Exhibit 10.3

 

REGISTRATION RIGHTS AGREEMENT

 

This REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered into
effective as of August 24, 2004, by and between BioDelivery Sciences
International, Inc., a Delaware corporation (the “Company”) and the other
persons and entities signatory hereto (collectively, the “Series A
Stockholders”).

 

RECITALS

 

WHEREAS, pursuant to that certain Agreement and Plan of Merger and
Reorganization, dated as of August 10, 2004, the Company has agreed to grant to
the Series A Stockholders the registration rights set forth herein.

 

NOW, THEREFORE, to implement the foregoing and in consideration of the mutual
terms, conditions and covenants contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:

 

1. Piggyback Registration.

 

(a) Right to Piggyback Registration. Subject to the terms hereof, 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 Registrable Securities, the Company shall give prompt
written notice to the Series A Stockholders of its intention to effect such a
registration. Subject to Section 1(b) below, 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 Series A
Stockholders with respect to which the Company has received a written request
from the Series A Stockholders for inclusion therein within 30 days after the
receipt of the Company’s notice (such registration, a “Piggyback Registration”).

 

(b) Priority on Primary Registrations. 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 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 Series A Stockholders on the
condition that the Series A Stockholders 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 Series A Stockholders of all of its Registrable
Securities) for a three (3) month period following the declaration of
effectiveness of the applicable registration statement.

 

2. Registration Procedures. Whenever the Series A Stockholders request that any
Registrable Securities be registered pursuant to this Agreement, the Company
shall use its

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commercially reasonable efforts to effect the registration and the sale of such
Registrable Securities in accordance with the intended method of disposition
thereof, and pursuant thereto the Company shall as expeditiously as possible:

 

(a) prepare and file with the SEC a registration statement with respect to such
Registrable Securities and use its reasonable best efforts to cause such
registration statement to become effective;

 

(b) notify the Series A Stockholders of the effectiveness of each registration
statement filed hereunder and prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
the prospectus included therein usable for a period commencing on the date that
such registration statement is initially declared effective by the SEC and
ending on the date when all Registrable Securities covered by such registration
statement have been sold pursuant to the registration statement or cease to be
Registrable Securities, and comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration statement;

 

(c) furnish to the Series A Stockholders such number of copies of such
registration statement, each amendment and supplement thereto, the prospectus
included in such registration statement (including each preliminary prospectus)
and such other documents as such seller may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by the Series A
Stockholders;

 

(d) use its commercially reasonable efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as the Series A Stockholders reasonably requests and do any and
all other acts and things which may be reasonably necessary or advisable to
enable the Series A Stockholders to consummate the disposition in such
jurisdictions of the Registrable Securities owned by the Series A Stockholders;
provided, that the Company shall not be required to: (i) qualify generally to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this subparagraph; (ii) subject itself to taxation in any such
jurisdiction; or (iii) consent to general service of process in any such
jurisdiction;

 

(e) notify the Series A Stockholders, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the happening
of any event as a result of which the prospectus included in such registration
statement contains an untrue statement of a material fact or omits any fact
necessary to make the statements therein not misleading, and, at the request of
the Series A Stockholders, the Company shall prepare a supplement or amendment
to such prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus shall not contain an untrue statement of
a material fact or omit to state any fact necessary to make the statements
therein not misleading;

 

(f) cause all such Registrable Securities to be listed or quoted on each
securities exchange or market on which similar securities issued by the Company
are then listed;

 

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(g) provide a transfer agent and registrar for all such Registrable Securities
not later than the effective date of such registration statement;

 

(h) enter into such customary agreements (including underwriting agreements in
customary form) in order to expedite or facilitate the disposition of such
Registrable Securities;

 

(i) make available for inspection by any underwriter participating in any
disposition pursuant to such registration statement, and any attorney,
accountant or other agent retained by any such underwriter, all financial and
other records, pertinent corporate documents and properties of the Company, and
cause the Company’s officers, directors, managers, employees and independent
accountants to supply all information reasonably requested by any such
underwriter, attorney, accountant or agent in connection with such registration
statement;

 

(j) otherwise use its commercially reasonable efforts to comply with all
applicable rules and regulations of the SEC, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least 12 months beginning with the first day of the Company’s first
full calendar quarter after the effective date of the registration statement,
which earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder;

 

(k) in the event of the issuance of any stop order suspending the effectiveness
of a registration statement, or of any order suspending or preventing the use of
any related prospectus or suspending the qualification of any Registrable
Securities included in such registration statement for sale in any jurisdiction,
the Company shall use its reasonable best efforts promptly to obtain the
withdrawal of such order;

 

(l) subject to Section 2(d) above, use its reasonable best efforts to cause any
Registrable Securities covered by such registration statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to enable the sellers thereof to consummate the disposition of such
Registrable Securities; and

 

(m) if the offering is underwritten, use its reasonable best efforts to furnish
on the date that Registrable Securities are delivered to the underwriters for
sale pursuant to such registration, an opinion dated such date of counsel
representing the Company for the purposes of such registration, addressed to the
underwriters covering such issues as are reasonably required by such
underwriters.

 

3. Registration Expenses.

 

(a) Payment of Registration Expenses. All expenses incident to the Company’s
performance of or compliance with this Agreement, 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 (all such expenses being
herein called “Registration Expenses”), shall be borne by the Company. The
Company shall, in addition, pay

 

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its internal expenses (including, without limitation, all salaries and expenses
of its officers and employees performing legal or accounting duties), the
expense of any annual audit or quarterly review, the expense of any liability
insurance and the expenses and fees for listing or quoting the securities to be
registered on each securities exchange on which similar securities issued by the
Company are then listed or on the NASDAQ Stock Market.

 

(b) Payment of Registration Expenses by Holders of Registrable Securities. To
the extent Registration Expenses are not required to be paid by the Company
(including, without limitation, any underwriting discounts or commissions that
are the responsibility of the holders of Registrable Securities), each holder of
the Series A Stockholders shall pay those Registration Expenses allocable to the
registration of the Series A Stockholders’ securities so included, and any
Registration Expenses not so allocable shall be payable by all sellers of
securities included in such registration in proportion to the aggregate selling
price of the securities to be so registered.

 

4. Indemnification.

 

(a) Indemnification by The Company. The Company agrees to indemnify, to the
extent permitted by law, the Series A Stockholders and their agents and
representatives against all losses, claims, damages, liabilities and expenses
caused by any untrue or alleged untrue statement of material fact contained in
any registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same are caused by or contained in
any information furnished in writing to the Company by such holder expressly for
use therein, results from the failure of the Series A Stockholders to provide
information necessary for the registration statement to the Company, or by the
Series A Stockholders’ failure to deliver a copy of the registration statement
or prospectus or any amendments or supplements thereto after the Company has
furnished such holder with a sufficient number of copies of the same.

 

(b) Indemnification by the Series A Stockholders. In connection with any
registration statement in which the Series A Stockholders is participating, the
Series A Stockholders 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 and, to the extent permitted by law,
shall indemnify the Company, its officers, directors, employees, agents and
representatives and each Person who controls the Company (within the meaning of
the Securities Act) against any losses, claims, damages, liabilities and
expenses resulting from any untrue or alleged untrue statement of material fact
contained in the registration statement, prospectus or preliminary prospectus or
any amendment thereof or supplement thereto resulting from such information
provided by the Series A Stockholders or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading and not provided by the Series A Stockholders; provided
that the obligation to indemnify shall be be limited to the net amount of
proceeds received by the Series A Stockholders from the sale of Registrable
Securities pursuant to such registration statement.

 

(c) Procedure For Indemnification. Any Person entitled to indemnification
hereunder shall: (i) give prompt written notice to the indemnifying party of any
claim with respect to which it seeks indemnification (provided that the failure
to give prompt notice shall not impair any

 

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Person’s right to indemnification hereunder to the extent such failure has not
prejudiced the indemnifying party) and (ii) unless in such indemnified party’s
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party shall not be subject to any liability for any settlement made
by the indemnified party without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim. Notwithstanding anything in this Section 4(c) to the contrary, in the
event the Company determines, in good faith, that a claim materially affects the
interests of the Company, the Company may solely control the defense of such
claim with counsel reasonably satisfactory to the Company. In the event the
Company is an indemnified party pursuant to this Section 4, the indemnifying
party may be subject to liability if the Company settles a claim in good faith
and in a reasonable manner.

 

5. Participation in Underwritten Registrations. The Series A Stockholders may
not participate in any registration hereunder unless the Series A Stockholders:

 

(a) in the case of a registration which is underwritten, agrees to sell the
Series A Stockholders’s securities on the basis provided in any underwriting
arrangements approved by the Company;

 

(b) as expeditiously as possible, notifies the Company, at any time when a
prospectus relating to such the Series A Stockholders’ Registrable Securities is
required to be delivered under the Securities Act, of the happening of any event
as a result of which such prospectus contains an untrue statement of a material
fact or omits any fact necessary to make the statements therein not misleading;
and

 

(c) completes, executes and delivers all questionnaires, powers of attorney,
indemnities, underwriting agreements and other usual and customary documents
necessary or appropriate with respect to the offering of such the Series A
Stockholders’ Registrable Securities, and in the case of a registration which is
underwritten, necessary or appropriate under the terms of such underwriting
arrangements (subject to the provision in Section 5(a) above).

 

6. Definitions.

 

(a) The term “Capital Stock” means and includes (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.

 

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(b) The term “Common Stock” means the shares of common stock, par value $.001
per share, of the Company.

 

(c) The term “Company Equity Securities” means any Capital Stock of the Company
or options, warrants or other rights acquire Capital Stock of the Company.

 

(d) The term “Person” means any individual, Company, partnership, joint venture,
association, joint-stock company, limited liability company, trust or
unincorporated organization.

 

(e) The term “Registrable Securities” means all shares of Common Stock held by
the Series A Stockholders or the shares of Common Stock issuable upon the
conversion of shares of Series A Stock held by the Series A Stockholders;
provided, however, that as to any particular Registrable Securities that have
been issued, such securities shall cease to be Registrable Securities when: (i)
a registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of under such registration statement, (ii) all Registrable Securities
owned by a holder thereof may be resold in a single 90-day period pursuant to
Rule 144 under the Securities Act (or any similar rule then in force), (iii)
they shall have been distributed to the public pursuant to Rule 144 under the
Securities Act (or any similar rule then in force), (iv) they become available
for sale under Rule 144(k) under the Securities Act (or any similar rule then in
force), or (v) they shall have ceased to be outstanding.

 

(f) The term “SEC” mean the United Stated Securities and Exchange Commission.

 

(g) The term “Securities Act” means the Securities Act of 1933, as amended, or
any similar federal law then in force.

 

(h) The term “Securities Exchange Act” means the Securities Exchange Act of
1934, as amended, or any similar federal law then in force.

 

(i) The term “Series A Stock” means the shares of Series A Non-Voting
Convertible Preferred Stock of the Company, par value $.001 per share.

 

7. Miscellaneous.

 

(a) No Inconsistent Agreements. The Company shall not hereafter enter into any
agreement with respect to its securities which is inconsistent with or violates
the rights granted to the Series A Stockholders under this Agreement, and in the
event that any such agreement is entered into by the Company, the terms and
provisions of this Agreement will prevail over those contained in any such
agreement.

 

(b) Remedies. Any Person having rights under any provision of this Agreement
shall be entitled to enforce such rights specifically to recover damages caused
by reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party may in its sole discretion apply to any court of
law or equity of competent jurisdiction (without posting any bond or other
security) for specific performance and for other injunctive relief in order to
enforce or prevent violation of the provisions of this Agreement.

 

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(c) Amendments And Waivers. Except as otherwise provided herein, the provisions
of this Agreement may be amended or waived only upon the prior written consent
of the Company and the Series A Stockholders.

 

(d) Successors And Assigns. All covenants and agreements in this Agreement by or
on behalf of any of the parties hereto shall bind and inure to the benefit of
the respective successors and assigns of the parties hereto whether so expressed
or not. In addition, whether or not any express assignment has been made, the
provisions of this Agreement which are for the benefit of purchasers or holders
of Registrable Securities are also for the benefit of, and enforceable by, any
subsequent holder of Registrable Securities. Upon any transfer of Registrable
Securities, the holder of the Registrable Securities shall use its best efforts
to have the new holder of Registrable Securities sign a joinder agreement
pursuant to which such transferee shall agree to be bound by the terms of this
Agreement applicable to the holder of such Registrable Securities, provided
that, even in the absence of such joinder agreement, by taking and holding such
Registrable Securities, such new holder shall be conclusively deemed to have
agreed to be bound by the terms hereof applicable to such new holder.

 

(e) Severability. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.

 

(f) Counterparts; Facsimile Transmission. This Agreement may be executed in two
or more counterparts, any one of which need not contain the signatures of more
than one party, but all such counterparts taken together shall constitute one
and the same Agreement. Any such counterpart delivered to the Company shall be
effective if received by the Company no later than September 6, 2004. Each party
to this Agreement agrees that it will be bound by its own facsimile signature
and that it accepts the facsimile signature of each other party to this
Agreement.

 

(g) Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.

 

(h) Governing Law. This Agreement shall be construed and governed in accordance
with the laws of the State of New Jersey, without regard to its conflicts of
laws principles.

 

(i) Notices. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered in conformance
with the applicable provisions of the Merger Agreement.

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.

 

BIODELIVERY SCIENCES INTERNATIONAL, INC. By:  

/s/ Francis E. O’Donnell, Jr.

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Name:   Francis E. O’Donnell, Jr. Title:   President and Chief Executive Officer
SERIES A STOCKHOLDERS:

/s/ Mark A. Sirgo

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Mark A. Sirgo

/s/ Andrew L. Finn

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Andrew L. Finn WYRP FOUNDER’S FUND By:  

 

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Name:     Title:    

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Jeff Katz

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William S. Poole

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Arthur G. Lipman

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Delmar A. Nordstrom

 

[Signature Pages Continue]

 

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Signature Page to Registration Rights Agreement

 

 

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Celeste Lindley

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William McCarberg

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William Baicy

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Robert Reuss

 

[End of Signature Pages to Registration Rights Agreement]

 

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