Exhibit 10.1









                              AMENDED AND RESTATED
                  LIMITED LIABILITY COMPANY OPERATING AGREEMENT

                                       OF

                          BIORAL NUTRIENT DELIVERY, LLC




                      Dated effective as of October 1, 2003











THE  MEMBERSHIP  SHARES IN BIORAL  NUTRIENT  DELIVERY,  LLC (THE  "SHARES")  ARE
SUBJECT TO THE  RESTRICTIONS  ON TRANSFER  SET FORTH IN THIS  AGREEMENT  AND THE
OTHER TERMS AND  CONDITIONS OF THIS  AGREEMENT.  NEITHER THE SHARES NOR ANY PART
THEREOF  MAY BE OFFERED  FOR SALE,  PLEDGED,  HYPOTHECATED,  SOLD,  ASSIGNED  OR
TRANSFERRED  AT ANY TIME EXCEPT IN COMPLIANCE  WITH THE TERMS AND  CONDITIONS OF
THIS AGREEMENT AND (I) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER ANY
APPLICABLE  STATE  SECURITIES  LAWS OR IN A  TRANSACTION  WHICH IS  EXEMPT  FROM
REGISTRATION UNDER SUCH SECURITIES LAWS OR WHICH IS OTHERWISE IN COMPLIANCE WITH
SUCH  SECURITIES LAWS AND (II) PURSUANT TO AN EFFECTIVE  REGISTRATION  STATEMENT
UNDER THE SECURITIES  ACT OF 1933, AS AMENDED (THE  "SECURITIES  ACT"),  OR IN A
TRANSACTION WHICH IS EXEMPT FROM REGISTRATION  UNDER THE SECURITIES ACT OR WHICH
IS OTHERWISE IN COMPLIANCE WITH THE SECURITIES ACT.


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                                             TABLE OF CONTENTS

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Section 1.1       Name..................................................................................1
                  ----

Section 1.2       Formation.............................................................................1
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Section 1.3       Principal Business Office.............................................................2
                  -------------------------

Section 1.4       Registered Office and Agent...........................................................2
                  ---------------------------

Section 1.5       Term of the Company...................................................................2
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Section 1.6       Fiscal Year...........................................................................2
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Section 2.1       Purpose...............................................................................2
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Section 2.2       Powers................................................................................2
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Section 3.1       Membership Shares.....................................................................3
                  -----------------

Section 3.2       Percentage Interest...................................................................4
                  -------------------

Section 3.3       Capital Contributions.................................................................4
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Section 3.4       Partition.............................................................................4
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Section 3.5       No Interest on Capital................................................................4
                  ----------------------

Section 3.6       Withdrawal............................................................................4
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Section 3.7       Distributions of Class B Shares.......................................................5
                  -------------------------------

Section 3.8       Substitute and Additional Members.....................................................6
                  ---------------------------------

Section 3.9       Company Reorganization................................................................7
                  ----------------------

Section 3.10      MM Option.............................................................................7
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Section 4.1       Allocation of Profits and Loss........................................................7
                  ------------------------------

Section 4.2       Distributions.........................................................................8
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Section 4.3       Capital Accounts......................................................................8
                  ----------------

Section 4.4       Book/Tax Disparities; Section 754 Elections; etc......................................8
                  ------------------------------------------------

Section 4.5       Certain Tax-Related Definitions.......................................................9
                  -------------------------------

Section 4.6       Regulatory Allocations, Qualified Income Offset and Minimum Gain Chargebacks..........9
                  ----------------------------------------------------------------------------

Section 5.1       Management by the Board of Directors.................................................10
                  ------------------------------------

Section 5.2       Officers.............................................................................11
                  --------

Section 5.3       Class B Share Incentive Plan.........................................................11
                  ----------------------------

Section 5.4       Reliance by Third Parties............................................................12
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Section 5.5       Other Business Interests.............................................................12
                  ------------------------

Section 6.1       Books, Records and Financial Statements..............................................12
                  ---------------------------------------

Section 6.2       Company Audits.......................................................................12
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Section 6.3       Tax Matters Partner..................................................................13
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Section 6.4       Taxation as Partnership..............................................................13
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Section 7.1       Liability............................................................................13
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Section 7.2       Exculpation..........................................................................13
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Section 7.3       Indemnification......................................................................14
                  ---------------

Section 7.4       Expenses.............................................................................14
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Section 7.5       Insurance............................................................................15
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Section 8.1       Transfers of Membership Shares.......................................................15
                  ------------------------------

Section 8.2       Managing Member Right of First Refusal...............................................16
                  --------------------------------------

Section 9.1       Dissolution..........................................................................16
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Section 9.2       Liquidation..........................................................................17
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Section 9.3       Termination..........................................................................17
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Section 9.4       Claims of the Members................................................................17
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Section 10.1      Separability of Provisions...........................................................17
                  --------------------------

Section 10.2      Counterparts.........................................................................17
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Section 10.3      Entire Agreement.....................................................................17
                  ----------------

Section 10.4      Governing Law........................................................................18
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Section 10.5      Arbitration..........................................................................18
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Section 10.6      Remedies.............................................................................18
                  --------

Section 10.7      No Third Party Beneficiaries.........................................................19
                  ----------------------------

Section 10.8      Amendments...........................................................................19
                  ----------

Section 10.9      Interpretation.......................................................................19
                  --------------

Section 10.10     Captions.............................................................................19
                  --------

Section 10.11     Notices..............................................................................19
                  -------

Section 11.1      Certain Defined Terms................................................................20
                  ---------------------


SCHEDULES


Schedule A  Names, Contact Information and Membership Shares Held by the Members


Schedule B  2003 Class B Membership Share Option Plan


                                                   -ii-

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<PAGE>


                              AMENDED AND RESTATED
                LIMITED LIABILITY COMPANY OPERATING AGREEMENT OF
                          BIORAL NUTRIENT DELIVERY, LLC

         This AMENDED AND RESTATED LIMITED LIABILITY COMPANY OPERATING AGREEMENT
(this  "Agreement")  of  Bioral  Nutrient  Delivery,  LLC,  a  Delaware  limited
liability company (the "Company") is entered into as effective of the 1st day of
October,  2003,  by  BioDelivery  Sciences   International,   Inc.,  a  Delaware
corporation, as the managing member of the Company.

         WHEREAS,  the  Company is governed by that  certain  Limited  Liability
Company  Agreement,  dated  January 8, 2003 (as amended on March 31,  2003,  the
"Agreement"),  by and  among  the  Managing  Member  and the  Persons  listed on
Schedule A thereto,  which Persons hold Class B Shares (as defined below) in the
Company (the "Class B Members" and,  collectively  with the Managing  Member and
any future member of the Company  admitted in accordance  with the provisions of
this Agreement, the "Members");

         WHEREAS,  pursuant to Section 10.8 of the Agreement,  amendments to the
Agreement may be made only by the Managing Member;

         WHEREAS,  in light of certain  changes  to the  Company,  the  Managing
Member  desires to amend and  restated,  in its  entirety,  the Agreement in the
manner provided for herein.

         NOW,  THEREFORE,  in light of the foregoing and intending to be legally
bound,  the Managing  Member  hereby  amends and  restates the  Agreement in its
entirety as follows:

                                   ARTICLE I
                        FORMATION; DURATION AND PURPOSES

         Section 1.1 Name. The name of the limited liability company that is the
subject of this Agreement  shall be Bioral Nutrient  Delivery,  LLC. Each Member
acknowledges  that the word  "Bioral" is a registered  trademark of the Managing
Member.

Section 1.2  Formation.

         (a)  Pursuant to the Act,  the Members  hereby  form the  Company.  The
Company's  existence will commence upon the filing of a certificate of formation
of the Company (the "Certificate") by an authorized person (as such term is used
in  Section  18-201  of  the  Act)   designated  by  the  Managing  Member  (the
"Organizer") in the office of the Delaware Secretary of State. The execution and
filing  of such  Certificate  with the  Delaware  Secretary  of State is  hereby
authorized and approved by the Members. The rights,  liabilities and obligations
of any Member with respect to the Company shall be determined in accordance with
the Act, the Certificate and this Agreement. To the extent anything contained in
this  Agreement  modifies,  supplements  or  otherwise  affects  any such right,
liability,  or obligation  arising under the Act, this Agreement shall supersede
the Act to the extent not restricted thereby.



<PAGE>

         (b) The Organizer,  any Officer (as defined below) and any other Person
appointed by the Board of Directors  (as defined  below)  shall  hereinafter  be
authorized to cause the Company to be qualified,  or registered under assumed or
fictitious  name  statutes or similar  laws,  in any  jurisdiction  in which the
Company  transacts  business.  Such Person,  as an authorized  person within the
meaning of the Act, shall execute,  deliver and file any  certificates  (and any
amendments and/or  restatements  thereof) necessary or desirable for the Company
to qualify to do business in any  jurisdiction  in which the Company may wish to
conduct business.

         Section 1.3 Principal Business Office. The principal business office of
the  Company  shall  be  located  at c/o  UMDNJ  - New  Jersey  Medical  School,
Administrative Building 4, 185 South Orange Avenue, Newark, New Jersey 07103, or
at such other location as may hereafter be determined by the Board of Directors.

         Section 1.4  Registered  Office and Agent.  The name and address of the
registered  agent of the  Company  for  service of process on the Company in the
State of Delaware is National Registered Agents, Inc., 9 East Loockerman Street,
Suite 1B, Dover,  Delaware,  19901,  County of Kent.  The name of the registered
agent of the Company at such address is National  Registered Agents, Inc. At any
time,  the Board of Directors  may  designate  another  registered  agent and/or
registered office for the Company.

         Section 1.5 Term of the Company. The term of the Company shall commence
on the date of the filing of the Certificate and shall be perpetual,  unless the
Company is sooner  terminated  and dissolved  pursuant to the terms  hereof.  No
Member may withdraw from the Company  without the prior  written  consent of the
other Members, other than as expressly provided in this Agreement.

         Section 1.6 Fiscal  Year.  The fiscal year of the Company  shall end on
December 31st of each year.

                                   ARTICLE II
                        PURPOSE AND POWERS OF THE COMPANY

         Section  2.1  Purpose.  The  Company  is formed for the  objective  and
purpose of, and the nature of the business to be  conducted  and promoted by the
Company is,  engaging in any lawful act or activity for which limited  liability
companies  may be formed  under  the Act as may be  determined  by the  Managing
Member and engaging in any and all activities necessary,  convenient,  desirable
or incidental to the foregoing.  The initial purpose of the Company is to obtain
an  exclusive  world-wide   perpetual   sub-license  to  the  Managing  Member's
proprietary encochleation drug delivery technology for non-pharmaceutical use in
the processed  food and beverage and personal care product  industries  for both
human and animal consumption.

         Section 2.2 Powers.  In furtherance of its purposes,  the Company shall
have the power and is hereby  authorized to take any and all actions  necessary,
appropriate,   proper,  advisable,  incidental  or  convenient  to  or  for  the
furtherance of the purposes set forth in Section 2.1, including, but not limited
to, the power to conduct  its  business,  carry on its  operations  and have and
exercise  the powers  granted to a limited  liability  company by the Act in any
state,



                                       2
<PAGE>

territory,  district  or  possession  of the United  States,  or in any  foreign
country that may be necessary, convenient or incidental to the accomplishment of
the purpose of the Company.

                                  ARTICLE III
                            MEMBERS; MEMBERSIP SHARES

Section 3.1 Membership Shares.

         (a) Generally.  The limited  liability company interests of the Company
shall be classified in two classes of shares (each such interest in the Company,
a  "Membership  Share"  and  collectively,  the  "Membership  Shares"):  Class A
Membership  Shares  (each,  a "Class A Share"  and  collectively,  the  "Class A
Shares")  and  Class  B  Membership   Shares  (each,   a  "Class  B  Share"  and
collectively,  the "Class B Shares"). There shall be no limitation on the number
of Membership Shares which may be issued and/or outstanding at any time, subject
to the approval of the Board of Directors as to the timing of any such  issuance
and amount thereof.

         (b)  Class A  Shares.  The  Class  A  Shares  will be held  only by the
Managing Member and will grant the Managing Member the management and governance
rights contained in this Agreement.  The Managing Member, as a holder of Class A
Shares,  will be  entitled  to its pro rata  portion  (based  on its  Percentage
Interests) of distributions declared and paid by the Board of Directors.

         (c) Class B Shares.  The  Class B Shares  will be held by the  Managing
Member  and the  Class B  Members  in  accordance  with the  provisions  of this
Agreement.  The Class B Members will have no management,  governance or approval
rights whatsoever  relating to the business and operations of the Company.  Each
Class B Member will be entitled to its pro rata portion (based on its Percentage
Interests) of distributions declared and paid by the Board of Directors.

         (d) Other  Securities.  The Board of Directors is  authorized  to issue
additional  Membership  Shares,  or any  other  class or type of debt or  equity
securities  of the  Company  (including  options,  warrants or rights to receive
Class B Shares or any other  class or type of debt or equity  securities  of the
Company,   including  convertible   securities)  that  the  Board  of  Directors
designates,  at  such  times  and on  such  terms  as  the  Board  of  Directors
determines.  Any  such  action  shall  be  memorialized,  as  applicable,  in an
amendment and/or restatement to this Agreement executed by the Managing Member.

         (e) Inclusions to "Membership  Shares." For purposes of this Agreement,
a Member's  aggregate  "Membership  Shares" shall  include the entire  ownership
interest  of a Member in the  Company at any time,  including  (a) the rights of
such  Member  to any and all  benefits  to which a  Member  may be  entitled  as
provided in this  Agreement,  together  with the  obligations  of such Member to
comply  with all the terms and  provisions  of this  Agreement,  (b) all income,
profits,  Available  Net Cash,  fees or  payments  of  whatever  nature  and all
distributions  to  which  any  Member  would  be  entitled,  now or at any  time
hereafter,  of whatsoever description or character;  and (c) all of any Member's
present  and  future  rights to and in its  Capital  Account,  whether by way of
liquidating  distributions  or  otherwise,  and all of such


                                       3
<PAGE>

Member's right to receive or share in any surplus of the Company in the event of
the dissolution of the Company.

         Section 3.2 Percentage  Interest. A Member's percentage interest of the
outstanding Membership Shares (the "Percentage Interest") shall be calculated by
dividing  the number of  Membership  Shares held by such Member  (regardless  of
class) by the aggregate number of Membership Shares  outstanding  (regardless of
class).  The number and class of Membership Shares and the resulting  Percentage
Interest of the Members  shall be reflected on Schedule A hereto or on the books
and records of the transfer agent of the Company,  which transfer agent shall be
selected (and removed and replaced,  as the case may be) by the Managing  Member
in its sole  discretion.  Schedule A hereto or such books and  records  shall be
amended  from time to time to reflect  the  issuance  of  additional  Membership
Shares and the  admission of new Members,  in each case in  accordance  with the
provisions of this Agreement.

         Section 3.3 Capital Contributions. No Member shall be obligated to make
contributions  of cash or  other  property  to the  Company  (each,  a  "Capital
Contribution").  A Member may make a Capital  Contribution  or loan funds to the
Company with the prior written consent of the Managing Member, which consent may
be granted or withheld in the sole  discretion of the Managing  Member,  for any
reason or no reason.

         Section 3.4  Partition.  Each Member  waives any and all rights that it
may have to maintain an action for partition of the Company's property.

         Section 3.5 No Interest on Capital.  No Member shall be entitled to any
interest on any capital, if any, contributed by it to the Company.

         Section 3.6 Withdrawal.

         (a) Except in  connection  with a Transfer  to a  Permitted  Transferee
(each as  defined in Section  8.1  below) or a  Transfer  to which the  Managing
Member consents  pursuant to Section 8.1 hereof in which the transferee has been
admitted  as a  Substitute  Member  (as  defined  below)  and  has  assumed  the
obligations of a Member or as otherwise  described  herein, no Member shall have
the right to withdraw from the Company  without the prior written consent of the
Managing  Member  (which  consent  may be withheld  in  Managing  Member's  sole
discretion,  for any reason or no reason).  Effective on the date of a permitted
withdrawal,  such withdrawing  Member shall be deemed to have withdrawn from the
Company and shall no longer be a Member for purposes of this Agreement. From and
after the effective date of such withdrawal, the withdrawing Member shall not be
entitled to receive any  distributions  from the Company unless the  withdrawing
Member was a Member on the record date therefor.

         (b) If a Member  withdraws  from the  Company in  violation  of Section
3.6(a),  such Member shall not be entitled to any  distribution  or payment with
respect to his, her or its Membership  Shares in the Company and shall be liable
to the Company for breach of this Agreement.


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<PAGE>

         Section 3.7 Distributions of Class B Shares.

         (a) As of October 1, 2003, the Managing  Member holds 7,085,862 Class B
Shares and has the right to acquire, from time to time in the future,  4,185,000
Class B Shares underlying the MM Option (as defined in Section 3.10 below) (such
11,270,862   Class  B  Shares,   collectively,   the  "MM   Class  B   Shares").
Notwithstanding  any  provision of this  Agreement to the contrary (and assuming
the exercise,  from time to time, of the MM Option as provided for herein),  the
MM Class B Shares (or rights to purchase or other  securities  convertible  into
such Class B Shares) may be  distributed  to or sold by the  Managing  Member to
current  and/or future  stockholders  of the Managing  Member or other  Persons,
including,  without limitation,  as a dividend or other distribution or upon the
distribution  by the  Managing  Member  and  subsequent  exercise  of  rights to
purchase such MM Class B Shares.

         (b) At the request of the Managing  Member,  the Company shall register
the MM Class B Shares  (and/or  the  rights to  purchase  the MM Class B Shares)
distributed  to the Managing  Member's  stockholders  or other Class B Shares or
other securities of the Company (in this context, collectively, the "Registrable
Securities")  with the  Securities  and Exchange  Commission  ("SEC")  under the
Securities  Act of 1933,  as amended  (together  with the rules and  regulations
promulgated thereunder, the "Securities Act") and/or the Securities Exchange Act
of 1934,  as  amended  (together  with the  rules  and  regulations  promulgated
thereunder, the "Exchange Act"), it being understood and agreed that neither the
MM Class B Shares nor any other debt or equity  securities of the Company shall,
without the approval of the Managing Member in its sole discretion, be traded or
listed for quotation on any public market or exchange.

         (c) The Members agree that, in connection with any such registration of
the Registrable Securities under the Securities Act, the Company shall:

                  (i) File with the SEC a registration statement with respect to
         such Registrable  Securities (a  "Registration  Statement") and use its
         reasonable best efforts to cause that Registration  Statement to become
         effective as soon as possible;

                  (ii)  When   required   by  the   Managing   Member,   and  as
         expeditiously as possible, prepare and file with the SEC any amendments
         and  supplements  to the  Registration  Statement  and  the  prospectus
         included in the  Registration  Statement (the  "Prospectus")  as may be
         necessary to comply in all material respects with the provisions of the
         Securities  Act and/or  the  Exchange  Act  (including  the  anti-fraud
         provisions  thereof) and to keep the Registration  Statement  effective
         for so long as the Managing Member may require;

                  (iii)  When   required  by  the   Managing   Member,   and  as
         expeditiously  as  possible,   furnish  to  the  Managing  Member  such
         reasonable numbers of copies of the prospectus or information statement
         included with the  Registration  Statement,  including any  preliminary
         prospectus,  in conformity with the  requirements of the Securities Act
         and the Exchange Act, and such other  documents as the Managing  Member
         may reasonably  request in order to facilitate the public  distribution
         or sale of the Registrable Securities owned by the Managing Member;


                                       5
<PAGE>

                  (iv) As  expeditiously  as  possible,  use its best efforts to
         register  or  qualify  the  Registrable   Securities   covered  by  the
         Registration  Statement  under the  securities or Blue Sky laws of such
         states as the Managing Member shall reasonably request,  and do any and
         all other acts and things that may be  necessary or desirable to enable
         the Managing  Member to facilitate the public  distribution  or sale of
         the Registrable Securities owned by the Managing Member;

                  (v) Promptly  provide a transfer  agent and  registrar for all
         such  Registrable  Securities not later than the effective date of such
         Registration Statement;

                  (vi) As expeditiously as possible  following the effectiveness
         of such  Registration  Statement,  notify  the  Managing  Member of any
         request  by  the  SEC  for  the  amending  or   supplementing  of  such
         Registration Statement or prospectus;

                  (vii) Use its reasonable best efforts to obtain the lifting of
         any stop order that might be issued  suspending  the  effectiveness  of
         such Registration Statement at the earliest possible moment; and

                  (viii) Use its reasonable best efforts to file with the SEC in
         a timely manner all reports and other documents required of the Company
         under the Securities Act and the Exchange Act (at any time after it has
         become subject to such reporting requirements).

         Section 3.8 Substitute and Additional Members.

         (a) Additional  members may be admitted to the Company (the "Additional
Members")  upon the issuance of Membership  Shares to such  Additional  Members,
including,  without limitation,  upon the distributions  contemplated by Section
3.7 hereof. No Additional Member and no Person who is the transferee or assignee
of all or a portion of the Membership Shares of a Member (a "Substitute Member")
shall be entitled to any of the rights and benefits  under this Agreement of the
transferor or assignor of such interest (other than the right to  distributions)
unless and until:

                  (i) the  Additional  Member or the Substitute  Member,  as the
         case may be, shall execute and  acknowledge  any instrument  reasonably
         deemed  by the  Managing  Member to be  necessary  to  effectuate  such
         admission,  which  instrument shall include  representations  that such
         Additional  Member or  Substitute  Member or their  Affiliates is not a
         Prohibited Owner; and

                  (ii) the Additional  Member or the Substitute  Member,  as the
         case may be, shall  accept and assume in writing (in a form  determined
         by the Board of Directors) all of the terms, conditions and obligations
         of this Agreement applicable to the Membership Shares being acquired by
         it.

         (b) As promptly as is reasonably  practicable after the admission of an
Additional Member or a Substitute Member in the Company,  the Managing Member or
its designee shall amend this Agreement (including Schedule A annexed hereto) or
cause  the  books and  records  of the  Company  administered  by the  Company's
transfer agent to reflect the addition


                                       6
<PAGE>

of the  Additional  Member,  or the  addition of the  Substitute  Member and the
deletion of the Member  substituted  therefor,  and to set forth the  respective
designations,  preferences and rights, as established by the Managing Member, of
the  Membership  Shares of such  Additional  Member or  Substitute  Member.  The
Managing  Member shall cause any such  amendment to be dated and effective as of
the date  upon  which any such  Additional  Member or  Substitute  Member  first
acquired the Membership Shares in question.

         Section 3.9 Company Reorganization. If the Managing Member, in its sole
discretion,  determines  that  conditions  are  favorable  for  the  Company  to
reorganize as a  corporation,  the Company may be  reorganized  as a corporation
and, in connection therewith, its equity interests (including but not limited to
the  Class B Shares)  may be  reclassified  as  shares  of stock (or  securities
convertible  into,  or  options  to  purchase,  such  shares  of  stock) in such
corporation on such terms and conditions as are approved by the Managing Member,
provided that the relative  rights and  preferences  of the Class B Shares shall
not be materially modified. Each Member (including the Class B Members) or other
direct or indirect  holder of Membership  Shares will be required to execute and
deliver  such  instruments  or  documents  as may be  necessary  or advisable in
connection with any such reorganization.

         Section 3.10 MM Option.

         (a) The Company hereby grants to the Managing Member an option (the "MM
Option") to purchase, in whole or in part, and from time to time in any amounts,
for the period beginning January 8, 2003 and ending January 8, 2008 (the "Option
Period"),  an  aggregate  of  4,185,000  Class  B  Shares  at a  purchase  price
throughout the Option Period of $0.01 per Class B Share.

         (b) The MM Option shall be  exercised by the Managing  Member by giving
written  notice  thereof to the Company,  which notice shall state the amount of
Class B Shares  desired to be acquired by the Managing  Member and the aggregate
purchase price for such Class B Shares.  In connection with each exercise of the
MM Option  during the Option  Period,  the  Managing  Member shall tender to the
Company the aggregate  purchase  price for the Class B Shares  acquired no later
than five (5) days following its delivery of the written notice  contemplated by
this Section 3.10(b).

         (c) Upon  payment by the  Managing  Member for the  applicable  Class B
Shares,  an appropriate  amendment to Schedule A hereto shall be made reflecting
the number of Class B Shares  issued to the  Managing  Member and the  resulting
changes to the Percentage  Interests of each Member.  The Managing  Member shall
not be entitled to any preferential  return on any capital  contributed by it to
the Company in  connection  with the  exercise or exercises of the MM Option and
shall only be entitled to a pro rata increase in its Percentage Interest.

                                   ARTICLE IV
                  ALLOCATION OF PROFITS AND LOSS; DISTRIBUTIONS

         Section 4.1 Allocation of Profits and Loss.

         (a) Profits. Profits shall be allocated:


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<PAGE>

                  (i)  First  to each  Member  in an  amount  equal  to the Loss
         allocated to such Member pursuant to Section 4.1(b)(ii) hereof, then

                  (ii)  Second,  to each  Member in an amount  equal to the Loss
         allocated to such Member pursuant to Section 4.1(b)(i) hereof, then

                  (iii) Third,  to the Members pro rata in  proportion  to their
         respective Percentage Interests.

         (b) Loss. Loss shall be allocated:

                  (i)  First,   among  Members  with  positive  Capital  Account
         balances, until such balances have been reduced to zero, and then

                  (ii) Second,  to the Members,  pro rata in proportion to their
         respective Percentage Interests.

         Section 4.2 Distributions.  Available Net Cash, if available,  shall be
distributed by the Company at such time and in such amounts as shall be approved
by the Board of Directors, in its sole and absolute discretion, in the following
order of priority:

         (a) First, to each Member,  an amount sufficient for such Member to pay
his, her or its federal  income taxes,  if any, in respect of their share of the
Profits (as defined  below) of the  Company (in excess of prior  allocations  to
each Member of Loss (as  defined  below) of the  Company),  based on the highest
applicable  federal  income tax rate on  individuals  in effect at the time that
Profits are allocated to the Members; then

         (b) Second, to the Members, pro rata, to the extent such Members have a
positive  Capital  Account  balance,  an amount equal to such Member's  positive
Capital Account balance; and

         (c)  Thereafter,  to the  Members,  pro  rata in  proportion  to  their
respective  Percentage  Interests.  Distributions  to which a Member is entitled
pursuant to this Section 4.2(c) shall be reduced by any distributions which such
Member received pursuant to Section 4.2(a) and (b) above.

         Section 4.3 Capital  Accounts.  The Board of Directors  shall establish
and maintain  capital  accounts  ("Capital  Account")  for each Member.  Capital
Accounts   shall  be   maintained  in   accordance   with  Treasury   Regulation
ss.1.704-1(b)(2)(iv) and shall be interpreted and applied in a manner consistent
therewith.  If the Board of  Directors  shall  determine  that it is  prudent to
modify the manner in which the Capital  Accounts are computed in order to comply
with Treasury Regulation  ss.1.704-1(b)(2)(iv),  the Board of Directors may make
such modification.

         Section 4.4 Book/Tax Disparities; Section 754 Elections; etc.

         (a) In the case of contributed  property,  items of income, gain, loss,
deduction and credit,  as determined for federal  income tax purposes,  shall be
allocated in a manner


                                       8
<PAGE>

consistent  with the  principles of Section 704(c) of the Code by using a method
described  in  Treasury  Regulation  ss.1.704-3(d)  selected  by  the  Board  of
Directors,  in its sole discretion,  to take into account the difference between
the agreed  value of such  property  and its  adjusted  tax basis at the time of
contribution or adjustment, as the case may be.

         (b) All items of income, gain, loss, deduction and credit recognized by
the Company for federal  income tax  purposes  and  allocated  to the Members in
accordance with the provisions hereof shall be determined  without regard to any
election  under  Section 754 of the Code which may be made by Board of Directors
on behalf of the Company; provided,  however, that such allocations,  once made,
shall be  adjusted  as  necessary  or  appropriate  to take into  account  those
adjustments permitted by Section 734 and 743 of the Code.

         Section 4.5 Certain Tax-Related Definitions.

         (a) For purposes of this Agreement,  the terms "Profit" or "Loss" mean,
for each fiscal  year or other  period,  an amount  equal to the  Company's  net
taxable  income or loss for such year or period,  determined in accordance  with
Section 703(a) of the Code (for this purpose, all items of income, gain, loss or
deduction required to be stated separately  pursuant to Section 703(a)(1) of the
Code shall be included in taxable income or loss),  adjusted as follows: (i) any
income of the Company that is exempt from federal  income tax and not  otherwise
taken into  account in  computing  Profit or Loss shall be added to such taxable
income or loss;  (ii) any  expenditures  of the  Company  described  in  Section
705(a)(2)(B)  of the Code or treated as described  in such  Section  pursuant to
Treasury  Regulation Section  1.704-1(b)(2)(iv)(i)  and not otherwise taken into
account in  computing  Profit or Loss,  shall be  subtracted  from such  taxable
income or loss;  and (iii) in the event the Carrying Value (as defined below) of
any Company property is adjusted pursuant to Section 1.704-1(b)(2)(iv)(f) of the
Treasury  Regulations or other pertinent sections of such Treasury  Regulations,
the  amount of such  adjustment  shall be taken into  account  for  purposes  of
computing Profit and Loss. Notwithstanding any other provisions, any items which
are specially  allocated pursuant to Section 4.6 shall not be taken into account
in computing Profit or Loss.

         (b) For  purposes  of  computing  Profit and Loss,  the term  "Carrying
Value" shall mean (A) with respect to contributed property,  the agreed value of
such property,  (B) with respect to property the book value of which is adjusted
pursuant to Treasury Regulation ss. 1.704-1(b)(2)(iv)(d), (e) or (f), the amount
determined  by the  Board  of  Directors,  and (C)  with  respect  to any  other
property, the adjusted basis of such property for federal income tax purposes as
of the time of determination.

         Section 4.6 Regulatory Allocations, Qualified Income Offset and Minimum
Gain  Chargebacks.  The provisions of this Agreement are intended to comply with
Code  Section 704 and Treasury  Regulations  ss.ss.  1.704-1(b)  and 1.704-2 and
shall be interpreted  and applied in a manner  consistent  with such Section and
such  Regulations.  Notwithstanding  anything to the contrary in this Agreement,
the Members  shall make such  allocations  as may be required in order to comply
with Code Section 704 and Treasury  Regulations  ss.ss.  1.704-1(b)  and 1.704-2
including  any  allocations  necessary  to satisfy  the  requirements  for (i) a
"qualified  income  offset";  (ii) a  "minimum  gain  chargeback";  and  (iii) a
chargeback of "minimum gain  attributable to partner  nonrecourse  debt" as such
terms are defined in Treasury Regulation ss.ss. 1.704-1(b) and 1.704-2.


                                       9
<PAGE>

                                   ARTICLE V
                                   MANAGEMENT

         Section 5.1 Management by the Board of Directors.

         (a) Powers.  Subject to the  oversight by the  Managing  Member and the
other rights of the Managing Member contained in this Agreement,  the management
and control of the  business  and  affairs of the  Company  shall be vested in a
board of directors (the "Board of Directors"),  which shall have the power to do
any and all acts  necessary,  convenient or incidental to or for the furtherance
of the  purposes  of the  Company,  including  all powers  provided  for in this
Agreement,  the  Act or  otherwise.  Any  Officer  or  employee  of the  Company
authorized  by the  Board of  Directors  shall  have the  authority  to bind the
Company.  Without  limiting  the  generality  of the  foregoing,  the  Board  of
Directors shall establish overall policies for the Company, set long-range plans
and objectives  and direct the conduct of the Company's  Officers and employees.
No action shall be taken, sum expended,  decision made or obligation incurred by
the Company with respect to any matter  regarding the Company unless such matter
has been expressly approved by the Board of Directors as provided for herein.

         (b)  Composition.  The  Board of  Directors  shall  consist  of six (6)
individuals (each, a "Director" and collectively, the "Directors"), each of whom
shall be appointed  from time to time by the Managing  Member and shall serve at
the pleasure of the Managing Member. The Managing Member shall have the right to
remove any Director or all  Directors at any time,  with or without  cause.  Any
vacancy  existing  on the Board of  Directors  shall be  filled by the  Managing
Member. The initial Directors shall be:

                             Susan G. Bonitz, Ph.D.
                                   Mauro Bove
                               Christopher Chapman
                           Susan Gould-Fogerite, Ph.D.
                      Francis E. O'Donnell, Jr., M.D., and
                                L.M. Stephenson.

         (c) Meetings. The Board of Directors shall meet no less frequently than
quarterly and additionally at the request of the Managing  Member,  such request
to be made upon no less than three (3) business days notice by telephone, e-mail
or facsimile  transmission,  which notice may be waived in each  instance.  Each
such meeting shall be held at such date,  time and place as the Managing  Member
may determine. One or more Directors may participate in any meeting of the Board
via telephone  conference call or other electronic device by which all Directors
may hear such Directors. A Director may attend a meeting by proxy, provided that
his  proxyholder  presents a written  proxy at the meeting  which  empowers  the
proxyholder  to take any  action  that the  Director  could  take if  personally
present. A proxyholder must be another Director.

         (d) Voting and other Actions. Each Director shall have one vote and may
also cast one vote on behalf of any  Director  for whom he or she holds a proxy.
All actions of the Board shall require the affirmative vote of a majority of the
Directors.  No Director shall be liable to the Company or to the Managing Member
for any loss or damage sustained by the


                                       10
<PAGE>

Company or the  Managing  Member,  unless the loss or damage shall have been the
result of fraud, deceit, or intentional misconduct.

         (e) Action by Written Consent Without a Meeting. Any action that may be
taken at a meeting of the Board of Directors may be taken without a meeting if a
consent in writing  setting  forth the action so taken is signed by the required
number of Directors or by the Managing Member, as applicable.  All such consents
shall be filed with the minutes of the Company  and shall be  maintained  in the
Company records.

         (f)  Compensation.  Except as  determined  and approved by the Managing
Member or as provided for in Section 5.3 hereof, Directors shall not be entitled
to compensation for acting as such, provided that a Director shall be reimbursed
by the Company for reasonable out-of-pocket expenses incurred to attend meetings
of the Board of Directors.

         (g) Agency. No Director is an agent of the Company,  nor can a Director
bind, or execute any instrument on behalf of, the Company.

         Section 5.2 Officers.

         (a) Generally.  The day-to-day operations of the Company shall be under
the control of the officers of the Company duly  appointed  from time to time by
the Board of Directors and subject to the supervision and direction of the Board
of  Directors  (the  "Officers").  The Officers of the Company  shall  include a
president or chief executive  officer, a secretary and a chief financial officer
or  treasurer  and may  include  a chief  operating  officer,  one or more  vice
presidents  and such other  Officers as the Board of Directors  may from time to
time  consider  appropriate.   Such  Officers  shall  exercise  such  duties  as
customarily pertain to such offices as determined by the Board of Directors.

         (b) Appointment.  The Officers of the Company appointed by the Board of
Directors  shall hold office until their  successors  are chosen by the Board of
Directors. Any Officer may be removed at any time by the Board of Directors. Any
vacancy  occurring in any office of the Company  shall be filled by the Board of
Directors.

         (c)  Compensation.  Except as  determined  and approved by the Managing
Member or as provided for in Section 5.3 hereof,  Officers shall not be entitled
to compensation for acting as such during the first twelve (12) months following
the formation of the Company,  provided that Officers shall be reimbursed by the
Company for reasonable  out-of-pocket  expenses  incurred in connection with the
duties  assigned to them by the Board of Directors.  Promptly  following the one
(1) year  anniversary  of the  formation of the Company,  the Board of Directors
shall  determine  and  agree  with  each  Officer  on  a  reasonable  amount  of
compensation for services rendered or to be rendered to the Company.

         (d) The initial Officers of the Company shall be as follows: Francis E.
O'Donnell,  Jr., Chief  Executive  Officer and President;  and James A. McNulty,
Secretary, Treasurer and Chief Financial Officer.

         Section 5.3 Class B Share  Incentive  Plan. The Managing  Member hereby
establishes the 2003 Class B Share Option Plan for the Company,  a copy of which
is attached


                                       11
<PAGE>

hereto as  Schedule B (the  "Option  Plan").  Pursuant to the Option  Plan,  the
Company  may issue to  Directors  and  Officers  of the  Company and third party
individuals  or  entities  providing  services  to the  Company  ("Consultants")
options to purchase up to an aggregate of no more than 1,000,000 Class B Shares.
The Option Plan shall be administered by the Board of Directors  pursuant to the
terms of the Option Plan.

         Section 5.4  Reliance by Third  Parties.  Any Person  dealing  with the
Company, the Directors or any Officer or employee of the Company may rely upon a
certificate signed by the Managing Member as to:

         (a)  the  identity  of any of the  Managing  Member,  any  Director  or
Officer;

         (b)  the  persons  who  are  authorized  to  execute  and  deliver  any
instrument or document on behalf of the Company; or

         (c) any act or failure to act by the Company or as to any other  matter
whatsoever involving the Company.

         Section 5.5 Other Business Interests.  Any Member, Director or Officer,
or any  Affiliate  of any Member,  may engage in or possess an interest in other
business  ventures of every kind and description,  independently or with others,
and may  dedicate  such time to such  ventures as such  Persons  deem,  in their
discretion,  necessary.  None of the Company or the other Members shall have any
rights in or to such  ventures or the income or profits  therefrom  by virtue of
this Agreement.  Without  limiting the generality of the foregoing,  the Members
acknowledge that: (i) Francis E. O'Donnell, a Director and the initial President
and Chief  Executive  Officer of the Company,  is also  Chairman,  President and
Chief Executive  Officer of the Managing Member as well as the managing director
of The Hopkins  Capital  Group,  a group of  affiliated  of entities  engaged in
business  development  activities,  and  (ii)  James  A.  McNulty,  the  initial
Secretary,  Treasurer and Chief  Financial  Officer of the Company,  is also the
Secretary, Treasurer and Chief Financial Officer of the Managing Member.

                                   ARTICLE VI
                         BOOKS AND RECORDS; TAX MATTERS

         Section  6.1 Books,  Records  and  Financial  Statements.  At all times
during the  continuance  of the  Company,  the Company  shall  maintain,  at its
principal  place of  business,  separate  books of account for the Company  that
shall show a true and accurate  record of all costs and expenses  incurred,  all
charges made, all credits made and received and all income derived in connection
with the operation of the Company's  business.  Such books of account,  together
with a  certified  copy of  this  Agreement  (including  any  amendments  and/or
restatements hereof)and of the Certificate,  shall at all times be maintained at
the  principal  place of business of the Company and shall be open to inspection
and  examination  at  reasonable  times by each  Member and its duly  authorized
representative  for any purpose  reasonably related to such Member's interest in
the Company.

         Section 6.2 Company  Audits.  At any time at the sole discretion of the
Board of Directors, the financial statements of the Company may be audited by an
independent  certified  public  accountant,  selected by the Board of Directors,
with such audit to be accompanied by a


                                       12
<PAGE>

report of such accountant containing its opinion. The cost of such audit will be
an expense of the Company.  A copy of any such audited financial  statements and
accountant's reports will be made available for inspection by the Members.

         Section  6.3  Tax  Matters  Partner.  The  Managing  Member  is  hereby
designated as "Tax Matters Partner" of the Company for purposes of ss.6231(a)(7)
of the Code and shall  have the power to manage  and  control,  on behalf of the
Company,  any  administrative  proceeding at the Company level with the Internal
Revenue  Service  relating to the  determination  of any item of Company income,
gain, loss, deduction or credit for federal income tax purposes.

         Section 6.4 Taxation as Partnership.  The Company shall be treated as a
partnership for U.S. federal income tax purposes.

                                  ARTICLE VII
                   LIABILITY, EXCULPATION AND INDEMNIFICATION

         Section 7.1 Liability.

         (a) Except as otherwise provided by the Act, the debts, obligations and
liabilities  of the Company,  whether  arising in contract,  tort or  otherwise,
shall be solely the debts,  obligations and liabilities of the Company,  and the
Organizer,  the Members,  the  Directors,  the Officers and the employees of the
Company (each a "Covered Person" and collectively  "Covered  Persons") shall not
be  obligated  personally  for any such debt,  obligation  or  liability  of the
Company solely by reason of being a Covered Person.

         (b) Except as  otherwise  expressly  required by law, a Member,  in its
capacity as a Member of the  Company,  shall have no  liability in excess of (i)
the  amount  of its  Capital  Contributions,  (ii) its share of any  assets  and
undistributed  profits of the Company and (iii) the amount of any  distributions
wrongfully distributed to it.

         Section 7.2 Exculpation.

         (a) No Covered Person shall be liable to the Company, any Member or any
other  Person who has an interest  in the Company for any loss,  damage or claim
incurred by reason of any act or omission  performed  or omitted by such Covered
Person in good  faith in  connection  with the  formation  of the  Company or on
behalf of the Company and in a manner reasonably believed to be within the scope
of the authority conferred on such Covered Person by this Agreement, except that
a Covered Person shall be liable for any such loss,  damage or claim incurred by
reason of such Covered Person's gross negligence or willful misconduct.

         (b) A Covered Person shall be fully  protected in relying in good faith
upon the records of the Company and upon such information,  opinions, reports or
statements  presented  to the Company or the Board of Directors by any Person as
to matters the Covered Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the  Company,  including  information,  opinions,  reports or
statements  as to the value  and  amount of the  assets,  liabilities,  profits,
losses or any other facts  pertinent to the  existence and amount of assets from
which distributions to Members might properly be paid.



                                       13
<PAGE>

         Section 7.3 Indemnification.

         (a) Covered  Persons.  To the full extent  permitted by applicable law,
each Covered  Person shall be entitled to  indemnification  from the Company for
any loss,  damage or claim  incurred by such Covered Person by reason of any act
or omission  performed or omitted by such Covered Person in good faith on behalf
of the Company and in a manner reasonably believed to be within the scope of the
authority  conferred on such Covered  Person by this  Agreement,  except that no
Covered  Person  shall be  entitled  to be  indemnified  in respect of any loss,
damage or claim incurred by such Covered Person by reason of gross negligence or
willful  misconduct with respect to such acts or omissions;  provided,  however,
that any  indemnity  under this  Section 7.3 shall be provided out of and to the
extent of Company  assets only,  and no Member shall have personal  liability on
account thereof.

         (b)  Notice of  Claims.  Any  Covered  Person  seeking  indemnification
hereunder (an "Indemnitee")  shall promptly,  and within 30 days after notice to
it (notice to Indemnitee being the filing of any action, receipt of any claim in
writing or similar form of actual  notice) of any claim as to which it asserts a
right to indemnification,  notify the party from whom  indemnification is sought
(an  "Indemnitor") of such claim.  Indemnitee shall bill Indemnitor for any such
claims no more frequently than on a monthly basis, and Indemnitor shall promptly
pay (or cause to be paid)  Indemnitee upon receipt of any such bill. The failure
of Indemnitee to give the notification to Indemnitor  contemplated above in this
Section  7.3(b) shall not relieve  Indemnitor  from any  liability or obligation
that it may have  pursuant  to this  Agreement  unless the  failure to give such
notice within such time shall have been materially  prejudicial to it, and in no
event shall the failure to give such  notification  relieve  Indemnitor from any
liability it may have other than pursuant to this Agreement.

         (c) Third Party Claims. If any claim for  indemnification by Indemnitee
arises out of an action or claim by a Person other than  Indemnitee,  Indemnitor
may, by written notice to Indemnitee,  undertake to conduct the defense  thereof
and to take all other  steps or  proceedings  to defeat or  compromise  any such
action or claim, including the employment of counsel;  provided, that Indemnitor
shall  reasonably  consider  the  advice  of  Indemnitee  as to the  defense  or
compromise of such actions and claims,  and  Indemnitee  shall have the right to
participate,  at its own  expense,  in such  proceedings,  but  control  of such
proceedings shall remain  exclusively with Indemnitor.  Indemnitee shall provide
all reasonable  cooperation to Indemnitor in connection  with such  proceedings.
Counsel  and  auditor  costs  and  expenses  and  court  costs  and  fees of all
proceedings  with  respect  to any  such  action  or  claim  shall  be  borne by
Indemnitor. If any such claim is made hereunder and Indemnitor does not elect to
undertake the defense thereof by written notice to Indemnitee,  Indemnitee shall
be entitled to control such  proceedings and shall be entitled to indemnity with
respect thereto pursuant to the terms of this Section 7.3(b). To the extent that
Indemnitor  undertakes the defense of such claim by written notice to Indemnitee
and diligently pursues such defense at its expense, Indemnitee shall be entitled
to   indemnification   hereunder  only  to  the  extent  that  such  defense  is
unsuccessful  as  determined  by a  final  judgment  of  a  court  of  competent
jurisdiction, or by written acknowledgment of the parties.

         Section 7.4  Expenses.  To the fullest  extent  permitted by applicable
law,  expenses  (including legal fees) incurred by a Covered Person in defending
any claim,  demand,  action,  suit or  proceeding  shall,  from time to time, be
advanced by the Company prior to the final


                                       14
<PAGE>

disposition of such claim,  demand,  action,  suit or proceeding upon receipt by
the Company of an  undertaking  by or on behalf of the  Covered  Person to repay
such amount if it shall be determined that the Covered Person is not entitled to
be indemnified as authorized in Section 7.3 hereof.

         Section 7.5 Insurance. The Company may purchase and maintain insurance,
to the extent and in such amounts as the Board of Directors  shall,  in its sole
discretion, deem reasonable, on behalf of Covered Persons and such other persons
as the Board of Directors  shall  determine,  against any liability  that may be
asserted  against or expenses  that may be incurred by any person in  connection
with the  activities of the Company or such  indemnities,  regardless of whether
the Company would have the power to indemnify such person against such liability
under the  provisions of this  Agreement.  The Company may enter into  indemnity
contracts with Covered  Persons and such other Persons as the Board of Directors
shall determine and adopt written procedures  pursuant to which arrangements are
made for the  advancement  of  expenses  and the  funding of  obligations  under
Section   7.4   hereof  and   containing   such   other   procedures   regarding
indemnification as are appropriate.

                                  ARTICLE VIII
                        TRANSFERS OF MEMBERSHIP INTERESTS

         Section 8.1 Transfers of Membership Shares.

         (a) Generally.

                  (i) Except as contemplated by Section 3.7 hereof, no Member or
         Securityholder  may,  at any  time,  directly  or  indirectly,  assign,
         transfer,  sell,  exchange,   syndicate,  lien,  encumber,  pledge,  or
         hypothecate  (collectively,  a  "Transfer")  all or any  portion of its
         Membership  Shares,  or any  direct or  indirect  beneficial  or equity
         interest therein, or in the Company (collectively,  "Equity Interests")
         to any Person without the prior written consent of the Managing Member,
         which consent may be granted or withheld in the Managing  Member's sole
         discretion,  for any reason or no reason;  provided,  however, that any
         Member or  Securityholder  who is an individual may Transfer all or any
         portion of such Equity  Interest to any  Permitted  Transferee  without
         such prior approval.

                  (ii) Any  individual  Member  or  Securityholder  making  such
         Transfer to a Permitted Transferee shall provide written notice thereof
         to the Managing Member within ten (10) days of the applicable Transfer.
         It is agreed that failure to provide such notice to the Managing Member
         shall make the purported  Transfer to the Permitted  Transferee void ab
         initio.

                  (iii)  With   respect  to  Transfers   other  than   Permitted
         Transfers,  the  Managing  Member may  condition  its  approval  of any
         proposed Transfer of Membership Shares upon its receipt from the Member
         proposing  to make  such  Transfer  (the  "Transferring  Member")  of a
         written notice to the Managing Member (a "Transfer  Notice")  detailing
         all of the material terms of such proposed Transfer, including the name
         of proposed third party  transferee or lender and the economic  benefit
         to be derived by the Transferring Member from such transaction.


                                       15
<PAGE>

                  (iv) If a Class B Member  Transfers  all or any portion of its
         Membership Shares to a Permitted  Transferee or with the consent of the
         Managing  Member as provided for above,  the transferee may be admitted
         to the Company as a Substitute  Member in  accordance  with Section 3.8
         hereof.  If a Transfer of Membership  Shares is made in accordance with
         the  provisions  of this Section  8.1, the Managing  Member shall amend
         Schedule A hereto to record the admission of the Additional Member.

         (b) Override on Transfers. Notwithstanding the fact that a Transfer may
be (or may have  been  effected)  to a  Permitted  Transferee  or may have  been
approved by the  Managing  Member  pursuant to this  Section 8.1, no Transfer of
Membership  Shares  shall  be  permitted  if  such  Transfer  (i)  violates  any
applicable law, including federal or state securities laws or regulations,  (ii)
causes the  Company to be treated as a  "publicly  traded  partnership"  for tax
purposes  or (iii)  would  constitute  a  Transfer  of a  Membership  Share to a
Prohibited  Owner,  in which case any such  purported  Transfer shall be void ab
initio.

         Section 8.2 Managing Member Right of First Refusal. In the event that a
Transferring  Member is  proposing  to sell or assign all or any  portion of its
Membership  Shares to any  Person,  such  Transferring  Member  shall  deliver a
Transfer  Notice to the Managing  Member no later than thirty (30) days prior to
the contemplated closing of such sale or assignment. For a period of thirty (30)
days following receipt its receipt of such Transfer Notice,  the Managing Member
may  exercise  a right to  purchase  all or a portion of the  Membership  Shares
described in such Transfer  Notice on the same terms and conditions as set forth
therein.  Managing  Member's purchase right shall be exercised by written notice
signed by the Managing  Member (the "Managing  Member  Notice") and delivered to
such Transferring  Member.  The Managing Member shall effect the purchase of the
Transferring  Member's  Membership  Shares,  including  payment of the  purchase
price,  not more than thirty (30) days after  delivery  of the  Managing  Member
Notice,  and at such time the Transferring  Member shall sell to the Company the
Membership  Shares free and clear of any liens or encumbrances and shall execute
such  documentation as the Managing Member may reasonably  propose in connection
with such sale.  Upon the purchase by the Managing  Member of Membership  Shares
pursuant to this  Section  8.2,  such  Membership  Shares shall be owned for all
purposes by the Managing  Member (who may make such acquired  Membership  Shares
available  for  issuance  pursuant  to Section  3.7  hereof)  and the  resulting
Percentage Interests of the remaining Members shall be amended accordingly.

                                   ARTICLE IX
                    DISSOLUTION, LIQUIDATION AND TERMINATION

         Section 9.1 Dissolution.

         (a) The Company shall dissolve, and its affairs shall be wound up, only
upon the written consent of the Managing Member.

         (b) The Company  shall not be dissolved by the  admission of Additional
Members or Substitute Members in accordance with the terms of this Agreement.


                                       16
<PAGE>

         Section 9.2 Liquidation.  Upon dissolution of the Company, the Managing
Member  shall  carry out the  winding up of the  Company  and shall  immediately
commence  to wind up the  Company's  affairs;  provided,  however,  that (i) the
Managing  Member shall have all of the powers set forth in Section  18-803(b) of
the Act during the period of the winding up of the Company's  affairs and (ii) a
reasonable  time shall be allowed for the orderly  liquidation  of the assets of
the Company and the satisfaction of liabilities to creditors so as to enable the
Managing Member to minimize the normal losses attendant upon a liquidation.  The
Members  shall  continue to share in profits  and losses of the  Company  during
liquidation  in the same  proportions,  as specified  in Section 4.1 hereof,  as
before  liquidation,  provided  that  allocations  of profits,  losses and items
thereof  shall be made in a manner that results in the capital  account  balance
(as described in Treasury Regulation  1.704-1(b)) of each Member is equal to the
distribution to be made to such Member pursuant to Section 9.3(c).  The proceeds
of liquidation shall be distributed in the following order and priority:

         (a) first,  to  creditors  of the  Company,  including  Members who are
creditors,  to the extent  otherwise  permitted by law, in  satisfaction  of the
liabilities  of the  Company  (whether  by payment  or the making of  reasonable
provision for payment thereof); and

         (b)  thereafter,  to the  Members,  pro  rata in  proportion  to  their
respective Percentage Interests.

         Section 9.3  Termination.  The Company shall  terminate when all of the
assets  of the  Company,  after  payment  of or due  provision  for  all  debts,
liabilities and obligations of the Company,  shall have been  distributed to the
Members in the manner  provided  for in this Article IX and the  certificate  of
formation shall have been canceled in the manner required by the Act.

         Section 9.4 Claims of the Members. Upon dissolution of the Company, the
Members  shall  look  solely to the  Company's  assets  for the  return of their
capital contributions,  and if the assets of the Company remaining after payment
of or due provision for all debts,  liabilities  and  obligations of the Company
are insufficient to return such capital contributions, the Members shall have no
recourse against the Company or any other Member.

                                   ARTICLE X
                                  MISCELLANEOUS

         Section  10.1  Separability  of  Provisions.  Each  provision  of  this
Agreement  shall be considered  separable and if for any reason any provision or
provisions  herein are determined to be invalid,  unenforceable or illegal under
any existing or future law,  such  invalidity,  unenforceability  or  illegality
shall not impair the  operation  of or affect those  portions of this  Agreement
which are valid, enforceable and legal.

         Section 10.2 Counterparts.  This Agreement and any amendment or joinder
hereto may be executed in any number of counterparts  and by facsimile,  each of
which,  when taken  together,  shall be deemed an original of this Agreement and
one and the same Agreement.

         Section 10.3 Entire  Agreement.  This Agreement  constitutes the entire
agreement  between the parties hereto with respect to the subject matter hereof,
and supersedes all prior understandings or agreements between the parties.


                                       17
<PAGE>

         Section 10.4 Governing  Law. This  Agreement  shall be governed by, and
construed  under,  the laws of the  State of  Delaware  (without  regard  to the
conflict of laws principles of such State).

         Section 10.5 Arbitration.

         (a) Any  controversy,  claim,  or dispute arising out of or relating to
this  Agreement,  including  any  alleged  breach  or  threatened  breach of the
provisions  contained  in this  Agreement,  will,  upon demand of a party to the
controversy,  claim, or dispute,  be resolved timely by arbitration  held in New
York, New York, and administered by the American Arbitration Association ("AAA")
in  accordance  with the  Commercial  Arbitration  Rules of the AAA and,  to the
maximum extent applicable,  pursuant to the Federal  Arbitration Act, 9 U.S.C. 1
et seq.

         (b) An award rendered in any such proceeding  shall be final,  binding,
and  non-appealable,  and  judgment  thereon may be entered in any court  having
competent jurisdiction. With respect to a controversy, claim or dispute in which
the claim or amount in controversy does not exceed $100,000, a single arbitrator
will be impaneled,  who will be chosen by the AAA and have authority to render a
maximum award of $100,000,  including  all damages of any kind and costs,  fees,
interest and the like. With respect to a controversy,  claim or dispute in which
the claim or amount in controversy exceeds $100,000, the dispute will be decided
by a majority vote of three  arbitrators,  each of whom shall be selected by the
AAA. All arbitrators will be knowledgeable in the subject matter of the dispute.

         (c) The arbitrator(s) may grant any remedy or relief they deem just and
equitable, including any provisional and injunctive remedies available at law or
in equity (in which case the party  receiving such relief may apply to the court
of competent  jurisdiction  for  enforcement  of such  provisional or injunctive
order, without prejudice to the continued arbitration of the matter);  provided,
however,  that the AAA may,  upon the  demand of any  party to the  controversy,
claim,  or  dispute,  administratively  appoint  a single  "provisional  relief"
arbitrator  on an expedited  basis to consider any request for, and grant,  such
provisional or injunctive  remedy;  and, provided further,  that the arbitrators
shall award reasonable attorneys' fees and expenses to the prevailing party. The
arbitrators  will resolve all disputes in accordance  with the laws of the State
of Delaware.  The arbitrators  will make specific,  written findings of fact and
conclusions  of law.  The  arbitrators'  findings of fact will be binding on all
parties and will not be subject to further review.

         Section  10.6  Remedies.  The rights and remedies of the Company and of
the Members hereunder shall not be mutually exclusive, i.e., the exercise of one
or more of the  provisions  hereof  shall not preclude the exercise of any other
provisions  hereof.  Except as otherwise  provided  for herein,  it is expressly
understood  and agreed by the Members that,  notwithstanding  any other remedies
which may be available at law or in equity to the Company, the Members or any of
their  respective  Affiliates,  the  remedies  available  to such Persons upon a
failure by any other such Person to perform any of its obligations hereunder, or
upon a breach of any agreement,  covenant or representation hereunder,  shall be
limited to those remedies which are expressly set forth in this  Agreement,  and
all  remedies  which  are not set  forth  herein,  whether



                                       18
<PAGE>

at law,  equity or  otherwise,  are  hereby  waived by the  Members in their own
capacities and on behalf of their Affiliates.

         Section 10.7 No Third Party  Beneficiaries.  Nothing in this Agreement,
expressed  or implied,  is  intended  to confer any rights or remedies  upon any
Person,  other than the Members and,  subject to the  restrictions on assignment
contained herein, their respective successors and assigns.

         Section 10.8  Amendments.  This  Agreement  may be  modified,  altered,
supplemented  or amended in any manner only with the  approval  of the  Managing
Member. Any administrative  alteration to Schedule A hereto (i.e.,  correcting a
spelling or  typographical  error or updating of a Member's  address and contact
information  or reflecting  the  admission of  Additional  Members or Substitute
Members  following the issuance or Transfer of  Membership  Shares in accordance
with the terms of this  Agreement)  shall not be  deemed  an  amendment  to such
schedule  or to this  Agreement  for  purposes of this  Section  10.8 and may be
effectuated by the Officers at the direction of the Board of Directors.

         Section 10.9 Interpretation. Whenever appropriate in the context, terms
used in this Agreement in the singular also include the plural,  and vice versa,
and each  masculine,  feminine or neuter  pronoun  shall also  include the other
genders.  Unless otherwise  expressly stated herein,  all references to the term
"including"  shall be deemed to be  interpreted as meaning  "including,  without
limitation".  Unless otherwise  expressly  stated herein,  all references to the
phrase  "applicable  law"  shall be deemed to  include  provisions  of rules and
regulations  promulgated  under  applicable law.  Except as otherwise  expressly
provided herein,  all references herein to any contract,  agreement,  law, rule,
regulation or other document shall refer to such contract, agreement, law, rule,
regulation or other document as amended from time to time.

         Section  10.10  Captions.  The  captions  of  articles,   sections  and
schedules of this  Agreement  are for  convenience  only,  and neither limit nor
amplify the provisions of the Agreement itself.

         Section 10.11 Notices. All notices,  demands,  approvals,  consents and
requests to be sent to the Company,  or any Member  pursuant to the terms hereof
shall be in writing and shall be deemed to have been  properly  given or served,
if  personally  delivered,  sent by  recognized  messenger  or next day  courier
service,  or sent by United  States mail to the  addresses  listed on Schedule A
hereto,  and will be deemed received,  unless earlier  received:  (a) if sent by
express,  certified or registered  mail (and if by registered  mail, with return
receipt requested),  when actually received or delivery refused;  (b) if sent by
messenger or courier, when actually received or refused, provided it is received
or refused on the same  Business  Day; (c) if delivered by hand,  on the date of
delivery or refusal;  and (d) if sent by first-class  mail, seven (7) days after
it was mailed,  unless  returned  to sender for any reason by the United  Stated
Postal  Service,  but not at the request of the  addressee.  Rejection  or other
refusal  to accept or the  inability  to deliver  because of changed  address of
which no notice was given shall be deemed to be receipt of the notice, demand or
request sent.


                                       19
<PAGE>

                                   ARTICLE XI
                                   DEFINITIONS

         Section 11.1 Certain Defined Terms.  When used in this  Agreement,  the
following terms have the indicated  meanings.  All other  capitalized  terms are
defined elsewhere in this Agreement.


         "Affiliate"  or  "Affiliates"  of a  specified  Person  is a Person  or
Persons that (i)  directly or  indirectly,  through one or more  intermediaries,
Controls, is Controlled by or is under common Control with the Person specified,
or (ii) in the case of a natural person, is a spouse, natural brother or sister,
linear ancestor or linear  descendant of any such specified  person, or (iii) in
the case of a natural person,  is a legal  representative or trustee of any such
specified  persons,  or  (iv)  is  an  officer,  director,   trustee,  employee,
shareholder,  member, partner,  principal or trust for the benefit of any entity
or Person  referred to in the preceding  clauses (i),  (ii) or (iii);  provided,
however,  for the purposes of this Agreement,  that no Member shall be deemed an
Affiliate of any other  Member or any officer or agent of the Company  solely by
virtue of the  relationship  of those  parties  to each other  pursuant  to this
Agreement.

         "Available  Net Cash"  means,  for any  fiscal  period,  any  operating
receipts of the Company  (including the cash proceeds received by the Company in
connection with any Capital Event) after payment of (i) any amounts  required to
pay costs and  expenses of the Company,  including  normal  operating  expenses,
taxes and professional or other fees, (ii) any payments of any Indebtedness, and
(iii)  amounts of any reserves as may  reasonably  be determined by the Board of
Directors. For purposes of this definition,  the term "Indebtedness" means, with
respect  to the  Company,  (a) all  indebtedness  for  borrowed  money,  (b) the
deferred  purchase  price of  assets  or  services  which,  in  accordance  with
generally accepted accounting principles, would be reflected as a liability, (c)
the  maximum  amount of all  letters  of credit  issued  for the  account of the
Company, (d) all capitalized lease obligations, and (e) obligations to guarantee
the debt of another Person.

         "Business Day" shall mean any day other than a Saturday,  Sunday or any
day on which national banks in New York, New York are not open for business.

         "Capital Event" means any event not occurring in the ordinary course of
business  of  the   Company,   pursuant  to  which  the  Company   receives  any
consideration  with respect to its assets or the  disposition  thereof or of any
interest  therein,  and  including,  without  limitation,  any sale,  financing,
refinancing,  exchange, redemption, conversion or liquidation of all or any part
of the assets of the Company  (including equity interests owned by the Company).
For the  avoidance  of doubt,  the  reorganization  contemplated  by Section 3.9
hereof shall not be deemed a Capital Event.

         "Code" shall mean the Internal  Revenue  Code of 1986,  as amended,  or
corresponding provisions of future laws.

         "Control" shall mean the possession,  direct or indirect,  of the power
to direct or cause the  direction  of the  management  and policies of a Person,
whether through (i) the


                                       20
<PAGE>

ownership  of  voting  shares,  (ii)  general  partnership  or  managing  member
interests, (iii) common directors or trustees, or (iv) by contract or otherwise.

         "Government  Lists" shall mean (i) the Specially  Designated  Nationals
and Blocked  Persons List  maintained by the Office of Foreign  Assets  Control,
U.S. Department of the Treasury or (ii) any other list of terrorists,  terrorist
organizations or narcotics  traffickers  maintained pursuant to any of the rules
and  regulations of Office of Foreign  Assets  Control,  U.S.  Department of the
Treasury,  or (iii) any similar list  maintained  by the U.S.  Department of the
Treasury,  U.S. Department of State, the U.S. Department of Commerce,  any other
federal or state agency or pursuant to any  Executive  Order of the President of
the United States.

         "Patriot Act Offense"  means any  violation of the criminal laws of the
United  States of  America  or any of the  several  states,  or that  would be a
criminal  violation if committed within the jurisdiction of the United States of
America or any of the several states, relating to terrorism or the laundering of
monetary  instruments,  including  any offense under (a) the Bank Secrecy Act of
1970,  (b) the Money  Laundering  Control  Act of 1986,  or (c) the  Uniting and
Strengthening  of America by Providing  Appropriate  Tools Required to Intercept
and Obstruct  Terrorism  (USA PATRIOT ACT) Act of 2001, in each case as the same
may be  amended  from time to time,  and the rules and  regulations  promulgated
thereunder  and  corresponding  provisions of future laws. The term "Patriot Act
Offense"  also  includes  the  crimes of  conspiracy  to  commit,  or aiding and
abetting another to commit, a Patriot Act Offense.

         "Permitted Transferee" means, as to any Member or Securityholder who is
a natural  person,  but in any event solely in the furtherance of such Member or
Securityholder's  estate  planning:  (a) the  spouse,  brother,  sister,  lineal
ancestor or lineal  descendent of such Member or  Securityholder,  (b) the legal
representative  or  trustee of such  Member,  Securityholder  or any  individual
specified  in clause (a) of this  definition,  or (c) any  partnership,  limited
liability  company,  trust or other  entity  (i)  organized  solely for the sole
benefit of any individual specified in clause (a) of this definition or group of
such related individuals and (ii) controlled by such Member or Securityholder or
such Member or Securityholder's Permitted Transferee.

         "Person" means any legal person, including any individual, corporation,
limited liability company, partnership, joint venture, association,  joint-stock
company, trust, unincorporated organization, governmental entity or other entity
of similar nature.

         A "Prohibited  Owner" means a proposed  Additional Member or Substitute
Member or other  transferee or assignee of a Membership  Share, or such Person's
direct  or  indirect  shareholders,   members,  partners,  controlling  parties,
beneficiaries  or other owners of interests  in such  transferee,  to the extent
that any such Person is, are or has been (a) included on any Government  List or
(b) a Person who has been  determined by a Governmental  Authority to be subject
to the  prohibitions  contained in Executive Order 13224 (September 23, 2001) or
any similar  provisions  contained in the rules and regulations of the Office of
Foreign Assets Control or (c) indicted for any Patriot Act Offense or (d) to the
actual knowledge of the Company or any Member or their respective Affiliates, at
the time of transfer or other transaction, as applicable, under investigation by
any federal, state, local or foreign governmental authority for alleged criminal
behavior  or (e) a Person  which,  directly  or  indirectly,  is  engaged in the
business of drug or nutrient delivery or any other business which the Company is
engaged at the time of the proposed Transfer.


                                       21
<PAGE>

         "Securityholder"  means any Person holding a direct or indirect  equity
interest in a Member.

         "Treasury  Regulations"  means the income tax  regulations  promulgated
under the Code, as such  regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).

                            [signature page follows]




                                       22
<PAGE>


         IN WITNESS  WHEREOF,  the  undersigned,  intending to be legally  bound
hereby, has duly executed this Amended and Restated Limited Liability  Operating
Agreement as of the date first set forth above.


                            BIODELIVERY SCIENCES INTERNATIONAL, INC.

                                   /s/ Francis E. O'Donnell, Jr.
                            By:  __________________________________________
                                   Name:  Francis E. O'Donnell, Jr., M.D.
                                   Title: President and Chief Executive Officer




                                       23
<PAGE>
<TABLE>
<CAPTION>

                                                           SCHEDULE A

                              Names, Contact Information and Membership Shares Held by the Members

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

             Name/Contact Information                     Number/Class of Membership Shares             Percentage Interest
--------------------------------------------------- ----------------------------------------------- ----------------------------
<S>                                                 <C>                                             <C>
BioDelivery Sciences International, Inc.
c/o UMDNJ - New Jersey Medical School
Administrative Building 4                                          708,586/Class A                            94.972%
185 South Orange Avenue                                           7,085,862/Class B
Newark, New Jersey 07103
--------------------------------------------------- ----------------------------------------------- ----------------------------

Raphael Mannino
c/o UMDNJ - New Jersey Medical School
Administrative Building 4
185 South Orange Avenue                                            125,000/Class B                            1.523%
Newark, New Jersey 07103
--------------------------------------------------- ----------------------------------------------- ----------------------------

Susan Gould-Fogerite
c/o UMDNJ - New Jersey Medical School
Administrative Building 4                                           75,000/Class B                            0.914%
185 South Orange Avenue
Newark, New Jersey 07103
--------------------------------------------------- ----------------------------------------------- ----------------------------

Donald L. Ferguson
c/o Land Dynamics, Inc.
11719 Old Ballas Road
St. Louis, MO 63141                                                 75,000/Class B                            0.914%
--------------------------------------------------- ----------------------------------------------- ----------------------------

Ellenoff Grossman & Schole LLP
370 Lexington Avene, 19th Floor                                     37,500/Class B                            0.457%
New York, NY 10017
--------------------------------------------------- ----------------------------------------------- ----------------------------

James A. McNulty
4419 W. Sevilla Street                                              20,000/Class B                            0.244%
Tampa, FL 33629
--------------------------------------------------- ----------------------------------------------- ----------------------------

Susan G. Bonitz
21 Sleepy Hollow Drive                                              20,000/Class B                            0.244%
Flemington, NJ 08822
--------------------------------------------------- ----------------------------------------------- ----------------------------

Mauro Bove
Via Sudafrica 20                                                    20,000/Class B                            0.244%
00144 Rome Italy
--------------------------------------------------- ----------------------------------------------- ----------------------------

Christopher Chapman
800 Falls Lake Drive                                                20,000/Class B                            0.244%
Mitchellville, MD 20720
--------------------------------------------------- ----------------------------------------------- ----------------------------

Samuel S. Duffey
P.O. Box 3379                                                       20,000/Class B                            0.244%
Sarasota, Florida
--------------------------------------------------- ----------------------------------------------- ----------------------------

TOTAL                                                     708,586 Class A/7,498,362 Class B                    100%
--------------------------------------------------- ----------------------------------------------- ----------------------------

</TABLE>

<PAGE>



                                   SCHEDULE B

                          BIORAL NUTRIENT DELIVERY, LLC

         1. Purposes of the Plan. The purposes of the Bioral Nutrient  Delivery,
LLC 2003 Class B Share Membership Option Plan are to attract and retain the best
available  personnel for  positions of  substantial  responsibility,  to provide
additional  incentive to Directors,  Officers,  Consultants and Employees of the
Company,  and to promote  the  success of the  Company's  business.  All Options
granted under the Plan are Non-Qualified Stock Options.  This Plan is adopted by
the Managing Member as of January 8, 2003.

         2. Definitions.  As used herein, the following definitions shall apply.
All  capitalized  terms used but not  defined  herein  shall  have the  meanings
ascribed  such  terms  in  that  certain  Limited  Liability  Company  Operating
Agreement  of the  Company,  dated  January 8, 2003,  by the  parties  signatory
thereto,  as members of the Company (as the same may be amended and/or  restated
from time to time, the "Operating Agreement").

         "Applicable Laws" means the requirements relating to the administration
of stock or unit  option  plans  under the laws of the State of  Delaware,  U.S.
federal and state securities laws, and the Code.

         "BDSI"  means  BioDelivery  Sciences  International,  Inc.,  a Delaware
corporation.

         "Beneficial  Owner"  has the  meaning  set  forth in Rule  13d-3 of the
Exchange Act.

         "Board" means the Board of Directors of the Company.

         "Change in Control" means (i) any Person becomes the Beneficial  Owner,
directly indirectly of securities of the Company representing 51% or more of the
combined  voting power of the Company's then  outstanding  securities;  (ii) any
consolidation  or merger of the Company  with or into any other  corporation  or
other  entity  or  person  in which the  members  of the  Company  prior to such
consolidation  or merger  own less than  fifty  percent  (51%) of the  Company's
voting power  immediately  after such  consolidation  or merger,  excluding  any
consolidation  or merger  effected  exclusively  to change the  domicile  of the
Company;  (iii) a sale of all or substantially all of the assets of the Company,
or (iv) a liquidation or dissolution of the Company.

         "Class B Shares"  means the Class B  Membership  Shares of the Company,
the  holders  of  which  have the  rights  afforded  them  under  the  Operating
Agreement.

         "Code" means the  Internal  Revenue  Code of 1986,  as amended,  or any
successor statute or statutes thereto.  Reference to any particular Code section
shall include any successor section.

         "Company"  means Bioral  Nutrient  Delivery,  LLC , a Delaware  limited
liability company.

         "Director" means a Director of the Company.


                                       1
<PAGE>

         "Employee" means any person, including a Officer who is an employee (as
defined in  accordance  with  Section  3401(c) of the Code) of the  Company.  An
Employee  shall not cease to be an  Employee in the case of any leave of absence
approved by the Company.

         "Fair Market Value" means, as of any date, the value of a Class B Share
as determined in good faith by the Board.

         "Holder"  means a person  who has been  granted or awarded an Option or
who holds Class B Shares acquired pursuant to the exercise of an Option.

         "Non-Qualified Stock Option" means a stock option that does not qualify
as an "incentive stock option" within the meaning of Section 422 of the Code.

         "Option"  means an option  granted,  pursuant to the Plan,  to purchase
Class B Shares.

         "Option  Agreement" means a written agreement between the Company and a
Holder  evidencing the terms and conditions of an individual  Option grant.  The
Option Agreement is subject to the terms and conditions of the Plan.

         "Parent" means any entity which owns  securities  possessing 50 percent
or more of the  total  combined  voting  or  approval  power of all  classes  of
securities in the Company.

         "Person" has the meaning given under  Exchange Act Section  13(d),  and
shall  include a  "group,"  as defined  in Rule  13d-5  promulgated  thereunder.
However,  a  "person"  shall  not  include:  (i) the  Company  or its  Parent or
Subsidiaries;  (ii) a trustee or other fiduciary  holding  securities under this
Plan or any employee benefit plan of the Company, its Parent or Subsidiaries; or
(iii) BDSI or any entity which is controlled by BDSI or is under common  control
with BDSI.

         "Plan"  means this  Bioral  Nutrient  Delivery,  LLC 2003 Class B Share
Option Plan.

         "Subsidiary"  means any  entity in which the  Company  owns  securities
possessing 50 percent or more of the total combined  voting power of all classes
of securities in such entity.

3. Class B Shares  Subject To The Plan.  Subject to the provisions of Section 12
of the Plan, the maximum  aggregate number of Class B Shares which may be issued
upon exercise of Options is 1,000,000 Class B Shares. If an Option is cancelled,
expires or becomes  unexercisable  without  having been  exercised in full,  the
unpurchased Class B Shares which were subject thereto shall become available for
future  grant or sale under the Plan (unless the Plan has  terminated).  Class B
Shares  which are  delivered  by the Holder or withheld by the Company  upon the
exercise of an Option under the Plan,  in payment of the exercise  price thereof
or tax withholding thereon, may again be optioned, granted or awarded hereunder,
subject to the limitations of this Section 3.

         4. Administration of the Plan.

         (a)  Administration By the Board. The Plan shall be administered by the
Board in accordance with the provision of this Plan.


                                       2
<PAGE>

         (b) Powers of the Board. Subject to the provisions of this Plan and the
approval of any relevant authorities,  the Board shall have the authority in its
sole discretion:

                  (i) to determine the Fair Market Value;

                  (ii) to select the  Employees to whom Options may from time to
         time be granted hereunder;

                  (iii) to determine  the number of Class B Shares to be covered
         by each such award granted hereunder;

                  (iv) to approve forms of agreement for use under the Plan;

                  (v) to  determine  the  terms  and  conditions  of any  Option
         granted  hereunder  (such  terms and  conditions  include,  but are not
         limited to, the exercise price, the time or times when Options may vest
         or be  exercised  (which  may be based on  performance  criteria),  any
         vesting  acceleration  or waiver of  forfeiture  restrictions,  and any
         restriction  or  limitation  regarding  any  Option  or  Class  B Share
         relating  thereto,  based in each case on such factors as the Board, in
         its sole discretion, shall determine);

                  (vi) to  determine  whether  to offer to  buyout a  previously
         granted Option as provided in Section 10(g) hereof and to determine the
         terms and  conditions  of such  offer  and  buyout  (including  whether
         payment is to be made in cash or Class B Shares);

                  (vii) to prescribe,  amend and rescind  rules and  regulations
         relating to the Plan;

                  (viii) to allow Holders to satisfy withholding tax obligations
         by electing to have the Company  withhold from the Class B Shares to be
         issued upon  exercise of an Option that number of Class B Shares having
         a Fair Market Value equal to the minimum amount required to be withheld
         based on the  statutory  withholding  rates for  federal  and state tax
         purposes that apply to  supplemental  taxable  income.  The Fair Market
         Value of the Class B Shares to be withheld  shall be  determined on the
         date that the amount of tax to be  withheld  is to be  determined.  All
         elections  by Holders to have Class B Shares  withheld for this purpose
         shall be made in such form and under such  conditions  as the Board may
         deem necessary or advisable;

                  (ix) to amend the Plan or any Option granted under the Plan as
         provided in Section 14; and

                  (x) to construe and interpret the terms of the Plan and awards
         granted  pursuant to the Plan and to  exercise  such powers and perform
         such acts as the Board deems necessary or desirable to promote the best
         interests of the Company which are not in conflict with the  provisions
         of the Plan.


                                       3
<PAGE>

         (c)  Effect  of  Board  Decision.  All  decisions,  determinations  and
interpretations of the Board shall be final and binding on all Holders.

         5.  Eligibility.  Options may be granted only to  Directors,  Officers,
Employees and Consultants.  If otherwise eligible, a Director, Officer, Employee
or Consultant who has been granted an Option may be granted additional Options.

         6.  Limitations.  Neither the Plan nor any Option  shall  confer upon a
Holder any right with respect to continuing the Holder's status as a Director or
the Holder's employment or consulting  relationship with the Company,  nor shall
they  interfere in any way with the  Holder's  right or the  Company's  right to
terminate such directorship,  employment or consulting relationship at any time,
with or without cause.

         7. Term of Plan.  The Plan  shall  become  effective  upon its  initial
adoption by the Board and shall continue in effect until it is terminated  under
Section  14  hereof.  No  Options  may be issued  under the Plan after the tenth
(10th) anniversary of the date first listed above in this Plan.

         8.  Term of  Option.  The term of each  Option  shall be  stated in the
applicable Option Agreement;  provided,  however, that the term shall be no more
than ten (10) years from the date of grant thereof.

         9. Option Exercise Price and Consideration.

         (a) Except as provided in Section  12, the  exercise  price per Class B
Share for the Class B Shares to be issued upon  exercise  of an Option  shall be
such price as is determined by the Board.

         (b) The  consideration  to be paid for the  Class B Shares to be issued
upon exercise of an Option, including the method of payment, shall be determined
by the Board. Such consideration may consist of (i) cash or (ii) check.

         10. Exercise of Option.

         (a) Vesting; Fractional Exercises. Except as provided in Section 12, an
Option  granted  hereunder  shall  become  vested  and  exercisable  at the rate
specified  in the Option  Agreement.  In the absence of a specified  rate in the
Option  Agreement,  the Option shall become vested and  exercisable at a rate of
fifty  percent  (50%) per year over two (2)  years  from the date the  Option is
granted,  subject to the  condition  that the Holder  continue to be a Director,
Officer,  Consultant  or an  Employee.  An  Option  may not be  exercised  for a
fraction of a Class B Share.

         (b) Deliveries upon Exercise. All or a portion of an exercisable Option
shall be deemed exercised upon delivery of all of the following to the Secretary
of the Company or his or her office:

                   (i)  A  written  or  electronic  notice  complying  with  the
         applicable rules established by the Board stating that the Option, or a
         portion thereof, is exercised.


                                       4
<PAGE>


         The notice shall be signed by the Holder or other person then  entitled
         to exercise the Option or such portion of the Option;

                   (ii) Such  representations and documents as the Board, in its
         sole discretion, deems necessary or advisable to effect compliance with
         Applicable  Laws.  The Board  may,  in its sole  discretion,  also take
         whatever  additional  actions  it  deems  appropriate  to  effect  such
         compliance,  including, without limitation,  placing legends on Class B
         Share  certificates  and issuing  stop  transfer  notices to agents and
         registrars;

                   (iii)  In the  event  that  the  Option  shall  be  exercised
         pursuant  to  Section  10(f) by any  person or  persons  other than the
         Holder,  appropriate  proof of the right of such  person or  persons to
         exercise the Option; and

         (c) Conditions to Delivery of Evidence of Ownership.  The Company shall
not be required to issue or deliver any  certificate or  certificates  (or other
evidence  of  ownership,  including  an  amended  Schedule  A to  the  Operating
Agreement,  certified by the Managing  Member as to the number of Shares held by
each  Member) for Class B Shares  purchased  upon the  exercise of any Option or
portion thereof prior to fulfillment of all of the following conditions:

                  (i) The completion of any registration or other  qualification
         of such  Class B Shares  under any state or federal  law,  or under the
         rulings or regulations of the Securities and Exchange Commission or any
         other  governmental  regulatory body which the Board shall, in its sole
         discretion, deem necessary or advisable;

                  (ii) The obtaining of any approval or other clearance from any
         state or federal governmental agency which the Board shall, in its sole
         discretion, determine to be necessary or advisable;

                  (iii) The lapse of such  reasonable  period of time  following
         the exercise of the Option as the Board may establish from time to time
         for reasons of administrative convenience;

                  (iv) The receipt by the Company of full payment for such Class
         B Shares, including payment of any applicable withholding tax, which in
         the sole  discretion  of the Board may be in the form of  consideration
         used by the Holder to pay for such Class B Shares under  Section  9(b);
         and

                  (v) The Holder's  execution of a Joinder  Agreement or similar
         instrument (the form of which shall be determined by the Board) whereby
         the  Holder  agrees  to the  terms  and  conditions  of  the  Operating
         Agreement.

         (d)  Termination of  Relationship  as a Service  Provider.  If a Holder
ceases to be a Director, Officer, Employee or Consultant other than by reason of
the  Holder's  disability  or death,  such Holder may exercise his or her Option
within such period of time as is specified in the Option Agreement to the extent
that the  Option is  vested  on the date of  termination.  In the  absence  of a
specified time in the Option Agreement,  the Option shall remain exercisable for


                                       5
<PAGE>

three  (3)  months  following  the  Holder's  termination.  If,  on the  date of
termination,  the Holder is not vested as to his or her entire Option, the Class
B Shares covered by the unvested portion of the Option  immediately  cease to be
issuable  under the Option and shall again become  available for issuance  under
the Plan. If, after termination,  the Holder does not exercise his or her Option
within the time period specified  herein,  the Option shall  terminate,  and the
Class B Shares covered by such Option shall again become  available for issuance
under the Plan.

         (e) Disability of Holder. If a Holder ceases to be a Director, Officer,
Employee or Consultant as a result of the Holder's  disability,  as such term is
defined in Section  22(e)(3) of the Code, or, in the case of a Consultant  which
is an entity,  the bankruptcy or dissolution of such Consultant,  the Holder may
exercise  his or her Option  within such period of time as is  specified  in the
Option  Agreement to the extent the Option is vested on the date of termination.
In the absence of a specified  time in the Option  Agreement,  the Option  shall
remain  exercisable for three (3) years following the occurrence of the Holder's
disability,  bankruptcy or  dissolution,  as the case may be. If, on the date of
disability, bankruptcy or dissolution, the Holder is not vested as to his or her
entire Option,  the Class B Shares covered by the unvested portion of the Option
shall  immediately  cease to be issuable under the Option and shall again become
available  for issuance  under the Plan.  If, after  disability,  bankruptcy  or
dissolution,  the Holder  does not  exercise  his or her Option  within the time
specified herein, the Option shall terminate,  and the Class B Shares covered by
such Option shall again become available for issuance under the Plan.

         (f) Death of Holder. If a Holder dies while still acting as a Director,
Officer, Employee or Consultant,  the Option may be exercised within such period
of time as is specified in the Option Agreement,  by the Holder's estate or by a
person who acquires the right to exercise the Option by bequest or  inheritance,
but only to the extent  that the  Option is vested on the date of death.  In the
absence of a specified  time in the Option  Agreement,  the Option  shall remain
exercisable for three (3) years following the Holder's death. If, at the time of
death,  the  Holder is not vested as to his or her  entire  Option,  the Class B
Shares covered by the unvested portion of the Option shall  immediately cease to
be issuable under the Option and shall again become available for issuance under
the Plan.  The Option may be  exercised by the executor or Board of the Holder's
estate or, if none, by the  person(s)  entitled to exercise the Option under the
Holder's  will or the laws of descent or  distribution.  If the Option is not so
exercised within the time specified herein, the Option shall terminate,  and the
Class B Shares covered by such Option shall again become  available for issuance
under the Plan.

         (g) Buyout Provisions.  The Board may at any time offer to buyout for a
payment in cash or Class B Shares, an Option previously  granted,  based on such
terms and conditions as the Board shall  establish and communicate to the Holder
at the time that such offer is made.

         11.  Non-Transferability  of Options.  Except as otherwise  provided in
this  Section 11,  Options  may not be sold,  pledged,  assigned,  hypothecated,
transferred,  or disposed of in any manner  other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the Holder,
only by the Holder.  A Holder may transfer an Option to a  partnership  or trust
solely  benefiting the holder or immediate family members,  or to an inter vivos
or testamentary trust from which the option or underlying class b shares will be
transferred after the holder's death.


                                       6
<PAGE>

         12. Adjustments Upon Changes In Capitalization, Merger or Asset Sale.

         (a) In the  event  that the  Board  determines  that  any  distribution
(whether  in the  form of  cash,  Class B  Shares,  other  securities  or  other
property), recapitalization,  reclassification,  Membership Share split, reverse
Membership  Share  split,  reorganization,   merger,  consolidation,   split-up,
spin-off, combination, repurchase, liquidation,  dissolution, or sale, transfer,
exchange or other  disposition of all or substantially  all of the assets of the
Company,  or exchange of Membership  Shares or other  securities of the Company,
issuance  of  warrants  or other  rights  to  purchase  Class B Shares  or other
securities of the Company,  or other similar corporate  transaction or event, in
the Board's sole discretion,  affects the Class B Shares such that an adjustment
is determined  by the Board to be  appropriate  in order to prevent  dilution or
enlargement of the benefits or potential  benefits intended by the Company to be
made  available  under the Plan or with  respect to any  Option,  then the Board
shall, in such manner as it may deem equitable, adjust any or all of:

                  (i) the number and kind of Class B Shares (or other securities
         or  property)  with  respect  to which  Options  Class B Shares  may be
         granted or awarded  (including,  but not limited to, adjustments of the
         limitations  in  Section 3 on the  maximum  number  and kind of Class B
         Shares  which may be issued and  adjustments  of the maximum  number of
         Class B Shares that may be purchased by any Holder  pursuant to Section
         6(b));

                  (ii) the number and kind of shares of Class B Shares (or other
         securities or property) subject to outstanding Options; and

                  (iii) the exercise price with respect to any Option.

         (b) In the event of a Change in Control, all Options shall become fully
vested and exercisable.

         13. Time of Granting Options. The date of grant of an Option shall, for
all purposes,  be the date on which the Board makes the  determination  granting
such Option,  or such other date as is  determined  by the Board.  Notice of the
determination  shall be given to each  Director or Employee to whom an Option is
so granted within a reasonable time after the date of such grant.

         14. Amendment and Termination of the Plan.

         (a)  Amendment  and  Termination.  The Board may at any time  wholly or
partially amend, alter, suspend or terminate the  Plan.

         (b) Effect of  Amendment  or  Termination.  No  amendment,  alteration,
suspension  or  termination  of the Plan shall  impair the rights of any Holder,
unless  mutually  agreed  otherwise  between  the Holder  and the  Board,  which
agreement  must  be in  writing  and  signed  by the  Holder  and  the  Company.
Termination  of the Plan shall not affect the Board's  ability to  exercise  the
powers granted to it hereunder with respect to Options  granted or awarded under
the Plan prior to the date of such termination.



                                       7
<PAGE>

         15.  Inability  to Obtain  Authority.  The  inability of the Company to
obtain authority from any regulatory body having  jurisdiction,  which authority
is deemed by the  Company's  counsel to be necessary to the lawful  issuance and
sale of any Class B Shares hereunder, shall relieve the Company of any liability
in respect of the  failure to issue or sell such Class B Shares as to which such
requisite authority shall not have been obtained.

         16.  Right to Issue of Class B Shares.  The  Board,  during the term of
this Plan, shall at all times maintain the right to issue such number of Class B
Shares as shall be sufficient to satisfy the requirements of the Plan.

         17. Investment  Intent.  The Board may require a Holder, as a condition
of exercising any Option,  (i) to give written  assurances  satisfactory  to the
Board as to the Holder's  knowledge  and  experience  in financial  and business
matters and/or to employ a purchaser  representative  reasonably satisfactory to
the company who is  knowledgeable  and  experienced  in  financial  and business
matters and that he or she is capable of evaluating,  alone or together with the
purchaser representative, the merits and risks of exercising the Option, (ii) to
give written  assurances  satisfactory  to the Board  stating that the Holder is
acquiring the Class B Shares  subject to the Option for the Holder's own account
and not with any present  intention  of selling or  otherwise  distributing  the
Class B Shares and (iii) that the Class B Shares are subject to the restrictions
of transfer contained in the Operating  Agreement.  The foregoing  requirements,
and any assurances given pursuant to such requirements,  shall be inoperative if
as to any particular  requirement,  a  determination  is made by counsel for the
company that such  requirement  need not be met in the  circumstances  under the
then applicable securities laws.

         18. Governing Law. The validity and  enforceability  of this Plan shall
be  governed  by and  construed  in  accordance  with the  laws of the  State of
Delaware  (including the Limited  Liability Company Act of the State of Delaware
(6 Del. C.ss.18-101,  et seq.), as amended from time to time), without regard to
otherwise governing principles of conflicts of law.



                                       8
<PAGE>



         IN WITNESS  WHEREOF,  the  undersigned  Managing  Member of the Company
certifies that the foregoing sets forth the Bioral Nutriment Delivery,  LLC 2003
Incentive Plan as duly adopted by the Managing Member on January 8, 2003.


                           BIODELIVERY SCIENCES INTERNATIONAL, INC.



                           By:  __________________________________
                                Name:  Francis E. O'Donnell, Jr.
                                Title:    President and Chief Executive Officer




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