Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement, dated on and as of the date set forth on the
signature page hereto (this “Agreement”), is made between BioDelivery Sciences
International, Inc., a corporation organized under the laws of the State of
Delaware (the “Company”) and CDC IV, LLC, a limited liability company organized
under the laws of the State of Delaware (the “Purchaser”) and any assignee of
Purchaser who becomes a party hereto.

WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
“Securities Act”) and Regulation D promulgated thereunder, the Company desires
to offer, issue and sell to the Purchaser (the “Offering”), and the Purchaser
desires to purchase from the Company, shares (the “Shares”) of the Company’s
common stock, par value $0.001 per share (the “Common Stock”), and warrants to
purchase shares of Common Stock (the “Warrants”), with an exercise price per
share equal to $3.50. The Shares and the Warrants are collectively referred to
herein as the “Securities”.

NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement, and for other good and valuable consideration the
receipt and adequacy of which is hereby acknowledged, the Company and the
Purchaser agree as follows:

A. Subscription

(1) Subject to the conditions to closing set forth herein, the Purchaser hereby
irrevocably subscribes for and agrees to purchase Securities in exchange for the
payment by Purchaser of $4,166,666.66 and for amending that certain Clinical
Development and License Agreement, dated as of July 14, 2005, by and among the
Company, Arius Pharmaceuticals, Inc., a wholly-owned subsidiary of the Company
(“Arius”) and Purchaser, an assignee of Clinical Development Capital LLC (the
“Clinical Development and License Agreement”), to among other matters, remove
all payment obligations of Purchaser under Section 6.4 of that Clinical
Development and License Agreement and remove certain obligations of the Company
and Arius to make a $7,000,000 milestone payment to Purchaser under
Section 6.5.1 of that Clinical Development and License Agreement. The Securities
to be issued to the Purchaser hereunder shall consist of (i) 2,000,000 Shares,
and (ii) a Warrant to purchase 904,000 shares of Common Stock.

(2) For purposes of this Agreement, the “Offering Price” of the Shares shall be
$3.50 per Share.

(3) The purchase and sale shall take place at a closing mutually agreed upon by
the Company and the Purchaser (the “Closing”). In the event there is more than
one closing, the term “Closing” shall apply to each such closing unless
otherwise specified herein.

(4) The Company shall, at the Closing: (i) issue to the Purchaser stock
certificates representing 2,000,000 shares of Common Stock purchased at such
Closing under this Agreement; (ii) issue to the Purchaser a Warrant to purchase
904,000 shares of Common Stock;

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(iii) deliver to the Purchaser a duly executed Amended and Restated Registration
Rights Agreement, made and entered into as of the date of Closing, by and
between the Company and Purchaser (the “Amended and Restated Registration Rights
Agreement”); and (iv) cause to be delivered to the Purchaser an opinion of
Wyrick Robbins Yates & Ponton LLP substantially in the form of Exhibit A hereto
and reasonably acceptable to counsel for the Purchaser.

(5) The Purchaser acknowledges and agrees that this Agreement shall be binding
upon such Purchaser upon the execution and delivery to the Company, of such
Purchaser’s signed counterpart signature page to this Agreement.

(6) The Purchaser acknowledges and agrees that the purchase of Shares and
Warrants by such Purchaser pursuant to the Offering is subject to all the terms
and conditions set forth in this Agreement.

B. Representations and Warranties of the Purchaser

The Purchaser hereby represents and warrants to the Company, and agrees with the
Company as follows:

(1) The Purchaser has carefully read this Agreement and the form of Warrant
attached hereto as Exhibit B (collectively the “Offering Documents”), and is
familiar with and understands the terms of the Offering. Specifically, and
without limiting in any way the foregoing representation, the Purchaser has
carefully read and considered the Company’s financial statements included in the
Company’s annual report on Form 10-KSB for the fiscal year ended December 31,
2005 (the “Form 10-KSB”), the subsection of the Form 10-KSB entitled
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations,” the section of the Form 10-KSB entitled “Item 1. Business,” the
financial results contained in each of the Company’s quarterly reports on Form
10-QSB for each of the periods ending subsequent to December 31, 2005, and the
subsection of each such Form 10-QSB entitled “Management’s Discussion and
Analysis of Financial Condition and Results of Operations,” and fully
understands all of the risks related to the purchase of the Securities. The
Purchaser has carefully considered and has discussed with the Purchaser’s
professional legal, tax, accounting and financial advisors, to the extent the
Purchaser has deemed necessary, the suitability of an investment in the
Securities for the Purchaser’s particular tax and financial situation and has
determined that the Securities being subscribed for by the Purchaser are a
suitable investment for the Purchaser. The Purchaser recognizes that an
investment in the Securities involves substantial risks, including the possible
loss of the entire amount of such investment.

(2) The Purchaser acknowledges that (i) the Purchaser has had the opportunity to
request copies of any documents, records, and books pertaining to this
investment and (ii) any such documents, records and books that the Purchaser
requested have been made available for inspection by the Purchaser, the
Purchaser’s attorney, accountant or advisor(s).

(3) The Purchaser and the Purchaser’s advisor(s) have had a reasonable
opportunity to ask questions of and receive answers from representatives of the
Company or persons acting on behalf of the Company concerning the Offering and
all such questions have been answered to the full satisfaction of the Purchaser.

 

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(4) The Purchaser is not subscribing for Securities as a result of or subsequent
to any advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio or
presented at any seminar, meeting or conference whose attendees have been
invited by any general solicitation or general advertising.

(5) The Purchaser has sufficient knowledge and experience in financial, tax and
business matters to enable the Purchaser to utilize the information made
available to the Purchaser in connection with the Offering, to evaluate the
merits and risks of an investment in the Securities and to make an informed
investment decision with respect to an investment in the Securities on the terms
described in the Offering Documents.

(6) The Purchaser will not sell or otherwise transfer the Securities without
registration under the Securities Act of 1933, as amended (the “Securities Act”)
and applicable state securities laws or an applicable exemption therefrom. The
Purchaser acknowledges that neither the offer nor sale of the Securities has
been registered under the Securities Act or under the securities laws of any
state. The Purchaser represents and warrants that the Purchaser is acquiring the
Securities for the Purchaser’s own account, for investment and not with a view
toward resale or distribution within the meaning of the Securities Act. The
Purchaser has not offered or sold the Securities being acquired nor does the
Purchaser have any present intention of selling, distributing or otherwise
disposing of such Securities either currently or after the passage of a fixed or
determinable period of time or upon the occurrence or non-occurrence of any
predetermined event or circumstances in violation of the Securities Act. The
Purchaser is aware that (i) the Securities are not currently eligible for sale
in reliance upon Rule 144 promulgated under the Securities Act and (ii) the
Company has no obligation to register the Securities subscribed for hereunder,
except as provided in the Amended and Restated Registration Rights Agreement.

(7) The Purchaser acknowledges that the certificates representing the Shares,
the Warrants and, upon the exercise of the Warrants, the shares of Common Stock
issuable upon exercise of the Warrants (the “Warrant Shares”), be stamped or
otherwise imprinted with a legend substantially in the following form:

The securities represented hereby have not been registered under the Securities
Act of 1933, as amended, or any state securities laws and neither the securities
nor any interest therein may be offered, sold, transferred, pledged or otherwise
disposed of except pursuant to an effective registration under such act or an
exemption from registration, which, in the opinion of counsel reasonably
satisfactory to this corporation, is available.

Certificates evidencing the Shares and the Warrant Shares shall not be required
to contain such legend or any other legend (i) following any sale of such Shares
or Warrant Shares pursuant to Rule 144, or (ii) if such Shares or Warrant Shares
are eligible for sale under Rule 144(k) or have been sold pursuant to the
Registration Statement (as hereafter defined), or (iii) such legend is not
required under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the Securities and
Exchange Commission), in each such case (i) through (iii) to the extent
reasonably determined by the

 

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Company’s legal counsel. At such time and to the extent a legend is no longer
required for the Shares or Warrant Shares, the Company will use its best efforts
to no later than five (5) trading days following the delivery by a Purchaser to
the Company or the Company’s transfer agent of a legended certificate
representing such Shares or Warrant Shares (together with such accompanying
documentation or representations as reasonably required by counsel to the
Company), deliver or cause to be delivered a certificate representing such
Shares or Warrant Shares that is free from the foregoing legend.

(8) The information contained in the purchaser questionnaire in the form of
Exhibit C attached hereto (the “Purchaser Questionnaire”) delivered by the
Purchaser in connection with this Agreement is complete and accurate in all
respects, and the Purchaser is an “accredited investor” as defined in Rule 501
of Regulation D under the Securities Act on the basis indicated therein. The
Purchaser shall indemnify and hold harmless the Company and each officer,
director or control person, who is or may be a party or is or may be threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of or arising from any actual or alleged misrepresentation or misstatement of
facts or omission to represent or state facts made or alleged to have been made
by the Purchaser to the Company or omitted or alleged to have been omitted by
the Purchaser, concerning the Purchaser or the Purchaser’s authority to invest
or financial position in connection with the Offering, including, without
limitation, any such misrepresentation, misstatement or omission contained in
the Agreement or any other document submitted by the Purchaser, against losses,
liabilities and expenses for which the Company or any officer, director or
control person has not otherwise been reimbursed (including attorney’s fees,
judgments, fines and amounts paid in settlement) actually and reasonably
incurred by the Company or such officer, director or control person in
connection with such action, suit or proceeding.

(9) The information contained in the selling stockholder questionnaire in the
form of Exhibit D attached hereto (the “Selling Stockholder Questionnaire”)
delivered by the Purchaser in connection with this Agreement is complete and
accurate in all respects.

C. Representations and Warranties of the Company

The Company hereby makes the following representations and warranties to the
Purchaser as of the date hereof and as of the date of Closing, which
representations and warranties shall survive the Closing and the purchase and
sale of the Securities.

(1) Organization, Good Standing and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has full corporate power and authority to conduct its
business as currently conducted. The Company is duly qualified to do business as
a foreign corporation and is in good standing in all jurisdictions in which the
character of the property owned or leased or the nature of the business
transacted by it makes qualification necessary, except where the failure to be
so qualified would not have a material adverse effect on the business,
properties, prospects, financial condition or results of operations of the
Company (a “Material Adverse Effect”).

 

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(2) Capitalization. The authorized capital stock of the Company consists of
50,000,000 shares of stock of all classes. The authorized capital stock is
divided into 45,000,000 shares of Common Stock, $0.001 par value per share and
5,000,000 shares of Preferred Stock, $0.001 par value per share (the “Preferred
Stock”). As of March 31, 2006, there were 11,943,637 shares of Common Stock
issued and outstanding and 1,988,235 shares of Preferred Stock issued and
outstanding. As of March 31, 2006, the Company had reserved 2,100,000 shares of
Common Stock for issuance to employees, directors and consultants pursuant to
the Company’s Stock Option Plan, of which 2,280,785 shares of Common Stock are
subject to outstanding, unexercised options as of such date. The Company has
outstanding publicly held warrants to purchase 2,085,000 shares of common stock
and warrants to purchase 1,948,765 shares of common stock issued. The Company
also has outstanding debt convertible into 1,839,091 shares of common stock.
Other than as set forth above or as contemplated in this Agreement, there are no
other options, warrants, calls, rights, commitments or agreements of any
character to which the Company is a party or by which either the Company is
bound or obligating the Company to issue, deliver, sell, repurchase or redeem,
or cause to be issued, delivered, sold, repurchased or redeemed, any shares of
the capital stock of the Company or obligating the Company to grant, extend or
enter into any such option, warrant, call, right, commitment or agreement.

(3) Issuance; Reservation of Shares. The issuance of the Shares has been duly
and validly authorized by all necessary corporate and stockholder action, and
the Shares, when issued and paid for pursuant to this Agreement, will be validly
issued, fully paid and non-assessable shares of Common Stock of the Company. The
issuance of the Warrants has been duly and validly authorized by all necessary
corporate and stockholder action, and the Warrant Shares, when issued upon the
due exercise of the Warrants, will be validly issued, fully paid and
non-assessable shares of Common Stock of the Company. The Company has reserved,
and will reserve, at all times that the Warrants remain outstanding, such number
of shares of Common Stock sufficient to enable the full exercise of the
Warrants.

(4) Authorization; Enforceability. The Company has all corporate right, power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. All corporate action on the part of the Company, its
directors and stockholders necessary for the authorization, execution, delivery
and performance of this Agreement by the Company, the authorization, sale,
issuance and delivery of the Securities contemplated herein and the performance
of the Company’s obligations hereunder has been taken. This Agreement has been
duly executed and delivered by the Company and constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms and subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies, and to
limitations of public policy. The issuance and sale of the Securities
contemplated hereby will not give rise to any preemptive rights or rights of
first refusal on behalf of any person.

(5) No Conflict; Governmental and Other Consents.

(a) The execution and delivery by the Company of this Agreement and the
consummation of the transactions contemplated hereby will not result in the
violation of any law, statute, rule, regulation, order, writ, injunction,
judgment or decree of any court or governmental

 

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authority to or by which the Company is bound, or of any provision of the
Certificate of Incorporation or Bylaws of the Company, and will not conflict
with, or result in a breach or violation of, any of the terms or provisions of,
or constitute (with due notice or lapse of time or both) a default under, any
lease, loan agreement, mortgage, security agreement, trust indenture or other
agreement or instrument to which the Company is a party or by which it is bound
or to which any of its properties or assets is subject, nor result in the
creation or imposition of any lien upon any of the properties or assets of the
Company except to the extent that any such violation, conflict or breach would
not be reasonably likely to have a Material Adverse Effect. No holder of any of
the securities of the Company or any of its Subsidiaries has any rights
(“demand,” “piggyback” or otherwise) to have such securities registered by
reason of the intention to file, filing or effectiveness of a Registration
Statement.

(b) No consent, approval, authorization or other order of any governmental
authority or other third-party is required to be obtained by the Company in
connection with the authorization, execution and delivery of this Agreement or
with the authorization, issue and sale of the Securities, except such
post-Closing filings as may be required to be made with the Securities and
Exchange Commission (the “SEC”), The NASDAQ Stock Market, Inc. (“NASDAQ”) and
with any state or foreign blue sky or securities regulatory authority.

(6) Litigation. There are no pending, or to the Company’s knowledge threatened,
legal or governmental proceedings against the Company, which, if adversely
determined, would be reasonably likely to have a Material Adverse Effect on the
Company. There is no action, suit, proceeding, inquiry or investigation before
or by any court, public board or body (including, without limitation, the SEC)
pending or, to the knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries wherein an unfavorable decision, ruling or
finding could adversely affect the validity or enforceability of, or the
authority or ability of the Company to perform its obligations under this
Agreement.

(7) Accuracy of Reports. All reports required to be filed by the Company within
the two years prior to the date of this Agreement (the “SEC Reports”) under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), have been
filed with the SEC, complied at the time of filing in all material respects with
the requirements of their respective forms and, except to the extent updated or
superseded by any subsequently filed report, including, without limitation, the
amendments to the Company’s annual report on Form 10-KSB for the year ended
December 31, 2005 and the quarterly reports on Form 10-QSB for each of the
periods subsequent to December 31, 2005, were complete and correct in all
material respects as of the dates at which the information was furnished, and
contained (as of such dates) no untrue statements of a material fact nor omitted
to state any material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.

(8) Financial Information. The Company’s financial statements that appear in the
SEC Reports have been prepared in accordance with United States generally
accepted accounting principles (“GAAP”), except in the case of unaudited
statements, as permitted by Form 10-QSB of the SEC or as may be indicated
therein or in the notes thereto, applied on a consistent basis throughout the
periods indicated and such financial statements fairly present in all material
respects the financial condition and results of operations of the Company as of
the dates and for the periods indicated therein.

 

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(9) Accounting Controls. The Company and each of its subsidiaries maintains a
system of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with management’s
general or specific authorization; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.

(10) Sarbanes-Oxley Act of 2002. The Company is, and will be, at all times
during the period the Company must maintain effectiveness of the Registration
Statement as provided herein, in compliance, in all material respects, with all
applicable provisions of the Sarbanes-Oxley Act of 2002 and all rules and
regulations promulgated thereunder or implementing the provisions thereof that
are in effect and is taking reasonable steps to ensure that it will be in
compliance with other applicable provisions of the Sarbanes-Oxley Act of 2002
not currently in effect upon the effectiveness of such provisions.

(11) Absence of Certain Changes. Since the date of the Company’s financial
statements in the latest of the SEC Reports, there has not occurred any
undisclosed event that has caused a Material Adverse Effect or any occurrence,
circumstance or combination thereof that reasonably would be likely to result in
such Material Adverse Effect.

(12) Investment Company. The Company is not an “investment company” within the
meaning of such term under the Investment Company Act of 1940, as amended, and
the rules and regulations of the SEC thereunder.

(13) Subsidiaries. To the extent required under applicable SEC rules, Exhibit
21.1 to the Form 10-KSB sets forth each subsidiary of the Company, showing the
jurisdiction of its incorporation or organization. For the purposes of this
Agreement, “subsidiary” shall mean any company or other entity of which at least
50% of the securities or other ownership interest having ordinary voting power
for the election of directors or other persons performing similar functions are
at the time owned directly or indirectly by the Company or any of its other
subsidiaries.

(14) Indebtedness. The financial statements in the SEC Reports reflect, to the
extent required, as of the date thereof all outstanding secured and unsecured
Indebtedness (as defined below) of the Company or any subsidiary, or for which
the Company or any subsidiary has commitments. For purposes of this Agreement,
“Indebtedness” shall mean (a) any liabilities for borrowed money or amounts owed
in excess of $50,000 (other than trade accounts payable incurred in the ordinary
course of business), (b) all guaranties, endorsements and other contingent
obligations in respect of Indebtedness of others, whether or not the same are or
should be reflected in the Company’s balance sheet (or the notes thereto),
except guaranties by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business; and
(c) the present value of any lease payments in excess of $50,000 due under
leases required to be capitalized in accordance with GAAP. Neither the Company
nor any subsidiary is in default with respect to any Indebtedness.

 

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(15) Certain Fees. No brokers’, finders’ or financial advisory fees or
commissions will be payable by the Company or any subsidiary with respect to the
transactions contemplated by this Agreement.

(16) Material Agreements. Except as set forth in the SEC Reports, neither the
Company nor any subsidiary is a party to any written or oral contract,
instrument, agreement, commitment, obligation, plan or arrangement, a copy of
which would be required to be filed with the SEC as an exhibit to Form 10-KSB
(each, a “Material Agreement”). The Company and each of its subsidiaries has in
all material respects performed all the obligations required to be performed by
them to date under the foregoing agreements, have received no notice of default
by the Company or the subsidiary that is a party thereto, as the case may be,
and, to the Company’s knowledge, are not in default under any Material Agreement
now in effect, the result of which would be reasonably likely to have a Material
Adverse Effect.

(17) Transactions with Affiliates. Except as set forth in the SEC Reports, there
are no loans, leases, agreements, contracts, royalty agreements, management
contracts or arrangements or other continuing transactions with aggregate
obligations of any party exceeding $60,000 between (a) the Company, any
subsidiary or any of their respective customers or suppliers on the one hand,
and (b) on the other hand, any person who would be covered by Item 404(a) of
Regulation S-K or any company or other entity controlled by such person.

(18) Taxes. The Company and each of the subsidiaries has prepared and filed all
federal, state, local, foreign and other tax returns for income, gross receipts,
sales, use and other taxes and custom duties (“Taxes”) required by law to be
filed by it, except for tax returns, the failure to file which, individually or
in the aggregate, do not and would not have a Material Adverse Effect on the
Company and its subsidiaries taken as a whole. Such filed tax returns are
complete and accurate, except for such omissions and inaccuracies which,
individually or in the aggregate, do not and would not have a Material Adverse
Effect on the Company and its subsidiaries taken as a whole. The Company and
each subsidiary has paid or made provisions for the payment of all Taxes shown
to be due on such tax returns and all additional assessments, and adequate
provisions have been and are reflected in the financial statements of the
Company and the subsidiaries for all current Taxes to which the Company or any
subsidiary is subject and which are not currently due and payable, except for
such Taxes which, if unpaid, individually or in the aggregate, do not and would
not have a Material Adverse Effect on the Company and its subsidiaries, taken as
a whole. None of the federal income tax returns of the Company or any subsidiary
for the past five years has been audited by the Internal Revenue Service. The
Company has not received written notice of any assessments, adjustments or
contingent liability (whether federal, state, local or foreign) in respect of
any Taxes pending or threatened against the Company or any subsidiary for any
period which, if unpaid, would have a Material Adverse Effect on the Company and
the subsidiaries taken as a whole.

(19) Insurance. The Company and its subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as the Company believes are prudent and customary in the businesses in
which the Company and its

 

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subsidiaries are engaged. Neither the Company nor any of its subsidiaries has
any reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business without an
increase in cost significantly greater than general increases in cost
experienced for similar companies in similar industries with respect to similar
coverage.

(20) Environmental Matters. Except as disclosed in the SEC Reports, all real
property owned, leased or otherwise operated by the Company and its subsidiaries
is free of contamination from any substance, waste or material currently
identified to be toxic or hazardous pursuant to, within the definition of a
substance which is toxic or hazardous under, or which may result in liability
under, any Environmental Law (as defined below), including, without limitation,
any asbestos, polychlorinated biphenyls, radioactive substance, methane,
volatile hydrocarbons, industrial solvents, oil or petroleum or chemical liquids
or solids, liquid or gaseous products, or any other material or substance
(“Hazardous Substance”) which has caused or would reasonably be expected to
cause or constitute a threat to human health or safety, or an environmental
hazard in violation of Environmental Law or to result in any environmental
liabilities that would be reasonably likely to have a Material Adverse Effect.
Neither the Company nor any of its subsidiaries has caused or suffered to occur
any release, spill, migration, leakage, discharge, disposal, uncontrolled loss,
seepage, or filtration of Hazardous Substances that would reasonably be expected
to result in environmental liabilities that would be reasonably likely to have a
Material Adverse Effect. The Company and each subsidiary has generated, treated,
stored and disposed of any Hazardous Substances in compliance with applicable
Environmental Laws, except for such non-compliances that would not be reasonably
likely to have a Material Adverse Effect. The Company and each subsidiary has
obtained, or has applied for, and is in compliance with and in good standing
under all permits required under Environmental Laws (except for such failures
that would not be reasonably likely to have a Material Adverse Effect) and
neither the Company nor any of its subsidiaries has any knowledge of any
proceedings to substantially modify or to revoke any such permit. There are no
investigations, proceedings or litigation pending or, to the Company’s
knowledge, threatened against the Company, any of its subsidiaries or any of the
Company’s or its subsidiaries’ facilities relating to Environmental Laws or
Hazardous Substances. “Environmental Laws” shall mean all federal, national,
state, regional and local laws, statutes, ordinances and regulations, in each
case as amended or supplemented from time to time, and any judicial or
administrative interpretation thereof, including orders, consent decrees or
judgments relating to the regulation and protection of human health, safety, the
environment and natural resources.

(21) Intellectual Property Rights and Licenses. The Company and its subsidiaries
own or have the right to use any and all information, know-how, trade secrets,
patents, copyrights, trademarks, trade names, software, formulae, methods,
processes and other intangible properties that are of a such nature and
significance to the business that the failure to own or have the right to use
such items would have a Material Adverse Effect (“Intangible Rights”). The
Company (including its subsidiaries) has not received any notice that it is in
conflict with or infringing upon the asserted intellectual property rights of
others in connection with the Intangible Rights, and, to the Company’s
knowledge, neither the use of the Intangible Rights nor the operation of the
Company’s businesses is infringing or has infringed upon any intellectual
property rights of others. All payments have been duly made that are necessary
to maintain the Intangible Rights in force. No claims have been made, and to the
Company’s knowledge, no claims are

 

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threatened, that challenge the validity or scope of any material Intangible
Right of the Company or any of its subsidiaries. The Company and each of its
subsidiaries have taken reasonable steps to obtain and maintain in force all
licenses and other permissions under Intangible Rights of third parties
necessary to conduct their businesses as heretofore conducted by them, and now
being conducted by them, and as expected to be conducted, and neither the
Company nor any of its subsidiaries is or has been in material breach of any
such license or other permission.

(22) Labor, Employment and Benefit Matters.

(a) There are no existing, or to the best of the Company’s knowledge, threatened
strikes or other labor disputes against the Company or any of its subsidiaries
that would be reasonably likely to have a Material Adverse Effect. There is no
organizing activity involving employees of the Company or any of its
subsidiaries pending or, to the Company’s or its subsidiaries’ knowledge,
threatened by any labor union or group of employees. There are no representation
proceedings pending or, to the Company’s or its subsidiaries’ knowledge,
threatened with the National Labor Relations Board, and no labor organization or
group of employees of the Company or its subsidiaries has made a pending demand
for recognition.

(b) Neither the Company nor any of its subsidiaries is, or during the five years
preceding the date of this Agreement was, a party to any labor or collective
bargaining agreement and there are no labor or collective bargaining agreements
which pertain to employees of the Company or its subsidiaries.

(c) Each employee benefit plan is in compliance with all applicable law, except
for such noncompliance that would not be reasonably likely to have a Material
Adverse Effect.

(d) Neither the Company nor any of its subsidiaries has any liabilities,
contingent or otherwise, including without limitation, liabilities for retiree
health, retiree life, severance or retirement benefits, which are not fully
reflected, to the extent required by GAAP, on the Balance Sheet or fully funded.
The term “liabilities” used in the preceding sentence shall be calculated in
accordance with reasonable actuarial assumptions.

(e) None of the Company nor any of its subsidiaries (i) has terminated any
“employee pension benefit plan” as defined in Section 3(2) of ERISA (as defined
below) under circumstances that present a material risk of the Company or any of
its subsidiaries incurring any liability or obligation that would be reasonably
likely to have a Material Adverse Effect, or (ii) has incurred or expects to
incur any outstanding liability under Title IV of the Employee Retirement Income
Security Act of 1974, as amended and all rules and regulations promulgated
thereunder (“ERISA”).

(23) Compliance with Law. The Company is in compliance in all material respects
with all applicable laws, except for such noncompliance that would not
reasonably be likely to have a Material Adverse Effect. The Company has not
received any notice of, nor does the Company have any knowledge of, any
violation (or of any investigation, inspection, audit or other proceeding by any
governmental entity involving allegations of any violation) of any applicable
law involving or related to the Company which has not been dismissed or
otherwise

 

10

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disposed of that would be reasonably likely to have a Material Adverse Effect.
The Company has not received notice or otherwise has any knowledge that the
Company is charged with, threatened with or under investigation with respect to,
any violation of any applicable law that would reasonably be likely to have a
Material Adverse Effect. Neither the Company nor any of its subsidiaries nor any
employee or agent of the Company or any subsidiary has made any contribution or
other payment to any official of, or candidate for, any federal, state or
foreign office in violation of any law. The Company and its directors, officers,
employees and agents have complied in all material respects with the Foreign
Corrupt Practices Act of 1977, as amended, and any related rules and
regulations.

(24) Ownership of Property. Except as set forth in the Company’s financial
statements included in the SEC Reports, each of the Company and its subsidiaries
has (i) good and marketable fee simple title to its owned real property, if any,
free and clear of all liens, except for liens which do not individually or in
the aggregate have a Material Adverse Effect; (ii) a valid leasehold interest in
all leased real property, and each of such leases is valid and enforceable in
accordance with its terms (subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies, and to
limitations of public policy) and is in full force and effect, and (iii) good
title to, or valid leasehold interests in, all of its other properties and
assets free and clear of all liens, except for liens disclosed in the SEC
Reports or which otherwise do not individually or in the aggregate have a
Material Adverse Effect.

(25) Compliance with NASDAQ Listing Requirements. The Company is in compliance
in all material respects with all currently effective NASDAQ continued listing
requirements and corporate governance requirements. The Company’s Common Stock
is registered pursuant to Section 12(g) of the Exchange Act and is listed on The
NASDAQ Stock Market, Inc. Capital Market (the “NASDAQ Capital Market”), trading
in the Common Stock has not been suspended, and the Company has taken no action
designed to, or likely to have the effect of, terminating the registration of
the Common Stock under the Exchange Act or de-listing the Common Stock from the
NASDAQ Capital Market, nor to the Company’s knowledge is the National
Association of Securities Dealers, Inc. (“NASD”) currently contemplating
terminating such listing. The Company and the Common Stock meet the criteria for
continued listing and trading on the NASDAQ Capital Market.

(26) Form S-3 Eligibility. As of the Closing Date, the Company is eligible to
register the Shares and the Warrant Shares for resale by the Purchaser on Form
S-3 promulgated under the Securities Act.

(27) No Integrated Offering. Assuming the accuracy of the Purchaser’s
representations and warranties set forth in Section B hereof, neither the
Company, nor any of its affiliates or other person acting on the Company’s
behalf has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security under circumstances that would cause
the Offering of the Securities to be integrated with prior offerings by the
Company for purposes of the Securities Act, when integration would cause the
Offering not to be exempt from the requirements of Section 5 of the Securities
Act.

 

11

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(28) General Solicitation. Neither the Company nor, its knowledge, any person
acting on behalf of the Company, has offered or sold any of the Securities by
any form of “general solicitation” within the meaning of Rule 502 under the
Securities Act. To the knowledge of the Company, no person acting on its behalf
has offered the Securities for sale other than to the Purchaser and certain
other “accredited investors” within the meaning of Rule 501 under the Securities
Act.

(29) No Manipulation of Stock. The Company has not taken and will not, in
violation of applicable law, take, any action designed to or that might
reasonably be expected to cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of the
Securities.

(30) No Registration. Assuming the accuracy of the representations and
warranties made by, and compliance with the covenants of, the Purchaser in
Section B hereof, no registration of the Securities under the Securities Act is
required in connection with the offer and sale of the Securities by the Company
to the Purchaser as contemplated by this Agreement.

(31) Form D. The Company agrees to file one or more Forms D with respect to the
Securities on a timely basis as required under Regulation D under the Securities
Act to claim the exemption provided by Rule 506 of Regulation D and to provide a
copy thereof to the Purchaser and their counsel promptly after such filing.

(32) Certain Future Financings and Related Actions. The Company will not sell,
offer to sell, solicit offers to buy or otherwise negotiate in respect of any
“security” (as defined in the Securities Act) that is or could be integrated
with the sale of the Securities in a manner that would require the registration
of the Securities under the Securities Act.

(33) Disclosure. The Company understands and confirms that the Purchaser will
rely on the foregoing representations in effecting transactions in securities of
the Company. All disclosure provided by the Company to the Purchaser regarding
the Company, its business and the transactions contemplated hereby furnished by
or on the behalf of the Company are true and correct in all material respects
and do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. To the
Company’s knowledge, no material event or circumstance has occurred or
information exists with respect to the Company or any of its Subsidiaries or its
or their business, properties, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed.

D. Understandings

The Purchaser understands, acknowledges and agrees with the Company as follows:

(1) The Purchaser hereby acknowledges and agrees that the subscription hereunder
is irrevocable by the Purchaser, and that, except as required by law, the
Purchaser is not entitled to cancel, terminate or revoke this Agreement or any
agreements of the Purchaser hereunder and that if the Purchaser is an individual
this Agreement shall survive the death or disability of the

 

12

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Purchaser and shall be binding upon and inure to the benefit of the parties and
their heirs, executors, administrators, successors, legal representatives and
permitted assigns.

(2) No federal or state agency or authority has made any finding or
determination as to the accuracy or adequacy of the Offering Documents or as to
the fairness of the terms of the Offering nor any recommendation or endorsement
of the Securities. Any representation to the contrary is a criminal offense. In
making an investment decision, Purchaser must rely on its own examination of the
Company and the terms of the Offering, including the merits and risks involved.

(3) The Offering is intended to be exempt from registration under the Securities
Act by virtue of Section 4(2) of the Securities Act and the provisions of
Regulation D thereunder, which is in part dependent upon the truth, completeness
and accuracy of the statements made by the Purchaser herein and in the Purchaser
Questionnaire.

(4) Notwithstanding the registration obligations described in the Amended and
Restated Registration Rights Agreement, there can be no assurance that the
Purchaser will be able to sell or dispose of the Securities. It is understood
that in order not to jeopardize the Offering’s exempt status under Section 4(2)
of the Securities Act and Regulation D, any transferee may, at a minimum, be
required to fulfill the investor suitability requirements thereunder.

(5) The Purchaser acknowledges that the Offering is confidential and non-public
and agrees that all information about the Offering shall be kept in confidence
by the Purchaser until the public announcement of the Offering by the Company.

(6) The Purchaser acknowledges that the foregoing restrictions on the
Purchaser’s use and disclosure of any such confidential, non-public information
contained in the above-described documents restricts the Purchaser from trading
in the Company’s securities to the extent such trading is on the basis of
material, non-public information of which the Purchaser is aware.

(7) The Purchaser agrees that beginning on the date hereof until the Offering is
publicly announced by the Company (which the Company has represented will occur
as soon as practicable), the Purchaser will not enter into any Short Sales. For
purposes of the foregoing sentence, a “Short Sale” by a Purchaser means a sale
of Common Stock that is marked as a short sale and that is executed at a time
when such Purchaser has no equivalent offsetting long position in the Common
Stock, exclusive of the Shares. For purposes of determining whether a Purchaser
has an equivalent offsetting long position in the Common Stock, all Common Stock
that would be issuable upon exercise in full of all options then held by such
Purchaser (assuming that such options were then fully exercisable,
notwithstanding any provisions to the contrary, and giving effect to any
exercise price adjustments scheduled to take effect in the future) shall be
deemed to be held long by such Purchaser.

(8) Notwithstanding anything contained herein, the number of shares of Common
Stock issued or issuable by the Company:

(i) upon exercise of all or any portion of the Warrant and

 

13

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(ii) upon exercise of the warrant to purchase Common Stock issued to Purchaser
in July 2005 (the “July 2005 Warrant”).

when added together with the 2 million shares of Common Stock issued to
Purchaser pursuant to the Securities Purchase Agreement (collectively, the
“Aggregated Shares”), shall not exceed 19.99% of the outstanding shares of
Common Stock as of May 16, 2006 (the “Maximum Common Stock Issuance”), unless
the issuance of that number of Aggregated Shares that would result in Purchaser
owning in excess of the Maximum Common Stock Issuance shall first be approved by
the Company’s stockholders.

(b) Notwithstanding anything contained herein, the provisions of this paragraph
D(8) are irrevocable and may not be waived or modified by Purchaser or the
Company (including, without limitation, any modification providing for an
alternative outcome should Company stockholder approval not be obtained).

E. Covenants of the Company

(1) The Company hereby agrees that, for a period of forty-five (45) days after
effectiveness of the Registration Statement, it shall not issue or sell any
Common Stock of the Company, any warrants or other rights to acquire Common
Stock or any other securities that are convertible into Common Stock, with the
exception of issuances or sales related to a strategic or collaborative
combination or transaction or to an employee, director, consultant, supplier,
lender or lessor, or any option grant or issuance, so long as no integration or
aggregation that would violate the rules and regulations of the Securities and
Exchange Commission and/or NASDAQ results.

(2) Until the effectiveness of the Registration Statement, the Company shall not
file any registration statement, other than the Registration Statement
contemplated hereby, or any registration statement related to securities issued
or to be issued pursuant to any option or other plan for the benefit of the
Company’s employees, officers, directors or consultants.

(3) As soon as practicable, and in accordance with applicable rules and
regulations, following the Closing, the Company shall, by filing a Current
Report on Form 8-K and/or by issuance of a press release, disclose such Closing
of the Offering .

(4) In the event the Company, at any time prior to the Company obtaining a
market capitalization in excess of $85,000,000 (market capitalization shall be
calculated by multiplying the Company’s current stock price per share by the
total number of shares issued and outstanding), desires to enter into a
transaction to offer and sell its debt and/or equity securities, in any manner,
including a transaction that is intended to be exempt from the registration
requirements of Section 5 of the Securities Act, the Company agrees to first
propose in writing the terms and conditions pursuant to which it would enter
such a transaction to Purchaser (the “Proposed Terms”). If Purchaser elects to
enter into such discussions, the Parties agree to negotiate exclusively and in
good faith for a period of sixty (60) days the terms and conditions of such a
transaction (the “Initial Negotiating Term”). If during such sixty (60) day
period the Parties do not enter into a binding agreement with respect to such
transaction, then the Company shall have one hundred twenty (120) days in which
to consummate a transaction with a third

 

14

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party; provided, however, that the terms and conditions of such transaction with
a third party shall not be more favorable (including financial consideration to
be received) than those proposed by Purchaser in the Initial Negotiating Term,
and shall be similar in structure and scope to those negotiated with Purchaser
during the Initial Negotiating Term. Promptly after any transaction, the Company
shall furnish Purchaser evidence of the consummation (including time of
completion) of such transaction and of the terms thereof as Purchaser may
request. If at the end of such one hundred twenty (120) day period the Company
has not consummated the transaction in all respects on terms required hereunder,
then the Company shall no longer be permitted to consummate the transaction
pursuant to this Section E(4) without again fully complying with the provisions
of this Section E(4).

(5) The Company shall pay (or reimburse the Purchaser for) all fees and expenses
incident to the performance of or compliance with this Agreement, the amendment
to the Clinical Development and License Agreement, the Amended and Restated
Registration Rights Agreement, and any other related transaction document, by
the Purchaser up to an aggregate of $25,000.

(6) The Company covenants that it shall provide for a stockholder vote on the
approval of Purchaser’s owning in excess of the Maximum Common Stock Issuance,
as described in paragraph D(8) above, in the Company’s upcoming Proxy Statement
on Schedule 14A and related materials for the Company’s 2006 Annual Meeting of
Stockholders, scheduled to take place in July 2006, and each successive meeting,
of stockholders, including any special meeting of stockholders, until such
approval is received.

F. Miscellaneous

(1) All pronouns and any variations thereof used herein shall be deemed to refer
to the masculine, feminine, singular or plural, as identity of the person or
persons may require.

(2) Any notice or other document required or permitted to be given or delivered
to the Purchaser shall be in writing and sent (a) by fax if the sender on the
same day sends a confirming copy of such notice by an internationally recognized
overnight delivery service (charges prepaid) or (b) by an internationally
recognized overnight delivery service (with charges prepaid):

(i) if to the Company, at

If to the Company:

BioDelivery Sciences International, Inc.

2501 Aerial Center Parkway, Suite 205

Morrisville, NC 27560

Attention: Mark A. Sirgo, Pharm.D.

Fax: (919) 653-5161

 

15

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

With a copy to:

Wyrick Robbins Yates & Ponton LLP

4101 Lake Boone Trail

Suite 300

Raleigh, NC 27607

Attention: Larry E. Robbins

Fax: (919) 781-4865

or such other address as it shall have specified to the Purchaser in writing,
with a copy (which shall not constitute notice) to:

Morgan, Lewis & Bockius LLP

502 Carnegie Center

Princeton, NJ 08540

Phone: (609) 919.6600

Fax: (609) 919.6701

Attention: Denis Segota, Esq.

(ii) if to the Purchaser, at its address set forth on the signature page to this
Agreement, or such other address as it shall have specified to the Company in
writing.

(3) Failure of the Company to exercise any right or remedy under this Agreement
or any other agreement between the Company and the Purchaser, or otherwise, or
delay by the Company in exercising such right or remedy, will not operate as a
waiver thereof. No waiver by the Company will be effective unless and until it
is in writing and signed by the Company.

(4) This Agreement shall be enforced, governed and construed in all respects in
accordance with the laws of the State of New York, as such laws are applied by
the New York courts to agreements entered into and to be performed in New York
by and between residents of New York, and shall be binding upon the Purchaser,
the Purchaser’s heirs, estate, legal representatives, successors and assigns and
shall inure to the benefit of the Company, its successors and assigns.

(5) If any provision of this Agreement is held to be invalid or unenforceable
under any applicable statute or rule of law, then such provision shall be deemed
modified to conform with such statute or rule of law. Any provision hereof that
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provisions hereof.

(6) The parties understand and agree that, unless provided otherwise herein,
money damages would not be a sufficient remedy for any breach of the Agreement
by the Company or the Purchaser and that the party against which such breach is
committed shall be entitled to equitable relief, including injunction and
specific performance, as a remedy for any such breach. Such remedies shall not,
unless provided otherwise herein, be deemed to be the exclusive remedies for a
breach by either party of the Agreement but shall be in addition to all other
remedies available at law or equity to the party against which such breach is
committed.

 

16

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(7) This Agreement, together with the agreements and documents executed and
delivered in connection with this Agreement, constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof.

G. Signature

The signature page of this Agreement is contained as part of the applicable
subscription package, entitled “Signature Page”.

* * * * * * *

 

17

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SIGNATURE PAGE

The Purchaser hereby subscribes for 2,000,000 shares of Common Stock, and shall
also receive a Warrant to purchase 904,000 shares of Common Stock, and agrees to
be bound by the terms and conditions of this Agreement.

PURCHASER

Dated: May 16, 2006

CDC IV, LLC

 

By:

 

/s/ Jan Leschly

Name:   Jan Leschly Title:  

 

Taxpayer Identification or Social Security Number

 

Name (please print as name will appear

on stock certificate)

 

Number and Street

 

City, State   Zip Code    

 

ACCEPTED BY: BIODELIVERY SCIENCES INTERNATIONAL, INC. By:  

/s/ Mark A. Sirgo

Name:   Mark A. Sirgo Title:   President and CEO Dated:  

May 16, 2006

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

Exhibit A

Legal Matters

[                                    ] shall deliver an opinion covering the
following matters. The opinion shall be subject to and include customary
assumptions, limitations and qualifications.

(1) The Company is a corporation, validly existing and in good standing under
the laws of the State of [            ] and has all requisite corporate power
and authority under the laws of the State of [            ] to conduct its
business as it is described in the Company’s Form 10-QSB for the quarter ended
[            ], Form 10-KSB for the fiscal year ended [            ] and the
Definitive Proxy Statement dated [            ], and to enter into and perform
its obligations under the Agreement.

(2) The authorized capital stock of the Company consists of [            ]
shares of stock of all classes. The authorized capital stock is divided into
[            ] shares of Common Stock, $[            ] par value per share (the
“Common Stock”) and [            ] shares of Preferred Stock, $[            ]
par value per share (the “Preferred Stock”). As of [            ], there were
[            ] shares of Common Stock issued and outstanding and [            ]
shares of Preferred Stock issued and outstanding.

(3) The Shares have been duly authorized or reserved for issuance by all
necessary corporate action on the part of the Company; and the Shares, when
issued and delivered against payment therefor in accordance with the provisions
of the Agreement, will be validly issued, fully paid and non-assessable. The
Warrants have been duly authorized by all necessary corporate action on the part
of the Company, and the Warrant Shares have been duly reserved for issuance and,
when issued and delivered against payment therefor upon the due exercise of the
Warrants in accordance with the provisions thereof, will be validly issued,
fully paid and non-assessable shares of Common Stock.

(4) The execution and delivery by the Company of the Agreement, and the
consummation by the Company of the transactions contemplated thereby, have been
duly authorized by all necessary corporate action on the part of the Company.
The Agreement constitutes the valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as rights
to indemnification and contribution thereunder may be limited by applicable law
and except as the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors’ rights generally or by general equitable principles.

(5) The execution and delivery by the Company of the Agreement, and the
consummation by the Company of the transactions contemplated thereby, do not
(a) violate the provisions of any federal law of the United States of America or
the General Corporation Law of the State of Delaware applicable to the Company;
(b) violate the provisions of the Company’s Certificate of Incorporation or
By-laws; or (c) violate any existing obligation of the Company under any
judgment, decree, order or award of any court, governmental body or arbitrator

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

specifically naming the Company and of which we are aware, without any inquiry;
or (d) with or without notice and/or the passage of time, conflict with or
result in the material breach or termination of any material term or provision
of, or constitute a material default under, or cause any acceleration of any
material obligation under, or cause the creation of any material lien, charge or
encumbrance upon the material properties or assets of the Company pursuant to
any contract or instrument in the form included as an Exhibit to the Company’s
Form 10-KSB and subsequent SEC filings.

(6) Assuming (a) the accuracy of the representations made by the Purchaser in
the Agreement; (b) that neither the Company, nor any person acting on behalf of
the Company has offered or sold the Securities by any form of general
solicitation or general advertising within the meaning of Rule 502(c) of
Regulation D promulgated (the “Regulation D”) under the Securities Act; (c) that
no offerings or sales of securities of the Company after the date hereof in a
transaction can be “integrated” with any sales of the Securities; and (d) that
each person or entity that purchased securities of the Company directly from the
Company or its agents and without registration between the date six months prior
to the Closing of the Offering and the date of the Agreement was, as of the date
of such purchase, an “accredited investor” as defined in Rule 501 of Regulation
D, the sale of the Securities to the Purchaser at the Closing under the
circumstances contemplated by this Agreement are exempt from the registration
and prospectus delivery requirements of Section 5 of the Securities Act.

(7) To our knowledge, without any inquiry (including, without limitation,
without any docket search or other inquiry), there is no action, proceeding or
litigation pending or threatened against the Company before any court,
governmental or administrative agency or body required to be described in the
Company’s Form 10-QSB for the quarter ended [            ], Form 10-KSB for the
fiscal year ended [            ] and the Definitive Proxy Statement dated
[            ], which is not otherwise disclosed therein.

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Exhibit B

Form of Warrant

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

Exhibit C

[                    ]

Confidential Purchaser Questionnaire

Before any sale of Shares or Warrants by [            ]. can be made to you,
this Questionnaire must be completed and returned to [            ].

 

  1. IF YOU ARE AN INDIVIDUAL PLEASE FILL IN THE IDENTIFICATION QUESTIONS IN
(A) IF YOU ARE AN ENTITY PLEASE FILL IN THE IDENTIFICATION QUESTIONS IN (B)

A. INDIVIDUAL IDENTIFICATION QUESTIONS

Name 
_______________________________________________________________________________

(Exact name as it should appear on stock certificate)

Residence Address
_____________________________________________________________________

Home Telephone Number __________________________________________________________

Fax Number
_______________________________________________________________________________

Date of Birth
_______________________________________________________________________________

Social Security Number
____________________________________________________________

B. IDENTIFICATION QUESTIONS FOR ENTITIES

Name
_______________________________________________________________________________

(Exact name as it will appear on stock certificate)

Address of Principal Place of Business
_____________________________________________________

State (or Country) of Formation or Incorporation
_____________________________________________________

Contact Person _________________________________________________________________

Telephone Number (            )
________________________________________________________

Type of Entity (corporation, partnership, trust, etc.)
_____________________________________________________

Was entity formed for the purpose of this investment?

Yes      No     

 

2. DESCRIPTION OF INVESTOR

The following information is required to ascertain whether you would be deemed
an “accredited investor” as defined in Rule 501 of Regulation D under the
Securities Act. Please check whether you are any of the following:

a corporation or partnership with total assets in excess of $5,000,000, not
organized for the purpose of this particular investment

private business development company as defined in Section 202(a)(22) of the
Investment Advisers Act of 1940, a U.S. venture capital fund which invests
primarily through private placements in non-publicly traded securities and makes
available (either directly or through co-investors) to the portfolio companies
significant guidance concerning management, operations or business objectives

a Small Business Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business Investment Act
of 1958

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

an investment company registered under the Investment Company Act of 1940 or a
business development company as defined in Section 2(a)(48) of that Act

a trust not organized to make this particular investment, with total assets in
excess of $5,000,000 whose purchase is directed by a sophisticated person as
described in Rule 506(b)(2)(ii) of the Securities Act of 1933 and who completed
item 4 below of this questionnaire

a bank as defined in Section 3(a)(2) or a savings and loan association or other
institution defined in Section 3(a)(5)(A) of the Securities Act of 1933 acting
in either an individual or fiduciary capacity

an insurance company as defined in Section 2(13) of the Securities Act of 1933

an employee benefit plan within the meaning of Title I of the Employee
Retirement Income Security Act of 1974 (i) whose investment decision is made by
a fiduciary which is either a bank, savings and loan association, insurance
company, or registered investment advisor, or (ii) whose total assets exceed
$5,000,000, or (iii) if a self-directed plan, whose investment decisions are
made solely by a person who is an accredited investor and who completed Part I
of this questionnaire;

a charitable, religious, educational or other organization described in
Section 501(c)(3) of the Internal Revenue Code, not formed for the purpose of
this investment, with total assets in excess of $5,000,000

an entity not located in the U.S. none of whose equity owners are U.S. citizens
or U.S. residents

a broker or dealer registered under Section 15 of the Securities Exchange Act of
1934

a plan having assets exceeding $5,000,000 established and maintained by a
government agency for its employees

an individual who had individual income from all sources during each of the last
two years in excess of $200,000 or the joint income of you and your spouse (if
married) from all sources during each of such years in excess of $300,000 and
who reasonably excepts that either your own income from all sources during the
current year will exceed $200,000 or the joint income of you and your spouse (if
married) from all sources during the current year will exceed $300,000

an individual whose net worth as of the date you purchase the securities
offered, together with the net worth of your spouse, be in excess of $1,000,000

an entity in which all of the equity owners are accredited investors

 

3. BUSINESS, INVESTMENT AND EDUCATIONAL EXPERIENCE

Occupation ____________________________________________________________________

Number of Years ________________________________________________________________

Present Employer
____________________________________________________________________

Position/Title
____________________________________________________________________

Educational Background
___________________________________________________________

 

- 2 -

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

Frequency of prior investment (check one in each column):

 

     Stocks & Bonds    Venture Capital Investments Frequently       Occasionally
      Never      

 

4. SIGNATURE

The above information is true and correct. The undersigned recognizes that the
Company and its counsel are relying on the truth and accuracy of such
information in reliance on the exemption contained in Subsection 4(2) of the
Securities Act of 1933, as amended, and Regulation D promulgated thereunder. The
undersigned agrees to notify the Company promptly of any changes in the
foregoing information which may occur prior to the investment.

Executed at                         , on                     , 2005

 

 

(Signature)

 

- 3 -

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

Exhibit D

Selling Stockholder Questionnaire

To: [                        ]

Reference is made to the Securities Purchase Agreement (the “Agreement”), made
between [            ], a [            ] (the “Company”), and the Purchaser.

Pursuant to Section B(12) of the Agreement, the undersigned hereby furnishes to
the Company the following information for use by the Company in connection with
the preparation of the Registration Statement contemplated by the Registration
Rights Agreement.

 

  (1) Name and Contact Information:

 

Full legal name of record holder:

 

 

Address of record holder:

 

 

 

 

Social Security Number or Taxpayer identification number of record holder:

 

 

Identity of beneficial owner (if different than record holder):

 

 

Name of contact person:

 

 

Telephone number of contact person:

 

 

Fax number of contact person:

 

 

E-mail address of contact person:

 

 

 

  (2) Beneficial Ownership of Registrable Securities:

 

(a) Number of Registrable Securities owned by Selling Stockholder:

 

(b) Number of Registrable Securities requested to be registered:

 

 

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

  (3) Beneficial Ownership of Other Securities of the Company Owned by the
Selling Stockholder:

 

Except as set forth below in this Item (3), the undersigned is not the
beneficial or registered owner of any securities of the Company other than the
Registrable Securities listed above in Item (2)(a). Type and amount of other
securities beneficially owned by the Selling Stockholder:

 

 

 

  (4) Relationships with the Company:

 

Except as set forth below, neither the undersigned nor any of its affiliates,
officers, directors or principal equity holders (5% or more) has held any
position or office or has had any other material relationship with the Company
(or its predecessors or affiliates) during the past three years. State any
exceptions here:

 

 

 

  (5) Plan of Distribution:

 

Except as set forth below, the undersigned intends to distribute pursuant to the
Registration Statement the Registrable Securities listed above in Item (2) in
accordance with the “Plan of Distribution” section set forth therein: State any
exceptions here:

 

 

 

  (6) Selling Stockholder Affiliations:

 

(a) Is the Selling Stockholder a registered broker-dealer?

 

(b) Is the Selling Stockholder an affiliate of a registered broker-dealer(s)?
(For purposes of this response, an “affiliate” of, or person “affiliated” with,
a specified person, is a person that directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control with,
the person specified.)

 

 

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(c) If the answer to Item (6)(b) is yes, identify the registered
broker-dealer(s) and describe the nature of the affiliation(s):

 

(d) If the answer to Item (6)(b) is yes, did the Selling Stockholder acquire the
Registrable Securities in the ordinary course of business (if not, please
explain)?

 

(e) If the answer to Item (6)(b) is yes, did the Selling Stockholder, at the
time of purchase of the Registrable Securities, have any agreements, plans or
understandings, directly or indirectly, with any person to distribute the
Registrable Securities (if yes, please explain)?

 

 

  (7) Voting or Investment Control over the Registrable Securities:

 

If the Selling Stockholder is not a natural person, please identify the natural
person or persons who have voting or investment control over the Registrable
Securities listed in Item (2) above:

 

The undersigned acknowledges that the Company may, by notice to the Purchaser at
its last known address, suspend or withdraw the Registration Statement and
require that the undersigned immediately cease sales of Registrable Securities
pursuant to the Registration Statement under certain circumstances described in
the Registration Rights Agreement. At any time that such notice has been given,
the undersigned may not sell Registrable Securities pursuant to the Registration
Statement.

The undersigned hereby acknowledges receipt of a draft of the Registration
Statement dated [            ], [            ] and confirms that the undersigned
has reviewed such draft including, without limitation, the sections captioned
“Selling Stockholders” and “Plan of Distribution,” and confirms that, to the
best of the undersigned’s knowledge, the same is true, complete and accurate in
every respect except as indicated in this Questionnaire. The undersigned hereby
further acknowledges that pursuant to Section B(12) of the Agreement, the
undersigned shall indemnify the Company and each of its directors and officers
against, and hold the Company and each of its directors and officers harmless
from, any losses, claims, damages, expenses or liabilities (including reasonable
attorneys fees) to which the Company or its directors and officers may become
subject by reason of any statement or omission in the Registration

 

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Statement made in reliance upon, or in conformity with, a written statement by
the undersigned, including the information furnished in this Questionnaire by
the undersigned.

By signing below, the undersigned consents to the disclosure of the information
contained herein in its answers to Items (1) through (7) above and the inclusion
of such information in the Registration Statement, any amendments thereto and
the related prospectus. The undersigned understands that such information will
be relied upon by the Company in connection with the preparation or amendment of
the Registration Statement and the related prospectus.

The undersigned has reviewed the answers to the above questions and affirms that
the same are true, complete and accurate. THE UNDERSIGNED AGREES TO NOTIFY THE
COMPANY IMMEDIATELY OF ANY CHANGES IN THE FOREGOING INFORMATION.

 

Dated:                     , 2006  

 

 

Signature of Record Holder

(Please sign your name in exactly the same

manner as the certificate(s) for the shares being

registered)

 

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