Exhibit 10.1

 

EQUITY LINE OF CREDIT AGREEMENT

 

This EQUITY LINE OF CREDIT AGREEMENT (the “Agreement”) is made and entered into
as of the 3rd day of September 2004 (the “Execution Date”) and effective for all
purposes as of August 23, 2004 (the “Effective Date”) by and between Hopkins
Capital Group II, LLC (the “Investor”) and BioDelivery Sciences International,
Inc. (the “Company”).

 

WHEREAS, the Investor and the Company are parties to that certain Binding Letter
of Intent and Termination Agreement, dated August 23, 2004 (the “Binding Letter
Agreement”);

 

WHEREAS, the parties desire to amend and restate the Binding Letter Agreement in
its entirety and provide that, upon the terms and subject to the conditions
contained herein, the Company shall issue and sell to the Investor, from time to
time as provided herein, and the Investor shall purchase from the Company, up to
Four Million Dollars ($4,000,000) of the Company’s Series B Convertible
Preferred Stock, par value $.001 per share (the “Preferred Stock”) at a purchase
price per share of Preferred Stock of $4.25 (the “Purchase Price”); and

 

WHEREAS, such investments will be made in reliance upon the provisions of
Regulation D (“Regulation D”) of the Securities Act of 1933, as amended, and the
regulations promulgated thereunder (the “Securities Act”), and or upon such
other exemption from the registration requirements of the Securities Act as may
be available with respect to any or all of the investments to be made hereunder.

 

NOW, THEREFORE, the parties hereto agree as follows:

 

ARTICLE 1.

DEFINITIONS AND OTHER MATTERS

 

Section 1.1 Amendment and Restatement of Binding Letter Agreement. In accordance
with Section 4 of the Binding Letter Agreement, the Company and the Investor
hereby amend and restate, in its entirety, the Binding Letter Agreement
effective for all purposes as of the Effective Date and agree that the terms and
conditions of this Agreement shall govern the relationship of the Company and
the Investor from and as of the Effective Date, but solely with respect to the
Investor’s investment in the Preferred Stock and to the matters addressed in
this Agreement and the Binding Letter Agreement. The Investor and the Company
hereby confirm the termination of that certain Facility Loan Agreement, dated
August 2, 2004, by and between the Investor and the Company, in accordance with
the provisions of Section 1 of the Binding Letter Agreement.

 

Section 1.2 Incorporation of Recitals. It is expressly agreed that the recitals
to this Agreement are incorporated herein and made an operative part of this
Agreement.

 

Section 1.3 Defined Terms. As used in this Agreement, the following terms shall
have the following meanings. Other capitalized terms are defined elsewhere
herein

 

“Advance” shall mean the portion of the Commitment Amount requested by the
Company in the Advance Notice.

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“Advance Date” shall mean the date the Company is in receipt of the funds from
the Investor. No Advance Date shall be less than five (5) Business Days after an
Advance Notice Date.

 

“Advance Notice” shall mean a written notice to the Investor setting forth the
Advance amount that the Company requests from the Investor and the Advance Date.

 

“Advance Notice Date” shall mean each date the Company delivers to the Investor
an Advance Notice requiring the Investor to advance funds to the Company,
subject to the terms of this Agreement.

 

“Business Day” shall mean any day except Saturday, Sunday or any other day on
which commercial banks located in New York, New York are required by law or
otherwise to be closed for business.

 

“Capital Stock” shall mean: (a) any and all shares, interests, participations or
other equivalents of or interests in (however designated) corporate stock,
including shares of preferred or preference stock and (b) all equity or
ownership interests in any Person of any other type, including any securities
convertible into or exchangeable for any of the foregoing or any options,
warrants or other rights to subscribe for, purchase or acquire any of the
forgoing.

 

“COD” shall mean the Certificate of Designations, Preferences and Rights of the
Preferred Stock, in the form attached hereto as Exhibit A, dated and filed with
Secretary of State of Delaware as of the Execution Date.

 

“Commitment Amount” shall mean the aggregate amount of up to Four Million
Dollars ($4,000,000) which the Investor has agreed to provide to the Company in
order to purchase the Company’s Preferred Stock pursuant to the terms and
conditions of this Agreement.

 

“Commitment Period” shall mean the period commencing on the Effective Date and
expiring on the earliest to occur of: (i) the date on which the Investor shall
have made payment of Advances pursuant to this Agreement in the aggregate amount
of Four Million Dollars ($4,000,000) and (ii) March 31, 2006.

 

“Common Stock” shall mean the Company’s common stock, par value $.001 per share.

 

“Company Equity Securities” shall mean any Capital Stock of the Company or
options, warrants or other rights to acquire Capital Stock of the Company.

 

“Contractual Obligation” shall mean, as to any Person, any provision of any
security issued by such Person or of any contract, agreement, instrument or
other undertaking to which such Person is a party or by which it or any of its
property is bound.

 

“Conversion Stock” shall mean only those shares of Common Stock (or equity
securities of any successor to the Company, as the case may be), which may be
received by the Investor upon conversion of Preferred Stock in accordance with
the terms hereof and the COD.

 

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“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.

 

“Governmental Authority” shall mean any government or any state, department or
other political subdivision thereof, or any governmental body, agency, authority
or instrumentality in any jurisdiction exercising executive, legislative,
regulatory or administrative functions of or pertaining to government.

 

“NASD” shall mean the National Association of Securities Dealers, Inc.

 

“Person” shall mean an individual, a corporation, limited liability company, a
general or limited partnership, an association, a trust or other entity or
organization, including any Governmental Authority.

 

“Principal Market” shall mean the Nasdaq National Market, the Nasdaq SmallCap
Market, the American Stock Exchange, the OTC Bulletin Board or the New York
Stock Exchange, whichever is at the time the principal trading exchange or
market for the Common Stock.

 

“Requirement of Law” shall mean as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its material property or to which such
Person or any of its material property is subject.

 

“SEC” shall mean the Securities and Exchange Commission.

 

“SEC Documents” shall mean all filings made by the Company with the SEC under
the Securities Act and the Exchange Act, including all exhibits thereto.

 

ARTICLE 2.

ADVANCES

 

Section 2.1 Advances.

 

(a) General. Upon the terms and conditions set forth in this Agreement, on any
Advance Notice Date the Company may request an Advance by the Investor by the
delivery of an Advance Notice. The number of shares of Preferred Stock that the
Investor shall receive for each Advance shall be determined by dividing the
amount of the Advance by the Purchase Price. No fractional shares shall be
issued. Fractional shares shall be rounded to the next higher whole number of
shares. The aggregate maximum amount of all Advances that the Investor shall be
obligated to make under this Agreement shall not exceed the Commitment Amount.

 

(b) Acknowledgement of Prior Advance. The Company hereby acknowledges and agrees
that on August 23, 2004, Investor contributed $1,250,000 to the capital of the
Company (the “Initial Advance”) and that such Initial Advance shall be deemed an
Advance in consideration of shares of Preferred Stock properly made in
accordance with this Agreement and that the Commitment Amount as of the
Execution Date shall be reduced by such contributed amount. The Company agrees
to issue 294,118 shares of Preferred Stock to the Investor in consideration of
the Initial Advance.

 

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Section 2.2 Mechanics.

 

(a) Advance Notice. At any time during the Commitment Period, the Company may
deliver an Advance Notice to the Investor, subject to the conditions set forth
in this Agreement. The amount of each individual Advance made pursuant to this
Agreement shall not be less than $50,000 in any one (1) month period. The
aggregate amount of all Advances pursuant to this Agreement shall not exceed the
Commitment Amount.

 

(b) Date of Delivery of Advance Notice. An Advance Notice shall be deemed
delivered on the Business Day it is received by facsimile or email by the
Investor if such notice is received prior to 5:00 pm Eastern Time or the
immediately succeeding Business Day if it is received by facsimile or email
after 5:00 pm Eastern Time on a Business Day or at any time on a day which is
not a Business Day.

 

Section 2.3 Closings. The Investor shall deliver each Advance to the Company by
wire transfer of immediately available funds on the applicable Advance Date.
Within five (5) Business Days of each such Advance Date, the Company shall
deliver to the Investor the applicable number of shares of Preferred Stock (by
certificate or book entry or otherwise as may be agreed to by the Company and
Investor) representing the amount of the Advance by the Investor pursuant to
Section 2.1 herein, registered in the name of the Investor. In addition, on or
prior to the Advance Date, each of the Company and the Investor shall deliver to
each other all documents, instruments and writings required to be delivered by
either of them pursuant to this Agreement in order to implement and effect the
transactions contemplated herein. Neither the shares of Preferred Stock nor the
Conversion Shares thereunder so delivered share be registered with the SEC,
except as provided for in Section 6.1 hereof.

 

Section 2.4 Conditions to Advances. The Investor agrees to advance to the
Company the amount specified in any Advance Notice delivered by the Company
subject to the following conditions precedent and the other terms and conditions
set forth in this Agreement, each of which may be waived in the discretion of
the Investor (it being understood and agreed that the following conditions will
be deemed waived or satisfied by, respectively, the Investor and the Company in
connection with the Initial Advance):

 

(a) the COD shall have been filed with the Secretary of State of Delaware and
shall be in full force and effect;

 

(b) the shares of Conversion Stock underlying the shares of Preferred Stock
issued in connection with such Advance have been duly reserved for future
issuance on the books and records of the Company;

 

(c) the Company shall have obtained all material permits and qualifications
required by any applicable state for the offer and sale of the Preferred Stock,
or shall have the availability of exemptions therefrom. The sale and issuance of
the Preferred Stock shall be legally permitted by all laws and regulations to
which the Company is subject;

 

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(d) the Company shall have filed with the SEC in a timely manner all reports,
notices and other documents required of a “reporting company” under the Exchange
Act and applicable SEC regulations;

 

(e) each of the representations and warranties made by the Company pursuant to
this Agreement (or in any amendment, modification or supplement hereto or
thereto) shall, except to the extent that they relate to a particular date, be
true and correct in all material respects on and as of such date as if made on
and as of the applicable Advance Date; and

 

(f) the Company shall have complied with each and every covenant and agreement
applicable to it contained in this Agreement as of the applicable Advance Date.

 

ARTICLE 3.

REPRESENTATIONS AND WARRANTIES OF INVESTOR

 

Investor hereby represents and warrants to, and agrees with, the Company that
the following are true and as of the date hereof and as of each Advance Date:

 

Section 3.1 Organization and Authorization. The Investor is duly incorporated or
organized and validly existing in the jurisdiction of its incorporation or
organization and has all requisite power and authority to purchase and hold the
securities issuable hereunder. The decision to invest and the execution and
delivery of this Agreement by such Investor, the performance by such Investor of
its obligations hereunder and the consummation by such Investor of the
transactions contemplated hereby have been duly authorized and requires no other
proceedings on the part of the Investor. The Investor has the right, power and
authority to execute and deliver this Agreement and all related instruments.
This Agreement has been duly executed and delivered by the Investor and,
assuming the execution and delivery hereof and acceptance thereof by the
Company, will constitute the legal, valid and binding obligations of the
Investor, enforceable against the Investor in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ rights generally
and except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law)

 

Section 3.2 Accredited Investor. The Investor is an “accredited investor” within
the meaning of Rule 501 promulgated under the Securities Act.

 

Section 3.3 Investment Experience; Access; Investigation.

 

(a) Access to Information. The Investor, in making its investment decision
hereunder, represents that: (a) it has read, reviewed and relied solely on the
publicly available information concerning the Company and any independent
investigation made by it and its representatives, if any; (b) it has been
afforded an opportunity to request from the Company to review, and has received,
all additional information requested from the Company, (c) it acknowledges that
no person has been authorized to give any information or to make any
representation concerning the Company or the Preferred Stock, other than as
contained in this Agreement, and if given or made, any such other information or
representation has not been relied upon as having been authorized by the
Company.

 

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(b) Reliance on Own Advisors. The Investor has relied completely on the advice
of, or has consulted with, its own tax, investment, legal or other advisors and
has not relied on the Company, or any of its officers, directors, attorneys,
accountants, representatives, agents, advisors for any advice.

 

(c) Capability to Evaluate. The Investor has such knowledge and experience in
financial and business matters, either directly or through its representatives
or advisors, that it is capable of evaluating the merits and risks of the
prospective investment, which risks are substantial.

 

(d) Ability to Bear Economic Risk. The Investor understands and acknowledges
that an investment in the Preferred Stock and the Conversion Stock involves a
high degree of risk. The Investor acknowledges that it has the ability to bear
the economic risk of its investment pursuant to this Agreement.

 

(e) Investment; No Distribution. The Investor is acquiring the Preferred Stock
and the Conversion Stock solely for the Investor’s own account for investment
purposes as a principal and not with a view to the resale or distribution of all
or any part thereof. The Investor is aware that there may be legal and practical
limits on the Investor’s ability to sell or dispose of the any of the Preferred
Stock and the Conversion Stock and, therefore, that the Investor must bear the
economic risk of its investment for an indefinite period of time. The Investor
acknowledges that it is possible that the Investor may incur a total loss of its
investment. The Investor has adequate means of providing for the Investor’s
current needs and possible contingencies and does not have a need for liquidity
of this investment. The Investor’s commitment to illiquid investments, including
the investments provided for herein, is reasonable in relation to the Investor’s
net worth.

 

(f) No General Solicitation. None of the Preferred Stock or the Conversion Stock
were offered to the Investor through, and the Investor is not aware of, any form
of general solicitation or general advertising with respect to this Agreement
and the transactions contemplated hereby, including, without limitation: (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television, radio or via
the Internet, and (ii) any seminar or meeting whose attendees have been invited
by any general solicitation or general advertising. The Investor further
understands that the Company is relying in part on this representation to ensure
compliance with the Securities Act.

 

Section 3.4 Trading Activities. The Investor’s trading activities with respect
to the Company’s Common Stock has and shall be in compliance with all applicable
federal and state securities laws, rules and regulations and the rules and
regulations of the Principal Market on which the Common Stock is listed or
traded. Neither the Investor nor its affiliates has an open short position in
the Common Stock of the Company and the Investor shall not and will cause its
affiliates not to engage in any short sale as defined in any applicable SEC or
NASD rules on any hedging transactions with respect to the Common Stock. Without
limiting the foregoing, the Investor agrees not to engage in any naked short
transactions (or an offsetting long position) during the Commitment Period.

 

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Section 3.5 Brokers. No broker or finder has acted for the Investor in
connection with this Agreement or the transactions contemplated thereby, and no
broker or finder is entitled to any brokerage or finder’s fees or other
commission in respect of such transactions based in any way on agreements,
arrangements or understandings made by or on behalf of the Investor.

 

ARTICLE 4.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Except in each case as provide for in the SEC Documents, the Company hereby
represents, warrants and covenants to the Investor as of the date hereof and
each Advance Date that:

 

Section 4.1 Existence. The Company: (a) is duly organized, validly existing and
in good standing under the laws of the State of Delaware and (b) has the power
and authority, and the legal right, to own and operate its property, to lease
the property it operates as lessee and to conduct the business in which it is
currently engaged.

 

Section 4.2 Power; Authorization; Enforceable Obligations. The Company: (i) has
the power and authority, and the legal right, to make, deliver and perform this
Agreement and to issued the Preferred Stock hereunder, (ii) has taken all
necessary action to authorize the execution, delivery and performance of this
Agreement, and the issuance of the Preferred Stock on the terms and conditions
of this Agreement and the conversion of the Preferred Stock for shares of Common
Stock on the terms and under the circumstances provided for herein. Except as
has been disclosed to the Investor, no consent or authorization of, filing with,
notice to or other similar act by or in respect of, any Governmental Authority
or any other Person is required to be obtained or made by or on behalf of the
Company in connection with the execution, delivery, performance, validity or
enforceability of this Agreement, the issuance of the Preferred Stock or the
conversion of the Preferred Stock plus accrued dividends thereon for shares of
Conversion Stock on the terms and under the circumstances provided for herein
and in the COD. This Agreement has been duly executed and delivered by the
Company. This Agreement constitutes the legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ rights generally
and except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).

 

Section 4.3 No Legal or Contractual Bar. Except as previously disclosed to the
Investor, the execution, delivery and performance of this Agreement by the
Company, the issuance of the Preferred Stock hereunder and the use of the
proceeds thereof by the Company and the conversion of the Preferred Stock plus
accrued dividends for shares of Conversion Stock under the circumstances
provided for herein: (a) do not and will not violate any Requirement of Law or
Contractual Obligation of the Company or permit the acceleration of any
obligation of the Company pursuant to any such Contractual Obligation and (b) do
not and will not result in, or require, the creation or imposition of any lien
or encumbrance on any on the Company’s properties or revenues pursuant to any
such Requirement of Law or Contractual Obligation.

 

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Section 4.4 Litigation. Other than matters adequately covered by existing
insurance or for which the Company is indemnified (subject only to reasonable
and customary deductibles) there are no: (i) actions, suits or legal, equitable,
arbitrative or administrative proceedings pending, or to the knowledge of the
Company, threatened against the Company or (ii) judgments, injunctions, writs,
rulings or orders by any Governmental Authority against the Company.

 

Section 4.5 Certain Regulations. The Company is not (a) an “investment company,”
or a company “controlled” by an “investment company,” within the meaning of the
Investment Company Act of 1940; or (b) a “holding company,” or an “affiliate” of
a “holding company” or a “Subsidiary company” of a “holding company,” within the
meaning of the Public Utility Holding Company Act of 1935.

 

Section 4.6 Compliance with Laws. The Company has obtained all material
approvals required by any Governmental Authority to carry on its business as now
being conducted. Each of such approvals is in full force and effect and the
Company is in compliance in all material respects with the terms and conditions
of such approvals, and is also in compliance in all material respects with all
other provisions of any applicable environmental law.

 

Section 4.7 Brokers. No broker or finder has acted for the Company in connection
with this Agreement or the transactions contemplated thereby, and no broker or
finder is entitled to any brokerage or finder’s fees or other commission in
respect of such transactions based in any way on agreements, arrangements or
understandings made by or on behalf of the Company.

 

ARTICLE 5.

INDEMNIFICATION

 

Section 5.1 Indemnification.

 

(a) In consideration of the Investor’s execution and delivery of this Agreement,
and in addition to all of the Company’s other obligations under this Agreement,
the Company shall defend, protect, indemnify and hold harmless the Investor, and
all of its officers, directors, partners, employees and agents (collectively,
the “Investor Indemnitees”) from and against any and all actions, causes of
action, suits, claims, losses, costs, penalties, fees, liabilities and damages,
and expenses in connection therewith (irrespective of whether any such Investor
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys’ fees and disbursements (the
“Indemnified Liabilities”), incurred by the Investor Indemnitees or any of them
as a result of, or arising out of, or relating to: (a) any misrepresentation or
breach of any representation or warranty made by the Company in this Agreement
or any other certificate, instrument or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement or obligation of the Company contained
in this Agreement or any other certificate, instrument or document contemplated
hereby or thereby, or (c) any cause of action, suit or claim brought or made
against such Investor Indemnitee not arising out of any action or inaction of an
Investor Indemnitee, and arising out of or resulting from the execution,
delivery, performance or enforcement of this Agreement or any other

 

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instrument, document or agreement executed pursuant hereto by any of the
Investor Indemnitees. To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities, which is permissible under applicable law.

 

(b) In consideration of the Company’s execution and delivery of this Agreement,
and in addition to all of the Investor’s other obligations under this Agreement,
the Investor shall defend, protect, indemnify and hold harmless the Company and
all of its officers, directors, shareholders (other than the Investor),
employees and agents (collectively, the “Company Indemnitees”) from and against
any and all Indemnified Liabilities incurred by the Company Indemnitees or any
of them as a result of, or arising out of, or relating to: (a) any
misrepresentation or breach of any representation or warranty made by the
Investor in this Agreement or any instrument or document contemplated hereby or
thereby executed by the Investor, (b) any breach of any covenant, agreement or
obligation of the Investor(s) contained in this Agreement or any other
certificate, instrument or document contemplated hereby or thereby executed by
the Investor, or (c) any cause of action, suit or claim brought or made against
such Company Indemnitee based on misrepresentations or due to a breach by the
Investor and arising out of or resulting from the execution, delivery,
performance or enforcement of this Agreement or any other instrument, document
or agreement executed pursuant hereto by any of the Company Indemnitees. To the
extent that the foregoing undertaking by the Investor may be unenforceable for
any reason, the Investor shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities, which is permissible under
applicable law.

 

(c) The obligations of the parties to indemnify or make contribution under this
Section 5.1 shall survive termination of this Agreement.

 

ARTICLE 6.

OTHER AGREEMENTS AND COVENANTS OF THE COMPANY

 

Section 6.1 Piggyback Registration Rights. The Investor shall have the following
rights with respect to any shares of Conversion Stock received or to be received
by the Investor upon conversion of the shares of Preferred Stock owned by the
Investor as provided for herein:

 

(a) Whenever the Company proposes to register any Company Equity Securities
under the Securities Act (other than pursuant to a registration statement on
Form S-4, Form S-8 or any successor form) and the registration statement form to
be used may be used for the registration of shares of Conversion Stock (such
shares of Conversion Stock only, and no other shares of Capital Stock held by
the Investor or its affiliates, are referred to herein as the “Registrable
Securities”), the Company shall give prompt written notice to the Investor of
its intention to effect such a registration. The Company shall include in such
registration and use commercially reasonable efforts to include in any
underwriting all shares of Registrable Securities held by the Investor with
respect to which the Company has received a written request from the Investor
for inclusion therein within 30 days after the receipt of the Company’s notice
(such registration, a “Piggyback Registration”).

 

(b) If a Piggyback Registration is an underwritten primary registration on
behalf of the Company, and the managing underwriters advise the Company in
writing that in

 

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their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold without materially and
adversely affecting the marketability of such offering or the timing thereof,
the Company shall include in such registration all Registrable Securities held
by the Investor on the condition that the Investor will agree to refrain from
selling a reasonable number of such Registrable Securities (as determined in
good faith by the Company based on the impact on the timing and marketability of
the offering of the sale immediate by the Investor of all of its Registrable
Securities) for a three (3) month period following the declaration of
effectiveness of the applicable registration statement.

 

(c) Whenever the Investor requests that any Registrable Securities be registered
pursuant to this Section 6.1, the Company shall use its commercially reasonable
efforts to effect the registration and the sale of such Registrable Securities
in accordance with the intended method of disposition thereof (subject in all
instances to the requirements of the Securities Act, the rules and regulations
promulgated thereunder, and all other applicable laws, rules and regulations),
and pursuant thereto the Company shall as expeditiously as possible take all
reasonable and customary actions necessary to effect such registration and sale.

 

(d) All expenses incident to the Company’s performance of or compliance with
this Section 6.1, including without limitation all registration and filing fees,
fees and expenses of compliance with securities or blue sky laws, printing
expenses, messenger and delivery expenses, fees and disbursements of custodians,
and fees and disbursements of counsel for the Company and all independent
certified public accountants, underwriters (excluding underwriting discounts and
commissions relating to the Registrable Securities) and other Persons retained
by the Company shall be borne by the Company.

 

(e) In connection with any registration statement in which the Investor is
participating pursuant to this Section 6.1, the Investor shall furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus.

 

Section 6.2 Corporate Existence. The Company will take all steps necessary to
preserve and continue the corporate existence of the Company.

 

Section 6.3 Issuance of the Company’s Preferred Stock. The sale of the shares of
Preferred Stock shall be made in accordance with the provisions and requirements
of Regulation D and any applicable state securities law.

 

ARTICLE 7.

AFFIRMATIVE COVENANTS

 

The Company hereby agrees that, from and after the date hereof and so long as
any shares of Preferred Stock remain outstanding, the Company shall:

 

Section 7.1 Conduct of Business; Maintenance of Existence; Compliance with Laws.
Continue to engage in business of the same general type as conducted by the
Company on the Closing Date, and preserve, renew and keep in full force and
effect its corporate existence and take all reasonable action to maintain all
rights, privileges and franchises necessary or desirable in the normal conduct
of the business of the Company. The Company shall do or cause to be

 

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done all things necessary to ensure compliance by the Company in all material
respects with all applicable statutes, regulations and orders of, and all
applicable restrictions imposed by, any Governmental Authority (including those
with jurisdiction over matters pertaining to the environment and hazardous
materials).

 

Section 7.2 Maintenance of Properties and Books and Records. (a) Maintain,
preserve, protect and keep its material properties in good repair, working order
and condition (ordinary wear and tear excepted), and make reasonable, necessary
and proper repairs, renewals and replacements so that its business carried on in
connection therewith may be properly conducted at all times consistent with its
past practices, and (b) maintain a standard system of accounting that enables it
timely to produce financial statements in accordance with GAAP.

 

Section 7.3 Maintenance of Insurance. Maintain insurance with responsible and
reputable insurance companies or associations in such amounts and covering such
risks as is usually carried by companies of similar size engaged in similar
businesses and owning similar properties in the same general areas in which the
Company operates.

 

ARTICLE 8.

MISCELLANEOUS

 

Section 8.1 Amendments. This Agreement and any terms hereof may not be amended,
supplemented or modified except pursuant to a writing signed by both the
Investor and the Company.

 

Section 8.2 Notices. All notices, requests and demands to or upon the respective
parties hereto to be effective shall be in writing (including by facsimile
transmission), and, unless otherwise expressly provided herein, shall be deemed
to have been duly given or made when delivered: (a) by hand, upon receipt or (b)
three (3) days after being deposited in the mail, postage prepaid, or (c) in the
case of a facsimile transmission notice, when received (with confirmation of
receipt), or (d) in the case of delivery by a nationally recognized overnight
courier, when received, in each case addressed to such addresses or fax number
as may be hereafter notified by the respective parties hereto.

 

Section 8.3 No Third Party Beneficiaries. This Agreement does not create, and
shall not be construed as creating, any rights enforceable by any person or
entity not a party hereto.

 

Section 8.4 Waiver. Any waiver or any breach of any of the terms or conditions
of this Agreement shall not operate as a waiver of any other breach of such
terms or conditions or of any other term or condition, nor shall any failure to
insist upon strict performance or to enforce any provision hereof on any one
occasion operate as a waiver of such provision or of any other provision hereof
or a waiver of the right to insist upon strict performance or to enforce such
provision or any other provision on any subsequent occasion. Any waiver must be
in writing.

 

Section 8.5 Successors and Assigns. The Company may not assign its rights or
obligations under this Agreement without the consent of the Investor. This
Agreement shall be binding upon and inure to the benefit of the Company and the
Investor and their respective successors and permitted assigns.

 

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Section 8.6 Further Assurances. Each party hereto, at the reasonable request of
the other party hereto, shall execute and deliver such other instruments and do
and perform such other acts and things as may be necessary or desirable for
effecting completely the consummation of this Agreement and the transactions
contemplated hereby.

 

Section 8.7 Captions. The captions of the Sections and Articles of this
Agreement have been inserted for convenience only and shall have no substantive
effect.

 

Section 8.8 Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

 

Section 8.9 Governing Law. This Agreement and any note and the rights and
obligations of the parties under this Agreement shall be governed by, and
construed and interpreted in accordance with, the internal laws of the State of
New Jersey without regard to any conflicts of law provisions thereof.

 

Section 8.10 Waiver of Jury Trial. To the extent not prohibited by applicable
law which cannot be waived, each of the Company and the Investor hereby waives,
and covenants that it will not assert (whether as plaintiff, defendant or
otherwise), any right to trial by jury in any forum in respect of any issue,
claim, demand, action, or cause of action arising out of or based upon this
Agreement, the subject matter hereof, any note or the subject matter thereof, in
each case whether now existing or hereafter arising and whether in contract or
tort or otherwise. Each of the Company and the Investor acknowledge that it has
been informed by the other parties hereto that the provisions of this section
constitute a material inducement upon which such other parties have relied, are
relying and will rely in entering into this Agreement. Any party may file an
original counterpart or a copy of this section with any court as written
evidence of the consent of the Company and the Investor to the waiver of its
rights to trial by jury.

 

Section 8.11 Counterparts. This Agreement may be executed in any number of
counterparts (including by facsimile), each of which when so executed shall be
deemed to be an original and all of which counterparts together shall constitute
one and the same instrument.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered on their behalf as of the date first above written.

 

INVESTOR: HOPKINS CAPITAL GROUP II, LLC

By:

 

/s/ Francis E. O’Donnell, Jr.

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Name:

 

Francis E. O’Donnell, Jr.

Title:

 

Manager

COMPANY: BIODELIVERY SCIENCES INTERNATIONAL, INC.

By:

 

/s/ James A. McNulty

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Name:

 

James A. McNulty

Title:

 

Secretary, Treasurer and Chief Financial Officer

 

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