Exhibit 10.1

Confidential Treatment Requested by BioDelivery Sciences International, Inc.,

Confidential treatment requested with respect to certain portions hereof denoted
with “***”

***CONFIDENTIAL TREATMENT REQUESTED***

Note: Confidential treatment requested with respect to certain portions hereof
denoted with “***”

EXECUTION COPY

CREDIT AND SECURITY AGREEMENT

THIS CREDIT AND SECURITY AGREEMENT (this “Agreement”), dated as of July 5, 2013
(the “Closing Date”) by and among MIDCAP FINANCIAL SBIC, LP, a Delaware limited
partnership (“MidCap”), as administrative agent (“Agent”), the Lenders listed on
the Credit Facility Schedule attached hereto and otherwise party hereto from
time to time (each a “Lender”, and collectively the “Lenders”), BIODELIVERY
SCIENCES INTERNATIONAL, INC., a Delaware corporation (“BDSI”), ARIUS
PHARMACEUTICALS, INC., a Delaware corporation (“API”), ARIUS TWO, INC., a
Delaware corporation (“Arius Two” and, together with BDSI, API and any other
entity that becomes a party hereto in accordance with the terms of this
Agreement, collectively and in the singular, “Borrower”), provides the terms on
which Lenders agree to lend to Borrower and Borrower shall repay Lenders. The
parties agree as follows:

 

  1 ACCOUNTING AND OTHER TERMS

Accounting terms not defined in this Agreement shall be construed in accordance
with GAAP. Calculations and determinations must be made in accordance with GAAP.
Capitalized terms not otherwise defined in this Agreement shall have the
meanings set forth in Section 15. All other terms contained in this Agreement,
unless otherwise indicated, shall have the meaning provided by the Code to the
extent such terms are defined therein. All headings numbered without a decimal
point are herein referred to as “Articles,” and all paragraphs numbered with a
decimal point (and all subparagraphs or subsections thereof) are herein referred
to as “Sections.”

 

  2 CREDIT FACILITIES AND TERMS

2.1 Promise to Pay. Borrower hereby unconditionally promises to pay to each
Lender in accordance with each Lender’s respective Pro Rata Share of each Credit
Facility, the outstanding principal amount of all Credit Extensions made by the
Lenders under such Credit Facility and accrued and unpaid interest thereon and
any other amounts due hereunder as and when due in accordance with this
Agreement.

2.2 Credit Facilities. Subject to the terms and conditions hereof, each Lender,
severally, but not jointly, agrees to make available to Borrower Credit
Extensions in respect of each Credit Facility set forth opposite such Lender’s
name on the Credit Facility Schedule, in each case not to exceed such Lender’s
commitment as identified on the Credit Facility Schedule (such commitment of
each Lender, as it may be amended to reflect assignments made in accordance with
this Agreement or terminated or reduced in accordance with this Agreement, its
“Applicable Commitment”, and the aggregate of all such commitments, the
“Applicable Commitments”). As of the Closing Date, Lenders have agreed to make
available to Borrower one Credit Facility of $20,000,000 to be advanced in
accordance with the terms of this Agreement.

2.3 Term Credit Facilities.

(a) Nature of Credit Facility; Credit Extension Requests. For any Credit
Facility identified on the Credit Facility Schedule as a term facility (a “Term
Credit Facility”), Credit Extensions in respect of a Term Credit Facility may be
requested by Borrower during the Draw Period for such Term Credit Facility. To
the extent any Term Credit Facility proceeds are repaid for any reason, whether
voluntarily or involuntarily (including repayments from insurance or
condemnation proceeds), Agent and Lenders shall have no obligation to re-advance
such sums to Borrower.

(b) Principal Payments. Principal payable on account of a Term Credit Facility
shall be payable by Borrower to Agent immediately upon the earliest of (i) the
date(s) set forth in the Amortization Schedule for such Term Credit Facility (or
if no such Amortization Schedule is attached, then upon Agent’s demand for
payment), or (ii) the Maturity Date. Except as this Agreement may specifically
provide otherwise, all prepayments of Credit Extensions under

 

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Confidential Treatment Requested by BioDelivery Sciences International, Inc.,

Confidential treatment requested with respect to certain portions hereof denoted
with “***”

 

Term Credit Facilities shall be applied by Agent to the applicable Term Credit
Facility pro rata against all such scheduled principal payments based upon the
respective amounts thereof. After any partial prepayment of a Term Credit
Facility, whether mandatory or optional, the monthly payments required under the
Amortization Schedule for the applicable Term Credit Facility shall be adjusted
to reflect such partial prepayment (an “Adjusted Amortization Schedule”). After
any partial prepayment of a Term Credit Facility, Agent will replace the
Amortization Schedule for such Term Credit Facility attached hereto with the
Adjusted Amortization Schedule. Any Adjusted Amortization Schedule setting forth
the adjusted principal payable on account of a Term Credit Facility after a
partial prepayment shall be deemed true and correct absent manifest error.

(c) Mandatory Prepayment. If a Term Credit Facility is accelerated following the
occurrence of an Event of Default, Borrower shall immediately pay to Agent, for
payment to each Lender in accordance with its respective Pro Rata Share, an
amount equal to the sum of: (i) all outstanding principal of the Term Credit
Facility and all other Obligations, plus accrued and unpaid interest thereon,
(ii) any fees payable under the Fee Letters by reason of such prepayment,
(iii) the Applicable Prepayment Fee as specified in the Credit Facility Schedule
for the Credit Facility being prepaid, and (iv) all other sums that shall have
become due and payable, including Protective Advances.

(d) Permitted Prepayment. Except as provided below, Borrower shall have no right
to prepay the Credit Extensions made in respect of a Term Credit Facility. After
the Closed Period, if any, for the applicable Term Credit Facility as specified
in the Credit Facility Schedule, Borrower shall have the option to prepay
(i) the Prepayable Amount (as defined below) or (ii) upon the occurrence, and
within ***, of a Qualifying Prepayment Event (as defined below), the Datalock
Prepayable Amount (as defined below), in each case, of a Term Credit Facility
advanced by the Lenders under this Agreement, provided Borrower (1) provides
written notice to Agent of its election to prepay the Prepayable Amount at least
*** prior to such prepayment (or in the case of the Datalock Prepayable Amount,
at least *** prior to such prepayment), and (2) pays to Agent, for payment to
each Lender in accordance with its respective Pro Rata Share, on the date of
such prepayment, an amount equal to the sum of (A) the Prepayable Amount or
Datalock Prepayable Amount, as applicable, plus accrued interest thereon,
(B) any fees payable under the Fee Letters by reason of such prepayment, (C) the
Applicable Prepayment Fee as specified in the Credit Facility Schedule for the
Credit Facility being prepaid, and (D) all Protective Advances. The term
“Prepayable Amount” means all or any portion of the Credit Extensions under the
applicable Term Credit Facility. The term “Datalock Prepayable Amount” means
fifty percent (50%) of the then outstanding Credit Extensions and all other
Obligations under all Term Credit Facilities. The term “Qualifying Prepayment
Event” means the receipt by Borrower (pursuant to evidence satisfactory to Agent
in its discretion) of the second Database Lock Payment.

2.4 Reserved.

2.5 Reserved.

2.6 Interest and Payments; Administration.

(a) Interest; Computation of Interest. Each Credit Extension shall bear interest
on the outstanding principal amount thereof from the date when made until paid
in full at a rate per annum equal to the Applicable Interest Rate. Each Lender
may, upon the failure of Borrower to pay any fees or interest as required
herein, capitalize such interest and fees and begin to accrue interest thereon
until paid in full, which such interest shall be at a rate per annum equal to
the Applicable Interest Rate unless and until the Default Rate shall otherwise
apply. All other Obligations shall bear interest on the outstanding amount
thereof from the date they first become payable by Borrower under the Financing
Documents until paid in full at a rate per annum equal to the Applicable
Interest Rate unless and until the Default Rate shall otherwise apply. Interest
on the Credit Extensions and all fees payable under the Financing Documents
shall be computed on the basis of a 360-day year and the actual number of days
elapsed in the period during which such interest accrues. In computing interest
on any Credit Extension or other advance, the date of the making of such Credit
Extension or advance shall be included and the date of payment shall be
excluded; provided, however, that if any Credit Extension or advance is repaid
on the same day on which it is made, such day shall be included in computing
interest on such Credit Extension or advance. As of each Applicable Interest
Rate Determination Date, Agent shall determine (which determination shall,
absent manifest error in calculation, be final, conclusive and binding upon all
parties) the interest rate that shall apply to the Credit Extensions.

(b) Default Rate. Upon the election of Agent following the occurrence and during
the continuance of an Event of Default, Obligations shall bear interest at a
rate per annum which is four hundred basis points (4.00%) above the

 

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Confidential Treatment Requested by BioDelivery Sciences International, Inc.,

Confidential treatment requested with respect to certain portions hereof denoted
with “***”

 

rate that is otherwise applicable thereto (the “Default Rate”). Payment or
acceptance of the increased interest rate provided in this subsection is not a
permitted alternative to timely payment and shall not constitute a waiver of any
Event of Default or otherwise prejudice or limit any rights or remedies of Agent
or Lenders.

(c) Payments Generally. Except as otherwise provided in this Section 2.6(c), all
payments in respect of the Obligations shall be made to Agent for the account of
the applicable Lenders in accordance with their Pro Rata Share. Payments of
principal and interest in respect of any Credit Facility identified on the
Credit Facility Schedule as “Term” shall be made to each applicable Lender. All
Obligations are payable upon demand of Agent in the absence of any other due
date specified herein. All fees payable under the Financing Documents shall be
deemed non-refundable as of the date paid. Payments of principal and/or interest
received after 12:00 noon New York time are considered received at the opening
of business on the next Business Day. When a payment is due on a day that is not
a Business Day, the payment is due the next Business Day and additional fees or
interest, as applicable, shall continue to accrue until paid. All payments to be
made by Borrower under any Financing Document shall be made without set-off,
recoupment or counterclaim, in lawful money of the United States and in
immediately available funds. The balance of the Obligations, as recorded in
Agent’s books and records at any time, shall be conclusive and binding evidence
of the amounts due and owing to Agent and Lenders by each Borrower absent
manifest error; provided, however, that any failure to so record or any error in
so recording shall not limit or otherwise affect any Borrower’s duty to pay all
amounts owing hereunder or under any Financing Document. Agent shall endeavor to
provide Borrower with a monthly statement regarding the Credit Extensions (but
neither Agent nor any Lender shall have any liability if Agent shall fail to
provide any such statement). Unless Borrower notifies Agent of any objection to
any such statement (specifically describing the basis for such objection) within
ninety (90) days after the date of receipt thereof, it shall be deemed final,
binding and conclusive upon Borrower in all respects as to all matters reflected
therein.

(d) Interest Payments; Maturity Date. Commencing on the first (1st) Payment Date
following the funding of a Credit Extension, and continuing on the Payment Date
of each successive month thereafter through and including the Maturity Date,
Borrower shall make monthly payments of interest, in arrears, calculated as set
forth in this Section 2.6. All unpaid principal and accrued interest is due and
payable in full on the Maturity Date or any earlier date specified herein. If
the Obligations are not paid in full on or before the Maturity Date, all
interest thereafter accruing shall be payable immediately upon accrual.

(e) Fees. Borrower shall pay, as and when due and payable under the terms of the
Fee Letters, to Agent and each Lender, for their own accounts and not for the
benefit of any other Lenders, the fees set forth in the Fee Letters.

(f) Protective Advances. Borrower shall pay to Agent for the account of Lenders
all Protective Advances (including reasonable attorneys’ fees and expenses for
documentation and negotiation of this Agreement, the Warrants and the other
Financing Documents) when due under any Financing Document (and in the absence
of any other due date specified herein, such Protective Advances shall be due
upon demand).

(g) Maximum Lawful Rate. In no event shall the interest charged hereunder with
respect to the Obligations exceed the maximum amount permitted under the Laws of
the State of New York. Notwithstanding anything to the contrary in any Financing
Document, if at any time the rate of interest payable hereunder (the “Stated
Rate”) would exceed the highest rate of interest permitted under any applicable
Law to be charged (the “Maximum Lawful Rate”), then for so long as the Maximum
Lawful Rate would be so exceeded, the rate of interest payable shall be equal to
the Maximum Lawful Rate; provided, however, that if at any time thereafter the
Stated Rate is less than the Maximum Lawful Rate, Borrower shall, to the extent
permitted by Law, continue to pay interest at the Maximum Lawful Rate until such
time as the total interest received is equal to the total interest which would
have been received had the Stated Rate been (but for the operation of this
provision) the interest rate payable. Thereafter, the interest rate payable
shall be the Stated Rate unless and until the Stated Rate again would exceed the
Maximum Lawful Rate, in which event this provision shall again apply. In no
event shall the total interest received by any Lender exceed the amount which it
could lawfully have received, had the interest been calculated for the full term
hereof at the Maximum Lawful Rate. If, notwithstanding the prior sentence, any
Lender has received interest hereunder in excess of the Maximum Lawful Rate,
such excess amount shall be applied to the reduction of the principal balance of
such Lender’s Credit Extensions or to other amounts (other than interest)
payable hereunder, and if no such Credit Extensions or other amounts are then
outstanding, such excess or part thereof remaining shall be paid to Borrower. In
computing interest payable with reference to the Maximum Lawful Rate applicable
to any Lender, such interest shall be calculated at a daily rate equal to the
Maximum Lawful Rate divided by the number of days in the year in which such
calculation is made.

 

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Confidential Treatment Requested by BioDelivery Sciences International, Inc.,

Confidential treatment requested with respect to certain portions hereof denoted
with “***”

 

(h) Taxes; Additional Costs.

(i) All payments of principal and interest on the Obligations and all other
amounts payable hereunder shall be made free and clear of and without deduction
for any present or future income, excise, stamp, documentary, payroll,
employment, property or franchise taxes and other taxes, fees, duties, levies,
assessments, withholdings or other charges of any nature whatsoever (including
interest and penalties thereon) imposed by any taxing authority, excluding taxes
imposed on or measured by Agent’s or any Lender’s net income by the
jurisdictions under which Agent or such Lender is organized or conducts business
(other than solely as the result of entering into any of the Financing Documents
or taking any action thereunder) (all non-excluded items being called “Taxes”).
If any withholding or deduction from any payment to be made by any Borrower
hereunder is required in respect of any Taxes pursuant to any applicable Law,
then Borrower will: (i) pay directly to the relevant authority the full amount
required to be so withheld or deducted; (ii) promptly forward to Agent an
official receipt or other documentation satisfactory to Agent evidencing such
payment to such authority; and (iii) pay to Agent for the account of Agent and
Lenders such additional amount or amounts as is necessary to ensure that the net
amount actually received by Agent and each Lender will equal the full amount
Agent and such Lender would have received had no such withholding or deduction
been required. If any Taxes are directly asserted against Agent or any Lender
with respect to any payment received by Agent or such Lender hereunder, Agent or
such Lender may pay such Taxes and Borrower will promptly pay such additional
amounts (including any penalty, interest or expense) as is necessary in order
that the net amount received by such Person after the payment of such Taxes
(including any Taxes on such additional amount) shall equal the amount such
Person would have received had such Taxes not been asserted so long as such
amounts have accrued on or after the day which is two hundred seventy (270) days
prior to the date on which Agent or such Lender first made written demand
therefor.

(ii) If any Borrower fails to pay any Taxes when due to the appropriate taxing
authority or fails to remit to Agent, for the account of Agent and the
respective Lenders, the required receipts or other required documentary
evidence, Borrower shall indemnify Agent and Lenders for any incremental Taxes,
interest or penalties that may become payable by Agent or any Lender as a result
of any such failure.

(iii) Each Lender that (A) is organized under the laws of a jurisdiction other
than the United States, and (B) purports to become an assignee of an interest as
a Lender under this Agreement after the Closing Date (unless such Lender was
already a Lender hereunder immediately prior to such assignment) (each such
Lender a “Foreign Lender”) shall execute and deliver to each of Borrower and
Agent one or more (as Borrower or Agent may reasonably request) United States
Internal Revenue Service Forms W-8ECI, W-8BEN, W-8IMY (as applicable) and other
applicable forms, certificates or documents prescribed by the United States
Internal Revenue Service or reasonably requested by Agent certifying as to such
Lender’s entitlement to a complete exemption from withholding or deduction of
Taxes. Borrower shall not be required to pay additional amounts to any Lender
pursuant to this subsection (h) with respect to United States withholding and
income Taxes to the extent that the obligation to pay such additional amounts
would not have arisen but for the failure of such Lender to comply with this
paragraph other than as a result of a change in law.

(iv) If any Lender shall determine in its commercially reasonable judgment that
the adoption or taking effect of, or any change in, any applicable Law regarding
capital adequacy, in each instance, after the Closing Date, or any change after
the Closing Date in the interpretation, administration or application thereof by
any Governmental Authority, central bank or comparable agency charged with the
interpretation, administration or application thereof, or the compliance by any
Lender or any Person controlling such Lender with any request, guideline or
directive regarding capital adequacy (whether or not having the force of law) of
any such Governmental Authority, central bank or comparable agency adopted or
otherwise taking effect after the Closing Date, has or would have the effect of
reducing the rate of return on such Lender’s or such controlling Person’s
capital as a consequence of such Lender’s obligations hereunder to a level below
that which such Lender or such controlling Person could have achieved but for
such adoption, taking effect, change, interpretation, administration,
application or compliance (taking into consideration such Lender’s or such
controlling Person’s policies with respect to capital adequacy) then from time
to time, upon written demand by such Lender (which demand shall be accompanied
by a statement setting forth the basis for such demand and a calculation of the
amount thereof in reasonable detail, a copy of which shall be furnished to
Agent), Borrower shall promptly pay to such Lender such additional amount as
will compensate such Lender or such controlling Person for such reduction, so
long as such amounts have accrued on or after the day which is two hundred
seventy (270) days prior to the date on which such Lender first made demand
therefor; provided, however, that notwithstanding anything in this Agreement to
the contrary, (A) the Dodd-Frank Wall Street Reform and Consumer Protection Act
and all requests, rules, guidelines or directives thereunder or issued in
connection therewith and (B) all requests, rules, guidelines or directives
promulgated by the Bank for International Settlements, the Basel Committee

 

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Confidential Treatment Requested by BioDelivery Sciences International, Inc.,

Confidential treatment requested with respect to certain portions hereof denoted
with “***”

 

on Banking Supervision (or any successor or similar authority) or the United
States or foreign regulatory authorities, in each case pursuant to Basel III,
shall in each case be deemed to be a “change in applicable Law”, regardless of
the date enacted, adopted or issued.

(v) If any Lender requires compensation under this subsection (h), or requires
any Borrower to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to this subsection (h), then,
upon the written request of Borrower, such Lender shall use reasonable efforts
to designate a different lending office for funding or booking its Credit
Extensions hereunder or to assign its rights and obligations hereunder (subject
to the terms of this Agreement) to another of its offices, branches or
affiliates, if, in the judgment of such Lender, such designation or assignment
(A) would eliminate or materially reduce amounts payable pursuant to any such
subsection, as the case may be, in the future, and (B) would not subject such
Lender to any unreimbursed cost or expense and would not otherwise be
disadvantageous to such Lender (as determined in its sole discretion). Borrower
hereby agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.

(i) Administrative Fees and Charges.

(i) Borrower shall pay to Agent, for its own account and not for the benefit of
any other Lenders, all reasonable fees and expenses in connection with audits
and inspections of the books and records of the Credit Parties, audits,
valuations or appraisals of the Collateral, audits of Borrower’s compliance with
applicable Laws and such other matters as Agent shall deem reasonably
appropriate, which shall be due and payable on the first Business Day of the
month following the date of issuance by Agent of a written request for payment
thereof to any Borrower; provided, that, as long as no Default has occurred
within the preceding twelve (12) months, Agent shall be entitled to such
reimbursement for no more than one audit and inspection per calendar year.

(ii) If payments of principal or interest due on the Obligations, or any other
amounts due hereunder or under the other Financing Documents, are not timely
made and remain overdue for a period of ***, Borrower, without notice or demand
by Agent, promptly shall pay to Agent, for its own account and not for the
benefit of any other Lenders, as additional compensation to Agent in
administering the Obligations, an amount equal to five percent (5.0%) of each
delinquent payment.

2.7 Secured Promissory Notes. At the election of any Lender made as to each
Credit Facility for which it has made Credit Extensions, each Credit Facility
shall be evidenced by one or more secured promissory notes (each a “Secured
Promissory Note”) substantially in the form attached hereto as Exhibit D. Upon
receipt of an affidavit of an officer of a Lender as to the loss, theft,
destruction, or mutilation of its Secured Promissory Note, Borrower shall issue,
in lieu thereof, a replacement Secured Promissory Note in the same principal
amount thereof and of like tenor.

 

  3 CONDITIONS OF CREDIT EXTENSIONS

3.1 Conditions Precedent to Initial Credit Extension. Each Lender’s obligation
to make an advance in respect of a Credit Facility is subject to the condition
precedent that Agent shall consent to or shall have received, in form and
substance satisfactory to Agent, such documents, and completion of such other
matters, as Agent may reasonably deem necessary or appropriate, including,
without limitation, all items listed on the Closing Deliveries Schedule attached
hereto.

3.2 Conditions Precedent to all Credit Extensions. The obligation of each Lender
to make each Credit Extension, including the initial Credit Extension, is
subject to the following conditions precedent:

(a) satisfaction of all Applicable Funding Conditions for the applicable Credit
Extension as set forth in the Credit Facility Schedule, each in form and
substance satisfactory to Agent and each Lender;

(b) for Credit Extensions made after the Closing Date, if any, timely receipt by
the Agent and each Lender of an executed Credit Extension Form in the form
attached hereto;

(c) (i) for Credit Extensions made on the Closing Date, the representations and
warranties in Article 5 and elsewhere in the Financing Documents shall be true,
correct and complete in all respects on the Closing Date; provided, however,
that those representations and warranties expressly referring to a specific date
shall be true, correct and complete in all respects as of such date; and

(ii) for Credit Extension made after the Closing Date, if any, the
representations and warranties in Article 5 and elsewhere in the Financing
Documents shall be true, correct and complete in all material respects on the
date of the Credit Extension Form and on the Funding Date of each Credit
Extension; provided, however, that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or
modified by materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date. Each
Credit Extension is Borrower’s representation and warranty on that date that the
representations and warranties in Article 5 and elsewhere in the Financing
Documents remain true, accurate and complete in all material respects; provided,
however, that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or modified by
materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date;

 

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Confidential Treatment Requested by BioDelivery Sciences International, Inc.,

Confidential treatment requested with respect to certain portions hereof denoted
with “***”

 

(d) no Default or Event of Default shall have occurred and be continuing or
result from the Credit Extension;

(e) Agent shall be satisfied with the results of any searches conducted under
Section 3.5;

(f) receipt by Agent of such evidence as Agent shall request to confirm that the
deliveries made in Section 3.1 remain current, accurate and in full force and
effect, or if not, updates thereto, each in form and substance satisfactory to
Agent; and

(g) as determined in such Lender’s sole discretion, there has not been any
Material Adverse Change or any material adverse deviation by Borrower from the
most recent business plan of Borrower presented to and accepted by Agent.

3.3 Method of Borrowing. Each Credit Extension in respect of each Credit
Facility shall be in an amount at least equal to the applicable Minimum Credit
Extension Amount for such Credit Facility as set forth in the Credit Facility
Schedule or such lesser amount as shall remain undisbursed under the Applicable
Commitments for such Credit Facility. The date of funding for any requested
Credit Extension shall be a Business Day. To obtain a Credit Extension, Borrower
shall deliver to Agent a completed Credit Extension Form executed by a
Responsible Officer. Agent may rely on any notice given by a person whom Agent
reasonably believes is a Responsible Officer or designee thereof. Agent and
Lenders shall have no duty to verify the authenticity of any such notice.

3.4 Funding of Credit Facilities. Upon the terms and subject to the conditions
set forth herein, each Lender, severally and not jointly, shall make available
to Agent its Pro Rata Share of the requested Credit Extension, in lawful money
of the United States of America in immediately available funds, prior to 11:00
a.m. (New York time) on the specified date for the Credit Extension. Agent
shall, unless it shall have determined that one of the conditions set forth in
Section 3.1 or 3.2, as applicable, has not been satisfied, by 2:00 p.m. (New
York time) on such day, credit the amounts received by it in like funds to
Borrower by wire transfer to the Designated Funding Account (or to the account
of Borrower in respect of the Obligations, if the Credit Extension is being made
to pay an Obligation of Borrower). A Credit Extension made prior to the
satisfaction of any conditions set forth in Section 3.1 or 3.2 shall not
constitute a waiver by Agent or Lenders of Borrower’s obligation to satisfy such
conditions, and any such Credit Extension made in the absence of such
satisfaction shall be made in Agent’s discretion.

3.5 Searches. Before the Closing Date, and thereafter (as and when determined by
Agent in its discretion), Agent shall have the right to perform, all at
Borrower’s expense, the searches described in clauses (a), (b), and (c) below
against Borrower and any other Credit Party, the results of which are to be
consistent with Borrower’s representations and warranties under this Agreement
and the reasonably satisfactory results of which shall be a condition precedent
to all Credit Extensions requested by Borrower: (a) title investigations, UCC
searches and fixture filings searches; (b) judgment, pending litigation, federal
tax lien, personal property tax lien, and corporate and partnership tax lien
searches, in each jurisdiction searched under clause (a) above; and (c) searches
of applicable corporate, limited liability company, partnership and related
records to confirm the continued existence, organization and good standing of
the applicable Person and the exact legal name under which such Person is
organized.

 

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Confidential Treatment Requested by BioDelivery Sciences International, Inc.,

Confidential treatment requested with respect to certain portions hereof denoted
with “***”

 

  4 CREATION OF SECURITY INTEREST

4.1 Grant of Security Interest. Borrower hereby grants to Agent, for the ratable
benefit of the Lenders, to secure the payment and performance in full of all of
the Obligations, a continuing security interest in, and pledges to Agent, for
the ratable benefit of the Lenders, the Collateral (which, for the avoidance of
doubt, shall exclude the Excluded Intellectual Property Collateral), wherever
located, whether now owned or hereafter acquired or arising, and all proceeds
and products thereof. Borrower represents, warrants, and covenants that the
security interest granted herein is and shall at all times continue to be a
first priority perfected security interest in the Collateral, subject only to
Permitted Liens that may have priority by operation of applicable Law or by the
terms of a written intercreditor or subordination agreement entered into by
Agent.

4.2 Representations and Covenants.

(a) As of the Closing Date, Borrower has no ownership interest in any Chattel
Paper, letter of credit rights, commercial tort claims, Instruments, documents
or investment property (other than equity interests in any Subsidiaries of
Borrower disclosed on the Disclosure Schedule attached hereto).

(b) Borrower shall deliver to Agent all tangible Chattel Paper and all
Instruments and documents owned by any Borrower and constituting part of the
Collateral duly endorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance reasonably satisfactory to
Agent. Borrower shall provide Agent with “control” (as in the Code) of all
electronic Chattel Paper owned by any Borrower and constituting part of the
Collateral by having Agent identified as the assignee on the records pertaining
to the single authoritative copy thereof and otherwise complying with the
applicable elements of control set forth in the Code. Borrower also shall
deliver to Agent all security agreements securing any such Chattel Paper and
securing any such Instruments. Borrower will mark conspicuously all such Chattel
Paper and all such Instruments and Documents with a legend, in form and
substance reasonably satisfactory to Agent, indicating that such Chattel Paper
and such Instruments and Documents are subject to the security interests and
Liens in favor of Agent created pursuant to this Agreement and the Financing
Documents.

(c) Borrower shall deliver to Agent all letters of credit on which any Borrower
is the beneficiary and which give rise to letter of credit rights owned by such
Borrower which constitute part of the Collateral in each case duly endorsed and
accompanied by duly executed instruments of transfer or assignment, all in form
and substance satisfactory to Agent. Borrower shall take any and all actions as
may be necessary or desirable, or that Agent may request, from time to time, to
cause Agent to obtain exclusive “control” (as defined in the Code) of any such
letter of credit rights in a manner acceptable to Agent.

(d) Borrower shall promptly advise Agent upon any Borrower becoming aware that
it has any interests in any commercial tort claim that constitutes part of the
Collateral, which such notice shall include descriptions of the events and
circumstances giving rise to such commercial tort claim and the dates such
events and circumstances occurred, the potential defendants with respect such
commercial tort claim and any court proceedings that have been instituted with
respect to such commercial tort claims, and Borrower shall, with respect to any
such commercial tort claim, execute and deliver to Agent such documents as Agent
shall request to perfect, preserve or protect the Liens, rights and remedies of
Agent with respect to any such commercial tort claim.

(e) Except for Accounts and Inventory in an aggregate amount of ***, no Accounts
or Inventory or other Collateral shall at any time be in the possession or
control of any warehouse, consignee, bailee or any of Borrower’s agents or
processors without prior written notice to Agent and the receipt by Agent, if
Agent has so requested, of warehouse receipts, consignment agreements or bailee
lien waivers (as applicable) satisfactory to Agent prior to the commencement of
such possession or control. Borrower shall, upon the request of Agent, notify
any such warehouse, consignee, bailee, agent or processor of the security
interests and Liens in favor of Agent created pursuant to this Agreement and the
Financing Documents, instruct such Person to hold all such Collateral for
Agent’s account subject to Agent’s instructions and shall obtain an
acknowledgement from such Person that such Person holds the Collateral for
Agent’s benefit.

 

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(f) Upon request of Agent, Borrower shall promptly deliver to Agent any and all
certificates of title, applications for title or similar evidence of ownership
of all such tangible personal property and shall cause Agent to be named as
lienholder on any such certificate of title or other evidence of ownership.
Borrower shall not permit any such tangible personal property to become fixtures
to real estate unless such real estate is subject to a Lien in favor of Agent.

(g) Each Borrower hereby authorizes Agent to file without the signature of such
Borrower one or more UCC financing statements relating to its Liens on all or
any part of the Collateral, which financing statements may list Agent as the
“secured party” and such Borrower as the “debtor” and which describe and
indicate the collateral covered thereby as all or any part of the Collateral
under the Financing Documents in such jurisdictions as Agent from time to time
determines are appropriate, and to file without the signature of such Borrower
any continuations of or corrective amendments to any such financing statements,
in any such case in order for Agent to perfect, preserve or protect the Liens,
rights and remedies of Agent with respect to the Collateral. Each Borrower also
ratifies its authorization for Agent to have filed in any jurisdiction any
initial financing statements or amendments thereto if filed prior to the date
hereof. Any financing statement may include a notice that any disposition of the
Collateral not expressly permitted hereunder, by either Borrower or any other
Person, shall be deemed to violate the rights of Agent and the Lenders under the
Code.

(h) As of the Closing Date, no Borrower holds, and after the Closing Date
Borrower shall promptly notify Agent in writing upon creation or acquisition by
any Borrower of, any Collateral which constitutes a claim against any
Governmental Authority, including, without limitation, the federal government of
the United States or any instrumentality or agency thereof, the assignment of
which claim is restricted by any applicable Law, including, without limitation,
the federal Assignment of Claims Act and any other comparable Law. Upon the
request of Agent, Borrower shall take such steps as may be necessary or
desirable, or that Agent may request, to comply with any such applicable Law.

(i) Borrower shall furnish to Agent from time to time any statements and
schedules further identifying or describing the Collateral and any other
information, reports or evidence concerning the Collateral as Agent may
reasonably request from time to time.

 

  5 REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants as follows on the Closing Date and the date of
each Credit Extension:

5.1 Due Organization, Authorization: Power and Authority.

(a) Each Credit Party is duly existing and in good standing, as a Registered
Organization in its respective jurisdiction of formation. Each Credit Party is
qualified and licensed to do business and is in good standing in any
jurisdiction in which the conduct of its business or its ownership of property
requires that it be qualified except where the failure to do so could not
reasonably be expected to have a Material Adverse Change. The Financing
Documents have been duly authorized, executed and delivered by each Credit Party
and constitute legal, valid and binding agreements enforceable in accordance
with their terms except as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors’ rights generally. The
execution, delivery and performance by each Credit Party of each Financing
Document executed or to be executed by it is in each case within such Credit
Party’s powers.

(b) The execution, delivery and performance by each Credit Party of the
Financing Documents to which it is a party do not (i) conflict with any of such
Credit Party’s organizational documents; (ii) contravene, conflict with,
constitute a default under or violate any Law; (iii) contravene, conflict or
violate any applicable order, writ, judgment, injunction, decree, determination
or award of any Governmental Authority by which such Credit Party or any of its
property or assets may be bound or affected; (iv) require any action by, filing,
registration, or qualification with, or Required Permit from, any Governmental
Authority (except such Required Permits which have already been obtained and are
in full force and effect); or (v) constitute a default under or conflict with
any Material Agreement. No Credit Party is in default under any agreement to
which it is a party or by which it is bound in which the default could
reasonably be expected to have a Material Adverse Change.

5.2 Litigation. Except as disclosed on the Disclosure Schedule or, after the
Closing Date, pursuant to Section 6.7, there are no actions, suits, proceedings
or investigations pending or, to the knowledge of the Responsible

 

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Officers, threatened in writing by or against any Credit Party which involves
the possibility of any judgment or liability of more than *** or that could
result in a Material Adverse Change, or which questions the validity of the
Financing Documents, or the other documents required thereby or any action to be
taken pursuant to any of the foregoing, nor does any Credit Party have reason to
believe that any such actions, suits, proceedings or investigations are
threatened.

5.3 No Material Deterioration in Financial Condition; Financial Statements. All
financial statements for BDSI included in the SEC Filings fairly present, in
conformity with GAAP, in all material respects the consolidated financial
condition and consolidated results of operations of BDSI and its Subsidiaries.
There has been no material deterioration in the consolidated financial condition
of BDSI and its Subsidiaries from the most recent financial statements and
projections submitted to Agent or any Lender.

5.4 Solvency. The fair salable value of each Credit Party’s assets (including
goodwill minus disposition costs) exceeds the fair value of its liabilities.
After giving effect to the transactions described in this Agreement, (a) no
Credit Party is left with unreasonably small capital in relation to its business
as presently conducted, and (b) each Credit Party is able to pay its debts
(including trade debts) as they mature.

5.5 Subsidiaries; Investments. Borrower and its Subsidiaries do not own any
stock, partnership interest or other equity securities, except for Permitted
Investments.

5.6 Tax Returns and Payments; Pension Contributions. Each Credit Party has
timely filed all required tax returns and reports, and each Credit Party has
timely paid all foreign, federal, state and material local taxes, assessments,
deposits and contributions owed by such Credit Party. Borrower is unaware of any
claims or adjustments proposed for any of prior tax years of any Credit Party
which could result in additional taxes becoming due and payable by such Credit
Party. Each Credit Party has paid all amounts necessary to fund all present
pension, profit sharing and deferred compensation plans in accordance with their
terms, and no Credit Party has withdrawn from participation in, or has permitted
partial or complete termination of, or permitted the occurrence of any other
event with respect to, any such plan which could reasonably be expected to
result in any liability of such Credit Party, including any liability to the
Pension Benefit Guaranty Corporation or its successors or any other Governmental
Authority.

5.7 Disclosure Schedule. All information set forth in the Disclosure Schedule is
true, accurate and complete as of the date hereof. All information set forth in
the Perfection Certificate is true, accurate and complete as of the date hereof.

5.8 Inactive Subsidiary. BND does not own any assets, has not incurred any
Indebtedness or any other liabilities and does not conduct any business (other
than the payment of administrative fees ancillary to its limited liability
company existence).

5.9 Notice to CDC. (a) Borrowers have given CDC the required notice in
accordance with Section E(4) of the CDC Securities Purchase Agreement of the
transactions contemplated under this Agreement, (b) CDC has not elected to
exercise its Right of First Negotiation (as defined in the CDC Securities
Purchase Agreement) with respect to the transactions contemplated under this
Agreement and (c) the consummation of this Agreement will not breach any
covenant contained in the CDC Securities Purchase Agreement.

 

  6 AFFIRMATIVE COVENANTS

Borrower covenants and agrees as follows:

6.1 Organization and Existence; Government Compliance.

(a) Each Credit Party shall maintain its legal existence and good standing in
its respective jurisdiction of formation and maintain qualification in each
jurisdiction in which the failure to so qualify could reasonably be expected to
have a Material Adverse Change. If a Credit Party is not now a Registered
Organization but later becomes one, Borrower shall promptly notify Agent of such
occurrence and provide Agent with such Credit Party’s organizational
identification number.

(b) Each Credit Party shall comply with all Laws, ordinances and regulations to
which it or its business locations is subject, the noncompliance with which
could reasonably be expected to result in a Material Adverse Change. Each Credit
Party shall obtain and keep in full force and effect and comply with all of the
Required Permits, except where failure to have or maintain compliance with or
effectiveness of such Required Permit could not reasonably be expected to result
in a Material Adverse Change. Each Credit Party shall promptly provide copies of
any such obtained Required Permits to Agent.

 

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6.2 Financial Statements, Reports, Certificates.

(a) BDSI shall deliver to Agent and each Lender: (i) as soon as available, but
no later than thirty (30) days after the last day of each month, a company
prepared and unaudited consolidated balance sheet, income statement and cash
flow statement covering BDSI’s and its Subsidiaries’ consolidated operations for
such month certified by a Responsible Officer and in a form reasonably
acceptable to Agent; (ii) as soon as available, but no later than one hundred
twenty (120) days after the last day of BDSI’s fiscal year, (x) BDSI’s audited
consolidated statements prepared under GAAP, consistently applied, together with
an unqualified opinion on the financial statements from an independent certified
public accounting firm acceptable to Agent in its reasonable discretion (it
being agreed that Cherry Bekaert LLP is acceptable to Agent) and (y) unaudited
consolidating financial statements prepared by BDSI covering BDSI’s and its
Subsidiaries’ operations for such year prepared under GAAP, consistently
applied, certified by a Responsible Officer and in a form reasonably acceptable
to Agent; (iii) as soon as available after approval thereof by any Credit
Party’s governing board, but no later than forty-five (45) days after the last
day of such Credit Party’s fiscal year, and as amended and/or updated, such
Credit Party’s financial projections for current fiscal year; (iv) within five
(5) days of delivery, copies of (or, so long as BDSI remains subject to the
reporting requirements under the Exchange Act, a link thereto on such Credit
Party’s or another website on the Internet) all statements, reports and notices
made available to all of any Credit Party’s security holders or to any holders
of Subordinated Debt; (v) in the event that any Credit Party is or becomes
subject to the reporting requirements under the Exchange Act, within five
(5) days of filing, all reports on Form 10-K, 10-Q and 8-K filed with the SEC or
a link thereto on such Credit Party’s or another website on the Internet;
(vi) operating plans and other financial information reasonably requested by
Agent or any Lender; (vii) if requested by Agent and as soon as available, but
no later than thirty (30) days after the last day of each month, copies of the
month-end account statements for each Collateral Account maintained by any
Credit Party, which statements may be provided to Agent and each Lender by
Borrower or directly from the applicable institution(s); and (viii) such
additional information, reports or statements regarding the Credit Parties or
their respective businesses as Agent or any Lender may from time to time
reasonably request.

(b) Within thirty (30) days after the last day of each month, Borrower shall
deliver to Agent and each Lender with the monthly financial statements described
above, a duly completed Compliance Certificate signed by a Responsible Officer.

(c) Borrower shall cause each Credit Party to keep proper books of record and
account in accordance with GAAP. Upon reasonable prior written notice and during
business hours (which such limitations shall not apply if a Default or Event of
Default has occurred), Borrower shall allow, and cause each Credit Party to
allow, Agent and Lenders to visit and inspect any properties of a Credit Party,
to examine and make abstracts or copies from any Credit Party’s books, to
conduct a collateral audit and analysis of its operations and the Collateral to
verify the amount and age of the accounts, the identity and credit of the
respective account debtors (it being agreed that so long as no Default or Event
of Default has occurred or is continuing, neither Agent nor any Lender shall
make contact with any account debtor or other contract party of any Borrower
without the prior consent of such Borrower), to review the billing practices of
the Credit Party and to discuss its respective affairs, finances and accounts
with their respective officers, employees and independent public accountants as
often as may reasonably be desired. Borrower shall reimburse Agent and each
Lender for all reasonable costs and expenses associated with such visits and
inspections; provided, however, that Borrower shall be required to reimburse
Agent and each Lender for such costs and expenses for no more than one (1) such
visit and inspection per twelve (12) month period unless a Default or Event of
Default has occurred during such period.

(d) Borrower shall, and shall cause each Credit Party to, deliver to Agent and
each Lender, within *** after the same are sent or received, copies of all
material correspondence, reports, documents and other filings with any
Governmental Authority that could reasonably be expected to have a material
effect on any of the Required Permits which are material to Borrower’s business
or otherwise on the operations of Borrower or any of its Subsidiaries.

 

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6.3 Maintenance of Property. Borrower shall cause all equipment and other
tangible personal property other than Inventory to be maintained and preserved
in the same condition, repair and in working order as of the date hereof,
ordinary wear and tear excepted, and shall promptly make or cause to be made all
repairs, replacements and other improvements in connection therewith that are
reasonably necessary to such end. Borrower shall cause each Credit Party to keep
all Inventory in good and marketable condition, free from material defects.
Returns and allowances between a Credit Party and its Account Debtors shall
follow the Credit Party’s customary practices as they exist at the Closing Date.
Borrower shall promptly notify Agent of all returns, recoveries, disputes and
claims that involve more than *** of Inventory collectively among all Credit
Parties.

6.4 Taxes; Pensions. Borrower shall timely file and cause each Credit Party to
timely file, all required tax returns and reports and timely pay, and cause each
Credit Party to timely pay, all foreign, federal, state, and local taxes,
assessments, deposits and contributions owed, and shall deliver to Agent, on
demand, appropriate certificates attesting to such payments. Borrower shall pay,
and cause each Credit Party to pay, all amounts necessary to fund all present
pension, profit sharing and deferred compensation plans in accordance with their
terms. Notwithstanding the foregoing, a Credit Party may defer payment of any
contested taxes, provided, however, that such Credit Party (a) in good faith
contests its obligation to pay the taxes by appropriate proceedings promptly and
diligently instituted and conducted, (b) notifies Agent in writing of the
commencement of, and any material development in, the proceedings, and (c) posts
bonds or takes any other steps required to prevent the Governmental Authority
levying such contested taxes from obtaining a Lien upon any of the Collateral.

6.5 Insurance. Borrower shall, and shall cause each Credit Party to, keep its
business and the Collateral insured for risks and in amounts standard for
companies in Borrower’s industry and location. Insurance policies shall be in a
form, with companies, and in amounts that are reasonably satisfactory to Agent.
All property policies shall have a lender’s loss payable endorsement showing
Agent as sole lender’s loss payee and waive subrogation against Agent, and all
liability policies shall show, or have endorsements showing, Agent as an
additional insured. No other loss payees may be shown on the policies unless
Agent shall otherwise consent in writing. If required by Agent, all policies (or
the loss payable and additional insured endorsements) shall provide that the
insurer shall endeavor to give Agent at least *** notice before canceling,
amending, or declining to renew its policy. At Agent’s request, Borrower shall
deliver certified copies of all such Credit Party insurance policies and
evidence of all premium payments. If any Credit Party fails to obtain insurance
as required under this Section 6.5 or to pay any amount or furnish any required
proof of payment to third persons and Agent, Agent may make all or part of such
payment or obtain such insurance policies required in this Section 6.5, and take
any action under the policies Agent deems prudent.

6.6 Collateral Accounts. Borrower shall, and shall cause each Credit Party to,
provide Agent *** prior written notice before establishing any Collateral
Account at or with any bank or financial institution. In addition, for each
Collateral Account that any Credit Party at any time maintains, Borrower shall,
and shall cause each Credit Party to, cause the applicable bank or financial
institution at or with which any Collateral Account is maintained to execute and
deliver a Control Agreement or other appropriate instrument with respect to such
Collateral Account to perfect Agent’s Lien in such Collateral Account in
accordance with the terms hereunder, which Control Agreement may not be
terminated without prior written consent of Agent. The provisions of the
previous sentence shall not apply to deposit accounts exclusively used for
payroll, payroll taxes and other employee wage and benefit payments to or for
the benefit of a Credit Party’s employees and identified to Agent by Borrower as
such; provided, however, that at all times Borrower shall maintain one or more
separate Deposit Accounts to hold any and all amounts to be used for payroll,
payroll taxes and other employee wage and benefit payments, and shall not
commingle any monies allocated for such purposes with funds in any other Deposit
Account.

6.7 Notices of Material Agreements, Litigation and Defaults. Promptly (and in
any event within ***, (a) upon Borrower becoming aware of the existence of any
Event of Default or event which, with the giving of notice or passage of time,
or both, would constitute an Event of Default or (b) upon the execution and
delivery of any Material Agreement and each material amendment, consent, waiver
or other modification, and each notice of termination or default or similar
notice delivered to or by a Credit Party in connection with any Material
Agreement, or (c) upon Borrower becoming aware of any pending (or threatened in
writing) action, suit, proceeding or investigation by or against Borrower or any
Credit Party which involves the possibility of any judgment or liability of more
than *** or that could result in a Material Adverse Change, or which questions
the validity of any of the Financing Documents, or the other documents required
thereby or any action to be taken pursuant to any of the foregoing, Borrower
shall give written notice to Agent and each Lender of such occurrence, and such
further information (including copies of such documentation) as Agent or any
Lender shall reasonably request.

 

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6.8 Creation/Acquisition of Subsidiaries. In the event Borrower or any
Subsidiary creates or, to the extent permitted hereunder, acquires any
Subsidiary, Borrower and such Subsidiary shall promptly (and in any event within
*** of such creation or acquisition) notify Agent of the creation or acquisition
of such new Subsidiary and take all such action as may be reasonably required by
Agent or the Required Lenders to cause each such Subsidiary to become a
co-Borrower hereunder or to guarantee the Obligations of Borrower under the
Financing Documents and, in each case, grant a continuing pledge and security
interest in and to the assets of such Subsidiary (substantially as described on
Exhibit A hereto); and Borrower shall grant and pledge to Agent, for the ratable
benefit of the Lenders, a perfected security interest in the stock, units or
other evidence of ownership of each Subsidiary (the foregoing collectively, the
“Joinder Requirements”); provided, that Borrower shall not be permitted to make
any Investment in such Subsidiary until such time as Borrower has satisfied the
Joinder Requirements.

6.9 Use of Proceeds. Borrower shall use the proceeds of the Credit Extensions
solely for (a) transaction fees incurred in connection with the Financing
Documents, (b) for working capital needs, general corporate purposes or other
activities of Borrower and its Subsidiaries permitted pursuant to this
Agreement, and (c) any other Permitted Purpose specified in the Credit Facility
Schedule, if any, for such Credit Facility, provided, however, that no portion
of the proceeds of the Credit Extensions will be used for family, personal,
agricultural or household use.

6.10 Hazardous Materials; Remediation.

(a) If any release or disposal of Hazardous Materials shall occur or shall have
occurred on any real property or any other assets of any Borrower or any other
Credit Party, such Borrower will cause, or direct the applicable Credit Party to
cause, the prompt containment and removal of such Hazardous Materials and the
remediation of such real property or other assets as is necessary to comply with
all Laws and to preserve the value of such real property or other assets.
Without limiting the generality of the foregoing, each Borrower shall, and shall
cause each other Credit Party to, comply with each Law requiring the performance
at any real property by any Borrower or any other Credit Party of activities in
response to the release or threatened release of a Hazardous Material.

(b) Borrower will provide Agent within *** after written demand therefor with a
bond, letter of credit or similar financial assurance evidencing to the
reasonable satisfaction of Agent that sufficient funds are available to pay the
cost of removing, treating and disposing of any Hazardous Materials or Hazardous
Materials Contamination and discharging any assessment which may be established
on any property as a result thereof, such demand to be made, if at all, upon
Agent’s determination that the failure to remove, treat or dispose of any
Hazardous Materials or Hazardous Materials Contamination, or the failure to
discharge any such assessment could reasonably be expected to have a Material
Adverse Change.

6.11 Power of Attorney. Each of the officers of Agent is hereby irrevocably
made, constituted and appointed the true and lawful attorney for each Borrower
(without requiring any of them to act as such) with full power of substitution
to do the following: (a) pay, contest or settle any Lien, charge, encumbrance,
security interest, and adverse claim in or to the Collateral (in each case, so
long as no Default or Event of Default has occurred, other than Permitted
Liens), or any judgment based thereon, or otherwise take any action to terminate
or discharge the same; (b) so long as Agent has provided not less than *** prior
written notice to Borrower to perform the same and Borrower has failed to take
such action, (i) execute in the name of any Person comprising Borrower any
schedules, assignments, instruments, documents, and statements that Borrower is
obligated to give Agent under this Agreement or that Agent or any Lender deems
necessary to perfect or better perfect Agent’s security interest or Lien in any
Collateral, (ii) do such other and further acts and deeds in the name of
Borrower that Agent may deem necessary or desirable to enforce, protect or
preserve any Collateral or its rights therein, including, but not limited to, to
sign Borrower’s name on any invoice or bill of lading for any Account or drafts
against Account Debtors; and (iii) after the occurrence and during the
continuance of an Event of Default, (A) endorse the name of any Borrower upon
any and all checks, drafts, money orders, and other instruments for the payment
of money that are payable to Borrower; (B) make, settle, and adjust all claims
under Borrower’s insurance policies; (C) take any action any Credit Party is
required to take under this Agreement or any other Financing Document;
(D) transfer the Collateral into the name of Agent or a third party as the Code
permits; (E) exercise any rights and remedies described in this Agreement or the
other Financing Documents; and (F) do such other and further acts and deeds in
the name of Borrower that Agent may deem necessary or desirable to enforce its
rights with regard to any Collateral.

6.12 Further Assurances. Borrower shall, and shall cause each Credit Party to,
promptly execute any further instruments and take further action as Agent
reasonably requests to perfect or better perfect or continue Agent’s Lien in the
Collateral or to effect the purposes of this Agreement or any other Financing
Document.

 

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6.13 Post-Closing Obligations. Borrower shall, and shall cause each Credit Party
to, complete each of the post-closing obligations and/or deliver to Agent each
of the documents, instruments, agreements and information listed on the
Post-Closing Obligations Schedule attached hereto, on or before the date set
forth for each such item thereon (as may be extended by the Agent in writing in
its sole discretion), each of which shall be completed or provided in form and
substance satisfactory to Agent and Lenders.

6.14 Disclosure Schedule. Borrower shall, in the event of any information in the
Disclosure Schedule becoming outdated, inaccurate, incomplete or misleading in
any material respect, deliver to Agent a proposed update to the Disclosure
Schedule correcting all outdated, inaccurate, incomplete or misleading
information, together with the next Compliance Certificate required to be
delivered under this Agreement after such event. With respect to any proposed
updates to the Disclosure Schedule involving Permitted Liens, Permitted
Indebtedness or Permitted Investments, Agent will replace the Disclosure
Schedule attached hereto with such proposed update only if such updated
information is consistent with the definitions of and limitations herein
pertaining to Permitted Liens, Permitted Indebtedness or Permitted Investments.
With respect to any proposed updates to the Disclosure Schedule involving other
matters, Agent will replace the applicable portion of the Disclosure Schedule
attached hereto with such proposed update upon Agent’s approval thereof.

6.15 Proceeds from Casualty Events or Dispositions. On the date on which any
Credit Party receives (a) any casualty proceeds (net of out-of-pocket expenses
and, in the case of personal property, repayment of any permitted purchase money
debt encumbering the personal property that suffered such casualty) or
(b) proceeds from any asset disposition permitted under this Agreement, in each
case, in respect of assets upon which Agent maintained a Lien, Borrower shall
either (i) apply such proceeds toward the replacement or repair of destroyed or
damaged property, as applicable (provided that any such replaced or repaired
property (x) shall be of equal or like value as the replaced or repaired
Collateral and (y) shall be deemed Collateral in which Agent and Lenders have
been granted a first priority security interest) or (ii) deposit such proceeds
into a Collateral Account subject to a Control Agreement.

 

  7 NEGATIVE COVENANTS

Borrower shall not do, nor shall it permit any Credit Party to do, any of the
following without the prior written consent of Agent:

7.1 Dispositions. Convey, sell, abandon, lease, license, transfer, assign, grant
a security in or otherwise dispose of (collectively, “Transfer”), or permit any
of its subsidiaries to Transfer, all or any part of its business or property,
except for (a) sales, transfers or dispositions of Inventory in the Ordinary
Course of Business; (b) sales or abandonment of worn-out or obsolete Equipment;
(c) Permitted Liens; (d) Permitted Licenses; and (e) the sale, assignment,
transfer or disposition of the Doyen Equipment.

7.2 Changes in Business, Management, Ownership or Business Locations. (a) Other
than the discovery, development, testing, manufacturing, sale and marketing of
pharmaceutical products permitted under this Agreement, engage in any business
other than the businesses currently engaged in by Borrower or such Subsidiary,
as applicable, or reasonably related thereto; (b) liquidate or dissolve;
(c) (i) have a change in the chief executive officer where a suitable permanent
replacement, as approved by Borrower’s board of directors, has not been named
and hired by not later than *** after such change, or (ii) enter into any
transaction or series of related transactions which would result in a Change in
Control unless the agreement governing such transactions provides, as a
condition precedent to the consummation of such transactions, for either (x) the
indefeasible payment in full in cash of all Obligations or (y) the consent of
Agent and Lenders; (d) add any new offices or business locations, or enter into
any new leases with respect to existing offices or business locations (unless
such new or existing offices or business locations contain less than *** in
Borrower’s assets or property and do not contain any of Borrower’s Books)
without first delivering a fully-executed Access Agreement to Agent; (e) change
its jurisdiction of organization; (f) other than the creation or acquisitions of
Subsidiaries in accordance with Section 6.8, change its organizational structure
or type; (g) change its legal name; or (h) change any organizational number (if
any) assigned by its jurisdiction of organization.

7.3 Mergers or Acquisitions. Merge or consolidate with any other Person, or
acquire all or substantially all of the capital stock or property of another
Person; provided, however, that a Subsidiary of Borrower may merge or
consolidate into another Subsidiary that is a Borrower, so long as (a) Borrower
has provided Agent with prior written notice of such transaction, (b) a Person
already comprising the Borrower shall be the surviving legal entity,
(c) Borrower’s tangible net

 

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worth is not thereby reduced, (d) no Event of Default has occurred and is
continuing prior thereto or arises as a result therefrom, and (e) Borrower shall
be in compliance with the covenants set forth in this Agreement both before and
after giving effect to such transaction.

7.4 Indebtedness. Create, incur, assume, or be liable for any Indebtedness other
than Permitted Indebtedness.

7.5 Encumbrance. (a) Create, incur, allow, or suffer any Lien on any of its
property, except for Permitted Liens, (b) permit any Collateral to fail to be
subject to the first priority security interest granted herein except for
Permitted Liens that may have priority by operation of applicable Law or by the
terms of a written intercreditor or subordination agreement entered into by
Agent, or (c) enter into any agreement, document, instrument or other
arrangement (except with or in favor of Agent) with any Person which directly or
indirectly prohibits or has the effect of prohibiting Borrower or any Subsidiary
from collaterally assigning, mortgaging, pledging, granting a security interest
in or upon, or encumbering any of Borrower’s or any Subsidiary’s Collateral or
Intellectual Property, except as is otherwise permitted in the definition of
“Permitted Liens” herein.

7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account, except
pursuant to the terms of Section 6.6 hereof.

7.7 Distributions; Investments. (a) Pay any dividends (other than dividends
payable solely in common equity interests) or make any distribution or payment
with respect to or redeem, retire or purchase or repurchase any of its equity
interests (other than repurchases pursuant to the terms of employee stock
purchase plans, employee restricted stock agreements or similar plans), or
(b) directly or indirectly make any Investment (including, without limitation,
any additional Investment in any Subsidiary) other than Permitted Investments.

7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to
exist any material transaction with any Affiliate of any Credit Party, except
for (a) transactions that are in the Ordinary Course of Business, upon fair and
reasonable terms that are no less favorable to Borrower than would be obtained
in an arm’s length transaction with a non-affiliated Person, (b) transactions
with Subsidiaries that are designated as a Borrower hereunder and that are not
otherwise prohibited by Article 7 of this Agreement, (c) transactions permitted
by Section 7.7 of this Agreement, and (d) transactions with Affiliates in effect
on the Closing Date as disclosed on the Affiliates Transaction Schedule.

7.9 Subordinated Debt. (a) Make or permit any payment on any Subordinated Debt,
except to the extent expressly permitted to be made pursuant to the terms of the
Subordination Agreement to which such Subordinated Debt is subject, or (b) amend
any provision in any document relating to the Subordinated Debt other than as
may be expressly permitted pursuant to the terms of any applicable Subordination
Agreement to which such Subordinated Debt is subject.

7.10 Compliance. Become an “investment company” or a company controlled by an
“investment company”, under the Investment Company Act of 1940, as amended or
undertake as one of its important activities extending credit to purchase or
carry margin stock (as defined in Regulation U of the Board of Governors of the
Federal Reserve System), or use the proceeds of any Credit Extension for that
purpose; fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail
to comply with the Federal Fair Labor Standards Act or violate any other Law or
regulation, if the violation could reasonably be expected to have a Material
Adverse Change; withdraw from participation in, permit partial or complete
termination of, or permit the occurrence of any other event with respect to, any
present pension, profit sharing and deferred compensation plan which could
reasonably be expected to result in any liability of Borrower, including any
liability to the Pension Benefit Guaranty Corporation or its successors or any
other governmental agency.

7.11 Amendments to Organization Documents and Material Agreements. Amend, modify
or waive any provision of (a) any Material Agreement in a manner that is
materially adverse to Borrower, that is adverse to Agent or any Lender, that
pertains to rights to assign or grant a security interest in such Material
Agreement or that could or could reasonably be expected to result in a Material
Adverse Change, or (b) any of its organizational documents (other than (i) a
change in registered agents, *** or (iv) a change that could not reasonably be
excepted to adversely affect the rights of Agent or Lenders hereunder, but, for
the avoidance of doubt, under no circumstances a change of its name, type of
organization or jurisdiction of organization), in each case, without the prior
written consent of Agent. Borrower shall provide to Agent copies of all
amendments, waivers and modifications of any Material Agreement or
organizational documents.

 

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7.12 Compliance with Anti-Terrorism Laws. Directly or indirectly, knowingly
enter into any documents, instruments, agreements or contracts with any Person
listed on the OFAC Lists. Borrower shall immediately notify Agent if Borrower
has knowledge that Borrower or any Subsidiary or Affiliate is listed on the OFAC
Lists or (a) is convicted on, (b) pleads nolo contendere to, (c) is indicted on,
or (d) is arraigned and held over on charges involving money laundering or
predicate crimes to money laundering. Borrower will not, nor will Borrower
permit any Subsidiary or Affiliate to, directly or indirectly, (i) conduct any
business or engage in any transaction or dealing with any Blocked Person,
including, without limitation, the making or receiving of any contribution of
funds, goods or services to or for the benefit of any Blocked Person, (ii) deal
in, or otherwise engage in any transaction relating to, any property or
interests in property blocked pursuant to Executive Order No. 13224, any similar
executive order or other Anti-Terrorism Law, or (iii) engage in or conspire to
engage in any transaction that evades or avoids, or has the purpose of evading
or avoiding, or attempts to violate, any of the prohibitions set forth in
Executive Order No. 13224 or other Anti-Terrorism Law. Agent hereby notifies
Borrower that pursuant to the requirements of Anti-Terrorism Laws, and Agent’s
policies and practices, Agent is required to obtain, verify and record certain
information and documentation that identifies Borrower and its principals, which
information includes the name and address of Borrower and its principals and
such other information that will allow Agent to identify such party in
accordance with Anti-Terrorism Laws.

7.13 Inactive Subsidiary. Permit BND to own any assets, conduct any business
(other than the payment of administrative fees ancillary to its limited
liability company existence) or incur any Indebtedness or any other liabilities.

 

  8 ADDITIONAL COVENANTS

8.1 Life Sciences Covenants.

(a) As used in this Agreement, the following terms have the following meanings:

“BEMA Buprenorphine” means the formulation of buprenorphine with the BEMA
Technology for the treatment of moderate to severe chronic pain, which Product
is under exclusive license to Endo Health Solutions, Inc.

“BEMA Product” means any Product using Borrower’s proprietary BioErodible
MucoAdhesive (“BEMA”) technology (“BEMA Technology”), a buccal film consisting
of a small bioerodible, polymer film for application to the mucosal membranes
(i.e., inner lining of the cheek).

“BUNAVAIL Product” means any BEMA Product incorporating buprenorphine and
naloxone which is the subject of an investigational new drug application as of
the Closing Date.

“DEA” means the Drug Enforcement Administration of the United States of America,
and any successor agency thereof.

“Drug Application” means a new drug application, an abbreviated drug
application, or a product license application for any Product, as appropriate,
as those terms are defined in the FDCA.

“FDA” means the Food and Drug Administration of the United States of America, or
any successor entity thereto.

“FDCA” means the Federal Food, Drug and Cosmetic Act, as amended, 21 U.S.C.
Section 301 et seq., and all regulations promulgated thereunder.

“Material Intellectual Property” means all of Borrower’s Intellectual Property
and license or sublicense agreements or other agreements with respect to rights
in Intellectual Property that are material to the condition (financial or
other), business or operations of Borrower, as determined by Agent.

“Non BEMA Buprenorphine Product” means any Product other than BEMA
Buprenorphine.

“ONSOLIS Product” means the Product generically known as Fentanyl Buccal Soluble
Film (and known under the commercial names ONSOLIS in the United States and
BREAKYL in Europe) for the treatment of breakthrough cancer pain in opioid
tolerant patients, currently under license from Borrower to Meda AB, Kunwha
Pharmaceutical Co., Ltd. and TTY Biopharm Co., Ltd.

 

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“Permitted License” means ***

“Products” means any products manufactured, sold, developed, tested or marketed
by any Borrower or any of its Subsidiaries, including without limitation, those
products set forth on the Products Schedule (as updated from time to time in
accordance with Section 8.1(d)); provided, however, that if Borrower shall fail
to comply with the obligations under Section 8.1(d) to give notice to Agent and
update the Products Schedule prior to manufacturing, selling, developing,
testing or marketing any new Product, any such improperly undisclosed Product
shall be deemed to be included in this definition.

“Registered Intellectual Property” means any patent, registered trademark or
servicemark, registered copyright, registered mask work, or any pending
application for any of the foregoing.

(b) Notwithstanding the terms of Section 7.1 of this Agreement to the contrary,
Borrower shall be permitted to make Transfers in the form of Permitted Licenses.

(c) Borrower represents and warrants as follows at all times unless expressly
provided below:

(i) Intellectual Property and License Agreements. A list of all of Intellectual
Property of each Credit Party and all license agreements, sublicenses, or other
rights of any Credit Party to use Intellectual Property (including all in-bound
license agreements, but excluding over-the-counter software that is commercially
available to the public), as of the Closing Date and, as updated pursuant to
Section 8.1(d), is set forth on the Intellectual Property Schedule, which
indicates, for each item of property: (A) the name of the Credit Party owning
such Intellectual Property or licensee to such license agreement; (B) the Credit
Party’s identifier for such property (i.e., name of patent, license, etc.),
(C) whether such property is Intellectual Property (or application therefor)
owned by a Credit Party or is property to which a Credit Party has rights
pursuant to a license agreement and (D) the expiration date of such Intellectual
Property or license agreement. In the case of any Material Intellectual Property
that is a license agreement, the Intellectual Property Schedule further
indicates, for each: (1) the name and address of the licensor, (2) the name and
date of the agreement pursuant to which such item of Material Intellectual
Property is licensed, (3) whether or not such license agreement grants an
exclusive license to a Credit Party, (4) whether there are any purported
restrictions in such license agreement as to the ability of a Credit Party to
grant a security interest in and/or to transfer any of its rights as a licensee
under such license agreement, and (5) whether a default under or termination of
such license agreement could interfere with Agent’s right to sell or assign such
Collateral. Except as noted on the Intellectual Property Schedule, each Credit
Party is the sole owner of its Intellectual Property, except for licenses
granted to its customers in the Ordinary Course of Business as identified on the
Intellectual Property Schedule and Permitted Licenses. Each Patent is valid and
enforceable and no part of the Material Intellectual Property has been judged
invalid or unenforceable, in whole or in part, and to the best of Borrower’s
knowledge, no claim has been made that any part of the Intellectual Property
violates the rights of any third party.

(ii) Regulatory Status.

(A) All Products and all Required Permits are listed on the Products Schedule
and Required Permits Schedule (as updated from time to time pursuant to
Section 8.1(d)), and Borrower has delivered to Agent a copy of all Required
Permits requested by Agent as of the date hereof or to the extent requested by
Agent pursuant to Section 8.1(d).

(B) Without limiting the generality of Section 8.1 above, with respect to any
Product being tested or manufactured, Borrower and its Subsidiaries have
received, and such Product is the subject of, all Required Permits needed in
connection with the testing or manufacture of such Product as such testing or
manufacturing is currently being conducted by or on behalf of Borrower, and
Borrower and its Subsidiaries have not received any notice from any applicable
Governmental Authority, specifically including the FDA, that such Governmental
Authority is conducting an investigation or review of (1) Borrower’s or such
Subsidiary’s manufacturing facilities and processes for such Product which have
disclosed any material deficiencies or violations of Laws and/or the Required
Permits related to the manufacture of such Product, or (2) any such Required
Permit or that any such Required Permit has been revoked or withdrawn, nor has
any such Governmental Authority issued any order or recommendation stating that
the development, testing and/or manufacturing of such Product should cease.

 

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(C) Without limiting the generality of Section 8.1 above, with respect to any
Product marketed or sold by Borrower or its Subsidiaries, except as disclosed on
the ONSOLIS Disclosure Schedule, Borrower and its Subsidiaries have received,
and such Product is the subject of, all Required Permits needed in connection
with the marketing and sales of such Product as currently being marketed or sold
by Borrower or its Subsidiaries, and Borrower and its Subsidiaries have not
received any notice from any applicable Governmental Authority, specifically
including the FDA, that such Governmental Authority is conducting an
investigation or review of any such Required Permit or approval or that any such
Required Permit has been revoked or withdrawn, nor has any such Governmental
Authority issued any order or recommendation stating that such marketing or
sales of such Product cease or that such Product be withdrawn from the
marketplace.

(D) Without limiting the generality of Section 8.1 above (i) and except as
disclosed in the SEC Filings made prior to the Closing Date, there have been no
adverse clinical test results conducted by Borrower, or to Borrower’s knowledge,
conducted by other Persons which have or could reasonably be expected to result
in a Material Adverse Change, and (ii) except as disclosed on the ONSOLIS
Disclosure Schedule, there have been no Product recalls or voluntary Product
withdrawals from any market.

(E) Except as disclosed on the ONSOLIS Disclosure Schedule, Borrower and its
Subsidiaries have not experienced any significant failures in its manufacturing
of any Product such that the amount of such Product successfully manufactured by
Borrower or its Subsidiaries in accordance with all specifications thereof and
the required payments related thereto in any month shall decrease significantly
with respect to the quantities of such Product produced in the prior month.

(d) Borrower covenants and agrees as follows:

(i) Reserved.

(ii) Borrower shall own, or be licensed to use or otherwise have the right to
use, all Material Intellectual Property. All Material Intellectual Property of
Borrower is and shall be fully protected and/or duly and properly registered,
filed or issued in the appropriate office and jurisdictions for such
registrations, filings or issuances, except where the failure to do so would not
reasonably be expected to result in a Material Adverse Change. Borrower shall
not become a party to, nor become bound by, any material license or other
agreement with respect to which Borrower is the licensee that prohibits or
otherwise restricts Borrower from granting a security interest in Borrower’s
interest in such license or agreement or other property. Aside of and separate
from any litigation matter set forth on the Disclosure Schedules on the Closing
Date, Borrower shall at all times conduct its business without infringing
(knowingly or where Borrower should have known) on any Intellectual Property
rights of others. Borrower shall do the following, to the extent it determines,
in the exercise of its reasonable business judgment, that it is prudent to do
so: (A) protect, defend and maintain the validity and enforceability of its
Material Intellectual Property; (B) promptly advise Agent in writing of material
infringements of its Material Intellectual Property; and (C) not allow, without
Agent’s prior written consent, any Material Intellectual Property to be
abandoned, invalidated, forfeited or dedicated to the public or to become
unenforceable. Except with respect to the Excluded Intellectual Property
Collateral, if Borrower (1) obtains any patent, registered trademark or
servicemark, registered copyright, registered mask work, or any pending
application for any of the foregoing, whether as owner, licensee or otherwise,
or (2) applies for any patent or the registration of any trademark, servicemark
or copyright, then concurrently with the delivery of an updated Intellectual
Property Schedule as required under clause (iv) below, Borrower shall provide
written notice thereof to Agent together with such information as Agent may
reasonably request to identify the forgoing and shall execute such intellectual
property security agreements and other documents and take such other actions as
Agent shall request in its good faith business judgment to perfect and maintain
a first priority perfected security interest in favor of Agent, for the ratable
benefit of Lenders, in such property. Borrower shall execute documents and take
such other actions as Agent shall request in its good faith business judgment to
perfect and maintain a first priority perfected security interest in favor of
Agent, for the ratable benefit of Lenders, in the IP Proceeds (as defined in
Exhibit A) pertaining to the Excluded Intellectual Property Collateral.

 

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(iii) In connection with the development, testing, manufacture, marketing or
sale of each and any Product by a Credit Party, such Credit Party shall comply
fully and completely in all respects with all Required Permits at all times
issued by any Governmental Authority the noncompliance with which could have a
Material Adverse Change, specifically including the FDA, with respect to such
development, testing, manufacture, marketing or sales of such Product by such
Credit Party as such activities are at any such time being conducted by such
Credit Party.

(iv) Within *** in which (A) Borrower (1) acquires and/or develops any new
Registered Intellectual Property or (2) enters or becomes bound by any
additional license or sublicense agreement or other agreement with respect to
rights in Intellectual Property (other than over-the-counter software that is
commercially available to the public) and (B) there occurs any other material
change in Borrower’s Material Intellectual Property from that listed on the
Intellectual Property Schedule, deliver to Agent an updated Intellectual
Property Schedule reflecting same. Borrower shall take such steps as Agent
requests to obtain the consent of, or waiver by, any person whose consent or
waiver is necessary for (x) all licenses or agreements to be deemed “Collateral”
and for Agent to have a security interest in it that might otherwise be
restricted or prohibited by Law or by the terms of any such license or
agreement, whether now existing or entered into in the future, and (y) Agent to
have the ability in the event of a liquidation of any Collateral to dispose of
such Collateral in accordance with Agent’s rights and remedies under this
Agreement and the other Financing Documents.

(v) If, after the Closing Date, Borrower determines to manufacture, sell,
develop, test or market any new Product for which an investigational new drug
application has been filed, Borrower shall give prior written notice to Agent of
such determination (which shall include a brief description of such Product,
plus a list of all Required Permits relating to such new Product (and a copy of
such Required Permits if requested by Agent) and/or Borrower’s manufacture,
sale, development, testing or marketing thereof issued or outstanding as of the
date of such notice), along with a copy of an updated Intellectual Property
Schedule, Products Schedule and Required Permits Schedule; provided, however,
that if Borrower shall at any time obtain any new or additional Required Permits
from the FDA, DEA, or parallel state or local authorities, or foreign
counterparts of the FDA, DEA, or parallel state or local authorities, with
respect to any Product which has previously been disclosed to Agent, Borrower
shall promptly give written notice to Agent of such new or additional Required
Permits (along with a copy thereof if requested by Agent).

(e) In addition to the events listed in Article 10 and except for the matters
disclosed on the ONSOLIS Disclosure Schedule, any one of the following shall
also constitute an Event of Default under this Agreement: (i) the institution of
any proceeding by FDA or similar Governmental Authority to order the withdrawal
of any Product or Product category from the market or to enjoin Borrower, its
Subsidiaries or any representative of Borrower or its Subsidiaries from
manufacturing, marketing, selling or distributing any Product or Product
category, (ii) the institution of any action or proceeding by any DEA, FDA, or
any other Governmental Authority to revoke, suspend, reject, withdraw, limit, or
restrict any Required Permit held by Borrower, its Subsidiaries or any
representative of Borrower or its Subsidiaries, which, in each case, could
reasonably be expected to result in Material Adverse Change, (iii) the
commencement of any enforcement action against Borrower, its Subsidiaries or any
representative of Borrower or its Subsidiaries (with respect to the business of
Borrower or its Subsidiaries) by DEA, FDA, or any other Governmental Authority,
(iv) the recall of any Products from the market, the voluntary withdrawal of any
Products from the market, or actions to discontinue the sale of any Products
(other than, in each case, with respect to any ONSOLIS Products so long as any
such recall, voluntary withdrawal or actions to discontinue the sale of any
ONSOLIS Products could not reasonably be expected to result in a Material
Adverse Change), ***.

8.2 SBIC Related Provisions.

(a) SBIC Acknowledgement. Borrower acknowledges that Agent, and any Lender with
the word “SBIC” in its name, is a Federal licensee under the Small Business
Investment Act of 1958, as amended (“SBA Act”). The term “SBA” as used herein
means the U.S. Small Business Administration.

(b) As a condition to any Credit Extension, Borrower shall, upon request of
Agent or any Lender, complete and deliver to Agent and such Lender SBA Forms
480, 652 and 1031, the SBA Economic Impact Assessment. Any information provided
by the Borrower to Agent or any Lender on each such form is and will be true,
accurate and complete in all material respects.

(c) Within *** after the end of each fiscal year of Borrower, and at such other
times as Agent or any Lender may reasonably request to the extent related to SBA
regulations, Borrower shall provide to Agent and such Lender

 

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such forms and financial and other information with respect to any business or
financial condition of Borrower or any of its Subsidiaries required by the SBA,
including, but not limited to (i) forms and information with respect to Agent’s
or any Lender’s reporting requirements under SBA Form 468, (ii) information
regarding the full-time equivalent jobs created or retained in connection with
any Lender’s investment in Borrower, the impact of the financing on Borrower’s
business in terms of revenues and profits and on taxes paid by Borrower and its
employees, and (iii) a list of holders of the Obligations.

(d) Upon request of Agent or any Lender, the Borrower shall promptly (and in any
event within *** of such request) furnish to Agent and such Lender all
information as Agent or any Lender may reasonably request, to the extent
reasonably available to the Borrower, in order for Agent or any Lender to comply
with the requirements of 13 C.F.R. Section 107.620 or to prepare or file SBA
Form 468 and any other information requested or required by the SBA or any other
similar governmental agency asserting jurisdiction over Agent or such Lender.
Each Borrower shall afford to Agent and such Lender and examiners of the SBA
reasonable access, during normal business hours and with prior reasonable
notice, to the books, records and properties of such Borrower for the purpose of
verifying the certifications made in accordance with 13 C.F.R. Section 107.610
and for all other purposes required by the SBA.

(e) No Borrower presently engages in, and it will not hereafter engage in, any
activities, and no Borrower will use directly or indirectly, the proceeds from
the Credit Extensions made on the Closing Date or otherwise pursuant to the
Financing Documents, for any purpose for which a small business investment
company is prohibited from using funds by the SBA Act and the regulations
thereunder, including 13 C.F.R. Section 107.720. For a period of twelve
(12) months following the Closing Date, no Borrower shall knowingly cause the
nature of its business activity to change if such change would render such
Borrower ineligible for financing pursuant to 13 C.F.R. Section 107.720. So long
as any Obligations are owing to Agent or any Lender under the Financing
Documents, the Borrower will at all times comply with all non-discrimination
requirements applicable to the Borrower under federal law.

 

  9 RESERVED

 

  10 EVENTS OF DEFAULT

10.1 Events of Default. The occurrence of any of the following conditions and/or
events, whether voluntary or involuntary, by operation of law or otherwise,
shall constitute an “Event of Default” and Credit Parties shall thereupon be in
default under this Agreement and each of the other Financing Documents:

(a) Borrower fails to (i) make any payment of principal or interest on any
Credit Extension on its due date, or (ii) pay any other Obligations within ***
after such Obligations are due and payable (which *** grace period shall not
apply to payments due on the Maturity Date or the date of acceleration pursuant
to Section 10.2 hereof);

(b) Any Credit Party defaults in the performance of or compliance with any term
contained in this Agreement or in any other Financing Document (other than
occurrences described in other provisions of this Section 10.1 for which a
different grace or cure period is specified or for which no grace or cure period
is specified and thereby constitute immediate Events of Default) and such
default is not remedied by the Credit Party or waived by Agent within *** after
the earlier of (i) the date of receipt by any Borrower of notice from Agent or
Required Lenders of such default, or (ii) the date an officer of such Credit
Party becomes aware, or through the exercise of reasonable diligence should have
become aware, of such default; provided, however, that if the default cannot by
its nature be cured within the *** period or cannot after diligent attempts by
such Credit Party be cured within such *** period, and such default is likely to
be cured within a reasonable time, then such Credit Party shall have an
additional period (which shall not in any case exceed *** to attempt to cure
such default, and within such additional time period the failure to cure the
default shall not be deemed an Event of Default;

(c) Any Credit Party defaults in the performance of or compliance with any term
contained in Section 6.2, 6.4, 6.5, 6.6, 6.8 or 6.10 or Article 7 or Article 8;

(d) Any representation, warranty, certification or statement made by any Credit
Party, any holder of Subordinated Debt or any other Person acting for or on
behalf of a Credit Party or a holder of Subordinated Debt (i) in any Financing
Document or in any certificate, financial statement or other document delivered
pursuant to any Financing Document or (ii) to induce Agent and/or Lenders to
enter into this Agreement or any Financing Document is incorrect in any respect
(or in any material respect if such representation, warranty, certification or
statement is not by its terms already qualified as to materiality) when made (or
deemed made);

 

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(e) (i) any Credit Party defaults under or breaches any Material Agreement
(after any applicable grace period contained therein), or a Material Agreement
shall be terminated by a third party or parties party thereto prior to the
expiration thereof, or there is a loss of a material right of a Credit Party
under any Material Agreement to which it is a party, in each case which could
reasonably be expected to result in a Material Adverse Change, (ii) (A) any
Credit Party fails to make (after any applicable grace period) any payment when
due (whether due because of scheduled maturity, required prepayment provisions,
acceleration, demand or otherwise) on any Indebtedness (other than the
Obligations) of such Credit Party or such Subsidiary having an aggregate
principal amount (including undrawn committed or available amounts and including
amounts owing to all creditors under any combined or syndicated credit
arrangement) of more than *** (“Material Indebtedness”), (B) any other event
shall occur or condition shall exist under any contractual obligation relating
to any such Material Indebtedness, if the effect of such event or condition is
to accelerate, or to permit the acceleration of (without regard to any
subordination terms with respect thereto), the maturity of such Material
Indebtedness or (C) any such Material Indebtedness shall become or be declared
to be due and payable, or be required to be prepaid, redeemed, defeased or
repurchased (other than by a regularly scheduled required prepayment), prior to
the stated maturity thereof, (iii) any Credit Party defaults (beyond any
applicable grace period) under any obligation for payments due or otherwise
under any lease agreement for such Credit Party’s principal place of business or
any place of business that meets the criteria for the requirement of an Access
Agreement under Section 7.2 or for which an Access Agreement exists or was
required to be delivered, (iv) the occurrence of any breach or default under any
terms or provisions of any Subordinated Debt Document or under any agreement
subordinating the Subordinated Debt to all or any portion of the Obligations, or
the occurrence of any event requiring the prepayment of any Subordinated Debt,
or the delivery of any notice with respect to any Subordinated Debt or pursuant
to any Subordination Agreement that triggers the start of any standstill or
similar period under any Subordination Agreement, or (v) any Borrower makes any
payment on account of any Indebtedness that has been subordinated to any of the
Obligations, other than payments specifically permitted by the terms of such
subordination;

(f) (i) any Credit Party shall generally not pay its debts as such debts become
due, shall admit in writing its inability to pay its debts generally, shall make
a general assignment for the benefit of creditors, or shall cease doing business
as a going concern, (ii) any proceeding shall be instituted by or against any
Credit Party seeking to adjudicate it a bankrupt or insolvent or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, composition of it or its debts or any similar order, in each case under
any law relating to bankruptcy, insolvency or reorganization or relief of
debtors or seeking the entry of an order for relief or the appointment of a
custodian, receiver, trustee, conservator, liquidating agent, liquidator, other
similar official or other official with similar powers, in each case for it or
for any substantial part of its property and, in the case of any such
proceedings instituted against (but not by or with the consent of) such Credit
Party, either such proceedings shall remain undismissed or unstayed for a period
of *** or more or any action sought in such proceedings shall occur or (iii) any
Credit Party shall take any corporate or similar action or any other action to
authorize any action described in clause (i) or (ii) above;

(g) (i) The service of process seeking to attach, execute or levy upon, seize or
confiscate any Collateral Account, any Intellectual Property, or any funds of
any Credit Party on deposit with Agent, any Lender or any Affiliate of Agent or
any Lender, or (ii) a notice of lien, levy, or assessment is filed against any
assets of a Credit Party by any government agency, and the same under subclauses
(i) and (ii) hereof are not discharged or stayed (whether through the posting of
a bond or otherwise) prior to the earlier to occur of *** after the occurrence
thereof or such action becoming effective;

(h) (i) any court order enjoins, restrains, or prevents Borrower from conducting
any material part of its business, (ii) the institution by any Governmental
Authority of criminal proceedings against any Credit Party, or (iii) one or more
judgments or orders for the payment of money (not paid or fully covered by
insurance and as to which the relevant insurance company has acknowledged
coverage in writing) aggregating in excess of *** shall be rendered against any
or all Credit Parties and either (A) enforcement proceedings shall have been
commenced by any creditor upon any such judgments or orders, or (B) there shall
be any period of *** during which a stay of enforcement of any such judgments or
orders, by reason of a pending appeal, bond or otherwise, shall not be in
effect;

(i) any Lien created by any of the Financing Documents shall at any time fail to
constitute a valid and perfected Lien on all of the Collateral purported to be
encumbered thereby, subject to no prior or equal Lien except Permitted Liens, or
any Credit Party shall so assert; any provision of any Financing Document shall
fail to be valid and binding on, or enforceable against, a Credit Party, or any
Credit Party shall so assert;

 

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(j) A Change in Control occurs or any Credit Party or direct or indirect equity
owner in a Credit Party shall enter into agreement which contemplates a Change
in Control unless such agreement provides, as a condition precedent to the
consummation of such agreement, for either (x) the indefeasible payment in full
in cash of all Obligations or (y) the consent of Agent and Lenders;

(k) Any Required Permit shall have been (i) revoked, rescinded, suspended,
modified in an adverse manner or not renewed in the Ordinary Course of Business,
or (ii) subject to any decision by a Governmental Authority that designates a
hearing with respect to any applications for renewal of any of such Required
Permit or that could result in the Governmental Authority taking any of the
actions described in clause (i) above, and such decision or such revocation,
rescission, suspension, modification or non-renewal has, or could reasonably be
expected to have, a Material Adverse Change;

(l) If any Borrower is or becomes an entity whose equity is registered under the
Exchange Act, and/or is publicly traded on and/or registered with a public
securities exchange or inter-dealer quotation system, such Borrower’s equity
fails to remain registered with the SEC in good standing, and/or such equity
fails to remain publicly traded on and registered with a public securities
exchange or inter-dealer quotation system;

(m) The occurrence of any fact, event or circumstance that could reasonably be
expected to result in a Material Adverse Change, if such default shall have
continued unremedied for a period of *** after written notice from Agent; or

(n) Borrower fails to receive both Database Lock Payments on or before June 30,
2014 and provide Agent with evidence satisfactory to Agent of such receipt.

Notwithstanding the foregoing, if a Credit Party fails to comply with any same
provision of this Agreement two (2) times in any twelve (12) month period and
Agent has given to any Borrower in connection with each such failure any notice
to which Borrower would be entitled under this Section 10.1 before such failure
could become an Event of Default, then all subsequent failures by a Credit Party
to comply with such provision of this Agreement shall effect an immediate Event
of Default (without the expiration of any applicable cure period) with respect
to all subsequent failures by a Credit Party to comply with such provision of
this Agreement, and Agent thereupon may exercise any remedy set forth in this
Article 10 without affording Borrower any opportunity to cure such Event of
Default.

All cure periods provided for in this Section 10.1 shall run concurrently with
any cure period provided for in any applicable Financing Documents under which
the default occurred.

10.2 Rights and Remedies.

(a) Upon the occurrence and during the continuance of an Event of Default, Agent
may, and at the written direction of any Lender shall, without notice or demand,
do any or all of the following: (i) deliver notice of the Event of Default to
Borrower, (ii) by notice to any Borrower declare all Obligations immediately due
and payable (but if an Event of Default described in Section 10.1(f) occurs all
Obligations shall be immediately due and payable without any action by Agent or
the Lenders), or (iii) by notice to any Borrower suspend or terminate the
obligations, if any, of the Lenders to advance money or extend credit for
Borrower’s benefit under this Agreement or under any other agreement between any
Credit Party and Agent and/or the Lenders (but if an Event of Default described
in Section 10.1(f) occurs all obligations, if any, of the Lenders to advance
money or extend credit for Borrower’s benefit under this Agreement or under any
other agreement between Borrower and Agent and/or the Lenders shall be
immediately terminated without any action by Agent or the Lenders).

 

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(b) Without limiting the rights of Agent and Lenders set forth in
Section 10.2(a) above, upon the occurrence and during the continuance of an
Event of Default, Agent shall have the right, without notice or demand, to do
any or all of the following:

(i) with or without legal process, enter any premises where the Collateral may
be and take possession of and remove the Collateral from the premises or store
it on the premises, and foreclose upon and/or sell, lease or liquidate, the
Collateral, in whole or in part;

(ii) apply to the Obligations (A) any balances and deposits of any Credit Party
that Agent or any Lender or any Affiliate of Agent or a Lender holds or
controls, or (B) any amount held or controlled by Agent or any Lender or any
Affiliate of Agent or a Lender owing to or for the credit or the account of any
Credit Party;

(iii) settle, compromise or adjust and grant releases with respect to disputes
and claims directly with Account Debtors for amounts on terms and in any order
that Agent considers advisable, notify any Person owing any Credit Party money
with respect to the Collateral of Agent’s security interest in such funds, and
verify the amount of such Account;

(iv) make any payments and do any acts it considers necessary or reasonable to
protect the Collateral and/or its security interest in the Collateral. Borrower
shall assemble the Collateral if Agent requests and make it available as Agent
designates. Agent may also render any or all of the Collateral unusable at a
Credit Party’s premises and may dispose of such Collateral on such premises
without liability for rent or costs. Borrower grants Agent a license to enter
and occupy any of its premises, without charge, to exercise any of Agent’s
rights or remedies;

(v) pay, purchase, contest, or compromise any Lien which appears to be prior or
superior to its security interest and pay all expenses incurred;

(vi) ship, reclaim, recover, store, finish, maintain, repair, prepare for sale,
and/or advertise for sale, the Collateral. Agent is hereby granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower’s labels, patents, copyrights, mask works, rights of use of any name,
trade secrets, trade names, trademarks, service marks, and advertising matter,
or any similar property as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral (and including
in such license access to all media in which any of the licensed items may be
recorded or stored and to all computer software and programs used for the
compilation or printout thereof) and, in connection with Agent’s exercise of its
rights under this Article 10, Borrower’s rights under all licenses and all
franchise agreements shall be deemed to inure to Agent for the benefit of the
Lenders;

(vii) place a “hold” on any account maintained with Agent or the Lenders or any
Affiliate of Agent or a Lender and/or deliver a notice of exclusive control, any
entitlement order, or other directions or instructions pursuant to any Control
Agreement or similar agreements providing control of any Collateral;

(viii) demand and receive possession of the Books of Borrower and the other
Credit Parties; and

(ix) exercise all other rights and remedies available to Agent under the
Financing Documents or at law or equity, including all remedies provided under
the Code (including disposal of the Collateral pursuant to the terms thereof).

10.3 Notices. Any notice that Agent is required to give to a Credit Party under
the Code of the time and place of any public sale or the time after which any
private sale or other intended disposition of the Collateral is to be made shall
be deemed to constitute reasonable notice if such notice is given in accordance
with this Agreement at least *** prior to such action.

10.4 Protective Payments. If any Credit Party fails to pay or perform any
covenant or obligation under this Agreement or any other Financing Document,
Agent may pay or perform such covenant or obligation, and all amounts so paid by
Agent are Protective Advances and immediately due and payable, bearing interest
at the then highest applicable rate for the Credit Facilities hereunder, and
secured by the Collateral. No such payments or performance by Agent shall be
construed as an agreement to make similar payments or performance in the future
or constitute Agent’s waiver of any Event of Default.

 

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10.5 Liability for Collateral No Waiver; Remedies Cumulative. So long as Agent
and the Lenders comply with reasonable banking practices regarding the
safekeeping of the Collateral in the possession or under the control of Agent
and the Lenders, Agent and the Lenders shall not be liable or responsible for:
(a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral;
(c) any diminution in the value of the Collateral; or (d) any act or default of
any carrier, warehouseman, bailee, or other Person. Borrower bears all risk of
loss, damage or destruction of the Collateral. Agent’s failure, at any time or
times, to require strict performance by Borrower of any provision of this
Agreement or any other Financing Document shall not waive, affect, or diminish
any right of Agent thereafter to demand strict performance and compliance
herewith or therewith. No waiver hereunder shall be effective unless signed by
Agent and then is only effective for the specific instance and purpose for which
it is given. Agent’s rights and remedies under this Agreement and the other
Financing Documents are cumulative. Agent has all rights and remedies provided
under the Code, by Law, or in equity. Agent’s exercise of one right or remedy is
not an election, and Agent’s waiver of any Event of Default is not a continuing
waiver. Agent’s delay in exercising any remedy is not a waiver, election, or
acquiescence.

10.6 Application of Payments and Proceeds. Notwithstanding anything to the
contrary contained in this Agreement, upon the occurrence and during the
continuance of an Event of Default, (i) Borrower, for itself and the other
Credit Parties, irrevocably waives the right to direct the application of any
and all payments at any time or times thereafter received by Agent from or on
behalf of Borrower of all or any part of the Obligations, and, as between
Borrower and the Credit Parties on the one hand and Agent and Lenders on the
other, Agent shall have the continuing and exclusive right to apply and to
reapply any and all payments received against the Obligations in such manner as
Agent may deem advisable notwithstanding any previous application by Agent, and
(ii) unless the Agent and the Lenders shall agree otherwise, the proceeds of any
sale of, or other realization upon all or any part of the Collateral shall be
applied: first, to the Protective Advances; second, to accrued and unpaid
interest on the Obligations (including any interest which, but for the
provisions of the United States Bankruptcy Code, would have accrued on such
amounts); third, to the principal amount of the Obligations outstanding; and
fourth, to any other indebtedness or obligations of the Credit Parties owing to
Agent or any Lender under the Financing Documents. Borrower shall remain fully
liable for any deficiency. Any balance remaining shall be delivered to Borrower
or to whoever may be lawfully entitled to receive such balance or as a court of
competent jurisdiction may direct. Unless the Agent and the Lenders shall agree
otherwise, in carrying out the foregoing, (x) amounts received shall be applied
in the numerical order provided until exhausted prior to the application to the
next succeeding category, and (y) each of the Persons entitled to receive a
payment in any particular category shall receive an amount equal to its pro rata
share of amounts available to be applied pursuant thereto for such category.

10.7 Waivers.

(a) Except as otherwise provided for in this Agreement and to the fullest extent
permitted by applicable law, each Borrower waives: (i) presentment, demand and
protest, and notice of presentment, dishonor, intent to accelerate,
acceleration, protest, default, nonpayment, maturity, release, compromise,
settlement, extension or renewal of any or all Financing Documents and hereby
ratifies and confirms whatever Agent or Lenders may do in this regard; (ii) all
rights to notice and a hearing prior to Agent’s or any Lender’s entry upon the
premises of a Borrower, the taking possession or control of, or to Agent’s or
any Lender’s replevy, attachment or levy upon, any Collateral or any bond or
security which might be required by any court prior to allowing Agent or any
Lender to exercise any of its remedies; and (iii) the benefit of all valuation,
appraisal and exemption Laws. Each Borrower acknowledges that it has been
advised by counsel of its choices and decisions with respect to this Agreement,
the other Financing Documents and the transactions evidenced hereby and thereby.

(b) Each Borrower for itself and all its successors and assigns, (i) agrees that
its liability shall not be in any manner affected by any indulgence, extension
of time, renewal, waiver, or modification granted or consented to by Lender;
(ii) consents to any indulgences and all extensions of time, renewals, waivers,
or modifications that may be granted by Agent or any Lender with respect to the
payment or other provisions of the Financing Documents, and to any substitution,
exchange or release of the Collateral, or any part thereof, with or without
substitution, and agrees to the addition or release of any Borrower, endorsers,
guarantors, or sureties, or whether primarily or secondarily liable, without
notice to any other Borrower and without affecting its liability hereunder;
(iii) agrees that its liability shall be unconditional and without regard to the
liability of any other Borrower, Agent or any Lender for any tax on the
indebtedness; and (iv) to the fullest extent permitted by law, expressly waives
the benefit of any statute or rule of law or equity now provided, or which may
hereafter be provided, which would produce a result contrary to or in conflict
with the foregoing.

 

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(c) To the extent that Agent or any Lender may have acquiesced in any
noncompliance with any requirements or conditions precedent to the closing of
the Credit Facilities or to any subsequent disbursement of Credit Extensions,
such acquiescence shall not be deemed to constitute a waiver by Agent or any
Lender of such requirements with respect to any future Credit Extensions and
Agent may at any time after such acquiescence require Borrower to comply with
all such requirements. Any forbearance by Agent or a Lender in exercising any
right or remedy under any of the Financing Documents, or otherwise afforded by
applicable law, including any failure to accelerate the maturity date of the
Credit Facilities, shall not be a waiver of or preclude the exercise of any
right or remedy nor shall it serve as a novation of the Financing Documents or
as a reinstatement of the Obligations or a waiver of such right of acceleration
or the right to insist upon strict compliance of the terms of the Financing
Documents. Agent’s or any Lender’s acceptance of payment of any sum secured by
any of the Financing Documents after the due date of such payment shall not be a
waiver of Agent’s and such Lender’s right to either require prompt payment when
due of all other sums so secured or to declare a default for failure to make
prompt payment. The procurement of insurance or the payment of taxes or other
Liens or charges by Agent as the result of an Event of Default shall not be a
waiver of Agent’s right to accelerate the maturity of the Obligations, nor shall
Agent’s receipt of any condemnation awards, insurance proceeds, or damages under
this Agreement operate to cure or waive any Credit Party’s default in payment of
sums secured by any of the Financing Documents.

(d) Without limiting the generality of anything contained in this Agreement or
the other Financing Documents, each Borrower agrees that if an Event of Default
is continuing (i) Agent and Lenders shall not be subject to any “one action” or
“election of remedies” law or rule, and (ii) all Liens and other rights,
remedies or privileges provided to Agent or Lenders shall remain in full force
and effect until Agent or Lenders have exhausted all remedies against the
Collateral and any other properties owned by Borrower and the Financing
Documents and other security instruments or agreements securing the Obligations
have been foreclosed, sold and/or otherwise realized upon in satisfaction of
Borrower’s obligations under the Financing Documents.

(e) Neither Agent nor any Lender shall be under any obligation to marshal any
assets in payment of any or all of the Obligations. Nothing contained herein or
in any other Financing Document shall be construed as requiring Agent or any
Lender to resort to any part of the Collateral for the satisfaction of any of
Borrower’s obligations under the Financing Documents in preference or priority
to any other Collateral, and Agent may seek satisfaction out of all of the
Collateral or any part thereof, in its absolute discretion in respect of
Borrower’s obligations under the Financing Documents. To the fullest extent
permitted by law, each Borrower, for itself and its successors and assigns,
waives in the event of foreclosure of any or all of the Collateral any equitable
right otherwise available to any Credit Party which would require the separate
sale of any of the Collateral or require Agent or Lenders to exhaust their
remedies against any part of the Collateral before proceeding against any other
part of the Collateral; and further in the event of such foreclosure each
Borrower does hereby expressly consent to and authorize, at the option of Agent,
the foreclosure and sale either separately or together of each part of the
Collateral.

10.8 Injunctive Relief. The parties acknowledge and agree that, in the event of
a breach or threatened breach of any Credit Party’s obligations under any
Financing Documents, Agent and Lenders may have no adequate remedy in money
damages and, accordingly, shall be entitled to an injunction (including, without
limitation, a temporary restraining order, preliminary injunction, writ of
attachment, or order compelling an audit) against such breach or threatened
breach, including, without limitation, maintaining any cash management and
collection procedure described herein. However, no specification in this
Agreement of a specific legal or equitable remedy shall be construed as a waiver
or prohibition against any other legal or equitable remedies in the event of a
breach or threatened breach of any provision of this Agreement. Each Credit
Party waives, to the fullest extent permitted by law, the requirement of the
posting of any bond in connection with such injunctive relief. By joining in the
Financing Documents as a Credit Party, each Credit Party specifically joins in
this Section 10.8 as if this Section 10.8 were a part of each Financing Document
executed by such Credit Party.

 

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  11 NOTICES

All notices, consents, requests, approvals, demands, or other communication
(collectively, “Communication”) by any party to this Agreement or any other
Financing Document must be in writing and shall be deemed to have been validly
served, given, or delivered: (a) upon the earlier of actual receipt and three
(3) Business Days after deposit in the U.S. mail, first class, registered or
certified mail return receipt requested, with proper postage prepaid; (b) upon
transmission, when sent by electronic mail (if an email address is specified
herein) or facsimile transmission; (c) one (1) Business Day after deposit with a
reputable overnight courier with all charges prepaid; or (d) when delivered, if
hand-delivered by messenger, all of which shall be addressed to the party to be
notified and sent to the address, facsimile number, or email address indicated
below. Any of Agent, Lender or Borrower may change its mailing or electronic
mail address or facsimile number by giving the other party written notice
thereof in accordance with the terms of this Article 11.

If to Borrower:

BioDelivery Sciences International, Inc.

801 Corporate Center, Suite 210

Raleigh, North Carolina 27607

Attention: Mark A. Sirgo

Fax: (919) 582-9051

E-Mail: msirgo@bdsi.com

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

Ellenoff Grossman & Schole LLP

150 E. 42nd Street, 11th Floor

New York, NY 10017

Attention: Barry I. Grossman, Esq.

Fax: (212) 370-7889

E-Mail: bigrossman@egsllp.com

If to Agent or Lenders:

MidCap Financial SBIC, LP

7255 Woodmont Avenue, Suite 200

Bethesda, Maryland 20814

Attention: Portfolio Management- Life Sciences

Fax: (301) 941-1450

E-Mail: lviera@midcapfinancial.com

with a copy to:

MC Serviceco, LLC

7255 Woodmont Avenue, Suite 200

Bethesda, Maryland 20814

Attention: General Counsel

Fax: (301) 941-1450

E-Mail: legalnotices@midcapfinancial.com

 

  12 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER; CONFESSION OF JUDGMENT

12.1 THIS AGREEMENT, EACH SECURED PROMISSORY NOTE AND EACH OTHER FINANCING
DOCUMENT, AND THE RIGHTS, REMEDIES AND OBLIGATIONS OF THE PARTIES HERETO AND
THERETO, AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS
AGREEMENT OR SUCH FINANCING DOCUMENT, THE RELATIONSHIP OF THE PARTIES, AND/OR
THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES AND
ALL OTHER MATTERS RELATING HERETO, THERETO OR ARISING THEREFROM (WHETHER
SOUNDING IN CONTRACT LAW, TORT LAW OR OTHERWISE), SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS. NOTWITHSTANDING THE
FOREGOING, AGENT AND LENDERS SHALL HAVE THE RIGHT TO BRING ANY ACTION OR
PROCEEDING AGAINST BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION WHICH AGENT AND LENDERS (IN ACCORDANCE WITH THE PROVISIONS OF THIS
SECTION 12.1) DEEM NECESSARY OR APPROPRIATE TO REALIZE ON THE COLLATERAL OR TO
OTHERWISE ENFORCE AGENT’S AND LENDERS’ RIGHTS AGAINST BORROWER OR ITS PROPERTY.
BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY
ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND BORROWER HEREBY WAIVES ANY
OBJECTION THAT IT MAY

 

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HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE, OR FORUM NON
CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF
AS IS DEEMED APPROPRIATE BY SUCH COURT. BORROWER HEREBY WAIVES PERSONAL SERVICE
OF THE SUMMONS, COMPLAINTS, AND OTHER PROCESS ISSUED IN SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS, AND OTHER PROCESS MAY BE MADE
BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH
IN ARTICLE 11 OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED
COMPLETED UPON THE EARLIER TO OCCUR OF BORROWER’S ACTUAL RECEIPT THEREOF OR
THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAIL, PROPER POSTAGE PREPAID.

12.2 TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER, AGENT AND
LENDERS EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE FINANCING DOCUMENTS OR ANY
CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER
CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS
AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

12.3 Borrower, Agent and each Lender agree that each Credit Extension (including
those made on the Closing Date) shall be deemed to be made in, and the
transactions contemplated hereunder and in any other Financing Document shall be
deemed to have been performed in, the State of Maryland.

 

  13 GENERAL PROVISIONS

13.1 Successors and Assigns.

(a) This Agreement binds and is for the benefit of the successors and permitted
assigns of each party. Borrower may not assign this Agreement or any rights or
obligations under it without Agent’s prior written consent (which may be granted
or withheld in Agent’s discretion). Any Lender may at any time assign to one or
more Eligible Assignees all or any portion of such Lender’s Applicable
Commitment and/or Credit Extensions, together with all related obligations of
such Lender hereunder. Borrower and Agent shall be entitled to continue to deal
solely and directly with such Lender in connection with the interests so
assigned until Agent shall have received and accepted an effective assignment
agreement in form and substance acceptable to Agent, executed, delivered and
fully completed by the applicable parties thereto, and shall have received such
other information regarding such Eligible Assignee as Agent reasonably shall
require. Notwithstanding anything set forth in this Agreement to the contrary,
any Lender may at any time pledge or assign a security interest in all or any
portion of its rights under this Agreement to secure obligations of such Lender,
including any pledge or assignment to secure obligations to a Federal Reserve
Bank; provided, however, that no such pledge or assignment shall release such
Lender from any of its obligations hereunder or substitute any such pledgee or
assignee for such Lender as a party hereto. If requested by Agent, Borrower
agrees to (i) execute any documents reasonably required to effectuate and
acknowledge each assignment of an Applicable Commitment or Credit Extension to
an assignee hereunder, (ii) make Borrower’s management available to meet with
Agent and prospective participants and assignees of Applicable Commitments or
Credit Extensions and (iii) assist Agent or the Lenders in the preparation of
information relating to the financial affairs of Borrower as any prospective
participant or assignee of an Applicable Commitment or Credit Extension
reasonably may request.

(b) From and after the date on which the conditions described above have been
met, (i) such Eligible Assignee shall be deemed automatically to have become a
party hereto and, to the extent of the interests assigned to such Eligible
Assignee pursuant to such assignment agreement, shall have the rights and
obligations of a Lender hereunder, and (ii) the assigning Lender, to the extent
that rights and obligations hereunder have been assigned by it pursuant to such
assignment agreement, shall be released from its rights and obligations
hereunder (other than those that survive termination). Upon the request of the
Eligible Assignee (and, as applicable, the assigning Lender) pursuant to an
effective assignment agreement, each Borrower shall execute and deliver to Agent
for delivery to the Eligible Assignee (and, as applicable, the assigning Lender)
secured notes in the aggregate principal amount of the Eligible Assignee’s
Credit Extensions or Applicable Commitments (and, as applicable, secured
promissory notes in the principal amount of that portion of the principal amount
of the Credit Extensions or Applicable Commitments retained by the assigning
Lender).

(c) Agent, acting solely for this purpose as an agent of Borrower, shall
maintain at its offices located in Bethesda, Maryland a copy of each assignment
agreement delivered to it and a register for the recordation of the names

 

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and addresses of each Lender, and the commitments of, and principal amount of
the Credit Extensions owing to, such Lender pursuant to the terms hereof. The
entries in such register shall be conclusive, and Borrower, Agent and Lenders
may treat each Person whose name is recorded therein pursuant to the terms
hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding
notice to the contrary. Such register shall be available for inspection by
Borrower and any Lender, at any reasonable time upon reasonable prior notice to
Agent.

 

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13.2 Indemnification.

(a) Borrower hereby agrees to promptly pay (i) all costs and expenses of Agent
(including, without limitation, the fees, costs and expenses of counsel to, and
independent appraisers and consultants retained by Agent) in connection with the
examination, review, due diligence investigation, documentation, negotiation,
closing and syndication of the transactions contemplated by the Financing
Documents, in connection with the performance by Agent of its rights and
remedies under the Financing Documents and in connection with the continued
administration of the Financing Documents including (A) any amendments,
modifications, consents and waivers to and/or under any and all Financing
Documents, and (B) any periodic public record searches conducted by or at the
request of Agent (including, without limitation, title investigations, UCC
searches, fixture filing searches, judgment, pending litigation and tax lien
searches and searches of applicable corporate, limited liability, partnership
and related records concerning the continued existence, organization and good
standing of certain Persons); (ii) without limitation of the preceding clause
(i), all costs and expenses of Agent in connection with the creation, perfection
and maintenance of Liens pursuant to the Financing Documents; (iii) without
limitation of the preceding clause (i), all costs and expenses of Agent in
connection with (A) protecting, storing, insuring, handling, maintaining or
selling any Collateral, (B) any litigation, dispute, suit or proceeding relating
to any Financing Document, and (C) any workout, collection, bankruptcy,
insolvency and other enforcement proceedings under any and all of the Financing
Documents; (iv) without limitation of the preceding clause (i), all costs and
expenses of Agent in connection with Agent’s reservation of funds in
anticipation of the funding of the Credit Extensions to be made hereunder; and
(v) all costs and expenses incurred by Agent or Lenders in connection with any
litigation, dispute, suit or proceeding relating to any Financing Document and
in connection with any workout, collection, bankruptcy, insolvency and other
enforcement proceedings under any and all Financing Documents, whether or not
Agent or Lenders are a party thereto.

(b) Borrower hereby agrees to indemnify, pay and hold harmless Agent and Lenders
and the officers, directors, employees, trustees, agents, investment advisors,
collateral managers, servicers, and counsel of Agent and Lenders (collectively
called the “Indemnitees”) from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature whatsoever (including the fees and
disbursements of counsel for such Indemnitee) in connection with any
investigative, response, remedial, administrative or judicial matter or
proceeding, whether or not such Indemnitee shall be designated a party thereto
and including any such proceeding initiated by or on behalf of a Credit Party,
and the reasonable expenses of investigation by engineers, environmental
consultants and similar technical personnel and any commission, fee or
compensation claimed by any broker (other than any broker retained by Agent or
Lenders) asserting any right to payment for the transactions contemplated
hereby, which may be imposed on, incurred by or asserted against such Indemnitee
as a result of or in connection with the transactions contemplated hereby and
the use or intended use of the proceeds of the Credit Facilities, except that
Borrower shall have no obligation hereunder to an Indemnitee with respect to any
liability resulting from the gross negligence or willful misconduct of such
Indemnitee, as determined by a final non-appealable judgment of a court of
competent jurisdiction. To the extent that the undertaking set forth in the
immediately preceding sentence may be unenforceable, Borrower shall contribute
the maximum portion which it is permitted to pay and satisfy under applicable
Law to the payment and satisfaction of all such indemnified liabilities incurred
by the Indemnitees or any of them. No Indemnitee shall be liable for any damages
arising from the use by unintended recipients of any information or other
materials distributed by it through telecommunications, electronic or other
information transmission systems in connection with this Agreement or the other
Financing Documents or the transactions contemplated hereby or thereby.

(c) Notwithstanding any contrary provision in this Agreement, the obligations of
Borrower under this Section 13.2 shall survive the payment in full of the
Obligations and the termination of this Agreement. NO INDEMNITEE SHALL BE
RESPONSIBLE OR LIABLE TO ANY CREDIT PARTY OR TO ANY OTHER PARTY TO ANY FINANCING
DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OR ANY OTHER PERSON
ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE,
EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT
HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER THIS AGREEMENT OR ANY OTHER
FINANCING DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED
HEREUNDER OR THEREUNDER.

13.3 Time of Essence. Time is of the essence for the payment and performance of
the Obligations in this Agreement.

 

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13.4 Severability of Provisions. Each provision of this Agreement is severable
from every other provision in determining the enforceability of any provision.

13.5 Correction of Financing Documents. Agent and the Lenders may correct patent
errors and fill in any blanks in this Agreement and the other Financing
Documents consistent with the agreement of the parties.

13.6 Integration. This Agreement and the Financing Documents represent the
entire agreement about this subject matter and supersede prior negotiations or
agreements. All prior agreements, understandings, representations, warranties,
and negotiations between the parties about the subject matter of this Agreement
and the Financing Documents merge into this Agreement and the Financing
Documents.

13.7 Counterparts. This Agreement may be executed in any number of counterparts
and by different parties on separate counterparts, each of which, when executed
and delivered, is an original, and all taken together, constitute one Agreement.
Delivery of an executed signature page of this Agreement by facsimile
transmission or electronic transmission shall be as effective as delivery of a
manually executed counterpart hereof.

13.8 Survival. All covenants, representations and warranties made in this
Agreement continue in full force until this Agreement has terminated pursuant to
its terms and all Obligations (other than inchoate indemnity obligations and any
other obligations which, by their terms, are to survive the termination of this
Agreement) have been satisfied. The obligation of Borrower in Section 13.2 to
indemnify each Lender and Agent shall survive until the statute of limitations
with respect to such claim or cause of action shall have run. All powers of
attorney and appointments of Agent or any Lender as Borrower’s attorney in fact
hereunder, and all of Agent’s and Lenders’ rights and powers in respect thereof,
are coupled with an interest, are irrevocable until all Obligations (other than
inchoate indemnity obligations and any other obligations which, by their terms,
are to survive the termination of this Agreement) have been fully repaid and
performed and Agent’s and the Lenders’ obligation to provide Credit Extensions
terminates.

13.9 Confidentiality. In handling any confidential information of Borrower
(including, without limitation, all non-publicly available information, reports
and data provided by Borrower to Agent or any Lender pursuant to the terms of
Articles 6, 7 and 8 of this Agreement or otherwise), each of the Lenders and
Agent shall use all reasonable efforts to maintain, in accordance with its
customary practices, and not use (other than as permitted by this Agreement or
any Financing Document) the confidentiality of information obtained by it
pursuant to any Financing Document and designated in writing by any Credit Party
as confidential, but disclosure of information may be made: (a) to the Lenders’
and Agent’s Subsidiaries or Affiliates; (b) to prospective transferees or
purchasers of any interest in the Credit Extensions to the extent any such
Person is bound by obligations of confidentiality; (c) as required by Law,
regulation, subpoena, order or other legal, administrative, governmental or
regulatory request; (d) to regulators or as otherwise required in connection
with an examination or audit, or to any nationally recognized rating agency;
(e) as Agent or any Lender considers appropriate in exercising remedies under
the Financing Documents; (f) to financing sources that are advised of the
confidential nature of such information and are instructed to keep such
information confidential; (g) to third party service providers of the Lenders
and/or Agent so long as such service providers are bound to such Lender or Agent
by obligations of confidentiality; (h) to the extent necessary or customary for
inclusion in league table measurements; and (i) in connection with any
litigation or other proceeding to which such Lender or Agent or any of their
Affiliates is a party or bound, or to the extent necessary to respond to public
statements or disclosures by Credit Parties or their Affiliates referring to a
Lender or Agent or any of their Affiliates. Confidential information does not
include information that either: (i) is in the public domain or in the Lenders’
and/or Agent’s possession when disclosed to the Lenders and/or Agent, or becomes
part of the public domain after disclosure to the Lenders and/or Agent; or
(ii) is disclosed to the Lenders and/or Agent by a third party, if the Lenders
and/or Agent does not know that the third party is prohibited from disclosing
the information. Agent and/or Lenders may use confidential information for any
purpose (other than as prohibited by Law), including, without limitation, for
the development of client databases, reporting purposes, and market analysis, so
long as Agent and/or Lenders, as applicable, do not disclose Borrower’s identity
or the identity of any Person associated with Borrower unless otherwise
permitted by this Agreement. The provisions of the immediately preceding
sentence shall survive the termination of this Agreement. The agreements
provided under this Section 13.9 supersede all prior agreements, understanding,
representations, warranties, and negotiations between the parties about the
subject matter of this Section 13.9.

13.10 Right of Set-off. Borrower hereby grants to Agent and to each Lender, a
lien, security interest and right of set-off as security for all Obligations to
Agent and each Lender hereunder, whether now existing or hereafter arising upon
and against all deposits, credits, collateral and property, now or hereafter in
the possession, custody, safekeeping or control of

 

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Agent or the Lenders or any entity under the control of Agent or the Lenders
(including an Agent or Lender Affiliate) or in transit to any of them. At any
time after the occurrence and during the continuance of an Event of Default,
without demand or notice, Agent or the Lenders may set-off the same or any part
thereof and apply the same to any liability or obligation of Borrower even
though unmatured and regardless of the adequacy of any other collateral securing
the Obligations. ANY AND ALL RIGHTS TO REQUIRE AGENT TO EXERCISE ITS RIGHTS OR
REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS,
PRIOR TO EXERCISING ITS RIGHT OF SET-OFF WITH RESPECT TO SUCH DEPOSITS, CREDITS
OR OTHER PROPERTY OF BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY
WAIVED.

13.11 Publicity. Borrower will not, without the prior written consent of Agent
(not to be unreasonably withheld, denied, conditioned or delayed solely with
respect to voluntary disclosures relating to advertising and promotional
materials) directly or indirectly publish, disclose or otherwise use in any
public disclosure, advertising material, promotional material, press release or
interview, any reference to the name, logo or any trademark of Agent or any
Lender or any of their Affiliates or any reference to this Agreement or the
financing evidenced hereby, in any case except as required by applicable Law
(including in any filings with the SEC), subpoena or judicial or similar order,
in which case Borrower shall endeavor to give Agent prior written notice of such
publication or other disclosure. Each Lender and Borrower hereby authorizes each
Lender to publish the name of such Lender and Borrower, the existence of the
financing arrangements referenced under this Agreement, the primary purpose
and/or structure of those arrangements, the amount of credit extended under each
facility, the title and role of each party to this Agreement, and the total
amount of the financing evidenced hereby in any “tombstone”, comparable
advertisement or press release which such Lender elects to submit for
publication. In addition, each Lender and Borrower agrees that each Lender may
provide lending industry trade organizations with information necessary and
customary for inclusion in league table measurements after the Closing Date.
With respect to any of the foregoing, such authorization shall be subject to
such Lender providing Borrower and the other Lenders with an opportunity to
review and confer with such Lender regarding, and approve, the contents of any
such tombstone, advertisement or information, as applicable, prior to its
initial submission for publication, but subsequent publications of the same
tombstone, advertisement or information shall not require Borrower’s approval.

13.12 No Strict Construction. The parties hereto have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agreement.

13.13 Approvals. Unless expressly provided herein to the contrary, any approval,
consent, waiver or satisfaction of Agent or Lenders with respect to any matter
that is the subject of this Agreement or the other Financing Documents may be
granted or withheld by Agent and Lenders in their sole and absolute discretion
and credit judgment.

13.14 Amendments; Required Lenders; Inter-Lender Matters.

(a) No amendment, modification, termination or waiver of any provision of this
Agreement or any other Financing Document, no approval or consent thereunder, or
any consent to any departure by Borrower therefrom (in each case, other than
amendments, waivers, approvals or consents deemed ministerial by Agent), shall
in any event be effective unless the same shall be in writing and signed by
Borrower, Agent and Required Lenders. Except as set forth in clause (b) below,
all such amendments, modifications, terminations or waivers requiring the
consent of the “Lenders” shall require the written consent of Required Lenders.

(b) No amendment, modification, termination or waiver of any provision of this
Agreement or any other Financing Document shall, unless in writing and signed by
Agent and by each Lender directly affected thereby: (i) increase or decrease the
Applicable Commitment of any Lender (which shall be deemed to affect all
Lenders), (ii) reduce the principal of or rate of interest on any Obligation or
the amount of any fees payable hereunder, (iii) postpone the date fixed for or
waive any payment of principal of or interest on any Credit Extension, or any
fees or reimbursement obligation hereunder, (iv) release all or substantially
all of the Collateral, or consent to a transfer of any of the Intellectual
Property, in each case, except as otherwise expressly permitted in the Financing
Documents (which shall be deemed to affect all Lenders), (v) subordinate the
lien granted in favor of Agent securing the Obligations (which shall be deemed
to affect all Lenders, except as otherwise provided below), (vi) release a
Credit Party from, or consent to a Credit Party’s assignment or delegation of,
such Credit Party’s obligations hereunder and under the other Financing
Documents or any Guarantor from its guaranty of the Obligations (which shall be
deemed to affect all Lenders) or (vii) amend, modify, terminate or waive this
Section

 

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13.14(b) or the definition of “Required Lenders” or “Pro Rata Share” or any
other provision hereof specifying the number or percentage of Lenders required
to amend, waive or otherwise modify any rights hereunder or make any
determination or grant any consent hereunder, without the consent of each
Lender. For purposes of the foregoing, no Lender shall be deemed affected by
(i) waiver of the imposition of the Default Rate or imposition of the Default
Rate to only a portion of the Obligations, (ii) waiver of the accrual of late
charges, (iii) waiver of any fee solely payable to Agent under the Financing
Documents, (iv) subordination of a lien granted in favor of Agent provided such
subordination is limited to equipment being financed by a third party providing
Permitted Indebtedness. Notwithstanding any provision in this Section 13.14 to
the contrary, no amendment, modification, termination or waiver affecting or
modifying the rights or obligations of Agent hereunder shall be effective unless
signed by Agent and Required Lenders

(c) Agent shall not grant its written consent to any deviation or departure by
Borrower or any Credit Party from the provisions of Article 7 without the prior
written consent of the Required Lenders. Required Lenders shall have the right
to direct Agent to take any action described in Section 10.2(b). Upon the
occurrence of any Event of Default, Agent shall have the right to exercise any
and all remedies referenced in Section 10.2 without the written consent of
Required Lenders following the occurrence of an “Exigent Circumstance” (as
defined below). All matters requiring the satisfaction or acceptance of Agent in
the definition of Subordinated Debt shall further require the satisfaction and
acceptance of each Required Lender. Any reference in this Agreement to an
allocation between or sharing by the Lenders of any right, interest or
obligation “ratably,” “proportionally” or in similar terms shall refer to Pro
Rata Share unless expressly provided otherwise. As used in this
Section 13.14(c), “Exigent Circumstance” means any event or circumstance that,
in the reasonable judgment of Agent, imminently threatens the ability of Agent
to realize upon all or any material portion of the Collateral, such as, without
limitation, fraudulent removal, concealment, or abscondment thereof, destruction
or material waste thereof, or failure of Borrower after reasonable demand to
maintain or reinstate adequate casualty insurance coverage, or which, in the
judgment of Agent, could result in a material diminution in value of the
Collateral.

13.15 Borrower Liability. If there is more than one entity comprising Borrower,
then (a) any Borrower may, acting singly, request Credit Extensions hereunder,
(b) each Borrower hereby appoints the other as agent for the other for all
purposes hereunder, including with respect to requesting Credit Extensions
hereunder, (c) each Borrower shall be jointly and severally obligated to pay and
perform all obligations under the Financing Documents, including, but not
limited to, the obligation to repay all Credit Extensions made hereunder and all
other Obligations, regardless of which Borrower actually receives said Credit
Extensions, as if each Borrower directly received all Credit Extensions, and
(d) each Borrower waives (i) any suretyship defenses available to it under the
Code or any other applicable law, and (ii) any right to require the Lenders or
Agent to: (A) proceed against any Borrower or any other person; (B) proceed
against or exhaust any security; or (C) pursue any other remedy. The Lenders or
Agent may exercise or not exercise any right or remedy they have against any
Credit Party or any security (including the right to foreclose by judicial or
non-judicial sale) without affecting any other Credit Party’s liability or any
Lien against any other Credit Party’s assets. Notwithstanding any other
provision of this Agreement or other related document, until payment in full of
the Obligations and termination of the Applicable Commitments, each Borrower
irrevocably waives all rights that it may have at law or in equity (including,
without limitation, any law subrogating Borrower to the rights of the Lenders
and Agent under this Agreement) to seek contribution, indemnification or any
other form of reimbursement from any other Credit Party, or any other Person now
or hereafter primarily or secondarily liable for any of the Obligations, for any
payment made by any Credit Party with respect to the Obligations in connection
with this Agreement or otherwise and all rights that it might have to benefit
from, or to participate in, any security for the Obligations as a result of any
payment made by a Credit Party with respect to the Obligations in connection
with this Agreement or otherwise. Any agreement providing for indemnification,
reimbursement or any other arrangement prohibited under this Section 13.15 shall
be null and void. If any payment is made to a Credit Party in contravention of
this Section 13.15, such Credit Party shall hold such payment in trust for the
Lenders and Agent and such payment shall be promptly delivered to Agent for
application to the Obligations, whether matured or unmatured.

13.16 Reinstatement. This Agreement shall remain in full force and effect and
continue to be effective should any petition or other proceeding be filed by or
against any Credit Party for liquidation or reorganization, should any Credit
Party become insolvent or make an assignment for the benefit of any creditor or
creditors or should an interim receiver, receiver, receiver and manager or
trustee be appointed for all or any significant part of any Credit Party’s
assets, and shall continue to be effective or to be reinstated, as the case may
be, if at any time payment and performance of the Obligations, or any part
thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee of the Obligations, whether as
a fraudulent preference reviewable transaction or otherwise, all as though such
payment or performance had not been made. In the event that any payment, or any
part thereof, is rescinded, reduced, restored or returned, the Obligations shall
be reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.

 

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13.17. USA PATRIOT Act Notification. Agent (for itself and not on behalf of any
Lender) and each Lender hereby notifies each Borrower that pursuant to the
requirements of the USA PATRIOT Act, it is required to obtain, verify and record
certain information and documentation that identifies Borrower, which
information includes the name and address of Borrower and such other information
that will allow Agent or such Lender, as applicable, to identify Borrower in
accordance with the USA PATRIOT Act.

13.18 Warrants. Notwithstanding anything to the contrary herein, any warrants
issued to the Lenders by any Credit Party, the stock issuable thereunder, any
equity securities purchased by Lenders, any amounts paid thereunder, any
dividends, and any other rights in connection therewith shall not be subject to
the terms and conditions of this Agreement. Nothing herein shall affect any
Lender’s rights under any such warrants, stock, or other equity securities to
administer, manage, transfer, assign, or exercise such warrants, stock, or other
equity securities for its own account.

 

  14 AGENT

14.1 Appointment and Authorization of Agent. Each Lender hereby irrevocably
appoints, designates and authorizes Agent to take such action on its behalf
under the provisions of this Agreement and each other Financing Document and to
exercise such powers and perform such duties as are expressly delegated to it by
the terms of this Agreement or any other Financing Document, together with such
powers as are reasonably incidental thereto. The provisions of this Article 14
are solely for the benefit of Agent and Lenders and none of Credit Parties nor
any other Person shall have any rights as a third party beneficiary of any of
the provisions hereof. The duties of Agent shall be mechanical and
administrative in nature. Notwithstanding any provision to the contrary
contained elsewhere herein or in any other Financing Document, Agent shall not
have any duties or responsibilities, except those expressly set forth herein,
nor shall Agent have or be deemed to have any fiduciary relationship with any
Lender or participant, and no implied covenants, functions, responsibilities,
duties, obligations or liabilities shall be read into this Agreement or any
other Financing Document or otherwise exist against Agent. Without limiting the
generality of the foregoing sentence, the use of the term “agent” herein and in
the other Financing Documents with reference to Agent is not intended to connote
any fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable Law. Instead, such term is used merely as a matter of
market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties. Without limiting the
generality of the foregoing, Agent shall have the sole and exclusive right and
authority (to the exclusion of the Lenders), and is hereby authorized, to
(a) act as collateral agent for Agent and each Lender for purposes of the
perfection of all liens created by the Financing Documents and all other
purposes stated therein, (b) manage, supervise and otherwise deal with the
Collateral, (c) take such other action as is necessary or desirable to maintain
the perfection and priority of the liens created or purported to be created by
the Financing Documents, (d) except as may be otherwise specified in any
Financing Document, exercise all remedies given to Agent and the other Lenders
with respect to the Collateral, whether under the Financing Documents,
applicable law or otherwise and (e) execute any amendment, consent or waiver
under the Financing Documents on behalf of any Lender that has consented in
writing to such amendment, consent or waiver; provided, however, that Agent
hereby appoints, authorizes and directs each Lender to act as collateral
sub-agent for Agent and the Lenders for purposes of the perfection of all liens
with respect to the Collateral, including any deposit account maintained by a
Credit Party with, and cash and cash equivalents held by, such Lender, and may
further authorize and direct the Lenders to take further actions as collateral
sub-agents for purposes of enforcing such liens or otherwise to transfer the
Collateral subject thereto to Agent, and each Lender hereby agrees to take such
further actions to the extent, and only to the extent, so authorized and
directed.

 

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14.2 Successor Agent.

(a) Agent may at any time assign its rights, powers, privileges and duties
hereunder to (i) another Lender, or (ii) any Person to whom Agent, in its
capacity as a Lender, has assigned (or will assign, in conjunction with such
assignment of agency rights hereunder) fifty percent (50%) or more of the Credit
Extensions or Applicable Commitments then held by Agent (in its capacity as a
Lender), in each case without the consent of the Lenders or Borrower. Following
any such assignment, Agent shall give notice to the Lenders and Borrower. An
assignment by Agent pursuant to this subsection (a) shall not be deemed a
resignation by Agent for purposes of subsection (b) below.

(b) Without limiting the rights of Agent to designate an assignee pursuant to
subsection (a) above, Agent may at any time give notice of its resignation to
the Lenders and Borrower. Upon receipt of any such notice of resignation,
Required Lenders shall have the right to appoint a successor Agent. If no such
successor shall have been so appointed by Required Lenders and shall have
accepted such appointment within ten (10) Business Days after the retiring Agent
gives notice of its resignation, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent; provided, however, that if Agent shall
notify Borrower and the Lenders that no Person has accepted such appointment,
then such resignation shall nonetheless become effective in accordance with such
notice from Agent that no Person has accepted such appointment and, from and
following delivery of such notice, (i) the retiring Agent shall be discharged
from its duties and obligations hereunder and under the other Financing
Documents, and (ii) all payments, communications and determinations provided to
be made by, to or through Agent shall instead be made by or to each Lender
directly, until such time as Required Lenders appoint a successor Agent as
provided for above in this subsection (b).

(c) Upon (i) an assignment permitted by subsection (a) above, or (ii) the
acceptance of a successor’s appointment as Agent pursuant to subsection
(b) above, such successor shall succeed to and become vested with all of the
rights, powers, privileges and duties of the retiring (or retired) Agent, and
the retiring Agent shall be discharged from all of its duties and obligations
hereunder and under the other Financing Documents (if not already discharged
therefrom as provided above in this subsection (c)). The fees payable by
Borrower to a successor Agent shall be the same as those payable to its
predecessor unless otherwise agreed between Borrower and such successor. After
the retiring Agent’s resignation hereunder and under the other Financing
Documents, the provisions of this Article 14 shall continue in effect for the
benefit of such retiring Agent and its sub-agents in respect of any actions
taken or omitted to be taken by any of them while the retiring Agent was acting
or was continuing to act as Agent.

14.3 Delegation of Duties. Agent may execute any of its duties under this
Agreement or any other Financing Document by or through its, or its Affiliates’,
agents, employees or attorneys-in-fact and shall be entitled to obtain and rely
upon the advice of counsel and other consultants or experts concerning all
matters pertaining to such duties. Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects in the
absence of gross negligence or willful misconduct. Any such Person to whom Agent
delegates a duty shall benefit from this Article 14 to the extent provided by
Agent.

14.4 Liability of Agent. Except as otherwise provided herein, no “Agent-Related
Person” (as defined below) shall (a) be liable for any action taken or omitted
to be taken by any of them under or in connection with this Agreement or any
other Financing Document or the transactions contemplated hereby (except for its
own gross negligence or willful misconduct in connection with its duties
expressly set forth herein), or (b) be responsible in any manner to any Lender
or participant for any recital, statement, representation or warranty made by
any Credit Party or any officer thereof, contained herein or in any other
Financing Document, or in any certificate, report, statement or other document
referred to or provided for in, or received by Agent under or in connection
with, this Agreement or any other Financing Document, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Financing Document, or for any failure of any Credit Party or any
other party to any Financing Document to perform its obligations hereunder or
thereunder. No Agent-Related Person shall be under any obligation to any Lender
or participant to ascertain or to inquire as to the observance or performance of
any of the agreements contained in, or conditions of, this Agreement or any
other Financing Document, or to inspect the Collateral, other properties or
books or records of any Credit Party or any Affiliate thereof. The term
“Agent-Related Person” means the Agent, together with its Affiliates, and the
officers, directors, employees, agents, advisors, auditors and attorneys-in-fact
of such Persons; provided, however, that no Agent-Related Person shall be an
Affiliate of Borrower.

14.5 Reliance by Agent. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, communication, signature, resolution,
representation, notice, consent, certificate, affidavit, letter, telegram,
facsimile, telex or

 

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with “***”

 

telephone message, electronic mail message, statement or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons, and upon advice and statements of
legal counsel (including counsel to Borrower), independent accountants and other
experts selected by Agent. Agent shall be fully justified in failing or refusing
to take any action under any Financing Document (a) if such action would, in the
opinion of Agent, be contrary to law or any Financing Document, (b) if such
action would, in the opinion of Agent, expose Agent to any potential liability
under any law, statute or regulation or (c) if Agent shall not first have
received such advice or concurrence of all Lenders as it deems appropriate and,
if it so requests, it shall first be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. Agent shall in all cases
be fully protected in acting, or in refraining from acting, under this Agreement
or any other Financing Document in accordance with a request or consent of all
Lenders (or Required Lenders where authorized herein) and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the
Lenders.

14.6 Notice of Default. Agent shall not be deemed to have knowledge or notice of
the occurrence of any Default and/or Event of Default, unless Agent shall have
received written notice in the manner provided for herein from a Lender or
Borrower, describing such default or Event of Default. Agent will notify the
Lenders of its receipt of any such notice. While an Event of Default has
occurred and is continuing, Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Event of
Default as Agent shall deem advisable or in the best interest of the Lenders,
including without limitation, satisfaction of other security interests, liens or
encumbrances on the Collateral not permitted under the Financing Documents,
payment of taxes on behalf of Borrower or any other Credit Party, payments to
landlords, warehouseman, bailees and other Persons in possession of the
Collateral and other actions to protect and safeguard the Collateral, and
actions with respect to insurance claims for casualty events affecting a Credit
Party and/or the Collateral.

14.7 Credit Decision; Disclosure of Information by Agent. Each Lender
acknowledges that no Agent-Related Person has made any representation or
warranty to it, and that no act by Agent hereafter taken, including any consent
to and acceptance of any assignment or review of the affairs of Borrower or any
Affiliate thereof, shall be deemed to constitute any representation or warranty
by any Agent-Related Person to any Lender as to any matter, including whether
Agent-Related Persons have disclosed material information in their possession.
Each Lender represents to Agent that it has, independently and without reliance
upon any Agent-Related Person and based on such documents and information as it
has deemed appropriate, made its own appraisal of, and investigation into, the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Credit Parties, and all applicable bank or other
regulatory Laws relating to the transactions contemplated hereby, and made its
own decision to enter into this Agreement and to extend credit to Borrower
hereunder. Each Lender also represents that it will, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Financing Documents, and to make such
investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of Borrower. Except for notices, reports and other documents
expressly required to be furnished to the Lenders by Agent herein, Agent shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the business, prospects, operations, property,
financial and other condition or creditworthiness of any Credit Party which may
come into the possession of any Agent-Related Person.

14.8 Indemnification of Agent. Whether or not the transactions contemplated
hereby are consummated, each Lender shall, severally and pro rata based on its
respective Pro Rata Share, indemnify upon demand each Agent-Related Person (to
the extent not reimbursed by or on behalf of Borrower and without limiting the
obligation of Borrower to do so), and hold harmless each Agent-Related Person
from and against any and all Indemnified Liabilities (which shall not include
legal expenses of Agent incurred in connection with the closing of the
transactions contemplated by this Agreement) incurred by it; provided, however,
that no Lender shall be liable for the payment to any Agent-Related Person of
any portion of such Indemnified Liabilities to the extent determined in a
judgment by a court of competent jurisdiction to have resulted from such
Agent-Related Person’s own gross negligence or willful misconduct; provided,
however, that no action taken in accordance with the directions of the Required
Lenders shall be deemed to constitute gross negligence or willful misconduct for
purposes of this Section 14.8. Without limitation of the foregoing, each Lender
shall, severally and pro rata based on its respective Pro Rata Share, reimburse
Agent upon demand for its ratable share of any costs or out-of-pocket expenses
(including Protective Advances incurred after the closing of the transactions
contemplated by this Agreement) incurred by Agent (in its capacity as Agent, and
not as a Lender) in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, any other Financing Document,
or any document contemplated by or referred to herein, to the extent that Agent
is not reimbursed for such expenses by or on behalf of Borrower. The undertaking
in this Section 14.8 shall survive the payment in full of the Obligations, the
termination of this Agreement and the resignation of Agent.

 

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14.9 Agent in its Individual Capacity. With respect to its Credit Extensions,
MidCap shall have the same rights and powers under this Agreement as any other
Lender and may exercise such rights and powers as though it were not Agent, and
the terms “Lender” and “Lenders” include MidCap in its individual capacity.
MidCap and its Affiliates may lend money to, invest in, and generally engage in
any kind of business with, any Credit Party and any of their Affiliates and any
person who may do business with or own securities of any Credit Party or any of
their Affiliates, all as if MidCap were not Agent and without any duty to
account therefor to Lenders. MidCap and its Affiliates may accept fees and other
consideration from a Credit Party for services in connection with this Agreement
or otherwise without having to account for the same to Lenders. Each Lender
acknowledges the potential conflict of interest between MidCap as a Lender
holding disproportionate interests in the Credit Extensions and MidCap as Agent,
and expressly consents to, and waives, any claim based upon, such conflict of
interest.

14.10 Agent May File Proofs of Claim. In case of the pendency of any
receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement,
adjustment, composition or other judicial proceeding relative to any Credit
Party, Agent (irrespective of whether the principal of any Credit Extension,
shall then be due and payable as herein expressed or by declaration or otherwise
and irrespective of whether Agent shall have made any demand on such Credit
Party) shall be entitled and empowered, by intervention in such proceeding or
otherwise:

(a) to file and prove a claim for the whole amount of the principal and interest
owing and unpaid in respect of the Credit Extensions and all other Obligations
that are owing and unpaid and to file such other documents as may be necessary
or advisable in order to have the claims of the Lenders and Agent (including any
claim for the reasonable compensation, expenses, disbursements and advances of
the Lenders and Agent and their respective agents and counsel and all other
amounts due the Lenders and Agent allowed in such judicial proceeding); and

(b) to collect and receive any monies or other property payable or deliverable
on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Lender to make such payments to Agent and, in the event that Agent shall
consent to the making of such payments directly to the Lenders, to pay to Agent
any amount due for the reasonable compensation, expenses, disbursements and
advances of Agent and its agents and counsel, including Protective Advances. To
the extent that Agent fails timely to do so, each Lender may file a claim
relating to such Lender’s claim.

14.11 Collateral and Guaranty Matters. The Lenders irrevocably authorize Agent,
at its option and in its discretion, to release (a) any Credit Party and any
Lien on any Collateral granted to or held by Agent under any Financing Document
upon the date that all Obligations due hereunder have been fully and
indefeasibly paid in full and no Applicable Commitments or other obligations of
any Lender to provide funds to Borrower under this Agreement remain outstanding,
and (b) any Lien on any Collateral that is transferred or to be transferred as
part of or in connection with any transfer permitted hereunder or under any
other Financing Document. Upon request by Agent at any time, all Lenders will
confirm in writing Agent’s authority to release its interest in particular types
or items of Collateral pursuant to this Section 14.11.

14.12 Advances; Payments; Non-Funding Lenders.

(a) Advances; Payments. If Agent receives any payment for the account of Lenders
on or prior to 11:00 a.m. (New York time) on any Business Day, Agent shall pay
to each applicable Lender such Lender’s Pro Rata Share of such payment on such
Business Day. If Agent receives any payment for the account of Lenders after
11:00 a.m. (New York time) on any Business Day, Agent shall pay to each
applicable Lender such Lender’s Pro Rata Share of such payment on the next
Business Day. To the extent that any Lender has failed to fund any Credit
Extension (a “Non-Funding Lender”), Agent shall be entitled to set-off the
funding short-fall against that Non-Funding Lender’s Pro Rata Share of all
payments received from Borrower.

 

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(b) Return of Payments.

(i) If Agent pays an amount to a Lender under this Agreement in the belief or
expectation that a related payment has been or will be received by Agent from a
Credit Party and such related payment is not received by Agent, then Agent will
be entitled to recover such amount (including interest accruing on such amount
at the Federal Funds Rate for the first Business Day and thereafter, at the rate
otherwise applicable to such Obligation) from such Lender on demand without
set-off, counterclaim or deduction of any kind.

(ii) If Agent determines at any time that any amount received by Agent under
this Agreement must be returned to a Credit Party or paid to any other person
pursuant to any insolvency law or otherwise, then, notwithstanding any other
term or condition of this Agreement or any other Financing Document, Agent will
not be required to distribute any portion thereof to any Lender. In addition,
each Lender will repay to Agent on demand any portion of such amount that Agent
has distributed to such Lender, together with interest at such rate, if any, as
Agent is required to pay to a Credit Party or such other person, without
set-off, counterclaim or deduction of any kind.

14.13 Miscellaneous.

(a) Neither Agent nor any Lender shall be responsible for the failure of any
Non-Funding Lender to make a Credit Extension or make any other advance required
hereunder. The failure of any Non-Funding Lender to make any Credit Extension or
any payment required by it hereunder shall not relieve any other Lender (each
such other Lender, an “Other Lender”) of its obligations to make the Credit
Extension or payment required by it, but neither any Other Lender nor Agent
shall be responsible for the failure of any Non-Funding Lender to make a Credit
Extension or make any other payment required hereunder. Notwithstanding anything
set forth herein to the contrary, a Non-Funding Lender shall not have any voting
or consent rights under or with respect to any Financing Document or constitute
a “Lender” (or be included in the calculation of “Required Lender” hereunder)
for any voting or consent rights under or with respect to any Financing
Document. At Borrower’s request, Agent or a person reasonably acceptable to
Agent shall have the right with Agent’s consent and in Agent’s sole discretion
(but shall have no obligation) to purchase from any Non-Funding Lender, and each
Non-Funding Lender agrees that it shall, at Agent’s request, sell and assign to
Agent or such person, all of the Applicable Commitments and all of the
outstanding Credit Extensions of that Non-Funding Lender for an amount equal to
the principal balance of the Credit Extensions held by such Non-Funding Lender
and all accrued interest and fees with respect thereto through the date of sale,
such purchase and sale to be consummated pursuant to an executed assignment
agreement reasonably acceptable to Agent.

(b) Each Lender shall promptly remit to the other Lenders such sums as may be
necessary to ensure the ratable repayment of each Lender’s portion of any Credit
Extension and the ratable distribution of interest, fees and reimbursements paid
or made by any Credit Party. Notwithstanding the foregoing, if this Agreement
requires payments of principal and interest to be made directly to the Lenders,
a Lender receiving a scheduled payment shall not be responsible for determining
whether the other Lenders also received their scheduled payment on such date;
provided, however, if it is determined that a Lender received more than its
ratable share of scheduled payments made on any date or dates, then such Lender
shall remit to the Agent (for Agent to redistribute to itself and the Lenders in
a manner to ensure the payment to Agent of any sums due Agent hereunder and the
ratable repayment of each Lender’s portion of any Credit Extension and the
ratable distribution of interest, fees and reimbursements) such sums as may be
necessary to ensure the ratable payment of such scheduled payments, as
instructed by Agent. If any payment or distribution of any kind or character,
whether in cash, properties or securities and whether voluntary, involuntary,
through the exercise of any right of set-off, or otherwise, shall be received by
a Lender in excess of its ratable share, then (i) the portion of such payment or
distribution in excess of such Lender’s ratable share shall be received by such
Lender in trust for application to the payments of amounts due on the other
Lender’s claims, or, in the case of Collateral, shall hold such Collateral for
itself and as agent and bailee for the Agent and other Lenders and (ii) such
Lender shall promptly advise the Agent of the receipt of such payment, and,
within five (5) Business Days of such receipt and, in the case of payments and
distributions, such Lender shall purchase (for cash at face value) from the
other Lenders (through the Agent), without recourse, such participations in the
Credit Extension made by the other Lenders as shall be necessary to cause such
purchasing Lender to share the excess payment ratably with each of them in
accordance with the respective Pro Rata Shares of the Lenders; provided,
however, that if all or any portion of such excess payment is thereafter
recovered by or on behalf of a Credit Party from such purchasing Lender, the
purchase shall be rescinded and the purchase price restored to the extent of
such recovery, but without interest; provided, further, that the provisions of
this Section 14.13(b). shall not be construed to apply to (x) any payment made
by a Credit Party pursuant to and in accordance with the express terms of this
Agreement or the other Financing Documents, or (y) any payment obtained by a
Lender as consideration for the assignment of or sale of a participation in any
of its Applicable Commitment pursuant to Section 13.1. Borrower agrees that any
Lender so purchasing a participation from another Lender pursuant to this
Section

 

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with “***”

 

14.13(b). may exercise all its rights of payment (including the right of
set-off) with respect to such participation as fully as if such Lender were the
direct creditor of the Borrower in the amount of such participation. No
documentation other than notices and the like shall be required to implement the
terms of this Section 14.13(b). The Agent shall keep records (which shall be
conclusive and binding in the absence of manifest error) of participations
purchased pursuant to this Section 14.13(b) and shall in each case notify the
Lenders following any such purchases.

 

  15 DEFINITIONS

In addition to any terms defined elsewhere in this Agreement, or in any schedule
or exhibit attached hereto, as used in this Agreement, the following terms have
the following meanings:

“Access Agreement” means a landlord consent, bailee letter or warehouseman’s
letter, in form and substance reasonably satisfactory to Agent, in favor of
Agent executed by such landlord, bailee or warehouseman, as applicable, for any
third party location.

“Account” means any “account”, as defined in the Code, with such additions to
such term as may hereafter be made, and includes, without limitation, all
accounts receivable and other sums owing to Borrower.

“Account Debtor” means any “account debtor”, as defined in the Code, with such
additions to such term as may hereafter be made.

“Affiliate” means, with respect to any Person, a Person that owns or controls
directly or indirectly the Person, any Person that controls or is controlled by
or is under common control with the Person, and each of that Person’s senior
executive officers, directors, partners and, for any Person that is a limited
liability company, that Person’s managers and members.

“Agent” means, MidCap, not in its individual capacity, but solely in its
capacity as agent on behalf of and for the benefit of the Lenders.

“Agreement” has the meaning given it in the preamble of this Agreement.

“Anti-Terrorism Laws” means any Laws relating to terrorism or money laundering,
including Executive Order No. 13224 (effective September 24, 2001), the USA
PATRIOT Act, the Laws comprising or implementing the Bank Secrecy Act, and the
Laws administered by OFAC.

“API” has the meaning given it in the preamble of this Agreement.

“Applicable Commitment” has the meaning given it in Section 2.2.

“Applicable Floor” means for each Credit Facility the per annum rate of interest
specified on the Credit Facility Schedule; provided, however, that for the
Applicable Prime Rate, the Applicable Floor is a per annum rate that is three
hundred basis points above the Applicable Floor for the Applicable Libor Rate.

“Applicable Index Rate” means, for any Applicable Interest Period, the rate per
annum determined by Agent equal to the Applicable Libor Rate; provided, however,
that in the event that any change in market conditions or any law, regulation,
treaty, or directive, or any change therein or in the interpretation of
application thereof, shall at any time after the date hereof, in the reasonable
opinion of Agent or any Lender, make it unlawful or impractical for Agent or
such Lender to fund or maintain Obligations bearing interest based upon the
Applicable Libor Rate, Agent or such Lender shall give notice of such changed
circumstances to Agent and Borrower and the Applicable Index Rate for
Obligations outstanding or thereafter extended or made by Agent or such Lender
shall thereafter be the Applicable Prime Rate until Agent or such Lender
determines (as to the portion of the Credit Extensions or Obligations owed to
it) that it would no longer be unlawful or impractical to fund or maintain such
Obligations or Credit Extensions at the Applicable Libor Rate. In the event that
Agent shall have determined (which determination shall be final and conclusive
and binding upon all parties hereto), as of any Applicable Interest Rate
Determination Date, that adequate and fair means do not exist for ascertaining
the interest rate applicable to any Credit Facility on the basis provided for
herein, then Agent may select a comparable replacement index and corresponding
margin.

 

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with “***”

 

“Applicable Interest Period” for each Credit Facility has the meaning specified
for that Credit Facility in the Credit Facility Schedule; provided, however,
that at any time that the Applicable Prime Rate is the Applicable Index Rate,
Applicable Interest Period shall mean the period commencing as of the most
recent Applicable Interest Rate Determination Date and continuing until the next
Applicable Interest Rate Determination Date or such earlier date as the
Applicable Prime Rate shall no longer be the Applicable Index Rate; and
provided, further, that at any time the Libor Rate Index is adjusted as set
forth in the definition thereof, or re-implemented following invocation of the
Applicable Prime Rate as permitted herein, the Applicable Interest Period shall
mean the period of as of such adjustment or re-implementation and continuing
until the next Applicable Interest Rate Determination Date, if any.

“Applicable Interest Rate” means a per annum rate of interest equal to the
Applicable Index Rate plus the Applicable Margin.

“Applicable Interest Rate Determination Date” means the second (2nd) Business
Day prior to the first (1st) day of the related Applicable Interest Period;
provided, however, that at any time that the Applicable Prime Rate is the
Applicable Index Rate, Applicable Interest Rate Determination Date means the
date of any change in the Base Rate Index; and provided, further, that at any
time the Libor Rate Index is adjusted as set forth in the definition thereof,
the Applicable Interest Rate Determination Date shall mean the date of such
adjustment or the second (2nd) Business Day prior to the first (1st) day of the
related Applicable Interest Period, as elected by Agent.

“Applicable Libor Rate” means, for any Applicable Interest Period, the rate per
annum, determined by Agent (rounded upwards, if necessary, to the next
1/100th%), equal to the greater of (a) the Applicable Floor and (b) the Libor
Rate Index.

“Applicable Margin” for each Credit Facility has the meaning specified for that
Credit Facility in the Credit Facility Schedule.

“Applicable Prepayment Fee”, for each Credit Facility, has the meaning given it
in the Credit Facility Schedule for such Credit Facility.

“Applicable Prime Rate” means, for any Applicable Interest Period, the rate per
annum, determined by Agent (rounded upwards, if necessary, to the next
1/100th%), equal to the greater of (a) the Applicable Floor and (b) the Base
Rate Index.

“Approved Fund” means any (a) investment company, fund, trust, securitization
vehicle or conduit that is (or will be) engaged in making, purchasing, holding
or otherwise investing in commercial loans and similar extensions of credit in
the Ordinary Course of Business, or (b) any Person (other than a natural person)
which temporarily warehouses loans for any Lender or any entity described in the
preceding clause (a) and that, with respect to each of the preceding clauses
(a) and (b), is administered or managed by (i) a Lender, (ii) an Affiliate of a
Lender or (iii) a Person (other than a natural person) or an Affiliate of a
Person (other than a natural person) that administers or manages a Lender.

“Arius Two” has the meaning given it in the preamble of this Agreement.

“Base Rate Index” means, for any Applicable Interest Period, the rate per annum,
determined by Agent (rounded upwards, if necessary, to the next 1/100th%) as
being the rate of interest announced, from time to time, within Wells Fargo
Bank, N.A. (“Wells Fargo”) at its principal office in San Francisco as its
“prime rate,” with the understanding that the “prime rate” is one of Wells
Fargo’s base rates (not necessarily the lowest of such rates) and serves as the
basis upon which effective rates of interest are calculated for those loans
making reference thereto and is evidenced by the recording thereof after its
announcement in such internal publications as Wells Fargo may designate;
provided, however, that Agent may, upon prior written notice to any Borrower,
choose a reasonably comparable index or source to use as the basis for the Base
Rate Index.

“BDSI” has the meaning given it in the preamble of this Agreement.

 

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“BDSI’s Common Stock” means BDSI’s common stock, par value $.001 per share.

“Black Scholes Pricing Model” means the Black and Scholes Option Pricing Model
obtained from the “OV” function on Bloomberg, L.P. determined as of the day of
the Qualifying Prepayment Event for pricing purposes.

“Blocked Person” means: (a) any Person listed in the annex to, or is otherwise
subject to the provisions of, Executive Order No. 13224, (b) a Person owned or
controlled by, or acting for or on behalf of, any Person that is listed in the
annex to, or is otherwise subject to the provisions of, Executive Order
No. 13224, (c) a Person with which any Lender is prohibited from dealing or
otherwise engaging in any transaction by any Anti-Terrorism Law, (d) a Person
that commits, threatens or conspires to commit or supports “terrorism” as
defined in Executive Order No. 13224, or (e) a Person that is named a “specially
designated national” or “blocked person” on the most current list published by
OFAC or other similar list.

“BND” means Bioral Nutrient Delivery, LLC, a Delaware limited liability company.

“Books” means all of books and records of a Person, including ledgers, federal
and state tax returns, records regarding the Person’s assets or liabilities, the
Collateral, business operations or financial condition, and all computer
programs or storage or any equipment containing such information.

“Borrower” mean the entity(ies) described in the first paragraph of this
Agreement and each of their successors and permitted assigns. The term “each
Borrower” shall refer to each Person comprising the Borrower if there is more
than one such Person, or the sole Borrower if there is only one such Person. The
term “any Borrower” shall refer to any Person comprising the Borrower if there
is more than one such Person, or the sole Borrower if there is only one such
Person.

“Borrowing Resolutions” means, with respect to any Person, those resolutions, in
form and substance satisfactory to Agent, adopted by such Person’s Board of
Directors or other appropriate governing body and delivered by such Person to
Agent approving the Financing Documents to which such Person is a party and the
transactions contemplated thereby, as well as any other approvals as may be
necessary or desired to approve the entering into the Financing Documents or the
consummation of the transactions contemplated thereby or in connection
therewith.

“Business Day” means any day that is not (a) a Saturday or Sunday or (b) a day
on which Agent is closed.

“CDC” means CDC V, LLC.

“CDC Agreement” means: (i) that certain Clinical Development and License
Agreement, dated as of July 14, 2005, among CDC (as successor in interest to
Clinical Development Capital LLC), BDSI and API; (ii) the CDC Securities
Purchase Agreement; (iii) that certain Amendment No. 2, dated as of May 16,
2006, to that certain Clinical Development and License Agreement, dated as of
July 14, 2005, between BDSI, API and CDC (as successor in interest to CDC IV,
LLC); (iv) that certain Amended and Restated Registration Rights Agreement,
dated as of May 16, 2006, by and between BDSI and CDC (as successor in interest
to CDC IV, LLC); (v) that certain Dispute Resolution Agreement, dated March 12,
2007, between BDSI and CDC (as successor in interest to CDC IV, LLC); (vi) that
certain Amendment to Clinical Development and License Agreement, dated March 9,
2007, between BDSI and CDC (as successor in interest to CDC IV, LLC); (vii) that
certain Registration Rights Agreement, dated March 12, 2007, between BDSI and
CDC (as successor in interest to CDC IV, LLC); (viii) that certain Subscription
Agreement, dated March 12, 2007, between BDSI and CDC (as successor in interest
to CDC IV, LLC); (ix) that certain Royalty Purchase and Amendment Agreement,
dated as of September 5, 2007 between BDSI, and CDC (as successor in interest to
CDC IV, LLC); (x) that certain Amendment to the Clinical Development and License
Agreement, dated as of July 14, 2005, amendment dated as of September 5, 2007,
by and among CDC (as successor in interest to CDC IV, LLC), BDSI, API and Arius
Two; (xi) that certain Dispute Resolution Agreement, dated September 5, 2007 by
and between BDSI and CDC (as successor in interest to CDC IV, LLC); and
(xii) Amendment to Clinical Development and License Agreement, effective May 12,
2011, between BDSI, API, Arius Two, CDC and NB Athyrium.

“CDC Securities Purchase Agreement” means that certain Securities Purchase
Agreement dated as of May 16, 2006 by and between CDC (as successor in interest
to CDC IV, LLC) and BDSI, as amended.

“Change in Control” means any event, transaction, or occurrence as a result of
which (a) any “person” (as such term is defined in Sections 3(a)(9) and 13(d)(3)
of the Exchange Act), other than a trustee or other fiduciary holding

 

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securities under an employee benefit plan of BDSI, is or becomes a beneficial
owner (within the meaning Rule 13d-3 promulgated under the Exchange Act),
directly or indirectly, of securities of BDSI, representing forty percent
(40%) or more of the combined voting power of BDSI’s then outstanding
securities; (b) during any period of twelve consecutive calendar months,
individuals who at the beginning of such period constituted the board of
directors of Borrower (together with any new directors whose election by the
board of directors of Borrower was approved by a vote of not less than
two-thirds of the directors then still in office who either were directors at
the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason other than death or disability to
constitute a majority of the directors then in office; (c) Borrower ceases to
own and control, directly or indirectly, all of the economic and voting rights
associated with the outstanding securities of each of its Subsidiaries; (d) the
occurrence of any “change in control” or any term of similar effect under any
Subordinated Debt Document; or (e) the chief executive officer of Borrower as of
the date hereof shall cease to be involved in the day to day operations or
management of the business of Borrower, and a successor of such officer
reasonably acceptable to Agent is not appointed on terms reasonably acceptable
to Agent within *** of such cessation or involvement.

“Closing Date” has the meaning given it in the preamble of this Agreement.

“Closing Date Warrants” means warrants, in form and substance satisfactory to
Agent, to purchase shares of BDSI’s Common Stock equal to $1,500,000 divided by
the exercise price, which shall be equivalent to BDSI’s 20-day average share
price prior to the Closing Date.

“Code” means the Uniform Commercial Code in effect on the date hereof, as the
same may, from time to time, be enacted and in effect in the State of New York;
provided, however, that to the extent that the Code is used to define any term
herein or in any Financing Document and such term is defined differently in
different Articles or Divisions of the Code, the definition of such term
contained in Article or Division 9 shall govern; and provided, further, that in
the event that, by reason of mandatory provisions of Law, any or all of the
attachment, perfection, or priority of, or remedies with respect to, Agent’s
Lien on any Collateral is governed by the Uniform Commercial Code in effect in a
jurisdiction other than the State of New York the term “Code” shall mean the
Uniform Commercial Code as enacted and in effect in such other jurisdiction
solely for purposes of the provisions thereof relating to such attachment,
perfection, priority, or remedies and for purposes of definitions relating to
such provisions.

“Collateral” means all property, now existing or hereafter acquired, mortgaged
or pledged to, or purported to be subjected to a Lien in favor of, Agent, for
the benefit of Agent and Lenders, pursuant to this Agreement and the other
Financing Documents, including, without limitation, all of the property
described in Exhibit A hereto, but for the avoidance of doubt, excluding all
Excluded Intellectual Property Collateral.

“Collateral Account” means any Deposit Account, Securities Account or Commodity
Account.

“Commitment Commencement Date” has the meaning given it in the Credit Facility
Schedule.

“Commitment Termination Date” has the meaning given it in the Credit Facility
Schedule.

“Commodity Account” means any “commodity account”, as defined in the Code, with
such additions to such term as may hereafter be made.

“Communication” has the meaning given it in Article 11.

“Compliance Certificate” means a certificate, duly executed by an authorized
officer of Borrower, appropriately completed and substantially in the form of
Exhibit B.

“Contingent Obligation” means, for any Person, any direct or indirect liability,
contingent or not, of that Person for (a) any indebtedness, lease, dividend,
letter of credit or other obligation of another such as an obligation directly
or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by
that Person, or for which that Person is directly or indirectly liable; (b) any
obligations for undrawn letters of credit for the account of that Person; and
(c) all obligations from any interest rate, currency or commodity swap
agreement, interest rate cap or collar agreement, or other agreement or
arrangement designated to protect a Person against fluctuation in interest
rates, currency exchange rates or commodity prices;

 

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Confidential treatment requested with respect to certain portions hereof denoted
with “***”

 

but “Contingent Obligation” does not include endorsements in the Ordinary Course
of Business. The amount of a Contingent Obligation is the stated or determined
amount of the primary obligation for which the Contingent Obligation is made or,
if not determinable, the maximum reasonably anticipated liability for it
determined by the Person in good faith; but the amount may not exceed the
maximum of the obligations under any guarantee or other support arrangement.

“Control Agreement” means any control agreement entered into among the
depository institution at which Borrower maintains a Deposit Account or the
securities intermediary or commodity intermediary at which Borrower maintains a
Securities Account or a Commodity Account, Borrower, and Agent pursuant to which
Agent obtains control (within the meaning of the Code) for the benefit of the
Lenders over such Deposit Account, Securities Account or Commodity Account.

“Credit Extension” means an advance or disbursement of proceeds to or for the
account of Borrower in respect of a Credit Facility.

“Credit Extension Form” means that certain form attached hereto as Exhibit C, as
the same may be from time to time revised by Agent.

“Credit Facility” means a credit facility specified on the Credit Facility
Schedule.

“Credit Party” means any Borrower, any Guarantor under a guarantee of the
Obligations or any part thereof, and any other Person (other than Agent, a
Lender or a participant of a Lender), whether now existing or hereafter acquired
or formed, that becomes obligated as a borrower, guarantor, surety, indemnitor,
pledgor, assignor or other obligor under any Financing Document, and any Person
whose equity interests or portion thereof have been pledged or hypothecated to
Agent under any Financing Document; and “Credit Parties” means all such Persons,
collectively. As of the Closing Date, the only Credit Parties are BDSI, API and
Arius Two.

“Database Lock Payments” means, collectively, the two milestone payments, *** to
Borrower in connection with the BEMA Buprenorphine Phase 3 trial database locks,
and, a “Database Lock Payment” means any one milestone payment ***.

“Default” means any fact, event or circumstance which with notice or passage of
time or both, could constitute an Event of Default.

“Default Rate” has the meaning given it in Section 2.6(b).

“Deposit Account” means any “deposit account” as defined in the Code with such
additions to such term as may hereafter be made.

“Designated Funding Account” is Borrower’s Deposit Account, ***, maintained with
Wells Fargo Bank, National Association and over which Agent has been granted
control for the ratable benefit of all Lenders.

“Dollars,” “dollars” and “$” each means lawful money of the United States.

“Doyen Equipment” means that certain Doyen transmucosal patch fabricating and
packaging system and any components, including, but not limited to, dies and
tooling.

“Draw Period” means, for each Credit Facility, the period commencing on the
Commitment Commencement Date and ending on the Commitment Termination Date.

“Eligible Assignee” means (a) a Lender, (b) an Affiliate of a Lender, (c) an
Approved Fund, and (d) any other Person (other than a natural person) approved
by Agent; provided, however, that notwithstanding the foregoing, “Eligible
Assignee” shall not include any Credit Party, any Subsidiary of a Credit Party
or any competitor of a Credit Party. Notwithstanding the foregoing, in
connection with assignments by a Lender due to a forced divestiture at the
request of any regulatory agency, the restrictions set forth herein shall not
apply and Eligible Assignee shall mean any Person or party becoming an assignee
incident to such forced divestiture.

 

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Confidential Treatment Requested by BioDelivery Sciences International, Inc.,

Confidential treatment requested with respect to certain portions hereof denoted
with “***”

 

“Environmental Law” means all present and future any law (statutory or common),
ordinance, treaty, rule, regulation, order, policy, other legal requirement or
determination of an arbitrator or of a Governmental Authority and/or Required
Permits imposing liability or standards of conduct for or relating to the
regulation and protection of human health, safety, the workplace, the
environment and natural resources, and including public notification
requirements and environmental transfer of ownership, notification or approval
statutes.

“Equipment” means all “equipment”, as defined in the Code, with such additions
to such term as may hereafter be made, and includes without limitation all
machinery, fixtures, goods, vehicles (including motor vehicles and trailers),
and any interest in any of the foregoing.

“ERISA” means the Employee Retirement Income Security Act of 1974, and all
regulations promulgated thereunder.

“Event of Default” has the meaning given it in Section 10.1.

“Exchange Act” means the Securities Act of 1933, as amended, and the Securities
Exchange Act of 1934, as amended.

“Excluded Intellectual Property Collateral” means the Intellectual Property
identified on the Excluded Intellectual Property Collateral Schedule.

“Exigent Circumstance” has the meaning given it in Section 13.14.

“Federal Funds Rate” means, for any day, the rate per annum equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that if no such rate is so published on such
next succeeding Business Day, the Federal Funds Rate for such day shall be the
average rate quoted to Agent on such day on such transactions as determined by
Agent in a commercially reasonable manner.

“Fee Letters” means, collectively, the fee letter agreements among Borrower and
Agent and Borrower and each Lender.

“Financing Documents” means, collectively, this Agreement, the Perfection
Certificate, the Fee Letter(s), each note and guarantee executed by one or more
Credit Parties in connection with the indebtedness governed by this Agreement,
and each other present or future agreement executed by one or more Credit
Parties and, or for the benefit of, the Lenders and/or Agent in connection with
this Agreement, all as amended, restated, or otherwise modified from time to
time.

“Foreign Lender” has the meaning given it in Section 2.6(h)(iii).

“Funding Date” means any date on which a Credit Extension is made to or on
account of Borrower which shall be a Business Day.

“GAAP” means generally accepted accounting principles set forth in the opinions
and pronouncements of the Accounting Principles Board of the American Institute
of Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such other
Person as may be approved by a significant segment of the accounting profession
in the United States, which are applicable to the circumstances as of the date
of determination.

“General Intangibles” means all “general intangibles”, as defined in the Code,
with such additions to such term as may hereafter be made, and includes without
limitation, all copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work, whether published or unpublished, any patents, trademarks, service marks
and, to the extent permitted under applicable Law, any applications therefor,
whether registered or not, any trade secret rights, including any rights to
unpatented inventions, payment intangibles, royalties, contract rights,
goodwill, franchise agreements, purchase orders, customer lists, route lists,
telephone numbers, domain names, claims, income and other tax refunds, security
and other deposits, options to purchase or sell real or personal property,
rights in all

 

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Confidential treatment requested with respect to certain portions hereof denoted
with “***”

 

litigation presently or hereafter pending (whether in contract, tort or
otherwise), insurance policies (including, without limitation, key man, property
damage, and business interruption insurance), payments of insurance and rights
to payment of any kind.

“Governmental Authority” means any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government, any securities exchange and any self-regulatory
organization.

“Guarantor” means any present or future guarantor of the Obligations. As of the
Closing Date, the are no Guarantors other than Borrower (each Borrower being
jointly and severally obligated to pay and perform all obligations under the
Financing Documents).

“Hazardous Materials” means petroleum and petroleum products and compounds
containing them, including gasoline, diesel fuel and oil; explosives, flammable
materials; radioactive materials; polychlorinated biphenyls and compounds
containing them; lead and lead-based paint; asbestos or asbestos-containing
materials; underground or above-ground storage tanks, whether empty or
containing any substance; any substance the presence of which is prohibited by
any Laws; toxic mold, any substance that requires special handling; and any
other material or substance now or in the future defined as a “hazardous
substance,” “hazardous material,” “hazardous waste,” “toxic substance,” “toxic
pollutant,” “contaminant,” “pollutant” or other words of similar import within
the meaning of any Environmental Law, including: (a) any “hazardous substance”
defined as such in (or for purposes of) CERCLA, or any so-called “superfund” or
“superlien” Law, including the judicial interpretation thereof; (b) any
“pollutant or contaminant” as defined in 42 U.S.C.A. § 9601(33); (c) any
material now defined as “hazardous waste” pursuant to 40 C.F.R. Part 260;
(d) any petroleum or petroleum by-products, including crude oil or any fraction
thereof; (e) natural gas, natural gas liquids, liquefied natural gas, or
synthetic gas usable for fuel; (f) any “hazardous chemical” as defined pursuant
to 29 C.F.R. Part 1910; (g) any toxic or harmful substances, wastes, materials,
pollutants or contaminants (including, without limitation, asbestos,
polychlorinated biphenyls (“PCB’s”), flammable explosives, radioactive
materials, infectious substances, materials containing lead-based paint or raw
materials which include hazardous constituents); and (h) any other toxic
substance or contaminant that is subject to any Environmental Laws or other past
or present requirement of any Governmental Authority.

“Hazardous Materials Contamination” means contamination (whether now existing or
hereafter occurring) of the improvements, buildings, facilities, personalty,
soil, groundwater, air or other elements on or of the relevant property by
Hazardous Materials, or any derivatives thereof, or on or of any other property
as a result of Hazardous Materials, or any derivatives thereof, generated on,
emanating from or disposed of in connection with the relevant property.

“Indebtedness” means (a) indebtedness for borrowed money (including the
Obligations) or the deferred price of property or services, such as
reimbursement and other obligations for surety bonds and letters of credit,
(b) obligations evidenced by notes, bonds, debentures or similar instruments,
(c) capital lease obligations, (d) non-contingent obligations of such Person to
reimburse any bank or other Person in respect of amounts paid under a letter of
credit, banker’s acceptance or similar instrument, (e) equity securities of such
Person subject to repurchase or redemption other than at the sole option of such
Person, (f) obligations secured by a Lien on any asset of such Person, whether
or not such obligation is otherwise an obligation of such Person,
(g) “earnouts”, purchase price adjustments, profit sharing arrangements,
deferred purchase money amounts and similar payment obligations or continuing
obligations of any nature of such Person arising out of purchase and sale
contracts, (h) all Indebtedness of others guaranteed by such Person,
(i) off-balance sheet liabilities and/or pension plan or multiemployer plan
liabilities of such Person, (j) obligations arising under non-compete
agreements, (k) obligations arising under bonus, deferred compensation,
incentive compensation or similar arrangements, other than those arising in the
Ordinary Course of Business, and (l) Contingent Obligations.

“Indemnitee” has the meaning given it in Section 13.2.

“Insolvency Proceeding” means any proceeding by or against any Person under the
United States Bankruptcy Code, or any other bankruptcy or insolvency Law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.

 

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Confidential Treatment Requested by BioDelivery Sciences International, Inc.,

Confidential treatment requested with respect to certain portions hereof denoted
with “***”

 

“Intellectual Property” includes without limitation, all copyright rights,
copyright applications, copyright registrations and like protections in each
work of authorship and derivative work, whether published or unpublished, any
patents, patent applications and like protections, including improvements,
divisions, continuations, renewals, reissues, extensions, and
continuations-in-part of the same, trademarks, trade names, service marks, mask
works, rights of use of any name, domain names, or any other similar rights, any
applications therefor, whether registered or not, know-how, operating manuals,
trade secret rights, clinical and non-clinical data, rights to unpatented
inventions, and any claims for damage by way of any past, present, or future
infringement of any of the foregoing.

“Inventory” means all “inventory”, as defined in the Code, with such additions
to such term as may hereafter be made, and includes without limitation all
merchandise, raw materials, parts, supplies, packing and shipping materials,
work in process and finished products, including without limitation such
inventory as is temporarily out of Borrower’s custody or possession or in
transit and including any returned goods and any documents of title representing
any of the above.

“Investment” means, with respect to any Person, directly or indirectly, (a) to
purchase or acquire any stock or stock equivalents, or any obligations or other
securities of, or any interest in, any Person, including the establishment or
creation of a Subsidiary, (b) to make or commit to make any acquisition
(including through any in-license) of all or substantially all of the assets of
another Person, or of any business, Product, business line or product line,
division or other unit operation of any Person or (c) make or purchase any
advance, loan, extension of credit or capital contribution to, or any other
investment in, any Person.

“Joinder Requirements” has the meaning set forth in Section 6.8.

“Laws” means any and all federal, state, provincial, territorial, local and
foreign statutes, laws, judicial decisions, regulations, guidance, guidelines,
ordinances, rules, judgments, orders, decrees, codes, plans, injunctions,
permits, concessions, grants, franchises, governmental agreements and
governmental restrictions, whether now or hereafter in effect, which are
applicable to any Credit Party in any particular circumstance.

“Lender” means any one of the Lenders.

“Lenders” means the Persons identified on the Credit Facility Schedule as
amended from time to time to reflect assignments made in accordance with this
Agreement.

“Libor Rate Index” means, for any Applicable Interest Period, the rate per
annum, determined by Agent (rounded upwards, if necessary, to the next 1/100th%)
by dividing (a) the rate per annum, determined by Agent in accordance with its
customary procedures, and utilizing such electronic or other quotation sources
as it considers appropriate (rounded upwards, if necessary, to the next 1/100%),
to be the rate at which Dollar deposits (for delivery on the first day of such
Applicable Interest Period or, if such day is not a Business Day, on the
preceding Business Day) in the amount of One Million Dollars ($1,000,000) are
offered to major banks in the London interbank market on or about 11:00 a.m.
(New York time) on the Applicable Interest Rate Determination Date, for a period
of thirty (30) days, which determination shall be conclusive in the absence of
manifest error, by (b) 100% minus the Reserve Percentage; provided, however,
that Agent may, upon prior written notice to any Borrower, choose a reasonably
comparable index or source to use as the basis for the Libor Rate Index. The
Libor Rate Index may be adjusted by Agent with respect to any Lender on a
prospective basis to take into account any additional or increased costs to such
Lender of maintaining or obtaining any eurodollar deposits or increased costs,
in each case, due to changes in applicable Law occurring subsequent to the
commencement of the then Applicable Interest Period, including changes in tax
laws (except changes of general applicability in corporate income tax laws) and
changes in the reserve requirements imposed by the Board of Governors of the
Federal Reserve System (or any successor), which additional or increased costs
would increase the cost of funding loans bearing interest based upon the Libor
Rate Index; provided, however, that notwithstanding anything in this Agreement
to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection
Act and all requests, rules, guidelines or directives thereunder or issued in
connection therewith and (ii) all requests, rules, guidelines or directives
promulgated by the Bank for International Settlements, the Basel Committee on
Banking Supervision (or any successor or similar authority) or the United States
or foreign regulatory authorities, in each case pursuant to Basel III, shall in
each case be deemed to be a “change in applicable Law”, regardless of the date
enacted, adopted or issued. In any such event, the affected Lender shall give
Borrower and Agent notice of such a determination and adjustment and Agent
promptly shall transmit the notice to each other Lender and, upon its receipt of
the notice from the affected Lender, Borrower may, by notice to such affected
Lender require such Lender to furnish to Borrower a statement setting forth the
basis for adjusting such Libor Rate Index and the method for determining the
amount of such adjustment.

 

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Confidential Treatment Requested by BioDelivery Sciences International, Inc.,

Confidential treatment requested with respect to certain portions hereof denoted
with “***”

 

“Lien” means a claim, mortgage, deed of trust, lien, levy, charge, pledge,
security interest or other encumbrance of any kind, whether voluntarily incurred
or arising by operation of Law or otherwise against any property.

“Material Adverse Change” means (a) a material impairment in the perfection or
priority of the Agent’s Lien (or any Lender’s Lien therein to the extent
provided for in the Financing Documents) in the Collateral; (b) a material
impairment in the value of the Collateral; (c) a material adverse change in the
business, ability to conduct business, operations or condition (financial or
otherwise) of Borrower and its Subsidiaries, taken as a whole; or (d) a material
impairment of the prospect of repayment of any portion of the Obligations.

“Material Agreement” means (a) the agreements listed in the Disclosure Schedule,
(b) each agreement or contract to which a Credit Party is a party relating to
licensure of Intellectual Property, and (c) any agreement or contract to which
such Credit Party or its Subsidiaries is a party the termination of which could
reasonably be expected to result in a Material Adverse Change.

“Material Indebtedness” has the meaning given it in Section 10.1.

“Maturity Date” means July 5, 2016.

“Maximum Lawful Rate” has the meaning given it in Section 2.6(g).

“MidCap” has the meaning given it in the preamble of this Agreement.

“Obligations” means all of Borrower’s obligations to pay when due any debts,
principal, interest, Protective Advances, fees, indemnities and other amounts
Borrower owes the Agent or Lenders now or later, under this Agreement or the
other Financing Documents, including, without limitation, interest accruing
after Insolvency Proceedings begin (whether or not allowed) and debts,
liabilities, or obligations of Borrower assigned to the Lenders and/or Agent,
and the payment and performance of each other Credit Party’s covenants and
obligations under the Financing Documents. “Obligations” does not include
obligations under any Warrants issued to Agent or a Lender.

“OFAC” means the U.S. Department of Treasury Office of Foreign Assets Control.

“OFAC Lists” means, collectively, the Specially Designated Nationals and Blocked
Persons List maintained by OFAC pursuant to Executive Order No. 13224, 66 Fed.
Reg. 49079 (Sept. 25, 2001) and/or any other list of terrorists or other
restricted Persons maintained pursuant to any of the rules and regulations of
OFAC or pursuant to any other applicable Executive Orders.

“Operating Documents” means, for any Person, such Person’s formation documents,
as certified with the Secretary of State of such Person’s state of formation on
a date that is no earlier than thirty (30) days prior to the Closing Date, and
(a) if such Person is a corporation, its bylaws in current form, (b) if such
Person is a limited liability company, its limited liability company agreement
(or similar agreement), and (c) if such Person is a partnership, its partnership
agreement (or similar agreement), each of the foregoing with all current
amendments or modifications thereto.

“Ordinary Course of Business” means, in respect of any transaction involving any
Credit Party, the ordinary course of business of such Credit Party, as conducted
by such Credit Party in accordance with past practices, which shall in any event
be at arms-length.

“Payment Date” means the first calendar day of each calendar month.

“Perfection Certificate” means the Perfection Certificate delivered to Agent as
of the Closing Date, together with any amendments thereto required under this
Agreement.

 

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Confidential Treatment Requested by BioDelivery Sciences International, Inc.,

Confidential treatment requested with respect to certain portions hereof denoted
with “***”

 

“Permits” means licenses, certificates, accreditations, product clearances or
approvals, provider numbers or provider authorizations, marketing
authorizations, supplier numbers, provider numbers, other authorizations,
registrations, permits, consents and approvals issued or required in connection
with the conduct of Borrower’s or any Subsidiary’s business or to comply with
any applicable Laws, including, without limitation, drug listings and drug
establishment registrations under 21 U.S.C. Section 510, registrations issued by
DEA under 21 U.S.C. Section 823 (if applicable to any Product), and those issued
by State governments for the conduct of Borrower’s or any Subsidiary’s business.

“Permitted Indebtedness” means: (a) Borrower’s Indebtedness to the Lenders and
Agent under this Agreement and the other Financing Documents; (b) Indebtedness
existing on the Closing Date and described on the Disclosure Schedule;
(c) Indebtedness secured by Permitted Liens; (d) Subordinated Debt;
(e) unsecured Indebtedness to trade creditors incurred in the Ordinary Course of
Business; (f) extensions, refinancings, modifications, amendments and
restatements of any items of Permitted Indebtedness (b) and (c) above, provided,
however, that the principal amount thereof is not increased or the terms thereof
are not modified to impose more burdensome terms upon the obligors thereunder;
and (g) Indebtedness consisting of intercompany loans and advances made by any
Credit Party to any other Credit Party, provided that (1) the obligations of the
Credit Parties under such intercompany loan shall be subordinated at all times
to the Obligations of the Credit Parties hereunder or under the other Financing
Documents in a manner satisfactory to Agent and (2) to the extent that such
Indebtedness is evidenced by a promissory note or other written instrument,
Borrower shall pledge and deliver to Agent, for the benefit of itself and the
Lenders, the original promissory note or instrument, as applicable, along with
an endorsement in blank in form and substance satisfactory to Agent

“Permitted Investments” means: (a) Investments existing on the Closing Date and
described on the Disclosure Schedule; (b) Investments consisting of cash
equivalents; (c) any Investments in liquid assets permitted by Borrower’s
investment policy, as amended from time to time, provided that such investment
policy (and any such amendment thereto) has been approved in writing by Agent;
(d) Investments consisting of the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of any
Credit Party; (e) Investments consisting of deposit accounts or securities
accounts in which the Agent has a first priority perfected security interest
except as otherwise provided by Section 6.6; (f) Investments in Subsidiaries
solely to the extent permitted pursuant to Section 6.8; (g) Investments
consisting of (i) travel advances and employee relocation loans and other
employee loans and advances in the Ordinary Course of Business, and (ii) loans
to employees, officers or directors relating to the purchase of equity
securities of Borrower or its Subsidiaries pursuant to employee stock purchase
plans or agreements approved by Borrower’s board of directors; (h) Investments
(including debt obligations) received in connection with the bankruptcy or
reorganization of customers or suppliers and in settlement of delinquent
obligations of, and other disputes with, customers or suppliers arising in the
Ordinary Course of Business; (i) Investments consisting of intercompany
Indebtedness in accordance with and to the extent permitted by clause (h) of the
definition of “Permitted Indebtedness”; and (j) Investments consisting of
Products and/or in-licenses acquired by Borrower after the Closing Date;
provided that *** provided, further, that ***.

“Permitted Liens” means: (a) Liens existing on the Closing Date and shown on the
Disclosure Schedule or arising under this Agreement and the other Financing
Documents; (b) purchase money Liens (i) on Equipment acquired or held by a
Credit Party incurred for financing the acquisition of the Equipment securing no
more than *** in the aggregate amount outstanding, or (ii) existing on Equipment
when acquired, if the Lien is confined to the property and improvements and the
proceeds of the Equipment; (c) Liens for taxes, fees, assessments or other
government charges or levies, either not delinquent or being contested in good
faith and for which adequate reserves are maintained on the Books of the Credit
Party against whose asset such Lien exists, provided that no notice of any such
Lien has been filed or recorded under the Internal Revenue Code of 1986, as
amended, and the treasury regulations adopted thereunder; (d) statutory Liens
securing claims or demands of materialmen, mechanics, carriers, warehousemen,
landlords and other Persons imposed without action of such parties, provided
that they have no priority over any of Agent’s Lien and the aggregate amount of
such Liens for all Credit Parties does not any time exceed ***; (e) leases or
subleases of real property granted in the Ordinary Course of Business, and
leases, subleases, non-exclusive licenses or sublicenses of property (other than
real property or Intellectual Property) granted in the Ordinary Course of
Business, if the leases, subleases, licenses and sublicenses do not prohibit
granting Agent a security interest; (f) banker’s liens, rights of set-off and
Liens in favor of financial institutions incurred made in the Ordinary Course of
Business arising in connection with a Credit Party’s Collateral Accounts
provided that such Collateral Accounts are subject to a Control Agreement to the
extent required hereunder; (g) Liens to secure payment of workers’ compensation,
employment insurance, old-age pensions, social security and other like
obligations incurred in the Ordinary Course of Business (other than Liens
imposed by ERISA); (h) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default; (i) easements, reservations,
rights-of-way, restrictions, minor defects or irregularities in title and
similar charges or encumbrances affecting real property not constituting a
Material Adverse Change; (j) an

 

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Confidential Treatment Requested by BioDelivery Sciences International, Inc.,

Confidential treatment requested with respect to certain portions hereof denoted
with “***”

 

agreement by Borrower not to encumber the Excluded Intellectual Property
Collateral pursuant to the CDC Agreement in effect on the Closing Date; and
(k) Liens incurred in the extension, renewal or refinancing of the indebtedness
secured by Liens described in (a) and (b) above, but any extension, renewal or
replacement Lien must be limited to the property encumbered by the existing Lien
and the principal amount of the Indebtedness may not increase.

“Person” means any individual, sole proprietorship, partnership, limited
liability company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.

“Prepayment Fee Warrants” means warrants to purchase shares of BDSI’s Common
Stock, in substantially the form of the Closing Date Warrants, but for shares of
BDSI’s Common Stock equal to two percent (2.0%) of the Datalock Prepayable
Amount as calculated using the Black Scholes Pricing Model.

“Pro Rata Share” means, as determined by Agent, with respect to each Credit
Facility and Lender holding an Applicable Commitment or Credit Extensions in
respect of such Credit Facility, a percentage (expressed as a decimal, rounded
to the ninth decimal place) determined by dividing (a) in the case of
fully-funded Credit Facilities, the amount of Credit Extensions held by such
Lender in such Credit Facility by the aggregate amount of all outstanding Credit
Extensions for such Credit Facility, and (b) in the case of Credit Facilities
that are not fully-funded, the amount of Credit Extensions and unfunded
Applicable Commitments held by such Lender in such Credit Facility by the
aggregate amount of all outstanding Credit Extensions and unfunded Applicable
Commitments for such Credit Facility.

“Protective Advances” means all audit fees and expenses, costs, and expenses
(including reasonable attorneys’ fees and expenses) of Agent and Lenders for
preparing, amending, negotiating, administering, defending and enforcing the
Financing Documents and the Warrants (including, without limitation, those
incurred in connection with appeals or Insolvency Proceedings) or otherwise
incurred by Agent or the Lenders in connection with the Financing Documents and
the Warrants.

“Registered Organization” means any “registered organization” as defined in the
Code, with such additions to such term as may hereafter be made.

“Required Lenders” means, unless all of the Lenders and Agent agree otherwise in
writing, Lenders having (a) more than sixty percent (60%) of the Applicable
Commitments of all Lenders, or (b) if such Applicable Commitments have expired
or been terminated, more than sixty percent (60%) of the aggregate outstanding
principal amount of the Credit Extensions.

“Required Permit” means a Permit (a) issued or required under Laws applicable to
the business of Borrower or any of its Subsidiaries or necessary in the
manufacturing, importing, exporting, possession, ownership, warehousing,
marketing, promoting, sale, labeling, furnishing, distribution or delivery of
goods or services under Laws applicable to the business of Borrower or any of
its Subsidiaries or any Drug Application (including without limitation, at any
point in time, all licenses, approvals and permits issued by the FDA or any
other applicable Governmental Authority necessary for the testing, manufacture,
marketing or sale of any Product by any applicable Borrower(s) as such
activities are being conducted by such Borrower with respect to such Product at
such time), and (b) issued by any Person from which Borrower or any of their
Subsidiaries have received an accreditation

“Reserve Percentage” means, on any day, for any Lender, the maximum percentage
prescribed by the Board of Governors of the Federal Reserve System (or any
successor Governmental Authority) for determining the reserve requirements
(including any basic, supplemental, marginal, or emergency reserves) that are in
effect on such date with respect to eurocurrency funding (currently referred to
as “eurocurrency liabilities”) of that Lender, but so long as such Lender is not
required or directed under applicable regulations to maintain such reserves, the
Reserve Percentage shall be zero.

“Responsible Officer” means any of the President and Chief Executive Officer or
Chief Financial Officer of Borrower.

“SEC” means the Securities and Exchange Commission.

 

47

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Confidential Treatment Requested by BioDelivery Sciences International, Inc.,

Confidential treatment requested with respect to certain portions hereof denoted
with “***”

 

“SEC Filings” means BDSI’s filings (and related exhibits) filed or required to
be filed with the SEC under the Exchange Act.

“Secretary’s Certificate” means, with respect to any Person, a certificate, in
form and substance satisfactory to Agent, executed by such Person’s secretary on
behalf of such Person certifying that (a) such Person has the authority to
execute, deliver, and perform its obligations under each of the Financing
Documents to which it is a party, (b) that attached as Exhibit A to such
certificate is a true, correct, and complete copy of the Borrower Resolutions
then in full force and effect authorizing and ratifying the execution, delivery,
and performance by such Person of the Financing Documents to which it is a
party, (c) the name(s) of the Person(s) authorized to execute the Financing
Documents on behalf of such Person, together with a sample of the true
signature(s) of such Person(s), and (d) that Agent and the Lenders may
conclusively rely on such certificate unless and until such Person shall have
delivered to Agent a further certificate canceling or amending such prior
certificate.

“Secured Promissory Note” has the meaning given it in Section 2.7.

“Securities Account” means any “securities account”, as defined in the Code,
with such additions to such term as may hereafter be made.

“Stated Rate” has the meaning given it in Section 2.6(g).

“Subordinated Debt” means indebtedness incurred by Borrower which shall be
(a) in an amount satisfactory to Agent, (b) made pursuant to documents in form
and substance satisfactory to Agent (the “Subordinated Debt Documents”), and
(c) subordinated to all of Borrower’s now or hereafter indebtedness to the Agent
and Lenders pursuant to a Subordination Agreement.

“Subordination Agreement” means a subordination, intercreditor, or other similar
agreement in form and substance, and on terms, approved by Agent in writing.

“Subsidiary” means, with respect to any Person, any Person of which more than
fifty percent (50.0%) of the voting stock or other equity interests (in the case
of Persons other than corporations) is owned or controlled, directly or
indirectly, by such Person.

“Taxes” has the meaning given it in Section 2.6(h).

“Transfer” has the meaning given it in Section 7.1.

“Warrants” means, collectively, the Closing Date Warrants, the Prepayment Fee
Warrants and any other warrants issued by BDSI to Agent or any Lender, each in
form and substance satisfactory to Agent and Lenders.

[SIGNATURES APPEAR ON FOLLOWING PAGE(S)]

 

48

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Confidential Treatment Requested by BioDelivery Sciences International, Inc.,

Confidential treatment requested with respect to certain portions hereof denoted
with “***”

 

IN WITNESS WHEREOF, intending that this instrument constitute an instrument
executed and delivered under seal, the parties hereto have caused this Agreement
to be executed as of the Closing Date.

 

BORROWER: BIODELIVERY SCIENCES INTERNATIONAL, INC. By:  

/s/ Mark A. Sirgo

  (SEAL) Name:   Mark A. Sirgo   Title:   President and Chief Executive Officer
  ARIUS PHARMACEUTICAL, INC. By:  

/s/ Mark A. Sirgo

  (SEAL) Name:   Mark A. Sirgo   Title:   President   ARIUS TWO, INC. By:  

/s/ Mark A. Sirgo

  (SEAL) Name:   Mark A. Sirgo   Title:   President  

 

1

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Confidential Treatment Requested by BioDelivery Sciences International, Inc.,

Confidential treatment requested with respect to certain portions hereof denoted
with “***”

 

AGENT:

MIDCAP FINANCIAL SBIC, LP,

as Agent for Lenders

By:   Midcap Financial SBIC GP, LLC   By:  

/s/ Colleen Kovas

  (SEAL)   Name:   Colleen Kovas     Title:   Its Authorized Signatory  
LENDERS: MIDCAP FINANCIAL SBIC, LP, By:   Midcap Financial SBIC GP, LLC   By:  

/s/ Colleen Kovas

  (SEAL)   Name:   Colleen Kovas     Title:   Its Authorized Signatory  

 

2

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Confidential Treatment Requested by BioDelivery Sciences International, Inc.,

Confidential treatment requested with respect to certain portions hereof denoted
with “***”

 

EXHIBITS AND SCHEDULES

EXHIBITS

 

Exhibit A

   Collateral

Exhibit B

   Form of Compliance Certificate

Exhibit C

   Credit Extension Form

Exhibit D

   Form of Secured Promissory Note

SCHEDULES

Credit Facility Schedule

Amortization Schedule (for each Credit Facility)

Post-Closing Obligations Schedule

Closing Deliveries Schedule

Disclosure Schedule

Intellectual Property Schedule

Products Schedule

Required Permits Schedule

Excluded Intellectual Property Collateral Schedule

ONSOLIS Disclosure Schedule

Affiliate Transaction Schedule

 

1

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Confidential Treatment Requested by BioDelivery Sciences International, Inc.,

Confidential treatment requested with respect to certain portions hereof denoted
with “***”

 

EXHIBIT A

COLLATERAL

The Collateral consists of all assets of Borrower, including all of Borrower’s
right, title and interest in and to the following personal property:

(a) all goods, Accounts (including health-care insurance receivables),
Equipment, Inventory, contract rights or rights to payment of money, leases,
license agreements, franchise agreements, General Intangibles, commercial tort
claims, documents, instruments (including any promissory notes), chattel paper
(whether tangible or electronic), cash, deposit accounts, investment accounts,
commodity accounts and other Collateral Accounts, all certificates of deposit,
fixtures, letters of credit rights (whether or not the letter of credit is
evidenced by a writing), securities, and all other investment property,
supporting obligations, and financial assets, whether now owned or hereafter
acquired, wherever located; and

(b) all Borrower’s Books relating to the foregoing, and any and all claims,
rights and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.

Notwithstanding the foregoing, the Collateral shall not include any Excluded
Intellectual Property Collateral of any Credit Party. For the avoidance of any
doubt, the Collateral shall include, and Agent shall have a Lien and security
interest in, (i) all IP Proceeds (as defined below), and (ii) all payments with
respect to IP Proceeds that are received after the commencement of a bankruptcy
or insolvency proceeding. The term “IP Proceeds” means, collectively, all cash,
Accounts, license and royalty fees, claims, products, awards, judgments,
insurance claims, and other revenues, proceeds or income, arising out of,
derived from or relating to any Excluded Intellectual Property Collateral of any
Credit Party, and any claims for damage by way of any past, present or future
infringement of any Excluded Intellectual Property Collateral of any Credit
Party (including, without limitation, all cash, royalty fees, other proceeds,
Accounts and General Intangibles that consist of rights of payment to or on
behalf of a Credit Party and the proceeds from the sale, licensing or other
disposition of all or any part of, or rights in, any Excluded Intellectual
Property Collateral by or on behalf of a Credit Party).

Pursuant to the terms of a certain negative pledge arrangement with Agent and
Lenders, Borrower has agreed not to encumber any of its Intellectual Property
without Agent’s and Lenders’ prior written consent.

 

1

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Confidential Treatment Requested by BioDelivery Sciences International, Inc.,

Confidential treatment requested with respect to certain portions hereof denoted
with “***”

 

EXHIBIT B

COMPLIANCE CERTIFICATE

 

TO:   MidCap Financial SBIC, LP, as Agent FROM:   BioDelivery Sciences
International, Inc., Arius Pharmaceuticals, Inc., and Arius Two, Inc. DATE:  
            , 201    

The undersigned authorized officer of BioDelivery Sciences, Inc., a Delaware
corporation, Arius Pharmaceuticals, Inc., a Delaware corporation, and Arius Two,
Inc., a Delaware corporation (collectively and in the singular, “Borrower”),
certifies that under the terms and conditions of the Credit and Security
Agreement between Borrower, Agent and the Lenders (as amended, restated,
supplemented, replaced or otherwise modified from time to time, the
“Agreement”):

(1) Borrower is in complete compliance with all required covenants for the month
ending             , 201    , except as noted below;

(2) there are no Events of Default;

(3) all representations and warranties in the Agreement are true and correct in
all material respects on this date except as noted below; provided, however,
that such materiality qualifier shall not be applicable to any representations
and warranties that already are qualified or modified by materiality in the text
thereof; and provided, further, that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date;

(4) Each of Borrower and the other Credit Parties has timely filed all required
tax returns and reports, and has timely paid all foreign, federal, state and
local taxes, assessments, deposits and contributions owed except as otherwise
permitted pursuant to the terms of the Agreement; and

(5) no Liens have been levied or claims made against Borrower or any of its
Subsidiaries relating to unpaid employee payroll or benefits of which Borrower
has not previously provided written notification to Agent.

Attached are the required documents supporting the certifications set forth in
this Compliance Certificate. The undersigned certifies, in his/her capacity as
an officer of the Borrower, that these are prepared in accordance with GAAP
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The undersigned acknowledges, in his/her
capacity as an officer of Borrower, that no borrowings may be requested at any
time or date of determination that Borrower is not in compliance with any of the
terms of the Agreement, and that compliance is determined not just at the date
this certificate is delivered. Capitalized terms used but not otherwise defined
herein shall have the meanings given them in the Agreement.

Please indicate compliance status by circling Yes/No under “Complies” column.

 

Reporting Covenant

  

Required

  

Complies

Monthly Unaudited Financial Statements    Monthly within 30 days    Yes    No
Audited Financial Statements    Annually within 120 days after FYE    Yes    No
Board Approved Projections    Annually within 45 days after FYE    Yes    No
Compliance Certificate    Monthly within 30 days    Yes    No

 

1

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Confidential Treatment Requested by BioDelivery Sciences International, Inc.,

Confidential treatment requested with respect to certain portions hereof denoted
with “***”

 

The following are the exceptions with respect to the certification above: (If no
exceptions exist, state “No exceptions to note.”)

 

 

 

 

 

 

 

BIODELIVERY SCIENCES       AGENT USE ONLY                INTERNATIONAL, INC.   
                            Received by:  

 

           AUTHORIZED SIGNER                By:  

 

      Date:  

 

   Name:  

 

                       Title:  

 

      Verified:  

 

           AUTHORIZED SIGNER                        Date:  

 

   ARIUS PHARMACEUTICALS, INC.                                Compliance Status:
                  Yes             No     By:  

 

                       Name:  

 

                       Title:  

 

                       ARIUS TWO, INC.                        By:  

 

                       Name:  

 

                       Title:  

 

                      

 

2

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EXHIBIT D

SECURED PROMISSORY NOTE

 

$20,000,000.00   July 5, 2013    

FOR VALUE RECEIVED, BIODELIVERY SCIENCES INTERNATIONAL, INC., a Delaware
corporation (“BDSI”), ARIUS PHARMACEUTICALS, INC., a Delaware corporation
(“API”), ARIUS TWO, INC., a Delaware corporation (“Arius Two”, and together with
BDSI and API, either individually or collectively as the context may require,
“Borrower”), hereby promises to pay to MIDCAP FINANCIAL SBIC, LP, a Delaware
limited partnership, or its permitted assigns (“Lender”), with an address of
7255 Woodmont Avenue, Suite 200, Bethesda, Maryland 20814, or such other place
of payment as the holder of this Secured Promissory Note (this “Note”) may
specify from time to time in writing, in lawful money of the United States of
America, the principal amount of Twenty Million and No/100 Dollars
($20,000,000.00), or so much thereof as Lender has advanced to Borrower, on the
dates, terms and conditions set forth in the Credit Agreement (as defined
below), together with interest thereon in accordance with the terms of and at
the rate or rates set forth in the Credit Agreement.

This Note is executed and delivered in connection with that certain Credit and
Security Agreement of even date herewith by and among Borrower, MidCap Financial
SBIC, LP, as agent for the lenders thereunder, Lender, and the other lenders
named therein from time to time (as the same may from time to time be amended,
modified, restated or supplemented in accordance with its terms, the “Credit
Agreement”), and is entitled to the benefit and security of the Credit Agreement
and the other Financing Documents (as defined in the Credit Agreement), to which
reference is made for a statement of all of the terms and conditions thereof.
This Note shall evidence Borrower’s obligation to repay all sums advanced by
Lender from time to time under the Credit Agreement and as part of a Credit
Facility thereunder. All terms defined in the Credit Agreement shall have the
same definitions when used herein, unless otherwise defined herein. All of the
terms, covenants, provisions, conditions, stipulations, promises and agreements
contained in the Financing Documents to be kept, observed and/or performed by
Borrower are made a part of this Note and are incorporated into this Note by
this reference to the same extent and with the same force and effect as if they
were fully set forth in this Note; Borrower promises and agrees to keep, observe
and perform them or cause them to be kept, observed and performed, strictly in
accordance with the terms and provisions thereof. In the event of any conflict
between this Note and the Credit Agreement, the Credit Agreement shall govern
and control.

All payments hereunder shall be made in accordance with the Credit Agreement,
without setoff, recoupment or deduction and regardless of any counterclaim or
defense. This Note shall become due and payable in full upon the Maturity Date.
An Event of Default under the Credit Agreement shall constitute a default under
this Note, and upon any such Event of Default, all principal and interest and
other obligations owing under this Note may be accelerated and declared
immediately due and payable as provided for in the Credit Agreement. All amounts
due hereunder are payable in the lawful currency of the United States of
America. Time is of the essence hereof. This Note may be voluntarily prepaid
only as permitted under the Credit Agreement.

Each Borrower hereby makes all waivers set forth in the Credit Agreement with
respect to the indebtedness evidenced by this Note. No variation or modification
of this Note, or any waiver of any of its provisions or conditions, shall be
valid unless such variation or modification is made in accordance with the
Credit Agreement. If any term, provision, covenant or condition of this Note or
the application of any term, provision, covenant or condition of this Note to
any party or circumstance shall be found by a court of competent jurisdiction to
be, to any extent, invalid or unenforceable, then the remainder of this Note and
the application of such term, provision, covenant, or condition to parties or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby, and each term, provision, covenant or condition
shall be valid and enforced to the fullest extent permitted by law. This Note
shall be binding upon each Borrower and its successors. No Borrower may assign
any of its rights or delegate any of its obligations under this Note, except as
may be permitted pursuant to the Credit Agreement. Each of the undersigned shall
be jointly and severally liable for all of the obligations of Borrower under
this Note.

 

3

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This Note has been negotiated and delivered to Lender and is payable in the New
York. The provisions of the Credit Agreement regarding choice of law,
jurisdiction, venue and jury trial waiver are incorporated herein and shall
govern this Note.

 

4

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IN WITNESS WHEREOF, intending to be legally bound, and intending that this
document shall constitute an instrument executed and delivered under seal,
Borrower, as of the day and year first above written, has caused this Note to be
executed and delivered under seal.

 

BIODELIVERY SCIENCES INTERNATIONAL, INC., a Delaware corporation By:  

 

  (SEAL) Name:     Title:    

ARIUS PHARMACEUTICALS, INC.,

a Delaware corporation

By:  

 

  (SEAL) Name:     Title:    

ARIUS TWO, INC.,

a Delaware corporation

By:  

 

  (SEAL) Name:     Title:    

 

1

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EXHIBIT C CREDIT EXTENSION FORM

DEADLINE IS NOON E.S.T.

Date:                 , 201    

 

LOAN ADVANCE:

 

Complete Outgoing Wire Request section below if all or a portion of the funds
from this loan advance are for an outgoing wire.

 

   

From Account #

 

 

    To Account #  

 

   

    (Loan Account #)

 

     

        (Deposit Account #)

 

Amount of Advance $

 

 

         

 

All Borrower’s representations and warranties in the Credit and Security
Agreement are true, correct and complete in all material respects on the date of
the request for an advance; provided, however, that such materiality qualifier
shall not be applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof; and provided, further,
that those representations and warranties expressly referring to a specific date
shall be true, accurate and complete in all material respects as of such date:

 

Authorized Signature:

 

 

    Phone Number:  

 

   

Print Name/Title:

 

 

                               

 

OUTGOING WIRE REQUEST:

 

Complete only if all or a portion of funds from the loan advance above is to be
wired.

 

Beneficiary Name:

 

 

          Amount of Wire: $  

 

   

Beneficiary Lender:

 

 

              Account Number:    

 

   

City and State:

 

 

           

 

Beneficiary Lender Transit (ABA) #:                     

 

 

Beneficiary Lender Code (Swift, Sort, Chip, etc.):                 

(For International Wire Only)

           

Intermediary Lender:                                

    Transit (ABA) #:  

 

   

 

For Further Credit to:

 

 

 

   

Special Instruction:

 

 

   

 

By signing below, I (we) acknowledge and agree that my (our) funds transfer
request shall be processed in accordance with and subject to the terms and
conditions set forth in the agreements(s) covering funds transfer service(s),
which agreements(s) were previously received and executed by me.

 

   

Authorized Signature:

 

 

    2nd Signature (if required):  

 

Print Name/Title:

 

 

    Print Name/Title:  

 

Telephone #:

 

 

          Telephone #:        

 

1

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CREDIT FACILITY SCHEDULE

The following Credit Facilities are specified on this Credit Facility Schedule:

Credit Facility #1:

Credit Facility and Type: Term

Lenders for and their respective Applicable Commitments to this Credit Facility:

 

Lender

   Applicable Commitment  

MidCap Financial SBIC, LP

   $ 20,000,000   

The following defined terms apply to this Credit Facility:

Applicable Interest Period: means the one-month period starting on the first
(1st) day of each month and ending on the last day of such month; provided,
however, that the first (1st) Applicable Interest Period for each Credit
Extension under this Facility shall commence on the date that the applicable
Credit Extension is made and end on the last day of such month.

Applicable Floor: means one-half of one percent (0.50%) per annum for the
Applicable Libor Rate.

Applicable Margin: a rate of interest equal to eight and 45/100 percent
(8.45%) per annum.

Applicable Prepayment Fee: means the following amount, calculated as of the date
(the “Accrual Date”) that the Applicable Prepayment Fee becomes payable in the
case of prepayments required under the Financing Documents or the date any
voluntary prepayment is made: (a) for an Accrual Date on or after the Closing
Date through and including the date which is twelve (12) months after the
Closing Date, five percent (5.0%) multiplied by the aggregate amount of the
Credit Extensions made under this Agreement (or, in the case of a partial
prepayment, multiplied by the product of the aggregate amount of the Credit
Extensions made under this Agreement and a fraction equal to the principal
amount of Credit Extensions being prepaid or required to be prepaid (whichever
is greater) divided by the aggregate amount of the Credit Extensions made under
this Agreement); (b) for an Accrual Date on or after the date which is twelve
(12) months after the Closing Date through and including the date immediately
preceding the Maturity Date three percent (3.0%) multiplied by the aggregate
amount of the Credit Extensions made under this Agreement (or, in the case of a
partial prepayment, multiplied by the product of the aggregate amount of the
Credit Extensions made under this Agreement and a fraction equal to the
principal amount of Credit Extensions being prepaid or required to be prepaid
(whichever is greater) divided by the aggregate amount of the Credit Extensions
made under this Agreement); provided, that, upon satisfaction of the conditions
set forth in Section 2.3(d) for prepayment of the Datalock Prepayable Amount,
and solely with respect to the prepayment of the Datalock Prepayable Amount, the
“Applicable Prepayment Fee” for such prepayment shall be either, at Borrower’s
election in its sole and absolute discretion, (x) delivery to Agent the
Prepayment Fee Warrant or (y) payment to Agent, for payment to each Lender in
accordance with its respective Pro Rata Share, a fee equal to two percent
(2.0%) of the Datalock Prepayable Amount.

Closed Period: not applicable.

Commitment Commencement Date: Closing Date.

Commitment Termination Date: the earliest to occur of (a) the close of the
second Business Day following the Closing Date, (b) an Event of Default, (c) the
existence of any Default, or (d) the Maturity Date.

Minimum Credit Extension Amount: $20,000,000.

 

1

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AMORTIZATION SCHEDULE (FOR EACH CREDIT FACILITY)

Credit Facility #1

Commencing on February 1, 2014, and continuing on the first day of each calendar
month thereafter, an amount equal to $666,666.67 per month.

 

Date

   Principal
Applied      Principal  

7/8/2013

        20,000,000.00   

8/1/2013

        20,000,000.00   

9/1/2013

        20,000,000.00   

10/1/2013

        20,000,000.00   

11/1/2013

        20,000,000.00   

12/1/2013

        20,000,000.00   

1/1/2014

        20,000,000.00   

2/1/2014

     666,666.67         19,333,333.33   

3/1/2014

     666,666.67         18,666,666.67   

4/1/2014

     666,666.67         18,000,000.00   

5/1/2014

     666,666.67         17,333,333.33   

6/1/2014

     666,666.67         16,666,666.67   

7/1/2014

     666,666.67         16,000,000.00   

8/1/2014

     666,666.67         15,333,333.33   

9/1/2014

     666,666.67         14,666,666.67   

10/1/2014

     666,666.67         14,000,000.00   

11/1/2014

     666,666.67         13,333,333.33   

12/1/2014

     666,666.67         12,666,666.67   

1/1/2015

     666,666.67         12,000,000.00   

2/1/2015

     666,666.67         11,333,333.33   

3/1/2015

     666,666.67         10,666,666.67   

4/1/2015

     666,666.67         10,000,000.00   

5/1/2015

     666,666.67         9,333,333.33   

 

1

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Date

   Principal
Applied      Principal  

6/1/2015

     666,666.67         8,666,666.67   

7/1/2015

     666,666.67         8,000,000.00   

8/1/2015

     666,666.67         7,333,333.33   

9/1/2015

     666,666.67         6,666,666.67   

10/1/2015

     666,666.67         6,000,000.00   

11/1/2015

     666,666.67         5,333,333.33   

12/1/2015

     666,666.67         4,666,666.67   

1/1/2016

     666,666.67         4,000,000.00   

2/1/2016

     666,666.67         3,333,333.33   

3/1/2016

     666,666.67         2,666,666.67   

4/1/2016

     666,666.67         2,000,000.00   

5/1/2016

     666,666.67         1,333,333.33   

6/1/2016

     666,666.67         666,666.67   

7/1/2016

     666,666.67         0.00   

 

2

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POST CLOSING OBLIGATIONS SCHEDULE

Borrower shall satisfy and complete each of the following obligations, or
provide Agent each of the items listed below, as applicable, on or before the
date indicated below, all to the satisfaction of Agent in its sole and absolute
discretion:

 

  1. ***

Borrower’s failure to complete and satisfy any of the above obligations on or
before the date indicated above, or Borrower’s failure to deliver any of the
above listed items on or before the date indicated above, shall constitute an
immediate and automatic Event of Default.

 

1

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CLOSING DELIVERIES SCHEDULE

 

1. duly executed original signatures to the Financing Documents to which
Borrower is a party.

 

2. duly executed original signatures to the Control Agreements with Wells Fargo
Bank, N.A.;

 

3. duly executed original Secured Promissory Notes in favor of MidCap in a face
amount of $20,000,000;

 

4. the Operating Documents of Borrower and good standing certificates of
Borrower certified by the Secretary of State of the state(s) of organization of
Borrower as of a date no earlier than thirty (30) days prior to the Closing
Date;

 

5. good standing certificates dated as of a date no earlier than thirty
(30) days prior to the Closing Date to the effect that Borrower is qualified to
transact business in all states in which the nature of Borrower’s business so
requires;

 

6. certified copies, dated as of a recent date, of financing statement searches,
as Agent shall request, accompanied by written evidence (including any UCC
termination statements) that the Liens indicated in any such financing
statements either constitute Permitted Liens or have been or, in connection with
the initial Credit Extension, will be terminated or released;

 

7. the Perfection Certificate executed by Borrower;

 

8. a legal opinion of Borrower’s counsel dated as of the Closing Date together
with the duly executed original signatures thereto;

 

9. evidence satisfactory to Agent that the insurance policies required by
Article 6 are in full force and effect, together with appropriate evidence
showing loss payable and/or additional insured clauses or endorsements in favor
of Agent, for the ratable benefit of the Lenders;

 

10. payment of the fees and expenses of Agent and Lenders then accrued,
including pursuant to the Fee Letters;

 

11. a duly executed original Secretary’s Certificate dated as of the Closing
Date which includes copies of the adopted and completed Borrowing Resolutions
for Borrower;

 

12. timely receipt by the Agent of an executed disbursement letter;

 

13. a certificate executed by a Responsible Officer of Borrower, in form and
substance satisfactory to Agent, which shall certify as to certain conditions to
the funding of the Credit Extensions on the Closing Date;

 

14. the Closing Date Warrant; and

 

15. evidence, in form and substance satisfactory to Agent, that notice, with
respect to the “Right of First Negotiation”, has been given to CDC in accordance
with Section E(4) of the CDC Securities Purchase Agreement and that CDC has
elected not to exercise such right.

 

1

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PRODUCTS SCHEDULE

 

1.

ONSOLIS®/BREAKYLTM

 

2. BUNAVAIL™

 

3.

BEMA® Buprenorphine

 

4. Topical Clonidine Gel

 

5. BEMA Granisetron

 

1

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REQUIRED PERMITS SCHEDULE

 

1. Bunavail

 

  •  

IND 110,267

 

2. Onsolis

 

  •  

IND 62,864 (Inactive)

 

3. BEMA Granisetron

 

  •  

IND 107,602 (Inactive)

 

4. Clonidine Gel

 

  •  

IND 78,606

 

1

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EXCLUDED INTELLECTUAL PROPERTY COLLATERAL SCHEDULE

Excluded Intellectual Property Collateral means:

The Company Intellectual Property, the Subject Product Agreements and the NDA
for the Product, but, in each case, only if and solely to the extent the Company
is either (i) prohibited from granting a security interest in the foregoing
pursuant to the CDC Agreement (as in effect on the Closing Date) or (ii) in the
case of the Company Know-How, NDA and Subject Product Agreements, required to
transfer its interest in such Company Know-How, NDA and Subject Product
Agreements to CDC pursuant to the CDC Agreement (as in effect on the Closing
Date); provided, that, for the avoidance of doubt, any transfer of interest in
the BEMA Intellectual Property or Know-How related to BEMA shall not be for more
than a non-exclusive right to use such BEMA Intellectual Property and Know-How
solely in connection with the Product and to the extent required pursuant to the
CDC Agreement (as in effect on the Closing Date).

For purposes of this Agreement:

“BEMA” means BioErodible MucoAdhesive.

“BEMA Intellectual Property” means the Company Patent Rights and Company
Trademark Rights relating to BEMA.

“Company” means the Borrower.

“Company Intellectual Property” means, collectively, the Company Know-How, the
Company Patent Rights and the Company Trademark Rights.

“Company Know-How” means any Know-How solely with respect to the Product that
either (a) is Controlled by Company, or (b) comes within Company’s Control,
including the BEMA Intellectual Property.

“Company Patent Rights” means the patents and patent applications listed on
Attachment A to the Excluded Intellectual Property Collateral Schedule.

“Company Trademark Rights” means the trademarks and trademark applications
listed on Attachment A to the Excluded Intellectual Property Collateral
Schedule.

“Compound” means fentanyl including without limitation metabolites or prodrugs
thereof, and any hydrates, conjugates, salts, esters, isomers, polymorphs or
analogues of any of the foregoing.

“Control” means, when used in reference to intellectual property, the possession
of the ability to grant a license or sublicense without (i) requiring the
consent of a third party or (ii) violating the terms of any agreement or other
arrangement with any third party.

“Know-How” means any information and materials, whether proprietary or not and
whether patentable or not, including without limitation ideas, concepts,
formulas, methods, procedures, designs, compositions, plans documents, data
(including all pre-clinical and clinical data), inventions, discoveries, works
of authorship, compounds and biological materials.

“NDA” means the New Drug Application 022-266 with respect to the Product,
including any supplements or amendments thereto.

“Product” means any product that contains the Compound either alone or in
combination with one or more other substances.

“Product License Agreements” mean (i) that certain LICENSE AND DEVELOPMENT
AGREEMENT, dated August 2, 2006, as amended, by and among BDSI, API, and MEDA
AB, (ii) that certain LICENSE AND DEVELOPMENT AGREEMENT, dated September 5,
2007, as amended, by and among BDSI, API, and MEDA

 

1

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AB, (ii) that certain LICENSE AND SUPPLY AGREEMENT, dated May 26, 2010, as
amended, by and among BDSI, API and KunWha Pharmaceutical Co., Ltd., and
(iv) that certain LICENSE AND SUPPLY AGREEMENT, dated October 4, 2010, as
amended, by and among BDSI, API and TTY Biopharm Co., Ltd.

“Product Supply Agreements” mean (i) that certain BEMA FENTANYL SUPPLY
AGREEMENT, dated August 2, 2006, as amended, by and among BDSI, API, and Meda
AB, (ii) that certain SUPPLY AGREEMENT, dated October 17, 2005, as amended, by
and between BDSI and Aveva Drug Delivery Systems, Inc., and (iii) that certain
MANUFACTURING, SUPPLY, AND LICENSE AGREEMENT, dated April 26, 2012, as amended,
by and among BDSI, API and LTS Lohmann Therapie-Systeme AG.

“Subject Product Agreements” means, collectively, the Product Supply Agreements
and the Product License Agreements.

 

2

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ATTACHMENT A

EXCLUDED INTELLECTUAL PROPERTY COLLATERAL SCHEDULE

 

Country

  Appln. No.   Status   Filing Date   Patent or
Trademark
No.   Issue Date   Expiration Date US   08/734519   Granted   18-Oct-1996  
5800832   01-Sep-1998   18-Oct-2016 US   09/144827   Granted   01-Sep-1998  
6159498   12-Dec-2000   18-Oct-2016 US   11/069089   Granted   01-Mar-2005  
7579019   25-Aug-2009   22-Jan-2020 US   13/886487   Pending   03-May-2013      
Austria   97 91 0117.7   Granted   16-Oct-1997   973497   11-Dec-2002  
16-Oct-2017 Austria   99 92 2753.1   Granted   29-Apr-1999   1079813  
09-Feb-2005   29-Apr-2019 Australia   9747574   Granted   16-Oct-1997   729516B
  17-May-2001   16-Oct-2017 Australia   200138924B2   Granted   13-May-2004  
769500   13-May-2004   16-Oct-2017 Australia   9939678   Granted   29-Apr-1999  
746339B   01-Aug-2002   29-Apr-2019 Belgium   97 91 0117.7   Granted  
16-Oct-1997   973497   11-Dec-2002   16-Oct-2017 Belgium   99 92 2753.1  
Granted   29-Apr-1999   1079813   09-Feb-2005   29-Apr-2019 Canada   2268187  
Granted   16-Oct-1997   2268187   05-Jun-2007   16-Oct-2017 Canada   2329128  
Granted   29-Apr-1999   2329128   18-Mar-2008   29-Apr-2019 Switzerland   97 91
0117.7   Granted   16-Oct-1997   973497   11-Dec-2002   16-Oct-2017 Switzerland
  99 92 2753.1   Granted   29-Apr-1999   1079813   09-Feb-2005   29-Apr-2019
Germany   97 91 0117.7   Granted   16-Oct-1997   973497   11-Dec-2002  
16-Oct-2017 Germany   99 92 2753.1   Granted   29-Apr-1999   1079813  
09-Feb-2005   29-Apr-2019 Denmark   97 91 0117.7   Granted   16-Oct-1997  
973497   11-Dec-2002   16-Oct-2017 Denmark   99 92 2753.1   Granted  
29-Apr-1999   1079813   09-Feb-2005   29-Apr-2019 EP   97910118   Granted  
16-Oct-1997   973497   11-Dec-2002   16-Oct-2017 EP   99922753   Granted  
29-Apr-1999   1079813   09-Feb-2005   29-Apr-2019 Spain   97 91 0117.7   Granted
  16-Oct-1997   973497   11-Dec-2002   16-Oct-2017 Spain   99 92 2753.1  
Granted   29-Apr-1999   1079813   09-Feb-2005   29-Apr-2019 Finland   99 92
2753.1   Granted   29-Apr-1999   1079813   09-Feb-2005   29-Apr-2019

 

3

--------------------------------------------------------------------------------

France   97 91 0117.7   Granted   16-Oct-1997   973497   11-Dec-2002  
16-Oct-2017 France   99 92 2753.1   Granted   29-Apr-1999   1079813  
09-Feb-2005   29-Apr-2019 U.K.   97 91 0117.7   Granted   16-Oct-1997   973497  
11-Dec-2002   16-Oct-2017 U.K.   99 92 2753.1   Granted   29-Apr-1999   1079813
  09-Feb-2005   29-Apr-2019 Greece   97 91 0117.7   Granted   16-Oct-1997  
973497   11-Dec-2002   16-Oct-2017 Greece   99 92 2753.1   Granted   29-Apr-1999
  1079813   09-Feb-2005   29-Apr-2019 Ireland   97 91 0117.7   Granted  
16-Oct-1997   973497   11-Dec-2002   16-Oct-2017 Ireland   99 92 2753.1  
Granted   29-Apr-1999   1079813   09-Feb-2005   29-Apr-2019 Italy   97 91 0117.7
  Granted   16-Oct-1997   973497   11-Dec-2002   16-Oct-2017 Italy   99 92
2753.1   Granted   29-Apr-1999   1079813   09-Feb-2005   29-Apr-2019 Japan  
10-519467   Granted   16-Oct-1997   3964465   01-Jun-2007   16-Oct-2017 Japan  
2005-233505   Granted   29-Apr-1999   4619894   05-Nov-2010   29-Apr-2019
Luxembourg   99 92 2753.1   Granted   29-Apr-1999   1079813   09-Feb-2005  
29-Apr-2019 Netherlands   97 91 0117.7   Granted   16-Oct-1997   973497  
11-Dec-2002   16-Oct-2017 Netherlands   99 92 2753.1   Granted   29-Apr-1999  
1079813   09-Feb-2005   29-Apr-2019 Portugal   99 92 2753.1   Granted  
29-Apr-1999   1079813   09-Feb-2005   29-Apr-2019 Sweden   97 91 0117.7  
Granted   16-Oct-1997   973497   11-Dec-2002   16-Oct-2017 Sweden   99 92 2753.1
  Granted   29-Apr-1999   1079813   09-Feb-2005   29-Apr-2019 US   13/413,112  
Pending   06-Mar-2012       UAE   58/2009   Pending   21-Jan-2009      
Australia   2011205222   Pending   09-Aug-2011       Brazil   PI0714712-0  
Pending   21-Jan-2009       Canada   2658585   Granted   20-Jan-2009   2658585  
01-Mar-2011   23-Jul-2027 China   200780031908.7   Pending   26-Feb-2009      
EP   07796992.1   Pending   16-Feb-2009       Japan   2009-520865   Pending  
20-Jan-2009       India   7156/CHENP/2011   Pending   03-Oct-2011      

 

4

--------------------------------------------------------------------------------

Israel   220722   Pending   02-Jul-2012       Korea   10-2012-7018611   Pending
  16-Jul-2012       Mexico   MX/a/2009/000745   Granted   20-Jan-2009   297332  
22-Mar-2012   23-Jul-2027 Norway   20090278   Pending   19-Jan-2009      
New Zealand   594545   Granted   10-Aug-2011   594545   22-Mar-2013  
23-Jul-2027 Singapore   200900216-3   Granted   13-Jan-2009   149359  
15-Aug-2011   23-Jul-2027 Ukraine   a200901454   Granted   20-Feb-2009   96455  
10-Nov-2011   23-Jul-2027 South Africa   2009/00485   Granted   21-Jan-2009  
2009/00485   31-Aug-2011   23-Jul-2027 Hong Kong   09110161.3   Pending  
30-Oct-2009       AU   BEMA (1028272)   Granted   04-Nov-2004   1028272  
25-Apr-2005   N/A CTM   BEMA (4097416)   Granted   04-Nov-2004   4,097,416  
11-Oct-2007   N/A US   BEMA (77/291,656)   Granted   28-Sep-2007   3,623,813  
19-May-2009   N/A US   BEMA (78/424,675)   Granted   25-May-2004   3,473,621  
22-Jul-2008   N/A US   ONSOLIS (78/953,589)   Granted   16-Aug-2006   3,723,904
  08-Dec-2009   N/A

Trade Secrets and Know-How relating to BEMA-Fentanyl (e.g., Onsolis or Breakyl),
including any corresponding manufacturing processes.

 

5

--------------------------------------------------------------------------------

ONSOLIS DISCLOSURE SCHEDULE

On March 12, 2012 BDSI announced the postponement of the U.S. relaunch of BDSI’s
FDA-approved ONSOLIS® product until a product formulation could be modified to
address two appearance issues raised by FDA following an inspection of the Aveva
manufacturing facility where ONSOLIS® is produced. Subsequently during 2012, FDA
requested that BDSI identify, characterize and address the formation of
microscopic crystals and a slight fading of the color during the 24-month shelf
life of the product. FDA believes that the fading of the color in particular may
potentially confuse patients, necessitating a modification of the product and
product specifications before additional product can be manufactured and
distributed. Therefore, the U.S. re-launch and additional manufacturing of
ONSOLIS® was been postponed until such product appearance issues have been
resolved.

*  *  *

 

1

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AFFILIATES TRANSACTION SCHEDULE

BDSI has several business relationships with Accentia Biopharmaceuticals, Inc.
(“Accentia”) and its affiliates. Hopkins Capital Group II, LLC (“HCG II”), which
is controlled by Dr. Frank O’Donnell, Jr., BDSI’s Executive Chairman of the
Board and which owns a significant percentage of BDSI’s Common Stock as of the
Closing Date, is a significant stockholder of Accentia. In addition,
Dr. O’Donnell is also the Executive Chairman of Accentia. In addition, William
S. Poole, a director of BDSI, is also a director of Accentia. Also, James A.
McNulty, BDSI’s Secretary, Treasurer and CFO, is also Secretary and Treasurer of
Accentia and Chief Financial Officer of HCG II. BDSI does not have any projects
with Accentia at this time, nor did BDSI in any part of 2012.

Arius/TEAMM Distribution Agreement. On March 12, 2004, API (then a separate
company) entered into a Distribution Agreement pursuant to which it granted
exclusive marketing and sales rights in the United States to TEAMM
Pharmaceuticals, Inc. with respect to the Emezine™ product for the treatment of
nausea and vomiting. TEAMM was renamed Accentia Pharmaceuticals, Inc. in 2007
and is a wholly-owned subsidiary of Accentia. As part of this agreement, TEAMM
agreed to pay for the development costs of Emezine™. BDSI received development
cost reimbursements of $1.0 million in 2004 from Accentia in connection with
this agreement and an additional $300,000 in 2005 upon the acceptance of the
Emezine™ NDA for filing. On December 17, 2008, in conjunction with the Reckitt
Benckiser Healthcare (UK) Limited (“Reckitt”) termination of the Emezine™
agreement, the Arius TEAMM Distribution Agreement was terminated.

Emezine™ Settlement Agreement. On December 30, 2009, BDSI entered into a
Settlement Agreement (the “Settlement Agreement”) with Accentia, Arius and
TEAMM. The purpose of such agreement was to memorialize the terms and conditions
of a settlement between BDSI and Accentia of claims by TEAMM relating to the
Distribution Agreement between Arius and TEAMM. At the time the Distribution
Agreement was entered into, Arius was not affiliated with BDSI. Arius was
acquired by BDSI in August 2004. BDSI did not believe that Accentia’s claims had
merit, but BDSI also believed that the alternative of a protracted dispute would
be distracting, time consuming and costly. As such, BDSI elected to enter into
the Settlement Agreement.

The Settlement Agreement provides that BDSI and Accentia mutually release all
claims that either may have against each other and, in connection therewith,
BDSI will (a) pay $2.5 million to Accentia (paid to escrow in February 2010,
which was paid upon Accentia’s emergence from bankruptcy in November 2010) (the
“$2.5 Million Payment”) and (b) grant the following royalty rights (the “Product
Rights”) to Accentia with respect to BDSI’s BEMA® Granisetron product candidate
(“BEMA® Granisetron”) (or in the event it is not BEMA® Granisetron, BDSI’s third
product candidate (excluding BEMA® product containing buprenorphine) as to which
BDSI files an NDA, which, together with BEMA® Granisetron, the “Product”):
(i) 70/30 split between BDSI and Accentia, respectively) of royalty received if
a third party sells the Product and 85/15 split on net sales if BDSI sells the
Product; and (ii) BDSI will, from the sale of the Product, fully recover amounts
equal to (1) all internal and external worldwide development costs of the
Product (“Costs”) plus interest (measured on weighted average prime interest
rate from first dollar spent until Product launch) and (2) the $2.5 Million
Payment plus interest (measured on weighted average prime interest rate from the
time of payment until Product launch) before Accentia begins to receive its
split as described in (b) (i) above. In addition, pursuant to the Settlement
Agreement, BDSI received a warrant to purchase 2 million shares of Accentia’s
majority-owned subsidiary, Biovest. The Warrant will be exercisable immediately
and for a period of seven 7 years from the date of issuance.

BSP. On November 30, 2000, BDSI entered into an agreement with Biotech Specialty
Partners, LLC (“BSP”), then an emerging alliance of early stage biotechnology
and specialty pharmaceutical companies. BSP to date has not distributed any
pharmaceutical products. Under this agreement, BSP will serve as a nonexclusive
distributor of our products in consideration of a ten (10%) percent discount to
the wholesale price, which BDSI’s board of directors has determined to be
commercially reasonable. BSP has waived its rights under this agreement with
respect to products which include the BEMA® technology. HCG is an equity owner
of, and Dr. O’Donnell is a member of the management of, BSP.

 

1