery and PharmaBio shall in good
      faith, as promptly as practicable, form an advisory body composed of an
      equal number of designees of Discovery and PharmaBio (the "Advisory
      Board"); provided, that Discovery shall have at least the same rights and
      authority with respect to such advisory body as it had with respect to the
      JCC (and PharmaBio shall have at least the same rights and authority with
      respect to such advisory body as Quintiles had with respect to the JCC).
      In such event, (i) the Advisory Board shall perform all of the obligations
      under this Agreement that would otherwise have been performed by the JCC,
      and all references to the JCC herein shall thereafter be deemed references
      to the Advisory Board, and (ii) PharmaBio shall appoint members to the
      Advisory Board who are at least as experienced in pharmaceutical marketing
      and sales activities as Quintiles' members of the JCC.

1.8   "Launch Date" shall mean the date upon which the Product is first shipped
      in the United States for commercial sale.

1.9   "Maximum Investment" shall mean $[***] per year for each of the seven (7)
      years following the Launch Date. (All dollar references in this Agreement
      shall refer to United States Dollars).

1.10  "Minimum Sales Force Level" shall mean the sales force size for the
      Product recommended by the JCC from time to time as provided for in the
      Commercialization Agreement (provided that, for purposes of such
      calculation, the recommended sales force size will not exceed the sales
      force size that could be reasonably supported by the amount of
      Commercialization Expenses funded by PharmaBio under this Agreement). If
      the parties are not able to unanimously agree to such sales force size
      calculation, then such calculation shall be made in accordance with the
      dispute resolution process set forth in Section 11 of this Agreement.

Information marked by [***] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Securities and Exchange Commission.

                                       2
<PAGE>

1.11  "Net Sales" means the amount billed by Discovery or an Affiliate or any
      sublicensee, or on behalf of or for the benefit of Discovery or an
      Affiliate or any sublicensee, for sales of the Product to a third party in
      the Territory less: (i) discounts, including cash and quantity discounts,
      charge-back payments, refunds and rebates granted to managed health care
      or similar organizations or to federal, state and local governments
      (including, without limitation, Medicaid rebates), their agencies, and
      purchasers and reimbursers or to trade customers, including but not
      limited to, wholesalers and chain and pharmacy buying groups, (ii) credits
      or allowances actually granted upon claims, damaged goods, rejections or
      returns of such Product, including recalls, regardless of the party
      requesting such, (iii) freight, postage, shipping and insurance charges
      actually allowed or paid for delivery of Product, to the extent billed,
      (iv) taxes, duties or other governmental charges levied on, absorbed or
      otherwise imposed on sale of such Product, including without limitation
      value-added taxes, or other governmental charges otherwise measured by the
      billing, when included in billing, as adjusted for rebates, charge-backs
      and refunds, and (v) bad debts related to Product sales (defined as any
      bills unpaid for 120 days after due), provided that (a) any subsequent
      collection by Discovery on such bad debt shall be restored as Net Sales at
      the time of collection, and in the amount, of such collection, and (b)
      Discovery shall follow commercially reasonable practices of collecting and
      otherwise administering debt related to Product sales. Provided, however,
      in no event shall Net Sales be less than [***] of the gross sales of the
      Product in the Territory.

1.12  "Product" shall mean the product currently known as Surfaxin, as such name
      may change from time to time, for any and all formulations and delivery
      mechanisms (i) for the indications of (x) idiopathic respiratory distress
      syndrome ("IRDS") and (y) meconium aspiration syndrome ("MAS"); and (ii)
      solely for the purposes of Section 1.11, include all "off-label" uses.

1.13  "Territory" shall mean the United States (including Puerto Rico).

2.0   Commercialization Agreement.

      The Commercialization Agreement is in the form attached hereto as Exhibit
      A. All defined terms used herein but not defined in this Agreement shall
      have the meanings set forth in the Commercialization Agreement.

Information marked by [***] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Securities and Exchange Commission.

                                       3
<PAGE>

3.0   Investment and Commission; Related Agreements.

3.1   PharmaBio will support the commercialization of the Product as follows:

      (a)   PharmaBio shall fund one hundred percent (100%) of the
            Commercialization Expenses for the period ending on the seventh
            anniversary of the Launch Date (the "Commitment Period"), subject to
            the Maximum Investment for each such year and the other terms and
            conditions in this Agreement.

      (b)   PharmaBio shall fund the amounts payable under Section 3.1(a) by
            paying the invoices submitted by Quintiles that correspond to the
            applicable Commercialization Expenses that accrue during the
            Commitment Period, which payments shall be made by PharmaBio within
            twenty (20) days of PharmaBio's receipt of the invoice. As directed
            by Discovery, PharmaBio shall make such payment through either (i) a
            payment to Discovery, or (ii) an inter-company payment directly to
            Quintiles.

3.2   In consideration for the performance of PharmaBio of its funding
      commitments set forth in Section 3.1, Discovery shall pay PharmaBio a
      commission on Net Sales during the Commission Term. The commission
      payments payable by Discovery to PharmaBio with respect to each Annual
      Period are as follows:

           -------------------------------------------------------
           Annual Period during the              Commission on Net
                Commission Term                        Sales
           -------------------------------------------------------
                       1                               [***]
           -------------------------------------------------------
                       2                               [***]
           -------------------------------------------------------
                       3                               [***]
           -------------------------------------------------------
                       4                               [***]
           -------------------------------------------------------
                       5                               [***]
           -------------------------------------------------------
                       6                               [***]
           -------------------------------------------------------
                       7                               [***]
           -------------------------------------------------------
                       8                               [***]
           -------------------------------------------------------
                       9                               [***]
           -------------------------------------------------------
                      10                               [***]
           -------------------------------------------------------

      The commission payments under this Section 3.2 shall be paid as soon as
      reasonably practicable following the end of each calendar quarter (but not
      later than thirty (30) days following the end of each calendar quarter)
      during the ten (10) Annual Periods in the Commission Term.

Information marked by [***] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Securities and Exchange Commission.

                                       4
<PAGE>

3.3   The JCC shall take the following actions a reasonable time prior to the
      Launch Date: (i) prepare a marketing plan for the Product, including a
      sales forecast; (ii) agree to the Commercialization Services reasonably
      necessary to support sales of the Product in the Territory at the levels
      set forth in such sales forecast (including the optimum sales force size
      to support such sales of the Product); and (iii) agree to a related budget
      for Commercialization Expenses. On or about each anniversary of the Launch
      Date, the JCC shall update such items. The above actions will be taken by
      the JCC with due regard to the size and value of the market for the
      Product in the Territory, taking into account, among other variables, the
      clinical safety and efficacy of the Product (and related labeling claims),
      the competitive environment in which the Product is being promoted, and a
      reasonable budget for the sales and marketing activities. Notwithstanding
      anything to the contrary in this Agreement or the procedures for JCC
      decisions set forth in the Commercialization Agreement, the parties agree
      to the following:

      (a)   Discovery shall have the final decision on the marketing plan for
            the Product and the activities (including the Commercialization
            Services) necessary to implement such marketing plan.

      (b)   Notwithstanding anything to the contrary in this Agreement,
            PharmaBio shall have the final decision on the amount of
            Commercialization Expenses that will be funded by PharmaBio under
            Section 3.1 of this Agreement, provided that PharmaBio shall not act
            unreasonably or in bad faith in determining such amount. For
            purposes of the preceding sentence, PharmaBio shall be deemed to
            have acted unreasonably or in bad faith if PharmaBio sets the amount
            of Commercialization Expenses that PharmaBio is willing to fund
            under Section 3.1 at a level that cannot reasonably be justified in
            light of the size and value of the market for the Product.
            Notwithstanding anything to the contrary in this Agreement,
            PharmaBio cannot be deemed to have acted unreasonably or in bad
            faith for purposes of this Section 3.3(b) by failing to fund
            Commercialization Expenses in excess of the Maximum Investment.
            Further, PharmaBio shall not be deemed to have acted unreasonably or
            in bad faith for purposes of this Section 3.3(b) by failing to fund
            Commercialization Expenses (or suspending such funding) upon certain
            events impacting the marketing of the Product that are not within
            PharmaBio's control, which is defined as: (i) a material breach by
            Discovery of any obligation or representation or warranty under this
            Agreement; (ii) withdrawal of Product caused by actual or threatened
            regulatory action by the FDA or other governmental entity, safety
            concerns relating to Product, the loss of Discovery's license rights
            or other rights to Product, or similar cause; (iii) significant
            unforeseen new information regarding the safety or efficacy of
            Product which has a material adverse effect on the sales of Product;
            or (iv) other material factors adversely impacting Net Sales of the
            Product that were not reasonably foreseeable by, or within the
            control of, PharmaBio as of the date hereof. If PharmaBio shall
            decide not to fund some amount of the Commercialization Expenses,
            then (i) Discovery shall be entitled to fund such amounts

                                       5
<PAGE>

            directly, and (ii) subject to prior termination as provided for in
            Section 7.0, PharmaBio's right to receive the commission payments
            set forth in Section 3.2 shall not be reduced.

3.4   Discovery shall use commercially reasonable efforts to commercialize the
      Product in the Territory. In this regard, Discovery will provide a sales
      force of a size not less the Minimum Sales Force Level during the
      Commitment Period. If, at any time during such period, Discovery reduces
      the Product sales force below the Minimum Sales Force Level for a period
      of more than [***], then Discovery and PharmaBio will negotiate in good
      faith to restructure PharmaBio's commitments under Section 3.1 and the
      corresponding commission amounts under Section 3.2 , which negotiations
      will take into account the implications of the reduced sales force size on
      future sales of the Product. If the parties are unable to agree to such
      restructuring within thirty (30) days after PharmaBio gives written notice
      to Discovery of its intent to pursue a remedy under this Section 3.4 for
      Discovery's failure to maintain the Minimum Sales Force Level, then
      PharmaBio may, at its sole discretion by written notice to Discovery,
      elect to suspend the following: (i) all future funding obligations under
      Section 3.1; and (ii) the running of the Commission Term (including,
      without limitation, the then-current Annual Period). During the suspension
      period, PharmaBio shall continue to receive royalties at the rate equal to
      the commission amount applicable immediately prior to the effective date
      of the suspension period. If PharmaBio elects this remedy, the then
      operating Annual Period for commission payments under Section 3.2, and the
      funding commitments under Section 3.1, shall be suspended until the
      Minimum Sales Force Level is satisfied. Such Annual Period, and the
      funding commitments under Section 3.1, shall restart when the Minimum
      Sales Force Level is satisfied, at the same time point such Annual Period
      was suspended, such that PharmaBio enjoys the full length of the ten (10)
      Annual Periods described in Section 3.2 with the benefit of the Minimum
      Sales Force Level for seven (7) full twelve-month periods, and the term
      "Commission Term" shall, for all purposes under this Agreement, be
      extended accordingly. PharmaBio's remedies under this Section 3.4 shall
      not apply for any period that Quintiles fails to satisfy its sales force
      staffing obligations under the Commercialization Agreement.
      Notwithstanding anything herein to the contrary, PharmaBio's rights under
      this Section 3.4 shall be expressly subject to the provisions of Section
      3.5.

3.5   In the event that Discovery terminates the Commercialization Agreement
      under Section 12.3 thereof, then:

      (a)   Discovery shall use commercially reasonable efforts in good faith to
            identify, retain and train a new sales force (the "New Sales Force")
            as soon as practicable to perform substantially similar functions as
            were to have been provided by Quintiles under the Commercialization
            Agreement;

Information marked by [***] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Securities and Exchange Commission.

                                       6
<PAGE>

      (b)   During the period (the "Transition Period") beginning on the
            effective date of Discovery's termination of the Commercialization
            Agreement and ending on the first day of the month next following
            the date on which the New Sales Force begins detailing physicians:

            (i)   Discovery's obligation to provide the Minimum Sales Force
                  Level shall be suspended;

            (ii)  PharmaBio shall have none of the suspension or other remedial
                  rights that it would otherwise have under Section 3.4 as a
                  result of Discovery's failure to provide the Minimum Sales
                  Force Level or otherwise;

            (iii) in lieu of the commission rate set forth in Section 3.2,
                  Discovery's commission obligation to PharmaBio hereunder shall
                  equal the product of (A) the commission rate set forth in
                  Section 3.2 multiplied by (B) the percentage that Net Sales is
                  during the Transition Period of projected Net Sales for the
                  Transition Period (based on the JCC's most recent Net Sales
                  forecast, prorated, to the extent necessary, on a reasonable,
                  good faith basis); and

            (iv)  the Commission Term shall continue to run during the
                  Transition Period such that it will continue to expire on the
                  tenth (10th) anniversary of the Funding Date.

      (c)   PharmaBio's funding commitments under Section 3.1 shall continue in
            full force and effect, and all references hereunder to Quintiles
            shall be deemed to refer to the New Sales Force (and all references
            to (i) the Commercialization Agreement hereunder shall be deemed to
            refer to the agreement, if any, pursuant to which Discovery retains
            the New Sales Force and (ii) Quintiles hereunder shall be deemed to
            refer to the New Sales Force or the contract provider of the New
            Sales Force, as applicable).

3.6   As of the date hereof, the parties have entered into a Common Stock and
      Warrant Purchase Agreement. The representations and warranties set forth
      in Article IV of the Stock Purchase Agreement with respect to Discovery
      (excluding Sections 4.02, 4.14 through 4.18 and 4.20, and after modifying
      Section 4.04 so that "Transaction Documents" shall mean this Agreement)
      and in Article V with respect to PharmaBio (excluding Section 5.03 through
      5.06 and after modifying Section 5.02 so that "Transaction Documents"
      shall mean this Agreement) are incorporated in this Agreement by reference
      and form part of the consideration given to each party in exchange for the
      other party's commitments set forth herein. Discovery agrees to continue
      to exercise diligent efforts to submit the NDA (as defined in the
      Commercialization Agreement) for the Product to the FDA and to reasonably
      diligently seek FDA approval for the Product. Upon the approval of either
      the MAS or the IRDS indication, Discovery shall continue to use
      commercially reasonable

                                       7
<PAGE>

      efforts to submit the NDA for the other indication to the FDA and to seek
      FDA approval of such.

3.7   Each Party shall keep or cause to be kept such records as are required to
      determine, in a manner consistent with generally accepted accounting
      principles in the United States, the sums or credits due under this
      Agreement. Upon the written request of either party, the other party shall
      permit an independent certified public accountant appointed by such party
      and reasonably acceptable to the other party, accompanied by
      representatives of the financial department of such party at reasonable
      times and upon reasonable notice, to audit only those records as may be
      necessary to determine the correctness or completeness of any report or
      payment made under this Agreement. Results of any such audit shall be (i)
      limited to information relating to the Product, (ii) made available to
      both parties and (iii) subject to the confidentiality protections set
      forth herein. The party requesting the audit shall bear the full cost of
      the performance of any such audit, unless such audit discloses a variance
      of more than five percent (5%) from the amount of the original report,
      royalty or payment calculation. In such case, the party being audited
      shall bear the full cost of the performance of such audit.

3.8   Without the prior approval of PharmaBio, Discovery shall not, nor shall it
      allow any Affiliate or third party acting on behalf of or for the benefit
      of Discovery or any Affiliate to, commercialize a product that would
      reasonably be expected to compete with the Product in the Territory during
      the Commission Term.

3.9   The parties acknowledge and agree that (i) Discovery may pursue additional
      formulations and/or delivery technologies for the Product, which may
      result in pre-launch and launch promotional activities for the additional
      formulations and/or delivery technologies, (ii) such pre-launch and launch
      promotional activities are within the scope of the Commercialization
      Agreement, and (iii) the expenses associated with such pre-launch and
      launch promotional activities will be considered "Commercialization
      Expenses" for purposes of this Agreement and shall be subject to
      PharmaBio's funding obligations hereunder in accordance with the terms and
      limitations set forth herein.

3.10  PharmaBio shall make milestone payments to Discovery pursuant to the terms
      set forth in this Section 3.10. The "First Milestone" (herein so called)
      shall be paid on the earlier to occur of the receipt of FDA approval ("FDA
      Approval") to commercialize (x) the MAS Indication or (y) the IRDS
      Indication. The amount of the First Milestone shall be seventy percent
      (70%) of the outstanding principal (as of the controlling FDA Approval)
      under the Loan Agreement (herein so called), dated as of the date hereof,
      between PharmaBio and Discovery. The "Second Milestone" (herein so called)
      shall be paid on the earlier to occur of (x) the completion by Quintiles
      or an appropriate Affiliate of a written assessment and report in
      customary form indicating the "approvability" by the FDA of Discovery's
      NDA for the Product for the indication that was not approved as a
      condition for the First Milestone, which shall include without limitation
      an assessment and report as to the quality of the documentation comprising
      such NDA and the clinical data included in such NDA, or

                                       8
<PAGE>

      (y) the issuance by the FDA of a letter in customary form indicating that
      Discovery's NDA for the Product for such indication is "approvable." The
      amount of the Second Milestone payment shall be the remaining principal
      amounts outstanding under the Loan Agreement. PharmaBio shall have the
      right to apply the First Milestone and Second Milestone payments against
      any amounts then outstanding under the Loan Agreement.

4.0   Confidentiality and Ownership of Information.

4.1   Discovery on the one part and PharmaBio on the other part each
      acknowledges that, in the course of performing its obligations hereunder,
      it may receive information from the other party which is proprietary to
      the disclosing party and which the disclosing party wishes to protect from
      public disclosure ("Confidential Information"). Each receiving party
      agrees to retain in confidence, during the Commission Term, and thereafter
      for a period of seven (7) years, all Confidential Information disclosed to
      it by or on behalf of the other party, and that it will not, without the
      written consent of such other party, use Confidential Information for any
      purpose other than the purposes indicated herein. These restrictions shall
      not apply to Confidential Information which: (i) is or becomes public
      knowledge (through no fault of the receiving party); (ii) is made lawfully
      available to the receiving party by an independent third party that, to
      the knowledge of the receiving party, is under no duty of confidentiality
      to the disclosing party; (iii) is already in the receiving party's
      possession at the time of receipt from the disclosing party (and such
      prior possession can be demonstrated by competent evidence by the
      receiving party); (iv) is independently developed by the receiving party
      and/or Affiliates (and such independent development can be demonstrated by
      competent evidence by the receiving party); or (v) is required by law,
      regulation, rule, act or order of any governmental authority or agency to
      be disclosed by the receiving party, provided, however, if reasonably
      possible, such receiving party gives the disclosing party sufficient
      advance written notice to permit it to seek a protective order or other
      similar order with respect to such Confidential Information and,
      thereafter, the receiving party discloses only the minimum Confidential
      Information required to be disclosed in order to comply.

4.2   PharmaBio on the one hand and Discovery on the other hand shall limit
      disclosure of the other party's Confidential Information to only those of
      their respective officers, representatives, agents and employees
      (collectively "Agents") who are directly concerned with the performance of
      this Agreement and have a legitimate need to know such Confidential
      Information in the performance of their duties.

4.3   All Discovery inventions, processes, know-how, patents, trade secrets,
      copyrights, trade names, trademarks, service marks, marketing materials,
      proprietary materials or other intellectual property of any kind, and all
      improvements to any of the foregoing (collectively, "Discovery Property"),
      disclosed, used, improved, modified or developed in connection with the
      relationship contemplated by this Agreement shall remain the sole and
      exclusive property of Discovery. PharmaBio shall not have any right, title
      or interest in or to any Discovery Property.

                                       9
<PAGE>

4.4   Discovery acknowledges that PharmaBio (and its Affiliates) possess certain
      inventions, processes, know-how, trade secrets, improvements, other
      intellectual properties and other assets, including but not limited to
      analytical methods, procedures and techniques, computer technical
      expertise and software, and business practices, including, but not limited
      to the Innovex Territory Management System (ITMS), which have been
      independently developed by PharmaBio and/or its Affiliates (collectively
      "Quintiles Property"). Any Quintiles Property or improvements thereto
      which are disclosed, used, improved, modified or developed by Quintiles
      under or during the term of this Agreement shall remain the sole and
      exclusive property of PharmaBio or the respective Affiliates.

5.0   Independent Contractor Relationship.

      For the purposes of this Agreement, Discovery and PharmaBio are
      independent contractors and nothing contained in this Agreement shall be
      construed to place them in the relationship of partners, principal and
      agent, employer and employee or joint venturers. Neither Discovery nor
      PharmaBio shall have the power or right to bind or obligate the other
      party, nor shall either party hold itself out as having such authority.

6.0   Termination.

      Either party may terminate this Agreement for material breach upon thirty
      (30) days written notice specifying the nature of the breach, if such
      breach (i) has not been substantially cured within the thirty (30) day
      period or (ii) is not curable within such 30-day period and the breaching
      party has not commenced and diligently continued during such 30-day period
      reasonable actions to cure such breach. During the 30-day cure period for
      termination due to breach, each party will continue to perform its
      obligations under this Agreement. Either party may terminate this
      Agreement immediately upon provision of written notice if the other party
      becomes insolvent or files for bankruptcy or is not otherwise able to pay
      its obligations as they become due and payable.

7.0   Indemnification and Liability Limits.

7.1   PharmaBio shall indemnify, defend and hold harmless Discovery, its
      Affiliates and its and their respective directors, officers, employees and
      agents from and against any and all losses, claims, actions, damages,
      liabilities, penalties, costs and expenses (including reasonable
      attorneys' fees and court costs) (collectively, "Losses"), resulting from
      any: (i) material breach by PharmaBio (or its employees) of its
      obligations hereunder; (ii) willful misconduct or grossly negligent acts
      or omissions of PharmaBio or its employees; and (iii) material violation
      by PharmaBio or its employees of any municipal, county, state or federal
      laws, rules or regulations applicable to the performance of PharmaBio's
      obligations under this Agreement; except, in each case, to the extent such
      Losses are determined to have resulted from the gross negligence or
      willful misconduct of Discovery or its employees.

7.2   Discovery shall indemnify, defend and hold harmless PharmaBio and its
      Affiliates and their respective directors, officers, employees and agents
      from and against any and all

                                       10
<PAGE>

      Losses resulting from: (i) any third party claim arising from the
      manufacture, storage, packaging, production, transportation, distribution,
      use, sale or other disposition of the Product; (ii) material breach by
      Discovery (or its employees) of its obligations hereunder; (iii) willful
      misconduct or grossly negligent acts or omissions of Discovery or its
      employees; and (iv) material violation by Discovery or its employees of
      any municipal, county, state or federal laws, rules or regulations
      applicable to the performance of Discovery's obligations under this
      Agreement, except, in each case, to the extent such Losses are determined
      to have resulted from the gross negligence or willful misconduct of
      PharmaBio or any of its employees.

7.3   In the event of a third party claim or lawsuit, the party seeking
      indemnification hereunder (the "Indemnified Party") shall give the party
      obligated to indemnify (the "Indemnifying Party") prompt written notice of
      any claim or lawsuit (including a copy thereof), provided that the failure
      of an Indemnified Party to notify the Indemnifying Party on a timely basis
      will not relieve the Indemnifying Party of any liability that it may have
      to the Indemnified Party unless the Indemnifying Party demonstrates that
      the defense of such action is materially prejudiced by the Indemnified
      Party's failure to give such notice. The Indemnified Party and its
      employees shall fully cooperate with Indemnifying Party and its legal
      representatives in the investigation and defense of any matter the subject
      of indemnification, which defense shall be managed by the Indemnifying
      Party in a manner, including the selection of legal counsel, reasonably
      acceptable to the Indemnified Party. The Indemnified Party shall not
      unreasonably withhold its approval of the settlement of any such claim,
      liability, or action by Indemnifying Party covered by this indemnification
      provision; provided that such settlement does not include an admission or
      acknowledgement of liability or fault of the Indemnified Party.

7.4   Neither PharmaBio nor Discovery, nor any of such party's Affiliates,
      directors, officers, employees, subcontractors or agents shall have, under
      any legal theory (including, but not limited to, contract, negligence and
      tort liability), any liability to any other party hereto for any loss of
      opportunity or goodwill, or any type of special, incidental, indirect or
      consequential damage or loss, in connection with or arising out of this
      Agreement. For the avoidance of doubt, a claim by PharmaBio for
      commissions on Net Sales payable by Discovery hereunder or a claim by
      Discovery for payments pursuant to Section 3.1 shall not be limited in any
      way pursuant to the provisions set forth in the preceding sentence.

8.0   Notices.

      Any notice required to be given by either party shall be in writing. All
      notices shall be to the parties and addresses listed below, and shall be
      deemed sufficiently given (i) when received, if delivered personally or
      sent by facsimile transmission with confirmed receipt, or (ii) one
      business day after the date mailed or sent by an internationally
      recognized overnight delivery service with charges prepaid.

                                       11
<PAGE>

      If to PharmaBio:  PharmaBio Development, Inc.
                        4709 Creekstone Drive
                        Durham, NC 27703
                        Attention: President
                        Fax: 919-998-2090

      With a copy to:   General Counsel
                        PharmaBio Development, Inc.
                        4709 Creekstone Drive
                        Durham, NC 27703
                        Fax: 919-998-2090

      If to Discovery:  Discovery Laboratories, Inc.
                        350 South Main Street, Suite 307
                        Doylestown, PA 18901
                        Attention: Robert J. Capetola, Ph.D., President and CEO
                        Fax: 215-340-3940

      With a copy to:   Roberts, Sheridan & Kotel
                        The New York Practice of
                        Dickstein Shapiro's Corporate & Finance Group
                        1177 Avenue of the Americas
                        New York, NY 10036-2714
                        Attn: Ira L. Kotel
                        Facsimile: (212) 835-1400

9.0   Assignment.

      No party may assign any of its rights or obligations under this Agreement
      to any third party without the written consent of the other party, except
      that Discovery may assign its rights or obligations under this Agreement
      to a bona fide third party that (i) acquires all of Discovery's business
      (a "Permitted Sale") provided that such party assumes all of Discovery's
      rights and obligations under this Agreement. Other than pursuant to a
      Permitted Sale, Discovery may not, without the written approval of
      PharmaBio, assign any of its rights in the Product in the Territory to a
      third party. PharmaBio may at any time assign or transfer any of its
      rights or obligations under this Agreement to an Affiliate so long as such
      Affiliate agrees in an enforceable written instrument to be bound by all
      the terms and conditions of this Agreement as if it were PharmaBio and a
      party thereto, which instrument shall be delivered a reasonably
      practicable time prior to such assignment. Nothing in this Section 9.0
      shall preclude the transfer of a party's rights and obligations under this
      Agreement in conjunction with a merger in which such party is not the
      surviving entity.

10.0  General Provisions.

10.1  This Agreement shall be construed, governed, interpreted, and applied in
      accordance with the laws of the State of Delaware, without giving effect
      to the principles of conflict of laws.

                                       12
<PAGE>

10.2  The provisions of Articles 1 (except for Section 1.7), 2, 45, 7, 8, 10 and
      11 shall survive the termination of this Agreement for any reason.

10.3  This Agreement contains the entire understandings of the parties with
      respect to the subject matter herein and cancels all previous agreements
      (oral and written), negotiations and discussions dealing with the same
      subject matter. The parties, from time to time during the term of this
      Agreement, may modify any of the provisions hereof only by an instrument
      in writing duly executed by the parties.

10.4  No failure or delay on the part of a party in either exercising or
      enforcing any right under this Agreement will operate as a waiver of, or
      impair, any such right. No single or partial exercise or enforcement of
      any such right will preclude any other or further exercise or enforcement
      thereof or the exercise or enforcement of any other right. No waiver of
      any such right will have effect unless given in a signed writing. No
      waiver of any such right will be deemed a waiver of any other right.

10.5  If any part or parts of this Agreement are held to be illegal, void or
      ineffective, the remaining portions of this Agreement shall remain in full
      force and effect. If any of the terms or provisions are in conflict with
      any applicable statute or rule of law, then such term(s) or provision(s)
      shall be deemed inoperative to the extent that they may conflict
      therewith, and shall be deemed to be modified or conformed with such
      statute or rule of law. In the event of any ambiguity respecting any term
      or terms hereof, the parties agree to construe and interpret such
      ambiguity in good faith in such a way as is appropriate to ensure its
      enforceability and viability.

10.6  The headings contained in this Agreement are used only as a matter of
      convenience, and in no way define, limit, construe or describe the scope
      or intent of any section of this Agreement.

10.7  The individuals signing below are authorized and empowered to bind the
      parties to the terms of this Agreement.

10.8  Whenever provision is made in this Agreement for either Party to secure
      the consent or approval of the other, that consent or approval shall not
      unreasonably be withheld or delayed, and whenever in this Agreement
      provisions are made for one Party to object to or disapprove a matter,
      such objection or disapproval shall not unreasonably be exercised. For the
      avoidance of doubt, PharmaBio's funding decisions under Section 3.3(b)
      shall not be deemed a "consent or approval" for purposes of this Section
      10.8.

11.0  Dispute Resolution:

11.1  Governing Law. This Agreement, including, without limitation, the
      interpretation, performance, enforcement, breach or termination thereof
      and any remedies relating thereto, shall be governed by and construed in
      accordance with the laws of the State

                                       13
<PAGE>

      of Delaware, United States of America, as applied to agreements executed
      and performed entirely in the State of Delaware, without regard to
      conflicts of law rules.

11.2  Internal Review. In the event that a dispute, difference, claim, action,
      demand, request, investigation, controversy, threat, discovery request or
      request for testimony or information or other question arises pertaining
      to any matters which arise under, out of, in connection with, or in
      relation to this Agreement (a "Dispute") and either party so requests in
      writing, prior to the initiation of any formal legal action, the Dispute
      will be submitted to the JCC, which will use its good faith efforts to
      resolve the Dispute within ten (10) days. If the JCC is unable to resolve
      the Dispute in such period, the JCC will refer the Dispute to the Chief
      Executive Officers of Discovery and Quintiles Corp. For all Disputes
      referred to the Chief Executive Officers, the Chief Executive Officers
      shall use their good faith efforts to meet at least two times in person
      and to resolve the Dispute within ten (10) days after such referral.

11.3  Arbitration.

      (a)   If the parties are unable to resolve any Dispute under Section 11.2,
            then either party may require the matter to be settled by final and
            binding arbitration by sending written notice of such election to
            the other party clearly marked "Arbitration Demand". Thereupon such
            Dispute shall be arbitrated in accordance with the terms and
            conditions of this Section 11.3 Notwithstanding the foregoing,
            either party may apply to a court of competent jurisdiction for a
            temporary restraining order, a preliminary injunction, or other
            equitable relief to preserve the status quo or prevent irreparable
            harm.

      (b)   The arbitration panel will be composed of three arbitrators, one of
            whom will be chosen by Discovery, one by Quintiles, and the third by
            the two so chosen. If both or either of Discovery or Quintiles fails
            to choose an arbitrator or arbitrators within 14 days after
            receiving notice of commencement of arbitration, or if the two
            arbitrators fail to choose a third arbitrator within 14 days after
            their appointment, the American Arbitration Association shall, upon
            the request of both or either of the parties to the arbitration,
            appoint the arbitrator or arbitrators required to complete the
            panel. The arbitrators shall have reasonable experience in the
            matter under dispute. The decision of the arbitrators shall be final
            and binding on the parties, and specific performance giving effect
            to the decision of the arbitrators may be ordered by any court of
            competent jurisdiction.

      (c)   Nothing contained herein shall operate to prevent either party from
            asserting counterclaim(s) in any arbitration commenced in accordance
            with this agreement, and any such party need not comply with the
            procedural provisions of this Section 11.3 in order to assert such
            counterclaim(s).

                                       14
<PAGE>

      (d)   The arbitration shall be filed with the office of the American
            Arbitration Association ("AAA") located in Wilmington, Delaware or
            such other AAA office as the parties may agree upon (without any
            obligation to so agree). The arbitration shall be conducted pursuant
            to the Commercial Arbitration Rules of AAA as in effect at the time
            of the arbitration hearing, such arbitration to be completed in a
            sixty (60) day period. In addition, the following rules and
            procedures shall apply to the arbitration:

      (e)   The arbitrators shall have the sole authority to decide whether or
            not any Dispute between the parties is arbitrable and whether the
            party presenting the issues to be arbitrated has satisfied the
            conditions precedent to such party's right to commence arbitration
            as required by this Section 11.3.

      (f)   The decision of the arbitrators, which shall be in writing and state
            the findings the facts and conclusions of law upon which the
            decision is based, shall be final and binding upon the parties, who
            shall forthwith comply after receipt thereof. Judgment upon the
            award rendered by the arbitrator may be entered by any competent
            court. Each party submits itself to the jurisdiction of any such
            court, but only for the entry and enforcement to judgment with
            respect to the decision of the arbitrators hereunder.

      (g)   The arbitrators shall have the power to grant all legal and
            equitable remedies (including, without limitation, specific
            performance) and award compensatory damages provided by applicable
            law, but shall not have the power or authority to award punitive
            damages. No party shall seek punitive damages in relation to any
            matter under, arising out of, or in connection with or relating to
            this Agreement in any other forum.

      (h)   The parties shall bear their own costs in preparing for and
            participating in the resolution of any Dispute pursuant to this
            Section 11.3, and the costs of the arbitrator(s) shall be equally
            divided between the parties; provided, however, that each party
            shall bear the costs incurred in connection with any Dispute brought
            by such party that the arbitrators determine to have been brought in
            bad faith.

      (i)   Except as provided in the last sentence of Section 11.3(a), the
            provisions of this Section 11.3 shall be a complete defense to any
            suit, action or proceeding instituted in any federal, state or local
            court or before any administrative tribunal with respect to any
            Dispute arising with regard to this Agreement. Any party commencing
            a lawsuit in violation of this Section 11.3 shall pay the costs of
            the other party, including, without limitation, reasonable
            attorney's fees and defense costs.

                                       15
<PAGE>

11.4  Costs. The parties shall bear their own costs in preparing for and
      participating in the resolution of any Dispute, and the costs of
      mediator(s) and arbitrator(s) shall be equally divided between the
      parties.

                                       16
<PAGE>

IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
through their duly authorized officers on the date(s) set forth below.

PHARMABIO DEVELOPMENT, INC.             DISCOVERY LABORATORIES, INC.

By:     /s/ Thomas C. Perkins           By      /s/ David L. Lopez
       -------------------------------         ---------------------------------

Name:   Thomas C. Perkins               Name:   David L. Lopez
       -------------------------------         ---------------------------------

Title:  Vice President and General      Title:  Vice President and
        Counsel                                 General Counsel
       -------------------------------         ---------------------------------

                                       17

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