EXHIBIT 10.3
                                                                    ------------


                         EXECUTIVE EMPLOYMENT AGREEMENT


         This Executive  Employment  Agreement (the "Agreement") is made this 31
day of  August,  2002 by and  between  James  A.  McNulty  ("Mr.  McNulty")  and
BioDelivery Sciences International, Inc. (the "Company").

     WHEREAS,  the  Company  is  engaged  in the  business  of  researching  and
developing drug delivery technologies; and

     WHEREAS, the Company and Mr. McNulty are willing to continue the employment
relationship,  on  the  terms,  conditions  and  covenants  set  forth  in  this
Agreement;

     NOW, THEREFORE, in consideration of Mr. McNulty's continued employment with
the  Company  and other good and  valuable  consideration,  receipt of which Mr.
McNulty and the Company hereby  acknowledge,  Mr. McNulty and the Company agree,
as follows:

     1.  Position.  Mr.  McNulty agrees to continue his employment as Secretary,
         --------
Treasurer  and Chief  Financial  Officer of the  Company.  He further  agrees to
perform the job duties and to carry out the  responsibilities  of that position,
as determined by the Chief Executive Officer from time to time.

     2. Mr. McNulty's Effort. Mr. McNulty agrees to devote his full working time
        --------------------
and best  efforts,  skill and  attention to his position and to the business and
interests of the Company.  However, at the discretion of the Board of Directors,
Mr.  McNulty may be reduced  from a full-time  employee to a part time  employee
upon 30 days written notice.

     3. Salary.  The Company  shall pay Mr.  McNulty  compensation  for services
        ------
rendered in the amount of One Hundred  Eighty Five Thousand  Dollars  ($185,000)
per annum payable on a monthly basis.  Further, the Company,  from time to time,
shall pay Mr. McNulty such bonuses, additional compensation or other benefits as
may be  determined  by the  Executive  Compensation  Committee  of the  Board of
Directors. In particular,  the company shall pay Mr. McNulty a one-time bonus of
$17,500 upon the signing of the first term sheet for a license to the  Company's
technology exceeding $1M in up-front payments and another $17,500 bonus upon the
Company  receiving the upfront  payment of said $1M license.  Any changes in Mr.
McNulty's  duties or  compensation,  shall not in any way affect the promises of
Mr. McNulty as set forth in this  Agreement.  Furthermore,  Mr. McNulty shall be
reimbursed for expenses properly documented as per the Company's policy.



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<PAGE>

     Where Mr.  McNulty's  status is changed  from a  full-time  to a  part-time
employee  pursuant to Section 2 above,  Mr. McNulty's salary of $185,000 will be
reduced pro rata assuming a 40 hour work week for a full-time employee.

     4.  Termination.  This  Agreement  and the  status and  obligations  of Mr.
         -----------
McNulty  thereunder as an employee of the Company  (except for the provisions of
paragraph 5 through 8 inclusive)  shall cease and terminate  effective  upon the
close of business August 31, 2005 unless further  extended by the parties hereto
in writing;  provided, that upon such date said termination shall not affect all
rights that Mr.  McNulty may have  pursuant to any of the  Company's  retirement
plans,  supplementary  retirement  plans,  profit  sharing  and  savings  plans,
healthcare,  401 (k) any other employee  benefit plans sponsored by the Company,
which, in accordance with its terms, is applicable to Mr. McNulty.

          4.1 Death or Disability.  This Agreement shall automatically terminate
              -------------------
     upon the death of Mr.  McNulty and all of his rights  hereunder,  including
     the  rights to  receive  compensation  and  benefits,  except as  otherwise
     required by law, shall terminate. The Company may, at its option, terminate
     this  Agreement  in the  event  that Mr.  McNulty  shall be  physically  or
     mentally  incapacitated  which  shall make him unable to perform the duties
     assigned to him for more than  ninety  (90) days in any one hundred  eighty
     (180) day period.  In the event of a dispute as to whether  Mr.  McNulty is
     physically or mentally unable to perform his duties hereunder,  the Company
     shall  select an  impartial  physician  to make a  determination  as to Mr.
     McNulty's  incapacity,  if any. Mr. McNulty agrees to submit to appropriate
     medical   examinations  for  the  purposes  of  such  determination.   Such
     termination  shall not affect Mr.  McNulty's  rights and obligations  under
     paragraphs 5 through 9  inclusive,  11 through 14  inclusive,  all of which
     shall survive the early termination or expiration of this Agreement.

          4.2 The  Company's  Right to Terminate  with  Notice.  The Company may
              ------------------------------------------------
     terminate this Agreement upon 30 days prior notice to Mr. McNulty.  In case
     of termination under this section, the Company may elect to pay Mr. McNulty
     a base rate of $185,000,  or the part-time  status reduced rate pursuant to
     Sections 2 and 3 of this Agreement,  for a period of six months, in lieu of
     permitting him to continue working.  Aside from payment as herein provided,
     the Company  shall have no further  obligations  to Mr.  McNulty  following
     termination.

          4.3 Termination for Cause.  Notwithstanding the immediately  preceding
              ---------------------
     paragraph  or anything  elsewhere  herein  contained to the  contrary,  the
     Company may  terminate  this  Agreement and all of its  obligations  to Mr.
     McNulty, with notice but effective immediately,  in the event that: (a) Mr.
     McNulty  breaches  any  term  of  this  Agreement;  (b) if Mr.  McNulty  is
     convicted of or enters a no contest plead to any felony or crime  involving
     moral  turpitude,  or if he pleads guilty to a lesser  included  offence or
     crime in exchange for withdrawal of a felony  indictment,  felony charge by
     information, or is charged with a crime involving moral turpitude,  whether
     the charge  arises  under the laws of the United  States or any other state
     therein;  (iii) Mr.  McNulty  fails to perform  the duties and  obligations



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<PAGE>

     assigned him by the Board of  Directors  of the  Company;  (iv) the Company
     reasonably suspects that he has engaged in illegal drug or substance use or
     abuse;  (v) he  wrongfully  appropriates  for  personal  use or benefit any
     property or money of the Company  entrusted to him by the Company;  (vi) he
     disregards any legal directions of the Chief Executive Officer or the Board
     of Directors of the Company;  (vii) he materially violates Company policies
     or procedures; (viii) he takes any actions that might damage the reputation
     of the Company or its  ability to receive  approvals  of its drug  delivery
     systems from the Food and Drug Adminstration  (excluding,  however, actions
     protected by "whistleblower"  legislation); or (ix) Mr. McNulty resigns his
     employment.  In the event of  termination  for any of the reasons set forth
     herein  Mr.  McNulty  shall be bound by all of the terms of this  Agreement
     that survive termination.

     5.  Confidentiality.  Mr.  McNulty shall keep  confidential,  except as the
         ---------------
Company may otherwise consent in writing,  and not disclose,  or make any use of
except for the benefit of the Company,  at any time either  during or subsequent
to Mr.  McNulty's  performance  of services for the Company,  any trade secrets,
knowledge,  data or other  information  of the  Company  relating  to  products,
processes,  know how, technical data,  designs,  formulas,  test data,  customer
lists,  business  plans,  marketing  plans and  strategies,  and product pricing
strategies or other subject matter  pertaining to any business of the Company or
any of its clients,  customers,  consultants,  licensees or affiliates which Mr.
McNulty  may  produce,  obtain or  otherwise  learn of during  the course of Mr.
McNulty's  performance  of  services  and  after its  termination  (collectively
"Confidential Information"). Mr. McNulty shall not deliver, reproduce, or in any
way allow any such  Confidential  Information  to be delivered to or used by any
third  parties  without the specific  direction or consent of a duly  authorized
representative  of the  Company.  The  terms  of this  paragraph  shall  survive
termination of this Agreement.

     6.  Return  of  Confidential   Material.   Upon  the  completion  or  other
         -----------------------------------
termination  of Mr.  McNulty's  services  for the  Company,  Mr.  McNulty  shall
promptly surrender and deliver to the Company all records, materials, equipment,
drawings,  documents,  lab notes and books and data of any nature  pertaining to
any invention, trade secret or confidential information of the Company or to Mr.
McNulty's  services,  and Mr.  McNulty  will not take  with him any  description
containing or pertaining to any Confidential  Information,  knowledge or data of
the Company  which Mr.  McNulty  may produce or obtain  during the course of his
services.  The  terms  of  this  paragraph  shall  survive  termination  of this
Agreement.

     7.  Competition  - For purposes of this  Agreement  "Competitive  Activity"
         -----------
shall  mean the  development,  manufacturing  or sale of any  lipid  based  drug
delivery system.

                  a.  Mr.  McNulty  will not do,  or  intend  to do,  any of the
following,  either directly or indirectly,  during Mr. McNulty's employment with
the  Company  and  during  the  period of three (3)  years  after Mr.  McNulty's
cessation of employment  with the Company,  anywhere in the world.  In the event
that Mr. McNulty's improperly competes with the Company, the period during which
he engages in such competition  shall not be counted in determining the duration
of the the three (3) year non-compete restriction.


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<PAGE>

               i. Own, manage, operate,  control,  consult for, be an officer or
          director  of, work for, or be employed in any capacity by any company,
          eleemosynary  institution  or any other  business,  entity,  agency or
          organization   which  is  in  any  way   involved  in  the   research,
          development,  distribution,  sale or  commercialization of lipid based
          drug delivery technologies; or

               ii.  Solicit  prior or current  customers  of the  Company or any
          entities  with  which the  Company  has  undertaken  joint  studies or
          developmental  activities for any purpose in  competition  (as defined
          herein) with the Company; or

               iii. Solicit any then current  employees  employed by the Company
          without the Company's consent.

          Mr. McNulty and Company agree that the phrase "Mr. McNulty's cessation

of  employment  with  the  Company"  as used in this  Agreement,  refers  to any

separation   from  his   employment  at  the  Company   either   voluntarily  or

involuntarily,  either with cause or without cause, or whether the separation is

at the behest of the Company or Mr. McNulty (hereinafter referred to and defined

as "Mr. McNulty's Cessation of Employment").

     b. Should Mr.  McNulty's status change from full-time to a part-time basis,
this  Agreement  expressly  authorizes  and permits Mr.  McNulty to continue his
relationship with Hopkins Capital.

     8. Other Obligations. All of Mr. McNulty's obligations under this Agreement
        -----------------
shall be subject to any applicable  agreements  with, and policies issued by the
Company to which Mr. McNulty is subject.

     9.  Confidential  Information of Others.  Mr. McNulty  represents  that Mr.
         -----------------------------------
McNulty's  performance  of all the terms of this  Agreement  as  employee to the
Company  does  not and will  not  breach  any  agreement  to keep in  confidence
proprietary information, knowledge or data acquired by Mr. McNulty in confidence
or in trust, and Mr. McNulty will not disclose to the Company, or the Company to
use, any  confidential or proprietary  information or material  belonging to any
other person or entity.  Mr. McNulty will not enter into any  agreement,  either
written or oral, which is in conflict with this Agreement.

     10.  Injunctive  Relief.  Mr.  McNulty  acknowledges  that  any  breach  or
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attempted  breach by Mr. McNulty of this Agreement or any provision hereof shall
cause the Company  irreparable harm for which any adequate  monetary remedy does
not exist.  Accordingly,  in the event of any such breach or threatened  breach,
the Company shall be entitled to obtain injunctive relief, without the necessity
of posting a bond or other surety, restraining such breach or threatened breach.


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     11. Modification.  This Agreement may not be changed,  modified,  released,
         ------------
discharged,  abandoned,  or otherwise amended, in whole or in part, except by an
instrument in writing,  signed by Mr. McNulty and by the Company. Any subsequent
change  or  changes  in Mr.  McNulty's  relationship  with  the  Company  or Mr.
McNulty's compensation shall not affect the validity or scope of this Agreement.

     12. Entire Agreement.  Mr. McNulty  acknowledges receipt of this Agreement,
         ----------------
and agrees that with respect to the subject matter thereof,  it is Mr. McNulty's
entire  agreement  with the Company,  superseding  any previous  oral or written
communications,  representations,  understandings with the Company or any office
or representative thereof.

     13.  Severability.  In the event that any  paragraph  or  provision of this
          ------------
Agreement  shall be held to be illegal or  unenforceable,  the entire  Agreement
shall not fall on account thereof,  but shall otherwise remain in full force and
effect,  and such paragraph or provision shall be enforced to the maximum extent
permissible.

     14.  Successors  and  Assigns.  This  Agreement  shall be binding  upon Mr.
          ------------------------
McNulty's heirs, executors, administrators or other legal representatives and is
for the benefit of the Company, its successors and assigns.

     15.  Governing  Law.  This  Agreement  shall be governed by the laws of the
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State of New Jersey  except for any  conflicts  of law rules  thereof that might
direct the application of the substantive law of another state.

     16. Counterparts. This Agreement may be signed in two counterparts, each of
         ------------
which shall be deemed an original  and both of which shall  together  constitute
one agreement.

     17.  Arbitration.  In the event the Mr.  McNulty,  his  spouse or any other
          -----------
person  claiming  benefits on behalf of or through Mr.  McNulty,  has a claim or

dispute based upon this agreement including the interpretation or application of

the terms and provisions of this Agreement, the sole and exclusive remedy is for

that party to submit the dispute to binding  arbitration in accordance  with the

rules of arbitration of the American Arbitration  Association in New Jersey. Any

arbitrator  selected  to  arbitrate  any such  dispute  will  have the  power to

interpret this Agreement.  Any determination or decision by the arbitrator shall

be  binding  upon the  parties  and may be  enforced  in any  court of law.  The

expenses  of the  arbitrator  will be  paid  50% by the  Company  and 50% by Mr.

McNulty,  his spouse or other person, as the case may be. The parties agree that

this arbitration  provision does not apply to the right of Mr. McNulty to file a

charge,  testify,  assist or  participate  in any  manner  in an  investigation,


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hearing or proceeding before the Equal Employment  Opportunity Commission or any

other agency  pertaining to any matters covered by this Agreement and within the

jurisdiction of the agency.

     18. No Waiver.  No waiver by the Company of any breach of this Agreement by
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Mr. McNulty shall constitute a waiver of any subsequent breach.

     19.  Notice.  Any notice hereby  required or permitted to be given shall be
          ------
sufficiently  given if in writing and upon  mailing by  registered  or certified
mail,  postage  prepaid,  to either  party at the  address of such party or such
othis address as shall have been  designated by written  notice by such party to
the other party.








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<PAGE>


EXECUTED as of the date set forth below.

Dated:     August 31, 2002.

BIODELIVERY SCIENCES INTERNATIONAL, INC.


                                     By:         /s/ Francis E. O'Donnell
                                          -----------------------------------
                                          Name:  Francis E. O'Donnell, Jr.
                                                 Title:   President, CEO



                                                 /s/ James A. McNulty
                                          -----------------------------------
                                                 James A. McNulty


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