Exhibit 10.4

AMENDMENT NO. 1 dated as of May 16, 2006 to that certain Security Agreement
dated as of February 15, 2006 between BioDelivery Sciences International, Inc.
(“BDSI”), Arius Pharmaceuticals, Inc., a wholly-owned subsidiary of BDSI
(“Arius”, and together with BDSI, the “Company”) (“BDSI”) and CDC IV, LLC, a
Delaware limited liability company (“CDC”) (as the same may be amended,
supplemented or otherwise modified, the “Security Agreement”).

INTRODUCTORY STATEMENT

Reference is made to that certain Clinical Development and License Agreement
dated as of July 14, 2005 between BDSI, Arius and CDC, assignee of Clinical
Development Capital LLC, concerning the development of a product containing or
comprising of fentanyl in conjunction with BEMA Technology (the “Development
Agreement”).

In order to facilitate its performance of its obligations under the Development
Agreement and to reduce certain financial obligations on the part of BDSI under
the Development Agreement, Company has requested and CDC has agreed to (i) BDSI
issuing certain securities to CDC pursuant to that certain Securities Purchase
Agreement dated the date hereof (the “Purchase Agreement”) by and between CDC
and BDSI; (ii) amending certain provisions of the Development Agreement pursuant
to Amendment No. 2 to the Development Agreement dated the date hereof; and
(iii) to amend the Security Agreement as set forth herein.

Accordingly, Company and CDC have agreed to amend the Security Agreement, all on
the terms and subject to the conditions hereinafter set forth.

Therefore, the parties hereto hereby agree as follows:

Section 1. Defined Terms. Capitalized terms used herein and not otherwise
defined herein shall have the meaning given them in the Security Agreement.

Section 2. Amendments to the Security Agreement. Subject to the satisfaction of
the conditions precedent set forth in Section 3 hereof, the Security Agreement
is hereby amended as of the Effective Date (as hereinafter defined) as follows:

Section 2.2 of the Security Agreement is hereby amended and restated in its
entirety to read as follows:

“2.2 Continuing Security Interest; Termination. This Agreement shall create a
security interest in the Collateral and shall in accordance with applicable law:

 

  (A) remain in full force and effect until the performance of Grantor’s and
BioDelivery’s obligations pursuant to the terms of the Development Agreement;
and

 

  (B) be binding upon the Grantor and BioDelivery, their successors, transferees
and assigns.

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Upon the Approval of the NDA by the FDA, the security interest granted herein
shall automatically terminate with respect to all Collateral. Upon any such
termination, Secured Party will, at the Grantor’s sole expense, deliver any
Collateral (or portion thereof) to the extent held by it hereunder and to the
extent the termination relates to such Collateral, and at the Grantor’s sole
expense execute and deliver to the Grantor such documents and instruments and
take such other action as the Grantor shall reasonably request to evidence or
more fully effect termination of the security interest hereunder relating to
such portion or all of the Collateral, as the case may be.”

Section 3. Conditions to Effectiveness. The effectiveness of this Amendment is
subject to the satisfaction of all of the following conditions precedent (the
date on which all such conditions have been satisfied being herein called the
“Effective Date”):

(a) CDC shall have received a fully executed Purchase Agreement, warrant to
purchase certain shares of BDSI common stock as set forth in the Purchase
Agreement and Amended and Restated Registration Rights Agreement;

(b) CDC shall have received a fully executed Amendment No. 2 to the Development
Agreement;

(c) CDC shall have received the favorable written opinion, dated the date of the
first Advance hereunder, addressed to CDC of Wyrick Robbins Yates & Ponton LLP,
counsel to Company, in form and substance satisfactory to CDC; and

(d) the receipt by CDC of counterparts of this Amendment which, when taken
together, bear the signatures of CDC and Company.

Section 4. Representations and Warranties. Company jointly and severally
represents and warrants that after giving effect to this Amendment, the
representations and warranties contained in the Security Agreement are true and
correct in all material respects on and as of the date hereof as if such
representations and warranties had been made on and as of the date hereof
(except to the extent that any such representations and warranties specifically
relate to an earlier date).

Section 5. Further Assurances. At any time and from time to time, upon CDC’s
request and at the sole expense of Company, Company will promptly and duly
execute and deliver any and all further instruments and documents and take such
further action as CDC reasonably deems necessary to effect the purposes of this
Amendment.

Section 6. Full Force and Effect. Except as expressly amended hereby, the
Security Agreement shall continue in full force and effect in accordance with
the provisions thereof on the date hereof. As used in the Security Agreement,
the terms “Agreement”, “this Agreement”, “herein”, “hereafter”, “hereto”,
“hereof”, and words of similar import, shall, unless the context otherwise
requires, mean the Security Agreement as amended by this Amendment.

 

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Section 7. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

Section 8. Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute but one instrument.

Section 9. Headings. The headings of this Amendment are for the purposes of
reference only and shall not affect the construction of or be taken into
consideration in interpreting this Amendment.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed as of the day and the year first written.

 

CDC IV, LLC, as Secured Party

By

 

/s/  Jan Leschly

Name:

 

Jan Leschly

Title:

 

Arius Pharmaceuticals, Inc., as Grantor

By

 

/s/  Mark A. Sirgo

Name:

 

Mark A. Sirgo

Title:

 

President

BIODELIVERY SCIENCES INTERNATIONAL, INC.

By

 

/s/  Mark A. Sirgo

Name:

 

Mark A. Sirgo

Title:

 

President and CEO

 

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