Exhibit 10.103

CONFIDENTIAL TREATMENT REQUESTED

WITH RESPECT TO CERTAIN PORTIONS HEREOF

DENOTED WITH “***”

PROCESS DEVELOPMENT AGREEMENT

THIS AGREEMENT (the “Agreement”), made and effective as of this 8th day of
February, 2008 (the “Effective Date”) by and between:

BioDelivery Sciences International, Inc., a corporation organized and existing
under the laws of Delaware, having a principal place of business at 801
Corporate Center Drive, Suite 210, Raleigh, NC 27607, U.S.A. (herein after
called “BDSI”); and

LTS Lohmann Therapie-Systeme AG, a limited liability company organized and
existing under the laws of Germany, having its executive offices and principal
place of business at Lohmannstrasse 2, 56626 Andernach, Germany (hereinafter
called “LTS”).

Background

LTS has experience with oral film-form products and has developed and is
presently engaged in the production of similar products. BDSI has experience
with oral film-form products and has knowledge in the production of similar
products. BDSI desires to cooperate with LTS for the scale up and process
development of BDSI’s buprenorphrine hydrochloride product to be distributed and
sold by BDSI and its Affiliates or licensees. LTS wishes to cooperate with
regard to such scale up and process development. BDSI wishes to have LTS
manufacture and supply clinical materials, and BDSI wishes to purchase Products
and Placebos. BDSI and LTS wish to cooperate in the exclusive manufacturing of
the Products and Placebos in the Territory.

NOW THEREFORE, BDSI and LTS, in consideration of the premises and of the mutual
promises and covenants hereinafter contained, do each hereby covenant and agree,
as hereinafter set forth.

Terms

 

I. DEFINITIONS.

1.1 Defined Terms. Capitalized terms used in this Agreement and not otherwise
defined herein will have the meaning set forth below.

“Active Principle” means buprenorphrine hydrochloride, as further specified in
accordance with the specifications for Active Principle attached hereto as Annex
1.

“Affiliate” used in relation to a party hereto means: (a) any company or other
entity of which such party now or hereafter (i) directly or indirectly owns more
than fifty percent (50%) of the stock or other equity interest entitled to vote
for the election of directors of such company or (ii) otherwise has voting
control over such entity; (b) any company or other entity of which such party
has the power to appoint more than half the members of the supervisory board,
board of

 

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directors or boards legally representing the undertaking; (c) any entity which,
directly or indirectly, has the powers described in Sections (a) or (b) with
respect to a party (a “Parent”); or (d) any entity over which a Parent of a
party has the powers described in Sections (a) or (b).

“Authority” means the relevant governmental or regulatory body whose approval is
required to develop the Process or to sell a Product in a particular country of
the Territory.

“Batch” means *** of a Product.

“BDSI Technology” means, individually and collectively, all discoveries,
inventions, know-how, trade secrets, techniques, patents, patent applications,
methodologies, modifications, improvements, works of authorship, materials,
designs and data (whether or not protectable under patent, copyright, trade
secrecy or similar laws), in each case with respect to bioerodable mucoadhesive
transmucosal technology which includes Confidential Information, and technical
know-how regarding and patents (including the BDSI Patents) with respect to its
and/or the Product’s use, formulation, components, formulae, processing methods
(including without limitation ***), that are conceived, discovered, developed,
generated, created, made or reduced to practice or tangible medium of expression
solely by employees or consultants of BDSI, or Controlled by BDSI, at any time
prior to the Effective Date, or after the Effective Date, if such are not based
upon or related to the performance of the Project Plan, together with all
Product Improvements owned or Controlled by BDSI in accordance with Section 9.1.

“Business Day” means a day other than Saturday, Sunday or any official holiday
in the applicable State of a party.

“Calendar Quarter” means the calendar quarters of the year beginning first of
January, April, July and October.

“Certificate of Analysis” means a certificate issued by a raw material supplier
which states the Product (and if issued by the raw material supplier Raw
Material) Specifications, indicates the final release test results and includes
documentation of any Batch deviations. “LTS Certificate of Analysis” means a
certificate issued by LTS on the finished drug Product which will indicate the
final release tests results and include documentation of any batch deviations.

“Commercially Reasonable Efforts” means those efforts ***.

“Control” or “Controlled” means the possession by a party of the right to grant
a license or sublicense as provided herein without the payment of additional
consideration to, and without violating the terms of any agreement or
arrangement with, any third party.

“European Territory” means all countries that are members of the European Patent
Organisation as of the Effective Date.

“Design” means the kind of structure, type or model, concept and the composition
of the Product including but not limited to quantity and quality of Active
Principle and excipients.

 

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CONFIDENTIAL TREATMENT REQUESTED

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“GMP” means the current Good Manufacturing Practices at the time of
manufacturing applicable to the manufacturing and packaging of pharmaceutical
products for human use in the country of manufacturing.

“GMP Product” means Product that is intended for use for clinical applications
as opposed to non-clinical research and development purposes.

“Improvements” means ***.

“LTS Technology” means, individually and collectively, all discoveries,
inventions, know-how, trade secrets, techniques, patents (including the ***),
patent applications, methodologies, modifications, improvements, works of
authorship, designs and data (whether or not protectable under patent,
copyright, trade secrecy or similar laws), in each case with respect to the
development of oral film form products and/or pharmaceutical preparations in
general, their use, process development (including without limitation ***), that
are conceived, discovered, developed, generated, created, made or reduced to
practice or tangible medium of expression solely by employees or consultants of
LTS, or Controlled by LTS, at any time prior to the Effective Date, or after the
Effective Date, if such are not based upon or related to the performance of the
Project Plan and all Process Improvements owned or Controlled by LTS in
accordance with Section 9.1.

“Patents” means: (a) all patents and patent applications, and patents issuing
thereon, which are owned or Controlled by BDSI or LTS at any time during the
term of this Agreement or thereafter and which are necessary or useful for the
use, development, sale, or manufacturing of the Product, and (b) all
continuations, continuations-in-part, re-issuances, divisions, foreign
counterparts, and extensions thereof.

“Placebo” means formulation and specifications without the Active Principle, as
specified in accordance with the specifications for Placebo attached hereto as
Annex 2.

“Process Improvement” means any Project Plan Improvement in or to the Process.

“Processing” means *** in manufacturing the Product in accordance with this
Agreement. The terms “Process” and “Processed” in this Agreement will be
construed accordingly.

“Product” means BDSI’s transmucosal oral system containing Active Principle
based on the Design of BDSI Technology as contemplated under the Product
Specifications attached hereto as Annex 3.

“Product Improvement” means any Project Plan Improvement in or to the Product,
including without limitation, any patent or patent application filed arising out
of or based upon any Project Plan Improvement that claims the Product or Active
Principle.

 

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CONFIDENTIAL TREATMENT REQUESTED

WITH RESPECT TO CERTAIN PORTIONS HEREOF

DENOTED WITH “***”

 

“Product Specifications” means the specifications for Product, including any
packaging and labeling specifications, as set forth in Annex 3, or as otherwise
mutually agreed upon in writing by the parties from time to time and furnished
to LTS by BDSI for the processing, manufacturing and quality control of the
Product, and any and all additions and amendments to the same made by the
written agreement of the parties during the term of this Agreement.

“Project” means the work to be performed under this Agreement as set forth in
the Project Plan, attached hereto as Annex 4, as may be amended from time to
time by written agreement by the Working Group.

“Project Plan Improvements” means any ***.

“Raw Materials” means the raw materials that are used by LTS to manufacture
Product through the applicable Process, according to specifications furnished by
BDSI to LTS as specified in Annex 3, Product Specifications, or as otherwise
mutually agreed upon in writing by the parties from time to time.

“Technical Information” means all technical information, which may include
Confidential Information, Improvements, patents, patent applications,
proprietary know-how, discoveries, inventions, processes, formulae and methods
which are necessary or useful for the Process and the manufacturing of the
Product.

“Territory” means the entire world.

“Valid Claim” means with respect to the sale of a Product within a particular
jurisdiction an unexpired claim of an issued patent within such jurisdiction
which has not expired, lapsed, or been found to be invalid, unpatentable or
unenforceable by a court or other competent authority in the subject
jurisdiction, from which decision no appeal is taken or can be taken, and which
has not been rendered unenforceable through disclaimer or otherwise, or
otherwise lost through an interference proceeding.

1.2 Other Defined Terms. The following terms will have the meanings set forth in
the section appearing opposite such term:

 

“Agreement”    Recitals “BDSI”    Recitals “BDSI Advices”    Section 12.2.6
“BDSI Infringement Claim”    Section 8.3.2 “Communications”    Section 13.8.1
“Competitor”    Section 13.1 “Confidential Information”    Section 10.2
“Disclosing Party”    Section 10.1 “Effective Date”    Recitals “ICC”    Section
13.2 “Indemnified Party”    Section 11.7.1

 

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CONFIDENTIAL TREATMENT REQUESTED

WITH RESPECT TO CERTAIN PORTIONS HEREOF

DENOTED WITH “***”

 

“Indemnifying Party”    Section 11.7.1 “Initial Amount”    Section 5.1.2
“Losses”    Section 11.3 “LTS”    Recitals “LTS Advices”    Section 12.2.5
“Project Leader”    Section 3.2 “Product Infringement Claim”    Section 8.3.2
“Recipient”    Section 10.1 “Working Group”    Section 3.1

 

II. CONTRIBUTION.

2.1 Contribution of the Parties.

2.1.1 The Parties agree to duly cooperate as to the purpose of this Agreement in
performing an investigation regarding the manufacturing of clinical samples and
later commercial supplies of the Products, clinical trials and registration
based on the Design and the manufacturing technology and know-how provided by
BDSI regarding the Product including, but not limited to clinical trials and
registration, all in accordance with and as to the extent further specified and
provided in this Agreement.

2.1.2 Based on Technical Information as disclosed by BDSI, LTS shall use
Commercially Reasonable Efforts to develop the Process to manufacture the
Product for BDSI in accordance with the applicable Product Specifications and
the Project Plan.

2.1.3 Solely for the purpose of LTS’s performance of its obligations to BDSI
hereunder, BDSI will disclose to LTS all necessary BDSI Technology concerning
formulation, ingredients and compounding ratio of the Product, the Product
specification values, manufacturing method and other technology and know-how of
the Product. Such disclosures will be deemed to be the Confidential Information
of BDSI for all purposes hereunder.

2.1.4 LTS shall use its Commercially Reasonable Efforts to supply quantities of
Product to BDSI according to the Project Plan. All Products supplied by LTS
hereunder shall: (a) conform to the Product Specifications; and (b) be
manufactured, labelled, packaged and tested (while in the possession or control
of LTS) in accordance with GMP and the applicable laws and regulations relating
to the manufacture, labelling, packaging and testing of the Product.

2.1.5 LTS shall use its Commercially Reasonable Efforts to prepare as soon as
possible those sections of any applicable regulatory documents of an Authority
which concern the development of the Process or the manufacturing of the Product
by LTS and shall provide those sections to BDSI as soon as possible for
inclusion in any applicable regulatory filings with an Authority which concern
the Product. To the extent disclosure of LTS’ proprietary information is
required for such purposes, Section 10.7. shall govern.

2.1.6 BDSI shall provide ***.

 

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WITH RESPECT TO CERTAIN PORTIONS HEREOF

DENOTED WITH “***”

 

2.1.7 To the extent required by law, BDSI shall use its Commercially Reasonable
Efforts to ensure that LTS has the right to reasonably audit the supplier of the
Active Principle for compliance with relevant regulatory requirements including
GMP.

2.1.8 BDSI or its Affiliates or its licensees shall be responsible for the
clinical trials, the registration of the Product with the proper health, customs
and other Authorities, as applicable, to be carried out in BDSI’s sole
discretion.

2.1.9 LTS shall ***.

 

III. WORKING GROUP.

3.1 Establishment. The parties shall establish a joint technology team (the
“Working Group”) responsible for monitoring and controlling the Project Plan,
exchanging information and coordinating all joint activities of the parties
under the Agreement.

3.2 Project Leader. Each party shall initially appoint one project leader (each,
a “Project Leader”). The Project Leaders shall determine from time to time
whether the Working Group should have additional members; if so, the Project
Leaders may choose from time to time to have *** additional members of the
Working Group. The Project Leaders shall each select an equal number of such
members to the Working Group, jointly define such members’ responsibilities and
jointly schedule meetings of the Working Group. ***.

3.3. Meetings. The Project Leaders shall meet regularly, at least every Calendar
Quarter, and jointly make at least quarterly reports to BDSI and LTS on the
progress of the development of the Process, as set forth in the Project Plan.

3.4 Decisions. The Working Group shall strive to always reach unanimous
decisions. In the event of a deadlock, the issue will be referred to the Project
Leaders for resolution. In the event that such persons cannot reach a unanimous
decision, the chief executive officers of BDSI and LTS or their designees shall
discuss the matter in good faith to resolve the dispute. For clarity the Working
Group shall not have authority to waive compliance with, or amend or modify the
Agreement, each of which are subject to Section 13.6 and 13.11 respectively.

 

IV. REQUIREMENTS AND SUPPLY; QUALITY CONTROL.

4.1 Supply. LTS shall use its Commercially Reasonable Efforts to supply Product
*** to BDSI for appropriate testing, toxicological evaluations and clinical
trials to be conducted in accordance with the Project Plan. Manufacture of
samples of Product shall comply with applicable laws, including GMP.

 

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CONFIDENTIAL TREATMENT REQUESTED

WITH RESPECT TO CERTAIN PORTIONS HEREOF

DENOTED WITH “***”

 

4.2 Certificate of Analysis. For shipment of Product delivered to BDSI, LTS
shall prepare a LTS Certificate of Analysis indicating that such shipment was
manufactured in compliance with this Agreement, GMP and the then-current Product
Specifications, and shall forward the LTS Certificate of Analysis to BDSI at the
time delivery of the shipment is initiated.

4.3 Inspection. Upon receipt of a shipment of Product, BDSI agrees to promptly
inspect such shipment to attempt to determine any apparent non-conformity to the
Product Specifications and GMP. Notwithstanding any acceptance of any shipment
of Product, the warranties provided in Section 11.1 and LTS’ obligations under
Section 11.6 shall survive acceptance of the Product by BDSI.

4.4 Replacement. Within ***.

4.5 Adverse Results. As long as BDSI continues with the development of Product,
BDSI shall conduct appropriate tests and toxicological evaluations for Product
in accordance with applicable laws, and report to LTS promptly any adverse
results of such tests and evaluations, which shall be received and treated as
BDSI’s Confidential Information (as defined in Section 10). Notwithstanding the
foregoing, BDSI shall have no obligation to report any adverse clinical trial
results to LTS, unless such adverse results directly relate to Product.

4.6 Facility Inspections. BDSI shall have the right upon written reasonable
advance notice to conduct plant inspections at LTS facilities where Product is
produced, in order to audit the compliance with relevant regulatory requirements
including GMP. Such plant inspections are subject to access during normal
business hours and to those parts of the facility that are used for the
manufacture of the Product. In addition, LTS shall make its facilities available
for inspection by any Authority.

4.7 Safety Problems. Subject to Section 4.5, each party shall promptly advise
the other of any safety or toxicity problem of which either party becomes aware
regarding the Product or Raw Materials used in the Process or manufacture of the
Product.

 

V. FUNDING OF PROJECT.

5.1 Funding of LTS Activities according to Project Plan.

5.1.1 BDSI shall compensate LTS for work performed in accordance with the
Project Plan (Annex 4) and this Agreement, ***.

5.1.2 The first invoice to BDSI in the amount of *** (the “Initial Amount”) will
be issued by LTS upon signature of this Agreement. Following, LTS shall invoice
BDSI on a *** basis for the man-hours actually employed by LTS during such ***.

5.1.3 LTS will verify and document the man-hours devoted by LTS to the Project,
and will submit to BDSI together with the invoice an accounting ***.

 

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WITH RESPECT TO CERTAIN PORTIONS HEREOF

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5.1.4 BDSI may have LTS’ records of man-hours and their allocation to the
Project Plan audited by an independent Certified Public Accountant or chartered
accountant or admitted Wirtschaftspruefer (i.e., German equivalent to a CPA)
reasonably acceptable to LTS acting in confidence, at reasonable intervals, at
BDSI’s expense and subject to reasonable prior notice.

5.1.5 During the term of the Agreement, ***.

5.2 Estimated Price. The estimated price to be paid by BDSI for commercially
salable Product purchased from LTS under a proposed Manufacturing and Supply
Agreement (the outlines of which are set forth in Annex 5), if executed in
accordance with Section 6.1, shall be provided to BDSI after the successful
scale up and the manufacture of clinical samples.

5.3 Non-Payment. Notwithstanding the foregoing, in the event that any invoice by
LTS is not paid in total within ***of BDSI’s receipt thereof, and BDSI did not
dispute such invoice in good faith within ***of BDSI’s receipt thereof, LTS may
request ***.

 

VI. COMMERCIALIZATION OF RESULTS; EXCLUSIVITY.

6.1 Exclusive Manufacture. In the event BDSI or any Affiliate controlled by
BDSI, or any BDSI licensee decides to sell Product within the Territory, LTS
will be the exclusive manufacturer for the sale of BDSI’s, BDSI’s Affiliates’
and/or licensees’ Product in the Territory. The general outlines of a
Manufacturing and Supply Agreement to be used are attached hereto as Annex 5.
***. In the event that after good faith negotiations the parties cannot agree
upon the definitive Manufacturing and Supply Agreement, then the exclusive
manufacturing right shall terminate . In such event LTS shall not be obliged to
grant to BDSI any right or license to and under the LTS Technology according to
Section 9.2.1, except for the license granted to BDSI according to Section 9.2.2
which shall continue to apply, ***.

Upon such Manufacturing and Supply Agreement, it is contemplated that LTS will
be in charge of, and responsible for, exclusive manufacturing for the Products
in the Territory at any of LTS’ manufacturing sites as determined by the Working
Group, but in all cases in accordance with the Manufacturing and Supply
Agreement.

6.2 Sublicense. BDSI may license and/or sublicense all of its rights, licenses,
and authorizations under this agreement including, but not limited to
distribution to a third party, and the use of third party distributors, provided
that BDSI provides written notification to LTS of such license and/or
sublicense.

6.3 Other Development. BDSI and LTS shall, at all times, have the right to ***.

6.4 Other Manufacture. LTS shall, at all times, have the right to manufacture
for third parties any product developed by LTS and/or a third party whether or
not such product contains the same or other ingredients as Active Principle, or
is used for the same indication as the Product. For clarity, LTS has no license
in, to or under, and LTS is prohibited from using or referring to, the BDSI
Technology or BDSI Confidential Information to conduct any of the activities
described in this Section 6.4.

 

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WITH RESPECT TO CERTAIN PORTIONS HEREOF

DENOTED WITH “***”

 

VII. GRANT OF LICENSE OF PURPOSE OF AGREEMENT.

7.1 License Grant. Subject to the terms and conditions of this Agreement BDSI
grants to LTS *** right and license during the term of this Agreement in and to
the BDSI Technology and Patents solely to develop the Process in the Territory
and manufacture the Product in the Territory for BDSI and its Affiliates under
this Agreement. Such license shall be non-assignable, except as set forth in
Section 7.2.

7.2 Performance by Affiliates. LTS shall have the right to assign all or any
portion of its rights granted under Section 7.1 and to delegate all or any
portion of its obligations under this Agreement to any Affiliate whilst it
remains so; provided that (a) such Affiliate is performing LTS’s obligations
hereunder, (b) prior to the commencement of activities by an Affiliate to
perform its obligations hereunder, such Affiliate shall have received all
necessary validations, inspections and regulatory approvals, and (c) such
assignment and delegation shall not relieve LTS of its obligations hereunder.

7.3 Affiliate Rights and Obligations. Any Affiliate with which LTS effects such
assignment and delegation shall enjoy all of the rights and be subject to all of
the obligations hereby imposed on LTS except that any assignment of LTS’ rights
and delegation of LTS’ obligations under this Agreement shall be non-assignable
and shall not contain any right to assign or delegate.

 

VIII.  INTELLECTUAL PROPERTY.

8.1 Use of Patents and Trademarks.

8.1.1 LTS acknowledges that the license of BDSI Technology for use by LTS in the
Process development or manufacturing of Product shall not grant to LTS the right
of any further license to such BDSI Technology (or any part thereof) for any
purpose whatsoever other than such work according to this Agreement and, without
limitation, shall not grant to LTS the right of any license to Process the
Product (or any part thereof) in any way whatsoever other than as set out in the
Product Specifications.

8.1.2 For the avoidance of doubt no right or license is granted or deemed to be
granted hereunder or in connection herewith, by estoppel or otherwise, with
respect to the BDSI Technology other than the express licenses set out in this
Agreement, and the grant of such license and the provision of the BDSI
Technology shall neither transfer to, nor create in favor of, LTS any right of
ownership therein. Except as expressly provided in Section 9.1 with respect to
Process Improvements, title to the BDSI Technology and any other intellectual
property, patents or patent applications of BDSI shall at all times remain
vested in BDSI.

8.1.3 For the avoidance of doubt no right or license is granted or deemed to be
granted hereunder or in connection herewith, by estoppel or otherwise, with
respect to the LTS Technology other than the express licenses set out in this
Agreement, and the grant of such

 

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license and the provision of the LTS Technology shall neither transfer to, nor
create in favor of, BDSI any right of ownership therein. Except as expressly
provided in Section 9.1 with respect to Product Improvements, title to the LTS
Technology and any other intellectual property, patents or patent applications
of LTS shall at all times remain vested in LTS.

8.2 No Rights by Implication. Nothing contained herein shall be construed as
granting to LTS any rights or implying any rights under any patents (including
the BDSI Patents) covering the Product or any right to use any information,
know-how or data covered thereby except as expressly provided for under Article
VII for the performance of LTS’ obligations under this Agreement.

8.3 Patent Infringement.

8.3.1 Each party will promptly notify the other party hereto if it receives
notice that the Process or Product infringes or allegedly infringes the
proprietary rights of any third party. Subject to the indemnification procedures
set forth herein, the parties will determine what action, if any, should be
taken (e.g. licenses), if it appears that the Process or Product infringes the
proprietary rights of a third party.

8.3.2 (a) Subject to the procedures and requirements set forth in Section 11.7,
BDSI shall indemnify, defend, and hold LTS, its managing directors, directors,
officers, employees, Affiliates and agents harmless as a sole remedy with regard
to any out-of-pocket expenses *** incurred, assessed or sustained by LTS as a
result of a third party claim that the Product (and not the Process developed by
LTS) infringes the intellectual property rights of a third party (by reason
other than its manufacture in accordance with the Process) (“Product
Infringement Claim”).

(b) LTS shall indemnify BDSI its directors, officers, employees, Affiliates,
agents and representatives as a sole remedy with regard to any out- of- pocket
expenses *** incurred, assessed or sustained as a result of a third party claim
with respect to any infringement caused by or based upon the Process developed
by LTS and not caused by aspects of the Process developed according to BDSI’s
instructions to employ a particular design or process and / or any specific
alterations to the Process requested by BDSI with respect to which LTS has not
identified issues or problems with such instructions (“BDSI Infringement Claim”)
provided that such indemnification shall be limited ***.

(c) Subject to the procedures and requirements set forth in Section 11.7, and
subject to the initial indemnification obligations of Section 8.3.2(a) and (b),
as applicable, BDSI shall indemnify LTS with regard to any exceeding out of
pocket expenses (such out-of-pocket expenses shall include ***) incurred,
assessed or sustained as a result of a third party claim that the Product or the
Process infringes the intellectual property rights of a third party, to the
extent such out-of-pocket expenses exceed *** such date the claim arose, or for
which LTS is not obliged to indemnify BDSI according to Section 8.3.2 (b) or
11.6 (if applicable).

 

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8.3.3 The Parties agree to jointly perform from time to time a freedom to
operate analysis with respect to the Product and the Process according to
investigation standards to be agreed upon by the parties. This cooperative
activity is to be undertaken to help minimize the risk of patent infringement
and resulting indemnification obligations under this Section 8.3. Such
activities will be undertaken pursuant to confidentiality and
commonality-of-interest agreements sufficient to protect each party’s
attorney-client privileged information. No activity under this Section 8.3.3
will (a) absolve either party of its indemnification obligations hereunder,
(b) serve to waive or limit the representations and warranties hereunder,
(c) absolve or limit either party of its own recklessness or negligence, or
(d) provide a basis for claims between the Parties for relying on the other
Party’s results of such freedom to operate analysis.

 

IX. IMPROVEMENTS.

9.1 Process and Product Improvements.

9.1.1 All Process Improvements shall be owned by LTS, LTS shall have the sole
proprietary rights to the Process, and BDSI hereby assigns any of its right,
title, or interest in or to Process Improvements to LTS. However, joint
ownership shall be considered if an employee of BDSI is an inventor and if the
invention or Improvement does not concern LTS’ Technology. All Product
Improvements shall be owned by BDSI, BDSI shall have the sole proprietary rights
to the Product, and LTS hereby assigns any of its right, title, or interest in
or to Product Improvements to BDSI.

9.1.2 Any patent filed from a jointly owned Project Plan Improvement shall be
filed and registered in the name of LTS and BDSI. In the event one of the
parties wishes to abandon such patent or patent application it shall offer its
rights to such patent to the other owner of such patent or patent application at
no cost or expense to such other party (other than assumption of any ongoing
prosecution or maintenance costs or fees subsequent to the effect date of
assignment). Such owner shall then have the option to assume such rights by
written notice within *** after receipt of the offer. In case the option is not
executed, the parties shall abandon the patent. The parties will confer and
cooperate as to appropriate protection for any jointly owned Project Plan
Improvement, including an application, preparation, prosecution, maintenance,
and enforcement strategies.

9.2 License Grant.

9.2.1 Except as expressly set forth in Section 9.2.2, LTS hereby grants to BDSI
a *** license to and under the LTS Technology, whether owned or Controlled or
otherwise used by LTS, to make, have made, use, have used, offer to sell, sell,
have sold or import or have imported the Product in the Territory for the term
of this Agreement.

9.2.2 LTS hereby grants to BDSI a non-exclusive, non-transferable, license to
and under EP 0 949 925 to make, have made, use, have used, offer to sell, sell,
have sold or import or have imported the Product for the term of this Agreement,
provided, however, that BDSI pays to LTS ***.

 

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9.2.3 As long as any of the following are satisfied: (i) both (A) LTS
exclusively manufactures the Product for the Territory, and (B) BDSI punctually
and completely makes the payments as, if, and when due as set forth in
Section 9.2.2; or (ii) this Agreement remains in effect, ***. This covenant
shall survive termination or expiration of this Agreement provided that 9.2.3(i)
is satisfied. BDSI’s right to challenge LTS’ patents shall remain unaffected;
however, in the event of such challenge in court, LTS may terminate this
Agreement, including but not limited to the license and any sublicenses, with
immediate effect upon written notice to BDSI.

9.2.4 Nothing contained herein shall be construed as granting to BDSI any rights
or implying any rights under any patents (including the LTS Patents) covering
the Product or any right to use any information, know-how or data covered
thereby except as expressly provided for under this Section 9.2.

 

X. CONFIDENTIALITY.

10.1 Disclosing Party. Insofar as a party provides proprietary or confidential
information it will be referred to herein as the “Disclosing Party”; insofar as
a party receives such proprietary information it will be referred to herein as
the “Recipient”. A party’s directors, officers, employees, agents and
representatives shall be referred herein as the “Representatives”, and each
Recipient shall be liable for any breach of this Article X by its
Representatives as though such Representatives were parties hereto.

10.2 Access Conditions. The Disclosing Party agrees to provide the Recipient
with, or allow the Recipient to have access to Confidential Information only
upon the following terms and conditions:

10.2.1 “Confidential Information” means

(i) (A) all data, information (including schematics, designs, drawings and
specifications), (B) Technical Information, (C) samples and specimens relating
to the Product or components of the Product (including the identity of compounds
used therein or therewith), or the use, manufacturing or marketing thereof, or
the Process, or related clinical or regulatory affairs, or (D) the Disclosing
Party’s businesses or financial affairs generally (including, without
limitation, results of operations, discussions, agreements or arrangements with
third parties, prices, processes, pre-clinical and clinical and other test or
trial results, products, product concepts, technologies and similar or related
non-public information), or those of the Disclosing Party’s Affiliates, clients,
customers or other third parties, whether in written, graphic oral or tangible
form, furnished to the Recipient by or on behalf of the Disclosing Party, either
directly or indirectly, or obtained by the Recipient, and

 

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DENOTED WITH “***”

 

(ii) identified by the Disclosing Party as Confidential Information subject to
this Agreement either in writing or orally (in the case of an oral disclosure,
the Confidential Information will be identified as such in writing within ***
after such oral disclosure is made). Notwithstanding anything to the contrary,
all Project Plan Improvements that qualify as trade secrets shall be deemed to
be the Confidential Information of the party (or parties, if jointly owned)
that, in accordance with Section 9.1, owns such Project Plan Improvements.

10.2.2 To the extent the Disclosing Party proposes to disclose information not
directly related to the development of the Process or the potential
manufacturing of the Product, the Disclosing Party shall first propose the
nature of the disclosure and the Recipient may decline such disclosure for any
reason or no reason, in its sole discretion.

10.3 Exceptions. The obligations imposed in this Section shall not apply to:

(a) information that is now in the public domain or subsequently enters the
public domain without breach of this Agreement by the Recipient;

(b) information that the Recipient can demonstrate from its own records to have
been known by the Recipient prior to the Disclosing Party’s disclosure and was
not previously acquired from the Disclosing Party; or

(c) information disclosed to the Recipient by a third party lawfully entitled to
make such disclosure without breach of any legal or contractual duty.

10.4 Combinations. Any information composed of a combination of features or
disclosures shall not be deemed to fall within the foregoing exclusions merely
because individual features are published or available to the general public or
in the Recipient’s rightful possession unless the combination itself is
published or available to the general public or is in the Recipient’s rightful
possession.

10.5 Non-Disclosure. The Recipient agrees to maintain in confidence all
Confidential Information, not to disclose any Confidential Information to any
third party without the express written consent of the Disclosing Party, and to
only use the Confidential Information for the purposes contemplated by this
Agreement. The Recipient agrees to promptly notify the Disclosing Party in
writing of any misuse or misappropriation of Confidential Information that may
come to the Recipient’s attention.

10.6 Limited Access. The Recipient shall take all necessary and reasonable
precautions to prevent the disclosure of Confidential Information to any
unauthorized third parties. In this regard, the Recipient agrees to disclose
Confidential Information only to those of its Representatives who are directly
concerned with the use and evaluation of such information for the purposes
specified in this Agreement and who are bound by obligations of confidentiality
at least as stringent as those set forth herein. Upon disclosing Confidential
Information to any of its Representatives, the Disclosing Party shall advise
them of the confidential nature of the information, and shall instruct them to
take all necessary and reasonable precautions to prevent the unauthorized
disclosure thereof. The Recipient shall remain liable for any breach hereof by
any of its Representatives

 

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CONFIDENTIAL TREATMENT REQUESTED

WITH RESPECT TO CERTAIN PORTIONS HEREOF

DENOTED WITH “***”

 

10.7 Required Disclosures. Notwithstanding the foregoing, Confidential
Information may be disclosed to the extent required by applicable laws,
regulations, or as ordered by a court or other regulatory body having competent
jurisdiction provided that the Recipient (i) uses its Commercially Reasonable
Efforts to limit the disclosure and maintain confidentiality to the extent
possible and (ii) provides prior written notice of such disclosure to the
Disclosing Party. In addition, BDSI shall have the right to disclose
Confidential Information to Authorities and licensees in order to obtain
marketing authorizations or other regulatory approvals of the Process or Product
under Commercially Reasonable Efforts to maintain the confidentiality of the
information, provided that BDSI shall only disclose such Confidential
Information to licensees who agree to maintain the same standard of
confidentiality and to owe such obligation to both LTS and BDSI. Notwithstanding
the foregoing, a party may not file any patent application or other
patent-related filing that will disclose the Confidential Information of the
other party without such other party’s prior written consent.

10.8 No Other Use. Confidential Information will not be used by the Recipient
for any purpose other than development of the Process and the manufacturing of
the Product and thereto related procedures without the express written consent
of the Disclosing Party, to be given or withheld in the Disclosing Party’s
absolute discretion. Except as otherwise set forth in this Agreement, in no case
shall BDSI be entitled to request any of LTS’ proprietary information concerning
the Process or other specific manufacturing know-how unless required for
regulatory filing purposes. In such event, BDSI may request such information
from LTS and LTS shall either provide such information to BDSI or, to the extent
permitted by applicable law, communicate such information directly to the
Authorities without disclosing it to BDSI so long as LTS does so in a timely
manner.

10.9 Ownership. All Confidential Information disclosed by the Disclosing Party
to the Recipient pursuant to this Agreement shall be and remain the property of
the Disclosing Party and all such Confidential Information in fixed form and
copies thereof shall be promptly returned or lawfully destroyed upon the
Disclosing Party’s request, provided that the Recipient’s legal department or
outside counsel shall be entitled to retain one set of all such information for
the sole purpose of monitoring the Recipient’s obligations hereunder.

10.10 Survival. The obligations of confidentiality and non-use under this
Agreement shall apply during the term of this agreement and for a term of ***
after termination of this Agreement for any reason.

 

11. REPRESENTATIONS AND WARANTIES.

11.1 LTS Representations and Warranties; Covenants.

11.1.1 LTS represents to BDSI that to the best of LTS’ knowledge, no claim has
been made that the LTS Technology infringes on the rights of any person or
entity, and that to the best of LTS’ knowledge, there is no potential claim of
infringement that may be so made.

 

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WITH RESPECT TO CERTAIN PORTIONS HEREOF

DENOTED WITH “***”

 

11.1.2 LTS represents to BDSI that it has the right to disclose the LTS
Technology to BDSI to fulfill the purposes of this Agreement, without the need
to obtain consents or approvals from any third party.

11.1.3 LTS represents to BDSI that it has the right to assume the ownership of
any inventions made by its employees under this Agreement.

11.1.4 Except as set forth in this Section 11.1 and Section 2.1.4, LTS makes no
other warranty, either express or implied, statutory or otherwise, with respect
to the Product, including without limitation any implied warranty of
merchantability or fitness for a particular purpose and non-infringement. The
warranties given under this Agreement are expressly in lieu of all other
warranties express or implied.

11.1.5 LTS represents and warrants to BDSI that all Product supplied hereunder
shall: (a) conform to the Product Specifications; and (b) be manufactured,
labeled, packaged and tested (while in the possession or control of LTS) in
accordance GMP and with applicable regulatory approvals therefore and the
applicable laws and regulations relating to the manufacture, labeling, packaging
and testing of the Product. This warranty does not apply to any non-conformity
of the Product resulting from (i) alteration, misuse, negligence, mishandling or
storage in an improper environment in each case by any party other than LTS or
its agents; or (ii) use, handling, storage or maintenance other than in
accordance with the Product Specifications.

11.2 BDSI’s Representations and Warranties.

11.2.1 BDSI acknowledges that the Product Specifications are determined by the
results and the quality of the development and manufacturing carried out solely
by or on behalf of BDSI and are being provided to LTS under the terms of this
Agreement, and LTS shall be entitled to disclaim any responsibility with regard
to any defect in the Product Specifications (except in respect of any part of
the Product Specifications based on the explicit written contribution of LTS).

11.2.2 BDSI represents to LTS that:

(a) BDSI has the right to disclose the BDSI Technology to LTS to fulfill the
purposes of this Agreement, without the need to obtain consents or approvals
from any third party;

(b) BDSI has full right to grant the license to LTS as set forth in Section 7.1
hereof without the need to obtain consents or approvals from any third party;
and

(c) To the best of BDSI’s knowledge, no claim has been made that the BDSI
Technology infringes on the rights of any person or entity and to the best of
BDSI’s knowledge, there is no potential claim of infringement that may be so
made.

 

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WITH RESPECT TO CERTAIN PORTIONS HEREOF

DENOTED WITH “***”

 

11.2.3 BDSI has full and exclusive rights to any inventions made by its
employees under this Agreement.

11.2.4 BDSI or its Affiliates or its licensees shall be responsible for the
clinical trials, the registration of the Product with the proper health, customs
and other Authorities, as applicable.

11.2.5 Except as set forth in this Section 11.2, BDSI makes no other warranty,
either express or implied, statutory or otherwise, with respect to the Product,
including without limitation any implied warranty of merchantability or fitness
for a particular purpose and non-infringement. The warranties given under this
Agreement are expressly in lieu of all other warranties express or implied.

11.3 Indemnification by BDSI. BDSI shall indemnify, defend, and hold LTS, its
managing directors, directors, officers, employees, Affiliates and agents
harmless from and against all damages, losses or expenses suffered or paid as a
result of any and all claims, demands, suits, penalties, judgments or
administrative and judicial orders and liabilities (including reasonable counsel
fees and expenses, “Losses”) incurred, assessed or sustained by LTS, arising out
of a third party claim with respect to or arising out of an injury, claim or
damage resulting from or caused by: (a) clinical trial use of the Product,
provided that no indemnification will be provided under this Section 11.3 to the
extent that any Losses are attributable to the failure of the Product to meet
the Product Specifications and warranties set forth in Section 11.1.4, provided
storage and handling of Product after delivery by LTS was in accordance with the
storage specifications, unless such Losses exceed LTS’ product liability
insurance cover (Annex 6); (b) any breach by BDSI of its acknowledgements,
representations, warranties, covenants or agreements hereunder; or (c) an
inherent defect in the Product Design and/or Specifications provided by BDSI;

11.4 BDSI’s Insurance Coverage. Prior to LTS delivery of clinical samples, BDSI
shall obtain sufficient clinical trial insurance prior to commencing any Product
clinical trials (Annex 6), and provide appropriate evidence.

11.5 LTS’ Product Liability Insurance Cover. LTS shall obtain and use its
Commercially Reasonable Efforts to maintain during the term of this Agreement
liability insurance (including but not limited to product liability insurance)
as annexed hereto (Annex 6).

11.6 Indemnification by LTS. LTS shall indemnify, defend, and hold BDSI, its
directors, officers, employees, Affiliates and agents harmless from and against
all Losses incurred, assessed or sustained by BDSI to the extent that LTS’
liability insurance, including but not limited to product liability, covers such
Losses with respect to or arising out of an injury, claim or damage resulting
from or caused by the Product not having been manufactured according to the
Product Specifications or due to any negligence or willful misconduct of LTS, or
the breach by LTS of its acknowledgements, representations, warranties,
covenants or agreements hereunder. Except for willful misconduct by LTS, any LTS
liability exceeding the liability insurance coverage, including but not limited
to product liability, shall be excluded.

 

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CONFIDENTIAL TREATMENT REQUESTED

WITH RESPECT TO CERTAIN PORTIONS HEREOF

DENOTED WITH “***”

 

11.7 Details of Indemnification.

11.7.1 In no event will an Indemnifying Party have an indemnification obligation
hereunder in the event and to the extent that such Losses arose as a result of
any Indemnified Party’s intentional misconduct of this Agreement.

The party seeking indemnification under this Article XI or Section 8.3 (the
“Indemnified Party”) shall give notice to the party providing such
indemnification (the “Indemnifying Party”) of the assertion of any claim, or
commencement of any suit, action or proceeding in respect of which indemnity may
be sought under this Agreement promptly after receipt of notice from a third
party of the assertion of such claim or the commencement of such suit, action or
proceeding.

11.7.2 The Indemnified Party shall tender to the Indemnifying Party (and its
insurer) full authority to defend or settle the claim or suit. The Indemnified
Party will be entitled at its own expense to participate in the defense with its
own counsel of any such claim, suit, action or proceeding, and shall provide
reasonable cooperation to the Indemnifying Party (and its insurer), as
reasonably requested, at Indemnifying Party’s cost and expense.

11.7.3 The Indemnifying Party shall not be liable for any compromise or
settlement of any such claim, suit, action or proceeding effected without its
consent.

11.7.4 The parties agree to cooperate to the fullest extent possible in
connection with any third-party claim, suit, action or proceeding for which
indemnification is or may be sought under this Agreement.

11.7.5 In the event the Indemnifying Party makes any payment pursuant to its
indemnification obligations under this Agreement, it shall be subrogated to all
rights of the Indemnified Party to pursue any claim to receive payment or other
consideration from any other third party which may be liable with respect to
such claim, suit, action or proceeding for which indemnification was provided.

11.7.6 The Indemnified Party shall execute and deliver such instruments and
agreements and take such other action as may be required to subrogate the
Indemnifying Party to such Indemnified Party’s rights to receive such payment or
consideration.

11.8 No Indirect, Punitive or Exemplary Damages. Under no circumstances shall
either party be liable for indirect, special or consequential damages, lost
profits and/or punitive damages unless (i) covered by an insurance policy or
(ii) caused by such party’s intentional misconduct or willful default, provided
however that this shall not limit the parties obligation to indemnify the other
party with respect to third party claims, as set forth in Section 11.3 and 11.6.

 

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WITH RESPECT TO CERTAIN PORTIONS HEREOF

DENOTED WITH “***”

 

XII. TERMINATION AND EXPIRATION.

12.1 Term of Agreement. This Agreement shall become effective as of the date of
execution by each of the parties hereto and shall continue, subject to its
termination in accordance with the terms of this Article XII until the Product
has been approved for sale and a Manufacturing and Supply Agreement is in place.

12.2 Termination.

12.2.1 Either party hereto shall have the right to terminate this Agreement at
once by written notice to the other party in the event that the other party by
voluntary or involuntary action goes into liquidation or receivership, or
dissolves or files a petition for bankruptcy or for suspension of payments or is
adjudicated a bankrupt, becomes insolvent or assigns or makes any composition of
its assets for the benefit of creditors.

12.2.2 BDSI may terminate this Agreement with immediate effect by written notice
to LTS if LTS materially breaches any of its representations or covenants
hereunder, provided that if such breach is capable of cure, LTS shall be
provided *** to cure such breach so long as LTS is diligently pursuing such
cure.

12.2.3 LTS may terminate this Agreement with immediate effect by written notice
to BDSI if BDSI materially breaches any of its representations or covenants
hereunder, provided that if such breach is capable of cure, BDSI shall be
provided *** to cure such breach so long as BDSI is diligently pursuing such
cure.

12.2.4 Both parties may terminate this Agreement immediately by written notice
to the other party if (i) in the Working Group’s judgment continuation is
inappropriate, impractical, or inadvisable either for reasons of safety or
efficacy; or (ii) if the emergence of any adverse event or side effect with the
Product or Active Principle is of such magnitude or incidence in the opinion of
the Working Group to support termination or (iii) if the chief executive
officers of BDSI and LTS or their designees cannot resolve any dispute discussed
in the Working Group according to Section 3.4.

12.2.5 LTS may terminate this Agreement immediately by written notice to BDSI as
a sole remedy if BDSI despite LTS’ suggestions, advices and guidelines (“LTS
Advices”), provided by LTS in writing to BDSI at any stage of the process
development in its sole discretion, refuses to comply with such LTS’ Advices and
therefore in LTS’ judgment the purpose of this Agreement cannot be achieved and
continuation is inappropriate, impractical or inadvisable; provided that the
parties have first attempted to resolve the disagreement through good faith
discussion in the Working Group according to Section 3.4.

12.2.6 If BDSI concludes, in BDSI’s sole judgment, that there is cause to
believe that the purposes of this Agreement cannot be reasonably achieved
despite the good faith and Commercially Reasonable Efforts of the parties, then
BDSI may provide written notice of such decision to LTS, and the parties will
have six (6) months (the “Execution Period”) to work together in good faith
within the Working Group according to Section 3.4 to attempt to provide a
solution that culminates in an action plan that is reasonably acceptable to
BDSI. If reasonable

 

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WITH RESPECT TO CERTAIN PORTIONS HEREOF

DENOTED WITH “***”

 

progress is made within the Working Group according to the action plan, the
parties may mutually extend the Execution Period from time to time by mutually
executing a written extention. If at the end of the Execution Period (as
extended, if applicable) LTS has not completed its tasks set forth in the action
plan and BDSI concludes, in BDSI’s sole judgment, that there remains cause to
believe that the purposes of this Agreement cannot be reasonably achieved
despite the good faith and Commercially Reasonable Efforts of the parties, then
BDSI may terminate this Agreement upon 30 days written notice.

12.3 Survival. The termination of this Agreement shall not relieve the parties
of their liabilities hereunder. Any termination shall not affect obligations
accrued prior to such termination. Without limiting the foregoing, the parties
agree that following the termination of this Agreement, the licenses granted by
Article VII and those granted by Section 9.2 hereof will terminate as of the
termination date and neither Party will have any further rights in the
intellectual property rights granted thereby.

 

XIII.  MISCELLANEOUS.

13.1 Assignments. This Agreement shall not be assignable by either party hereto,
in whole or in part, in fact or by operation of law, without the prior written
consent of the other, except that either party may assign this Agreement in
whole or in part to one or more of its Affiliates (but only for as long as it
remains so) and which may now or hereafter be organized, provided that the
assigning party shall remain fully liable under this Agreement for its own
performance and the performance of its assignees. Notwithstanding the foregoing,
BDSI may assign this Agreement without such consent to (a) any person or entity
to which BDSI transfers all or substantially all of its assets or with which
BDSI is consolidated or merged; or (b) any person or entity that owns a majority
of the voting stock of BDSI; provided that such person or entity is not a
competitior of LTS. “Competitor” shall mean a company active in the development
and/or manufacture and supply of transdermal and/or oral film form product
formulations for third parties.

13.2 Dispute Resolution. Any controversy or claims arising out of or relating to
either party’s performance under this Agreement (other than that of the Working
Group, which shall be settled in accordance with Section 3.4), the parties’
inability to agree on any provision to be agreed upon (other than the terms of a
Manufacturing and Supply Agreement) or the interpretation or effectiveness of
this Agreement shall upon the written request of either party be referred to the
Project Leaders for resolution. The Project Leaders shall promptly meet, in
person or by telephone, and in good faith attempt to resolve the controversy,
claims or issues referred to them. If no resolution has been achieved within ***
of such request, the chief executive officers of BDSI and LTS or their designees
shall discuss the matter in good faith and use Commercially Reasonable Efforts
to resolve the dispute. If such chief executive officers or their designees
cannot resolve the matter within *** of such request, either party shall be free
to commence proceedings to resolve the dispute in accordance with the following
arbitration procedure. Notwithstanding the foregoing, actions by any party
seeking equitable or declaratory relief may be brought in arbitration as set
forth below without resort to the procedures and the *** negotiation periods
specified above. All disputes arising out of or in connection with this

 

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DENOTED WITH “***”

 

Agreement shall be finally settled under the Rules of Arbitration of the
International Chamber of Commerce (“ICC”) by one or more referees or arbitrators
appointed in accordance with said Rules of Arbitration. Any party to this
Agreement shall also have the right to have recourse to, and shall be bound by,
the Pre-Arbitral Referee Procedure of the ICC in accordance with its Rules for a
Pre-Arbitral Referee Procedure, including without limitation any order of a
single referee for preliminary injunction. Any arbitration pursuant to this
Section 13.2 shall be conducted in the English language and shall be held in
Toronto (Ontario, Canada). The decisions of the referee or arbitrator(s) shall
be rendered to the parties in writing, and shall be final and binding. The costs
and expenses of the referee or arbitrator(s) shall be borne equally by the
parties, but each party shall bear its own expenses incurred in the proceedings.
The referee or arbitrator(s) shall have no authority to award punitive damages
but shall have full authority to award preliminary or permanent injunctive or
other equitable relief.

13.3 Governing Law and Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of Switzerland (Canton Zurich), regardless
of the laws that might otherwise govern under applicable principles of conflicts
of laws thereof. In no event shall choice of law analysis lead to the
application of any laws other than the laws of Switzerland.

13.4 No Jury Trial. In the event that any dispute or claim of any sort arising
out of this Agreement should be commenced by either party, each of the parties
waives irrevocably any right that such party may have to demand or request a
trial by jury.

13.5 Force Majeure. Neither party shall be responsible nor liable to the other
party for any failure to perform any of its obligations hereunder, if such
failure results from requisition by any government authority, the effect of any
statute, ordinance or governmental order or regulation enacted after the date of
this Agreement, wars, strikes, lockouts, riots, epidemic, disease, an act of
God, civil commotion, fire, earthquake, storm, failure of public utilities,
common carriers or suppliers, or any other circumstances beyond the control of
such party, whether or not similar to the above causes and whether or not
foreseeable. The parties shall use their Commercially Reasonable Efforts to
promptly avoid or remove any such cause and shall resume performance under this
Agreement as soon as feasible whenever such cause is removed; provided, however,
that the foregoing shall not be construed to require either party to settle any
dispute with any third party, to commence, continue or settle any litigation, or
to incur any unusual or extraordinary expenses; provided, further that if such
cause continues for more than ***, either party may terminate this Agreement
without any further remedies.

13.6 Waiver. No failure or delay by either party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise of any other
right, power or privilege. The rights and remedies provided shall be cumulative
and not exclusive of any rights or remedies provided by law.

 

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DENOTED WITH “***”

 

13.7 No Other Relationship.

13.7.1 LTS shall use its own employees which are in no sense to be deemed
employees of BDSI. LTS shall be solely responsible for the payment of employee
wages, national insurance and pension contributions for its employees. LTS
acknowledges that neither it nor its employees shall be entitled to any benefits
of whatsoever nature that BDSI may provide to its employees.

13.7.2 Neither party shall have authority to bind or otherwise render the other
party hereto pecuniary liable in any way, whether by agreement, contract,
representation or order, written or oral, or by instrument or action of any
kind, unless previously authorized in writing. Neither party shall bind or
purport to bind the other party to any affirmation, representation or warranty
to any third party, and any attempts to do so shall be null and void.

13.8 Notices.

13.8.1 All payments, notices, approvals, reports, statements, or other
communications required or permitted to be given by one party to the other
(collectively, “Communications”) shall be in writing and (as elected by the
party giving such Communication): (a) personally delivered; (b) transmitted by
postage pre-paid certified airmail, return receipt requested; or (c) transmitted
by facsimile (with written confirmation of receipt) to the party to which such
communication is being given at the address, or telefax number set forth below:

 

If to BDSI:

Bio Delivery Sciences International, Inc.

801 Corporate Center Drive, Suite 210

Raleigh, NC 27607

Attn: Mark Sirgo, Pharm. D.

President and CEO

Telefax: (919) 582-9051

  

If to LTS:

LTS Lohmann Therapie-Systeme AG

General Counsel

Postfach 15 25

56605 Andernach

Germany

Telefax: ***

13.8.2 Except as otherwise specified, all communications will be deemed to have
been duly given on (a) the date of receipt if delivered personally; (b) ***
after posting if transmitted by mail, or (c) the date of confirmation of receipt
if transmitted by facsimile. Either party hereto may at any time give notice to
the other party in the manner provided in this Section 13.8 of a change of name,
address or telefax number to which communications shall be mailed in accordance
with the foregoing.

13.9 Entire Understanding. This Agreement embodies the entire understanding of
the parties relating to the subject matter hereof and supersedes all prior
understandings and agreements. No modification or amendment of this Agreement
shall be valid or binding unless such modification or amendment is in writing
and is signed by each of the parties hereto.

 

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DENOTED WITH “***”

 

13.10 Invalidity.

13.10.1 If any provision of this Agreement or the application thereof is
adjudicated to be invalid or unenforceable, such invalidity or unenforceability
shall not affect other provisions of this Agreement which can be given effect
without the invalid and unenforceable provision or application, and to this end,
the provisions of this Agreement shall be severally.

13.10.2 The parties shall co-operate in good faith in amending this Agreement in
such an event in order to replace any provision hereof so held invalid or
unenforceable with a valid provision which is as similar as possible in
substance to the invalid or unenforceable provision, and to overcome any
difficulties thereby occasioned and thus restore the economic balance of this
Agreement.

13.11 Amendments. No amendment, alteration or other modification of this
Agreement shall be valid and binding upon the parties unless made in writing,
specifically referring to this Agreement and duly executed by the parties
hereto.

13.12 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to an original. Delivery of a signed counterpart of this
Agreement by facsimile shall constitute valid and sufficient delivery thereof.

13.13 Headings. The section headings in this Agreement are for convenience only
and shall not be given effect in interpreting the terms hereof.

[Signature Page Follows.]

 

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DENOTED WITH “***”

 

IN WITNESS WHEREOF, each of BDSI and LTS has caused this Agreement to be signed
and executed by their respective duly authorized officers this 8th day of
February, 2008.

 

LTS Lohmann Therapie-Systeme AG     BioDelivery Sciences International, Inc. /s/
K. Halzkiewicz     /s/ Mark Sirgo

(Signature)

K. Halzkiewicz, Head of BD

   

(Signature)

Mark Sirgo, President and CEO

/s/ U. Sielaff      

(Signature)

U. Sielaff, General Counsel

   

 

Andernach, January 29, 2008     Raleigh, North Carolina, USA February 8, 2008
(Place, Date)     (Place, Date)

 

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ANNEX 1

Active Principle Specifications

***

 

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ANNEX 2

***

 

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ANNEX 3

Product Specifications

***

 

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CONFIDENTIAL TREATMENT REQUESTED

WITH RESPECT TO CERTAIN PORTIONS HEREOF

DENOTED WITH “***”

 

ANNEX 4

Project Plan

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CONFIDENTIAL TREATMENT REQUESTED

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ANNEX 5

Outlines of the

Principles of LTS

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CONFIDENTIAL TREATMENT REQUESTED

WITH RESPECT TO CERTAIN PORTIONS HEREOF

DENOTED WITH “***”

 

Annex 6

Certificates of Insurance

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