Document:

2003 Recruitment Equity Incentive Plan

 Exhibit 10.1 
  
 CAPTIVA SOFTWARE CORPORATION 
  

2003 RECRUITMENT EQUITY INCENTIVE PLAN 
 (AMENDING AND RESTATING THE 2003 NEW EXECUTIVE
RECRUITMENT STOCK OPTION PLAN 
  
 ADOPTED: OCTOBER 23, 2003 
 AMENDED AND
RESTATED: JULY 29, 2004 
  
 1.    PURPOSES. 
  
 (a) General Purpose.    The Company, by means of the Plan, seeks to retain the services of persons not previously an employee or director of the Company, or following a bona fide period of non-employment,
as an inducement material to the individual’s entering into employment with the Company within the meaning of Rule 4350(i)(1)(A) of the NASD Marketplace Rules, and to provide incentives for such persons to exert maximum efforts for the
success of the Company and its Affiliates. 
  
 (b) Eligible
Stock Award Recipients.    The persons eligible to receive Stock Awards are the Employees of the Company and its Affiliates hired as employees of the Company. 
  
 (c) Available Stock Awards.    The purpose of the Plan is to provide a means by which eligible
recipients of Stock Awards may be given an opportunity to benefit from increases in value of the Common Stock through the granting of the following Stock Awards: (i) Options, (ii) Restricted Stock Awards, (iii) Stock Appreciation Rights (iv) Phantom
Stock Awards and (v) Other Stock Awards. 
  
 2.    DEFINITIONS. 
  
 (a) “Affiliate” means any parent corporation or subsidiary corporation of the Company, whether now or hereafter existing, as those terms are defined in Sections 424(e) and (f), respectively, of the
Code. 
  
 (b) “Board” means
the Board of Directors of the Company. 
  
 (c)
“Capitalization Adjustment” has the meaning ascribed to that term in Section 11(a). 
  
 (d) “Cause” means, with respect to a particular Participant (i) a felony conviction of such Participant;
(ii) the commission by such Participant of an act of fraud or embezzlement against the Company or an Affiliate; (iii) such Participant’s willful misconduct or gross negligence materially detrimental to the Company or an Affiliate; (iv)
such Participant’s continued failure to implement reasonable requests or directions received in the course of his service as an Employee; (v) such Participant’s wrongful dissemination or use of confidential or proprietary information; or
(vi) the intentional and habitual neglect by such Participant of his or her duties to the Company or an Affiliate. 
  
 (e) “Change in Control” means or occurs upon (i) a sale or other disposition of all or substantially all of the
assets of the Company; (ii) a merger or consolidation in which the Company is not the surviving entity and in which the stockholders of the Company immediately prior to such consolidation or merger Own less than 50% of the surviving entity’s
voting power immediately after the transaction; (iii) a reverse merger in which the Company is the surviving entity but the shares of Common Stock outstanding immediately preceding the merger are converted by virtue of the merger into other
property, whether in the form of securities, cash or otherwise, and in which the stockholders of the Company immediately prior to such reverse merger Own less than 50% of the Company’s voting power immediately after the transaction; and (iv)
any Exchange Act Person becoming the Owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities other than by virtue of a
merger, consolidation or similar transaction. 
  
 (f)
“Code” means the Internal Revenue Code of 1986, as amended. 

 (g) “Committee” means a committee of one or more members of the
Board appointed by the Board in accordance with Section 3(c). 
  
 (h) “Common Stock” means the common stock of the Company, or any security of the Company issued in substitution, exchange or lieu thereof. 
  
 (i) “Company” means Captiva Software Corporation, a Delaware corporation, or any
successor corporation. 
  
 (j)
“Consultant” means any person, including an advisor, (i) engaged by the Company or an Affiliate to render consulting or advisory services and who is compensated for such services or (ii) serving as a member of
the Board of Directors of an Affiliate and who is compensated for such services. However, the term “Consultant” shall not include Directors who are not compensated by the Company for their services as Directors, and the payment of a
director’s fee by the Company for services as a Director shall not cause a Director to be considered a “Consultant” for purposes of the Plan. 
  
 (k) “Continuous Service” means that the Participant’s service with the Company or an Affiliate, whether as an
Employee, Director or Consultant, is not interrupted or terminated. A change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the
Participant renders such service, provided that there is no interruption or termination of the Participant’s service with the Company or an Affiliate, shall not terminate a Participant’s Continuous Service. For example, a change in status
from an Employee of the Company to a Consultant of an Affiliate or a Director shall not constitute an interruption of Continuous Service. The Board or the chief executive officer of the Company, in that party’s sole discretion, may determine
whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal leave. Notwithstanding the foregoing, an approved leave of absence
shall be treated as Continuous Service for purposes of vesting in a Stock Award only to such extent as may be provided in the Company’s leave of absence policy or in the written terms of the Participant’s leave of absence. 
  
 (l) “Corporate Transaction” means the
occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events: 
  
 (i) a sale or other disposition of all or substantially all, as determined by the Board in its discretion, of the consolidated
assets of the Company and its Subsidiaries; 
  
 (ii) a sale or other disposition of at least ninety percent (90%) of the outstanding securities of the Company; 
  
 (iii) a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or 

 
 (iv) a merger, consolidation or similar
transaction following which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation
or similar transaction into other property, whether in the form of securities, cash or otherwise. 
  
 (m) “Director” means a member of the Board of Directors of the Company. 
  
 (n) “Disability” means, with respect to a
Participant, such Participant’s permanent and total disability within the meaning of the Company’s long-term disability plan, as it may be amended from time to time, or, if there is no such plan, as determined by the Committee. 

 
 (o) “Employee” means any person employed by
the Company or an Affiliate. Service as a Director or payment of a director’s fee by the Company or an Affiliate shall not be sufficient to constitute “employment” by the Company or an Affiliate. Subject to the exclusions set forth
below, the term “Employee” shall include only 

  

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an individual who was hired (and advised that he or she was being hired) directly by the Company or an Affiliate as a regular employee and who performs
regular employment services directly for the Company or an Affiliate. Exclusions: The term “Employee” as used in the Plan shall not include an individual who works, or who was hired to work, or who was advised that he or she works:
(1) as an independent contractor or an employee of an independent contractor; or (2) as a temporary employee, regardless of the length of time that he or she works at the Company or an Affiliate; or (3) through a temporary employment agency, job
placement agency, or other third party; or (4) as part of an employee leasing arrangement between the Company or an Affiliate and any third party. For the purposes of the Plan, the exclusions described above shall remain in effect even if the
described individual could otherwise be construed as an employee under any applicable common law or is subsequently determined under applicable laws to be an employee. 
  
 (p) “Entity” means a corporation, partnership or other entity. 
  
 (q) “Exchange Act” means the Securities
Exchange Act of 1934, as amended. 
  
 (r) “Exchange
Act Person” means any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” shall not include (A) the Company or any Subsidiary of
the Company, (B) any employee benefit plan of the Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary of the Company, (C) an underwriter
temporarily holding securities pursuant to an offering of such securities, or (D) an Entity Owned, directly or indirectly, by the shareowners of the Company in substantially the same proportions as their Ownership of stock of the Company.

  
 (s) “Fair Market Value” means,
as of any date, the value of the Common Stock determined as follows: 
  
 (i) If the Common Stock is listed on any established stock exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair Market Value of a share of Common Stock shall be the closing
sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Common Stock) on the relevant date or, if no shares are traded on
such date, then on the last market trading day prior to the relevant date. 
  
 (ii) In the absence of such markets for the Common Stock, the Fair Market Value shall be determined in good faith by the Board. 
  
 (t) “Non-Employee Director” means a Director who either (i) is not a current Employee or
Officer of the Company or its parent or a subsidiary, does not receive compensation (directly or indirectly) from the Company or its parent or a subsidiary for services rendered as a consultant or in any capacity other than as a Director (except for
an amount as to which disclosure would not be required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act (“Regulation S-K”)), does not possess an interest in any other transaction as to which disclosure would
be required under Item 404(a) of Regulation S-K and is not engaged in a business relationship as to which disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a “non-employee director” for
purposes of Rule 16b-3. 
  
 (u)
“Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder. 
  
 (v) “Option” means a nonstatutory stock option
granted pursuant to the Plan that is not intended to qualify as an incentive stock option under Section 422 of the Code and the regulations promulgated thereunder. 
  
 (w) “Option Agreement” means an agreement between the Company and an Optionholder evidencing
the terms and conditions of an individual Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan. 
  

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 (x) “Optionholder” means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Option. 
  
 (y) “Other Stock Award” means an award based in whole or in part by reference to the Common Stock which is granted pursuant to the terms and conditions of Section 7(d). 
  
 (z) “Other Stock Award Agreement” means an
agreement between the Company and a holder of an Other Stock Award evidencing the terms and conditions of an individual Other Stock Award grant. Each Other Stock Award Agreement shall be subject to the terms and conditions of the Plan. 

 
 (aa) “Own,” “Owned,” “Owner,”
“Ownership” A person or Entity shall be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person or Entity, directly or indirectly,
through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities. 
  
 (bb) “Participant” means a person to whom a
Stock Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Stock Award. 
  
 (cc) “Phantom Stock Award” means a right to receive shares of Common Stock which is granted pursuant to the terms and
conditions of Section 7(b). 
  
 (dd) “Phantom
Stock Award Agreement” means an agreement between the Company and a holder of a Phantom Stock Award evidencing the terms and conditions of an individual Phantom Stock Award grant. Each Phantom Stock Award Agreement shall be subject to
the terms and conditions of the Plan. 
  
 (ee)
“Restricted Stock Award” means an award of shares of Common Stock which is granted pursuant to the terms and conditions of Section 7(a). 
  

(ff) “Restricted Stock Award Agreement” means an agreement between the Company and a holder of a Restricted Stock Award
evidencing the terms and conditions of an individual Restricted Stock Award grant. Each Restricted Stock Award Agreement shall be subject to the terms and conditions of the Plan. 
  
 (gg) “Plan” means this Captiva Software Corporation 2003 Recruitment Equity Incentive Plan.

  
 (hh) “Rule 16b-3” means Rule
16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time. 
  
 (ii) “Securities Act” means the Securities Act of 1933, as amended. 
  
 (jj) “Stock Appreciation Right” means a right
to receive the appreciation of Common Stock which is granted pursuant to the terms and conditions of Section 7(c). 
  
 (kk) “Stock Appreciation Right Agreement” means an agreement between the Company and a holder of a Stock Appreciation Right
evidencing the terms and conditions of an individual Stock Appreciation Right grant. Each Stock Appreciation Right Agreement shall be subject to the terms and conditions of the Plan. 
  
 (ll) “Stock Award” means any right granted under the Plan, including an Option, a Restricted
Stock Award, Phantom Stock, a Stock Appreciation Right and an Other Stock Award. 
  
 (mm) “Stock Award Agreement” means an agreement between the Company and a holder of a Stock Award evidencing the terms and conditions of an individual Stock Award grant. Each Stock Award
Agreement shall be subject to the terms and conditions of the Plan. 
  

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 (nn) “Subsidiary” means, with respect to the Company, (i) any corporation
of which more than fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other class or classes of such
corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any partnership in which the Company has a direct or indirect interest (whether
in the form of voting or participation in profits or capital contribution) of more than fifty percent (50%). 
  
 3.    ADMINISTRATION. 
  
 (a) Administration by Board.    The Board shall administer the Plan unless and until the Board delegates administration to a
committee, as provided in Section 3(c). 
  
 (b) Powers of
Board.    The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan: 
  
 (i) Subject to Section 5 herein, to determine from time to time which of the persons eligible under the Plan shall be granted Stock
Awards; when and how each Stock Award shall be granted; what type or combination of types of Stock Award shall be granted; the provisions of each Stock Award granted (which need not be identical), including the time or times when a person shall be
permitted to receive Common Stock pursuant to a Stock Award; and the number of shares of Common Stock with respect to which a Stock Award shall be granted to each such person. 
  
 (ii) To construe and interpret the Plan and Stock Awards granted under it, and to establish, amend
and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Stock Award Agreement, in a manner and to the extent it shall deem necessary
or expedient to make the Plan fully effective. 
  
 (iii) To amend the Plan or a Stock Award as provided in Section 12. 
  
 (iv) To terminate or suspend the Plan as provided in Section 13. 
  
 (v) Generally, to exercise such powers and to perform such acts as the Board deems necessary or
expedient to promote the best interests of the Company and that are not in conflict with the provisions of the Plan. 
  
 (vi) To adopt such procedures and sub-plans as are necessary or appropriate to permit participation in the Plan by employees who
are foreign nationals or employed outside the United States. 
  
 (c) DELEGATION TO COMMITTEE. 
  
 (i) General.    The Board may delegate administration of the Plan to a Committee or Committees of one or more
members of the Board, and the term “Committee” shall apply to any person or persons to whom such authority has been delegated. If administration is delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Board, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall
thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any time and revest in
the Board the administration of the Plan. 
  
 (ii) Rule 16b-3 Compliance.    In the discretion of the Board, the Committee may consist solely of two or more Non-Employee Directors, in accordance with Rule 16b-3. 
  
 (d) Effect of Board’s Decision.    All
determinations, interpretations and constructions made by the Board in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons. 
  

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 4.    SHARES SUBJECT TO THE
PLAN. 
  
 (a) Share
Reserve.    Subject to the provisions of Section 11(a) relating to Capitalization Adjustments, the shares of Common Stock that may be issued pursuant to Stock Awards shall not exceed in the aggregate five hundred thousand
(500,000) shares of Common Stock. 
  
 (b) Reversion of Shares
to the Share Reserve. If any Stock Award shall for any reason expire or otherwise terminate, in whole or in part, without having been exercised in full, or if any shares of Common Stock issued to a Participant pursuant to a Stock Award are
forfeited back to or repurchased by the Company, including, but not limited to, any repurchase or forfeiture caused by the failure to meet a contingency or condition required for the vesting of such shares, then the shares of Common Stock not
acquired under such Stock Award, or forfeited back to or repurchased by the Company, shall revert to and again become available for issuance under the Plan. If any shares subject to a Stock Award are not delivered to a Participant because such
shares are withheld for taxes or the Stock Award is exercised through a reduction of shares subject to the Stock Award (i.e., “net exercised”), then the shares that are not delivered to the Participant as a result thereof shall revert to
and again become available for issuance under the Plan. If the exercise price of any Stock Award is satisfied by tendering shares of Common Stock held by the Participant (either by actual delivery or attestation), then the number of shares so
tendered shall revert to and again become available for issuance under the Plan. 
  
 (c) Source of Shares. The shares of Common Stock subject to the Plan may be unissued shares or reacquired shares, bought on the market or otherwise. 
  
 5.    ELIGIBILITY. 
  
 Persons eligible for Stock Awards shall consist of Employees whose potential contribution, in the judgment of the Committee,
will benefit the future success of the Company and/or an Affiliate. Stock Awards may be granted only to persons not previously an Employee or Director of the Company, or following a bona fide period of non-employment, as an inducement
material to the individual’s entering into employment with the Company within the meaning of Rule 4350(i)(1)(A) of the NASD Marketplace Rules. In addition, notwithstanding any other provision of the Plan to the contrary, all Stock Awards must
be granted either by a majority of the Company’s independent directors or a committee comprised of a majority of independent directors. 
  
 6.    OPTION PROVISIONS. 
  
 Each Option shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. All
Options shall be designated as nonstatutory stock options at the time of grant. The provisions of separate Options need not be identical, but each Option shall include (through incorporation of provisions hereof by reference in the Option or
otherwise) the substance of each of the following provisions: 
  
 (a) Term.    The Board shall determine the term of an Option. 
  
 (b) Exercise Price of an Option.    The Board, in its discretion, shall determine the exercise price of each Option.

  
 (c) Consideration.    The purchase
price of Common Stock acquired pursuant to an Option shall be paid, to the extent permitted by applicable law, either (i) in cash at the time the Option is exercised or (ii) at the discretion of the Board (1) by delivery to the Company of other
Common Stock, (2) by a “net exercise” of the Option (as further described below) or (3) in any other form of legal consideration that may be acceptable to the Board. Unless otherwise specifically provided in the Option, the purchase price
of Common Stock acquired pursuant to an Option that is paid by delivery to the Company of other Common Stock acquired, directly or indirectly from the Company, shall be paid only by shares of the Common Stock of the Company that have been held for
more than six (6) months (or such longer or shorter period of time required to avoid a charge to earnings for financial accounting purposes). 
  

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 In the case of a “net exercise” of an Option, the Company will not require a payment of the
exercise price of the Option from the Participant but will reduce the number of shares of Common Stock issued upon the exercise by the largest number of whole shares that has a Fair Market Value that does not exceed the aggregate exercise price.
With respect to any remaining balance of the aggregate exercise price, the Company shall accept a cash payment from the Participant. The shares of Common Stock so used to pay the exercise price of an Option under a “net exercise” will be
considered to have resulted from the exercise of the Option, and accordingly, the Option will not again be exercisable with respect to such shares, the shares actually delivered to the Participant, and any shares withheld for purposes of tax
withholding. 
  
 (d) Transferability of an
Option.    An Option shall be transferable to the extent provided in the Option Agreement. If the Option does not provide for transferability, then the Option shall not be transferable except by (a) will, (b) the laws of
descent and distribution, or (c) upon dissolution of the Optionholder’s marriage pursuant to a domestic relations order. Also, during the Optionholder’s lifetime, only the Optionholder is entitled to exercise his or her Option.
Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, an Optionholder may designate a third party who, in the event of such Optionholder’s death, shall thereafter be entitled to
exercise the Option. 
  
 (e) Vesting
Generally.    The total number of shares of Common Stock subject to an Option may, but need not, vest and therefore become exercisable in periodic installments that may, but need not, be equal. The Option may be subject to
such other terms and conditions on the time or times when it may be exercised (which may be based on performance or other criteria) as the Board may deem appropriate. The vesting provisions of individual Options may vary. The provisions of this
Section 6(d) are subject to any Option provisions governing the minimum number of shares of Common Stock as to which an Option may be exercised. 
  
 (f) Termination of Continuous Service.    In the event that an Optionholder’s Continuous Service terminates (other than
for Cause or upon the Optionholder’s death or Disability), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination) but only within such period of
time ending on the earlier of (i) the date three (3) months following the termination of the Optionholder’s Continuous Service (or such longer or shorter period specified in the Option Agreement) or (ii) the expiration of the term of the Option
as set forth in the Option Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified in the Option Agreement, the Option shall terminate. 
  
 (g) Extension of Termination Date.    An
Optionholder’s Option Agreement may also provide that if the exercise of the Option following the termination of the Optionholder’s Continuous Service (other than for Cause or upon the Optionholder’s death or Disability) would be
prohibited at any time solely because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of the term of the Option set
forth in the Option Agreement or (ii) the expiration of a period of three (3) months after the termination of the Optionholder’s Continuous Service during which the exercise of the Option would not be in violation of such registration
requirements. 
  
 (h) Disability of
Optionholder.    In the event that an Optionholder’s Continuous Service terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise such Option as of the date of termination), but only within such period of time ending on the earlier of (i) the date twelve (12) months following such termination (or such longer or shorter period specified in the Option
Agreement) or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified herein, the Option shall terminate. 

 
 (i) Death of Optionholder.    In the event that
(i) an Optionholder’s Continuous Service terminates as a result of the Optionholder’s death or (ii) the Optionholder dies within the period (if any) specified in the Option Agreement after the termination of the Optionholder’s
Continuous Service for a reason other than death, then the 

  

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Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder’s estate, by a
person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the option upon the Optionholder’s death pursuant to Section 6(c), but only within the period ending on the earlier of (1) the
date thirty-six (36) months following the date of death (or such longer or shorter period specified in the Option Agreement) or (2) the expiration of the term of such Option as set forth in the Option Agreement. If, after death, the Option is not
exercised within the time specified herein, the Option shall terminate. 
  
 (j) Termination for Cause.    In the event an Optionholder’s Continuous Service is terminated for Cause, the Option shall terminate upon the termination date of such Optionholder’s Continuous Service and
the Optionholder is prohibited from exercising his or her Option from and after the time of such termination. 
  
 (k) Early Exercise.    The Option may, but need not, include a provision whereby the Optionholder may elect at any time before
the Optionholder’s Continuous Service terminates to exercise the Option as to any part or all of the shares of Common Stock subject to the Option prior to the full vesting of the Option. Any unvested shares of Common Stock so purchased may be
subject to a repurchase option in favor of the Company or to any other restriction the Board determines to be appropriate. The Company will not exercise its repurchase option until at least six (6) months (or such longer or shorter period of time
required to avoid a charge to earnings for financial accounting purposes) have elapsed following exercise of the Option unless the Board otherwise specifically provides in the Option. 
  
 7.    PROVISIONS OF STOCK AWARDS OTHER
THAN OPTIONS. 
  
 (a)
Restricted Stock Awards.    Each Restricted Stock Award agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. At the Board’s election, shares of Common Stock may
be (i) held in book entry form subject to the Company’s instructions until any restrictions relating to the Restricted Stock Award lapse; or (ii) evidenced by a certificate, which certificate shall be held in such form and manner as determined
by the Board. The terms and conditions of Restricted Stock Award Agreements may change from time to time, and the terms and conditions of separate Restricted Stock Award Agreements need not be identical, provided, however, that each
Restricted Stock Award Agreement shall include (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions: 
  
 (i) Purchase Price.    At the
time of the grant of a Restricted Stock Award, the Board will determine the price to be paid by the Participant for each share subject to the Restricted Stock Award. To the extent required by applicable law, the price to be paid by the Participant
for each share of the Restricted Stock Award will not be less than the par value of a share of Common Stock. A Restricted Stock Award may be awarded as a stock bonus (i.e., with no cash purchase price to be paid) to the extent permissible
under applicable law. 
  
 (ii)
Consideration.    At the time of the grant of a Restricted Stock Award, the Board will determine the consideration permissible for the payment of the purchase price of the Restricted Stock Award. The purchase price of Common
Stock acquired pursuant to the Restricted Stock Award shall be paid either: (i) in cash at the time of purchase; (ii) by services rendered or to be rendered to the Company; or (iii) in any other form of legal consideration that may be acceptable to
the Board in its discretion. 
  
 (iii)
Vesting.    Shares of Common Stock acquired under a Restricted Stock Award may, but need not, be subject to a share repurchase option in favor of the Company in accordance with a vesting schedule to be determined by the
Board. 
  
 (iv) Termination of
Participant’s Continuous Service.    In the event that a Participant’s Continuous Service terminates, the Company shall have the right, but not the obligation, to repurchase or otherwise reacquire for no
consideration any or all of the shares of Common Stock held by the Participant that have not vested as of the date of termination under the terms of the Restricted Stock Award Agreement. At the 

  

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Board’s election, the repurchase right may be at the lower of: (i) the Fair Market Value on the relevant date; or (ii) the Participant’s original
cost. The Company will not exercise its repurchase option until at least six (6) months (or such longer or shorter period of time required to avoid a charge to earnings for financial accounting purposes) have elapsed following the purchase of the
restricted stock unless otherwise determined by the Board or provided in the Restricted Stock Award Agreement. 
  
 (v) Transferability.    Rights to purchase or receive shares of Common Stock granted under a Restricted Stock
Award shall be transferable by the Participant only upon such terms and conditions as are set forth in the Restricted Stock Award Agreement, as the Board shall determine in its discretion, and so long as Common Stock awarded under the Restricted
Stock Award remains subject to the terms of the Restricted Stock Award Agreement. 
  
 (b) Phantom Stock.    Each Phantom Stock Award Agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The terms and conditions of
the Phantom Stock agreements may change from time to time, and the terms and conditions of separate Phantom Stock agreements need not be identical, provided, however, that each Phantom Stock agreement shall include (through incorporation of
the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions: 
  
 (i) Consideration.    At the time of grant of a Phantom Stock Award, the Board will determine the
consideration, if any, to be paid by the Participant upon delivery of each share of Common Stock subject to the Phantom Stock Award. To the extent required by applicable law, the consideration to be paid by the Participant for each share of Common
Stock subject to a Phantom Stock Award will not be less than the par value of a share of Common Stock. The consideration may be paid in any form permitted under applicable law. 
  
 (ii) Vesting.    At the time of the grant of a Phantom Stock Award, the Board may
impose such restrictions or conditions to the vesting of the Phantom Stock Award as it, in its absolute discretion, deems appropriate. 
  
 (iii) Additional Restrictions.    At the time of the grant of Phantom Stock, the Board may impose such
restrictions or conditions that delay the delivery of the consideration after its vesting as the Board, in its absolute discretion, deems appropriate, with such terms to be contained in the Phantom Stock agreement. 
  
 (iv) Payment.    Phantom Stock
Awards may be settled in Common Stock or in cash or any combination of the two, or in any other form of consideration as determined by the Board and contained in the Phantom Stock Award Agreement. 
  
 (v) Dividend
Equivalents.    Dividend equivalents may be credited in respect of shares covered by a Phantom Stock Award, as determined by the Board and contained in the Phantom Stock Award Agreement. At the discretion of the Board, such
dividend equivalents may be converted into additional shares covered by the Phantom Stock Award in such manner as determined by the Board. Any additional shares covered by the Phantom Stock Award credited by reason of such dividend equivalents will
be subject to all the terms and conditions of the underlying Phantom Stock Award Agreement to which they relate. 
  
 (vi) Termination of Participant’s Continuous Service.    Except as otherwise provided in the applicable
Phantom Stock Award Agreement, such portion of the Phantom Stock Award that has not vested will be forfeited upon the Participant’s termination of service for any reason. 
  
 (c) Stock Appreciation Rights.    Each Stock Appreciation Right Agreement shall be in such form
and shall contain such terms and conditions as the Board shall deem appropriate. The terms and conditions of Stock Appreciation Right Agreements may change from time to time, and the terms and conditions of separate Stock Appreciation Right
Agreements need not be identical, but each Stock Appreciation Right Agreement shall include (through incorporation of provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions: 

  
 (i) Strike Price and Calculation of
Appreciation.    Each Stock Appreciation Right will be denominated in share of Common Stock equivalents. The appreciation distribution payable on the exercise 

  

 9 

 
of a Stock Appreciation Right will be not greater than an amount equal to the excess of (A) the aggregate Fair Market Value (on the date of the exercise of
the Stock Appreciation Right) of a number of shares of Common Stock equal to the number of share of Common Stock equivalents in which the Participant is vested under such Stock Appreciation Right and with respect to which the Participant is
exercising the Stock Appreciation Right on such date, over (B) an amount that will be determined by the Committee at the time of grant of the Stock Appreciation Right. 
  
 (ii) Vesting.    At the time of the grant of a Stock Appreciation Right, the
Board may impose such restrictions or conditions to the vesting of such Stock Appreciate Right as it, in its absolute discretion, deems appropriate. 
  
 (iii) Exercise.    To exercise any outstanding Stock Appreciation Right, the Participant must provide notice of
exercise to the Company in compliance with the provisions of the Stock Appreciation Right Agreement evidencing such Stock Appreciation Right. 
  
 (iv) Payment.    A Stock Appreciation Right may be paid in Common Stock or in cash or any combination of the
two, or in any other form of consideration as determined by the Board and contained in the Stock Appreciation Right Agreement evidencing such Stock Appreciation Right. 
  
 (v) Termination of Continuous Service.    In the event that a Participant’s
Continuous Service terminates, the Participant may exercise his or her Stock Appreciation Right (to the extent that the Participant was entitled to exercise such Stock Appreciation Right as of the date of termination) but only within such period of
time ending on the earlier of (i) the date three (3) months following the termination of the Participant’s Continuous Service (or such longer or shorter period specified in the Stock Appreciation Right Agreement) or (ii) the expiration of the
term of the Stock Appreciation Right as set forth in the Stock Appreciation Right Agreement. If, after termination, the Participant does not exercise his or her Stock Appreciation Right within the time specified in the Stock Appreciation Right
Agreement, the Stock Appreciation Right shall terminate. 
  
 (d) Other Stock Awards.    Other forms of Stock Awards valued in whole or in part by reference to, or otherwise based on, Common Stock may be granted either alone or in addition to Stock Awards provided for under
Section 6 and the preceding provisions of this Section 7. Subject to the provisions of the Plan, the Board shall have sole and complete authority to determine the persons to whom and the time or times at which such Other Stock Awards will be
granted, the number of shares of Common Stock (or the cash equivalent thereof) to be granted pursuant to such Awards and all other terms and conditions of such Awards. 
  
 8.    SECURITIES LAW COMPLIANCE. 
  
 The Company shall seek to obtain from each regulatory commission or agency
having jurisdiction over the Plan such authority as may be required to grant Stock Awards and to issue and sell shares of Common Stock upon exercise of the Stock Awards; provided, however, that this undertaking shall not require the Company
to register under the Securities Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any such Stock Award. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Stock Awards
unless and until such authority is obtained. 
  
 9.    USE OF PROCEEDS FROM STOCK. 
  
 Proceeds from the sale of Common Stock pursuant to Stock Awards shall constitute general funds of the Company. 
  
 10.    MISCELLANEOUS. 
  
 (a) Acceleration of Exercisability and
Vesting.    The Board shall have the power to accelerate the time at which a Stock Award may first be exercised or the time during which a Stock Award or any part thereof will vest 

  

 10 

 
in accordance with the Plan, notwithstanding the provisions in the Stock Award stating the time at which it may first be exercised or the time during which
it will vest. 
  
 (b) Shareowner
Rights.    No Participant shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to such Stock Award unless and until such Participant has satisfied
all requirements for exercise of the Stock Award pursuant to its terms. 
  
 (c) No Employment or other Service Rights.    Nothing in the Plan or any instrument executed or Stock Award granted pursuant thereto shall confer upon any Participant any right to continue to serve the Company or
an Affiliate in the capacity in effect at the time the Stock Award was granted or shall affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without cause, (ii) the service
of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law
of the state in which the Company or the Affiliate is incorporated, as the case may be. 
  
 (d) Investment Assurances.    The Company may require a Participant, as a condition of exercising or acquiring Common Stock under any Stock Award, (i) to give written assurances satisfactory
to the Company as to the Participant’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 Stock Award; and (ii) to give written assurances satisfactory to the Company stating that the
Participant is acquiring Common Stock subject to the Stock Award for the Participant’s own account and not with any present intention of selling or otherwise distributing the Common Stock. The foregoing requirements, and any assurances given
pursuant to such requirements, shall be inoperative if (1) the issuance of the shares of Common Stock upon the exercise or acquisition of Common Stock under the Stock Award has been registered under a then currently effective registration statement
under the Securities Act or (2) 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. The Company may, upon advice
of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer
of the Common Stock. 
  
 (e) Withholding
Obligations.    To the extent provided by the terms of a Stock Award Agreement, the Participant may, with the approval of the Committee, satisfy any federal, state or local tax withholding obligation relating to the exercise
or acquisition of Common Stock under a Stock Award by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (i) tendering a
cash payment; (ii) authorizing the Company to withhold shares of Common Stock from the shares of Common Stock otherwise issuable to the Participant as a result of the exercise or acquisition of Common Stock under the Stock Award; provided,
however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law (or such lesser amount as may be necessary to avoid variable award accounting); or (iii) delivering to the
Company owned and unencumbered shares of Common Stock. 
  
 11.    ADJUSTMENTS UPON CHANGES IN STOCK. 
  
 (a) Capitalization Adjustments.    If any change is made in, or other event occurs with respect to, the Common Stock subject to
the Plan or subject to any Stock Award without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split,
liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company (each a “Capitalization Adjustment”), the Plan will be
appropriately adjusted in the class(es) and maximum 

  

 11 

 
number of securities subject to the Plan pursuant to Sections 4(a) and 4(b) and the maximum number of securities subject to award to any person pursuant to
Section 5(c), and the outstanding Stock Awards will be appropriately adjusted in the class(es) and number of securities and price per share of Common Stock subject to such outstanding Stock Awards. The Board shall make such adjustments, and its
determination shall be final, binding and conclusive. (The conversion of any convertible securities of the Company shall not be treated as a transaction “without receipt of consideration” by the Company.) 
  
 (b) Dissolution or Liquidation.    In the event of
a dissolution or liquidation of the Company, then all outstanding Stock Awards shall terminate immediately prior to the completion of such dissolution or liquidation. 
  
 (c) Corporate Transaction.    In the event of a Corporate Transaction, any surviving corporation
or acquiring corporation may assume or continue any or all Stock Awards outstanding under the Plan or may substitute similar stock awards for Stock Awards outstanding under the Plan (it being understood that similar stock awards include, but are not
limited to, awards to acquire the same consideration paid to the shareowners or the Company, as the case may be, pursuant to the Corporate Transaction), and any reacquisition or repurchase rights held by the Company in respect of Common Stock issued
pursuant to Stock Awards may be assigned by the Company to the successor of the Company (or the successor’s parent company), if any, in connection with such Corporate Transaction. In the event that any surviving corporation or acquiring
corporation does not assume or continue all such outstanding Stock Awards or substitute similar stock awards for all such outstanding Stock Awards, then with respect to Stock Awards that have been not assumed, continued or substituted and that are
held by Participants whose Continuous Service has not terminated prior to the effective time of the Corporate Transaction, the vesting of such Stock Awards (and, if applicable, the time at which such Stock Awards may be exercised) shall (contingent
upon the effectiveness of the Corporate Transaction) be accelerated in full to a date prior to the effective time of such Corporate Transaction as the Board shall determine (or, if the Board shall not determine such a date, to the date that is five
(5) days prior to the effective time of the Corporate Transaction), such Stock Awards shall terminate if not exercised (if applicable) at or prior to such effective time, and any reacquisition or repurchase rights held by the Company with respect to
such Stock Awards shall (contingent upon the effectiveness of the Corporate Transaction) lapse. With respect to any other Stock Awards outstanding under the Plan that have not been assumed, continued or substituted, the vesting of such Stock Awards
(and, if applicable, the time at which such Stock Award may be exercised) shall not be accelerated, unless otherwise provided in a written agreement between the Company or any Affiliate and the holder of such Stock Award, and such Stock Awards shall
terminate if not exercised (if applicable) prior to the effective time of the Corporate Transaction. 
  
 (d) Change in Control.    A Stock Award held by any Participant whose Continuous Service has not terminated prior to the
effective time of a Change in Control may be subject to additional acceleration of vesting and exercisability upon or after such event as may be provided in the Stock Award Agreement for such Stock Award or as may be provided in any other written
agreement between the Company or any Affiliate and the Participant, but in the absence of such provision, no such acceleration shall occur. 
  
 12.    AMENDMENT OF THE PLAN AND STOCK
AWARDS. 
  
 (a) Amendment of
Plan.    The Board at any time, and from time to time, may amend the Plan. However, except as provided in Section 11(a) relating to Capitalization Adjustments, no amendment shall be effective unless approved by the
shareowners of the Company to the extent shareowner approval is necessary to satisfy applicable law. 
  
 (b) No Impairment of Rights.    Rights under any Stock Award granted before amendment of the Plan shall not be impaired by any
amendment of the Plan unless (i) the Company requests the consent of the Participant and (ii) the Participant consents in writing. 
  
 (c) Amendment of Stock Awards.    The Board at any time, and from time to time, may amend the terms of any one or more Stock
Awards to provide terms more favorable than previously provided in the Stock Award 

  

 12 

 
Agreement, subject to any specified limits in the Plan that are not subject to Board discretion; provided, however, that the rights under any Stock
Award shall not be impaired by any such amendment unless (i) the Company requests the consent of the Participant and (ii) the Participant consents in writing. 
  

(d) Repricings.    Notwithstanding the foregoing, the Board may not effect at any time (1) the reduction of the exercise
price of any outstanding Option under the Plan, (2) the cancellation of any outstanding Option under the Plan and the grant in substitution therefor of (A) a new Option under the Plan or another equity plan of the Company covering the same or a
different number of shares of Common Stock, (B) a Restricted Stock Award, (C) a Stock Appreciation Right, (D) a Phantom Stock Award, (E) an Other Stock Award, (F) cash and/or (G) other valuable consideration (as determined by the Board, in its
sole discretion), or (3) any other action that is treated as a repricing under generally accepted accounting principles without first obtaining shareholder approval for such action. 
  
 13.    TERMINATION OR
SUSPENSION OF THE PLAN. 
  
 (a) Plan Term.    The Board may suspend or terminate the Plan at any time. No Stock Awards may be granted under the Plan while the Plan is suspended or after it is terminated. 
  
 (b) No Impairment of Rights.    Suspension or
termination of the Plan shall not impair rights and obligations under any Stock Award granted while the Plan is in effect except with the consent of the Participant. 
  
 14.    EFFECTIVE DATE OF PLAN. 
  
 The Plan shall become effective as determined by the Board. 
  
 15.    CHOICE OF LAW.

  
 The law of the State of Delaware shall govern all
questions concerning the construction, validity and interpretation of this Plan, without regard to such state’s conflict of laws rules. 
  

 13Facility Loan Agreement

 EXHIBIT 10.1 
  
 FACILITY LOAN AGREEMENT 
  
 This FACILITY LOAN AGREEMENT (this “Agreement”), dated as of August 2, 2004, is made by and between BioDelivery Sciences
International, Inc. (the “Company”) and Hopkins Capital Group II, LLC (the “Lender”). 
  
 WHEREAS, the Company is in need of up to $4,000,000 of subordinated debt financing, which it desires to obtain through the Facility (as defined
herein); 
  
 WHEREAS, the Lender desires to make the
Facility available to the Company; 
  
 WHEREAS, the Lender
owns certain equity interests in the Company and has direct and indirect interests in the financial success and viability of the Company; and 
  
 WHEREAS, the Lender is willing to make the Loan to the Company on the terms and conditions contained in the herein; 
  
 NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties hereto agree as follows: 
  
 ARTICLE 1. 
 RECITALS AND DEFINITIONS 
  
 1.1 Incorporation of Recitals. It is expressly agreed that the recitals to this Agreement are incorporated herein and
made an operative part of this Agreement. 
  
 1.2 Defined
Terms. As used in this Agreement, the following terms shall have the following meanings. Other capitalized terms are defined elsewhere herein. 
  
 “Business Day” shall mean a day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized
or required by law to close. 
  
 “Capital Stock”
shall mean: (a) any and all shares, interests, participations or other equivalents of or interests in (however designated) corporate stock, including shares of preferred or preference stock and (b) all equity or ownership interests in any Person of
any other type, including any securities convertible into or exchangeable for any of the foregoing or any options, warrants or other rights to subscribe for, purchase or acquire any of the forgoing. 
  
 “Change in Control” shall mean the occurrence of one or more
of the following events: (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person (together with such Person’s affiliates and associates within the meanings set forth in Rule 12b-2 under the Securities
Exchange Act of 1934, as amended), in a single transaction or through a series of related transactions, of securities of the Company ordinarily having the right to elect a majority of directors or other individuals performing similar functions, (b)
any sale or disposition, in a single transaction or through a series of related transactions, of all or substantially all of the assets of the Company, other than leases, licenses and/or distribution arrangements entered into by the Company
consistent with industry practice with respect to non-sale transactions, (c) any merger or consolidation of the Company with or into another Person, or (d) the adoption of a plan relating to the liquidation or dissolution of the Company. 

 “Commitment Termination Date” shall mean March 31, 2006. 
  
 “Common Stock” shall mean the shares of common stock, par
value $0.01 per share, of the Company. 
  
 “Company Equity
Securities” shall mean any Capital Stock of the Company or options, warrants or other rights acquire Capital Stock of the Company. 
  
 “Contractual Obligation” shall mean, as to any Person, any provision of any security issued by such Person or of any contact, agreement,
instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. 
  
 “Conversion Notice” shall mean a written notice given by Lender to the Company of its election to convert the Loan Amount into Common
Stock. 
  
 “Conversion Price” shall mean $4.25
per share, subject to proportional adjustment in the event the Company: (a) pays a dividend or makes a distribution on its Common Stock in the form of Common Stock; (b) subdivides its outstanding shares of Common Stock into a greater number of
shares; (c) combines its outstanding shares of Common Stock into a smaller number of shares; or (d) issues by reclassification of its Common Stock, or by merger or reorganization, any interests of the Company or any successor entity. In the event of
any such occurrences, the Conversion Price shall be proportionately adjusted to a price that would have permitted the Lender to receive the same Conversion Stock Percentage which the Lender would have been entitled to receive immediately following
such action if the Lender had exercised its right to convert the Loan Amount immediately prior to such action. The adjustment shall become effective immediately after the record date in the case of a dividend or distribution and immediately after
the effective date in the case of a subdivision, combination or reclassification. The term “Conversion Stock Percentage” shall mean a percentage derived by dividing the maximum number of shares of Conversion Stock receivable at any
given time by the then aggregate outstanding shares of Common Stock at such time. 
  
 “Conversion Stock” shall mean only those shares of Common Stock (or equity securities of any successor to the Company, as the case may be, receivable by the Lender upon conversion of Loan Amounts in
accordance with the terms hereof. 
  
 “Default”
shall mean any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default. 
  
 “Event of Default” shall mean any of the events specified in Section 8; provided that any requirement for the giving of notice,
the lapse of time, or both, or any other condition, has been satisfied. 
  
 “GAAP” shall mean generally accepted accounting principles in the United States of America in effect from time to time. 
  

 2 

 “Indebtedness” shall mean (without double counting), at any time and with respect to any
Person: (i) indebtedness of such Person for borrowed money (whether by loan or the issuance and sale of debt securities) or for the deferred purchase price of property or services purchased (other than amounts constituting trade payables (payable
within 90 days or such longer terms as may be customary in the industry) arising in the ordinary course of business); (ii) obligations of such Person in respect of letters of credit, acceptance facilities, or drafts or similar instruments issued or
accepted by banks and other financial institutions for the account of such Person; (iii) obligations of such Person under capital leases and any financing lease involving substantially the same economic effect; (iv) deferred payment obligations of
such Person resulting from the adjudication or settlement of any litigation to the extent not already reflected as a current liability on the balance sheet of such Person; and (v) indebtedness of others of the type described in clauses (i), (ii),
(iii) and (iv) which such Person has (a) directly or indirectly assumed or guaranteed in connection with a guaranty, or (b) secured by a Lien on the assets of such Person whether or not such Person has assumed such indebtedness. 
  
 “Lien” shall mean any mortgage, deed of trust, pledge,
security interest, hypothecation, assignment, encroachment, lien (statutory or otherwise), claim of property interest, reservation of title or property rights, easement, or encumbrance of any kind. 
  
 “Loan Amount” shall mean the amount of any Loan outstanding
including any interest accrued thereon. 
  
 “Obligations” shall mean all money, debts, obligations and liabilities which now are or have been or at any time hereafter may be or become due, owing or incurred by the Company to the Lender pursuant to this Agreement or
any Note, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, whether on account of principal, interest (including, without limitation, interest accruing after the Maturity Date of the
Note and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Company, whether or not a claim for post-filing or post-petition interest is allowed
in such proceeding), royalties, reimbursement obligations, fees, indemnities, costs, expenses or otherwise. 
  
 “Facility” shall mean the $4,000,000 convertible credit facility to be provided by the Lender to the Company pursuant to this Agreement.

  
 “Person” shall mean an individual,
partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. 
  
 “Prime Rate” shall mean the “prime rate” or
equivalent (non-LIBOR) base rate from time to time, as reported in the Wall Street Journal from time to time, determined on the first day of each calendar quarter and remaining constant at such rate for the balance of such calendar quarter, adjusted
quarterly for any interim change therein, if any, on the first day of the next succeeding calendar quarter. 
  
 “Requirement of Law” shall mean as to any Person, the certificate of incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule 
  

 3 

 or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or
binding upon such Person or any of its material property or to which such Person or any of its material property is subject. 
  
 “Securities Act” shall mean the Securities Act of 1933, as amended from time to time. 
  
 “Subsidiary” shall mean, with respect to any Person, any
other Person whose shares of stock or other security having a majority of the general voting power in electing the board of directors or equivalent governing body of such other Person are, at the time as of which any determination is made, owned by
such Person either directly or indirectly through one or more entities constituting subsidiaries. 
  
 1.3 Other Definitional Provisions. The words “hereof,” “herein” and “hereunder” and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection and Exhibit references are to this Agreement unless otherwise specified. The meanings given to terms defined
herein shall be equally applicable to both the singular and plural forms of such terms. “Includes,” “including” and like expressions are not limiting, i.e., “including” implies “including, without limitation,”
etc. 
  
 ARTICLE 2. 
 THE LOANS 
  
 2.1 Agreement to Make Loans. Subject to the terms and conditions hereof, upon the written request of the Company at any time, the Lender agrees to
make loans to the Company on any Business Day (each, a “Funding Date”) from time to time beginning on the date hereof up to but excluding the Commitment Termination Date, each in the aggregate principal amount which, when added
together, shall not exceed $4,000,000. As used herein, the term “Loan” or “Loans” shall mean the loans made by the Lender in accordance with this Section 2.1. Any Loan, when repaid, may not be reborrowed.

  
 2.2 Notes. In order to evidence each Loan, the Company
will execute and deliver to the Lender on the date of funding a promissory note substantially in the form of Exhibit A hereto (each, a “Note”), payable to the order of the Lender and in a principal amount equal to amount
loaned. Each Note: (i) shall be dated as of the applicable Funding Date, (ii) shall be payable as provided in Section 2.4, and (iii) shall provide for the payment of interest in accordance with Section 3.1. 
  
 2.3 Procedures for Making Loans. 
  
 (a) Subject to the terms and conditions herein, each Loan shall be made as
the Company shall request subject to and in accordance with this Section 2.3. The Company shall give the Lender at least three (3) Business Days’ prior written notice of each requested borrowing (unless the Lender in its sole discretion
consents to a shorter period of notice). Each such notice shall be irrevocable and shall specify the amount requested and the date that such Loan is to be made. On the Funding Date specified in such notice, the Lender shall make the Loan available
to the Company by wire transfer of immediately available funds. Unless otherwise agreed by the Lender, the amount of any borrowing hereunder shall be in the minimum aggregate principal amount of US$50,000. 
  

 4 

 2.4 Repayment of Loan Amounts. The aggregate amount of the Loans, if not earlier converted into
Common Stock in accordance with Section 3.2 hereof or accelerated upon or following an Event of Default, and subject to the mandatory repayment requirements set forth below, shall be due and payable, together with all accrued and unpaid interest
thereon on March 31, 2006 (the “Maturity Date”). Unless a payment is received at a time when no Default or Event of Default exists and is earmarked for a specific purpose (e.g., a periodic interest payment), the general rule for
application of payments hereunder shall be: (i) first, to accrued expense or indemnity Obligations then due under this Agreement or any Note; (ii) second, to accrued interest under any Note; and (iii) third, to principal of the Loans. 
  
 2.5 Voluntary Prepayment. The Company may voluntarily prepay all or
any portion of the outstanding Obligations on ten (10) days’ prior written notice to the Lender without penalty. A prepayment notice, once given by the Company to the Lender, shall be irrevocable unless the Lender, in its sole discretion,
agrees to the revocation of such notice. 
  
 ARTICLE 3.

 OTHER LOAN-RELATED PROVISIONS 
  
 3.1 Interest Rate and Payments. 
  
 (a) General. The outstanding principal of the Loans shall accrue interest from the applicable Funding Date pursuant to the terms hereunder until
paid in full at a rate per annum (computed on the basis of the actual number of days elapsed over a year of 365 days) equal to the Prime Rate. All interest and principal outstanding under any Note shall be payable on the Maturity Date or such
earlier date upon which the Note or any relevant portion thereof shall be repayable in accordance with the terms hereof. 
  
 (b) Acceleration Upon a Change in Control. Upon the occurrence of a Change in Control of the Company, the Lender may: (i) by written notice to the
Company, declare the then outstanding Loan Amount hereunder (including accrued but unpaid interest thereon) and all other amounts owing under this Agreement or any Note to be due and payable forthwith, whereupon the same shall immediately become due
and payable, without presentment, demand, protest or further notice of any kind, all of which are expressly waived by the Company, (ii) exercise all rights and remedies available to it in equity, at law, or pursuant to the provisions of this
Agreement or otherwise and (iii) terminate its commitment to make any future Loans to the Company. 
  
 3.2 Conversion of the Facility. The Loan Amount shall be convertible into shares of Common Stock of the Company, subject to and in accordance with
the provisions set forth below: 
  
 (a) Optional
Conversion. 
  
 (i) Upon a Change in Control. Upon the
occurrence of a Change in Control of the Company, even prior to the Maturity Date, the Lender may, in its sole discretion and in 
  

 5 

 accordance with the terms hereof, convert all or any portion of the interest and principal then outstanding on any Loan
into shares of Common Stock by providing a Conversion Notice to the Company. 
  
 (ii) At Maturity. Upon the giving of a Conversion Notice at any time following the Maturity Date, the Lender may, in its sole discretion and in accordance with the terms hereof, convert all or any portion of
the interest and principal then outstanding on any Loan into shares of Common Stock. 
  
 (ii) Conversion Price. The number of shares of Conversion Stock into which the applicable Loan Amount may be converted pursuant to this Section 3.2(a) shall be equal to the number resulting from dividing the
applicable Loan Amount by the applicable Conversion Price then in effect. 
  
 (b) Mechanics of Conversion. Upon receipt by the Company of a Conversion Notice as provided for in Section 3.2(a) above, the Company shall promptly issue and deliver to the Lender a certificate or certificates
for the number of shares of Conversion Stock to which the Lender is entitled based upon the then applicable Conversion Price. To the extent that principal is being converted, in exchange for such certificate or certificates, Lender shall surrender
the original copy of the applicable Note to the Company marked “cancelled” (or an appropriate lost note indemnification agreement, reasonably acceptable to the Company, if applicable). 
  
 (c) Fractional Shares. No fractional shares of Common Stock shall be
issued upon conversion of all or any portion of the Loan Amount as provided for herein. All fractional shares shall be rounded to the near whole share. 
  
 (d) Piggyback Registration Rights. The Lender shall have the following rights with respect to any shares of Common Stock received by the Lender
upon conversion of the Loan Amount as provided for herein: 
  
 (i) Whenever the Company proposes to register any Company Equity Securities under the Securities Act (other than pursuant to a registration statement on Form S-4, Form S-8 or any successor form) and the registration statement form to be
used may be used for the registration of shares of Common Stock received by the Lender pursuant to this Agreement (such shares of Common Stock only, and no other shares of Capital Stock held by the Lender or its affiliates, are referred to herein as
the “Registrable Securities”), the Company shall give prompt written notice to the Lender of its intention to effect such a registration. The Company shall include in such registration and use commercially reasonable efforts to
include in any underwriting all shares of Registrable Securities held by the Lender with respect to which the Company has received a written request from the Lender for inclusion therein within 30 days after the receipt of the Company’s notice
(such registration, a “Piggyback Registration”). 
  
 (ii) If a Piggyback Registration is an underwritten primary registration on behalf of the Company, and the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold without materially and adversely affecting the marketability of such offering or the timing thereof, the Company shall include in such registration all Registrable 
  

 6 

 Securities held by the Lender on the condition that the Lender will agree to refrain from selling a reasonable number of
such Registrable Securities (as determined in good faith by the Company based on the impact on the timing and marketability of the offering of the sale immediate by the Lender of all of its Registrable Securities) for a three (3) month period
following the declaration of effectiveness of the applicable registration statement. 
  
 (iii) Whenever the Lender requests that any Registrable Securities be registered pursuant to this Agreement, the Company shall use its commercially reasonable efforts to effect the registration and the sale of such
Registrable Securities in accordance with the intended method of disposition thereof (subject in all instances to the requirements of the Securities Act, the rules and regulations promulgated thereunder, and all other applicable laws, rules and
regulations), and pursuant thereto the Company shall as expeditiously as possible take all reasonable and customary actions necessary to effect such registration and sale. 
  
 (iv) All expenses incident to the Company’s performance of or compliance with this Section 3.2(d), including without
limitation all registration and filing fees, fees and expenses of compliance with securities or blue sky laws, printing expenses, messenger and delivery expenses, fees and disbursements of custodians, and fees and disbursements of counsel for the
Company and all independent certified public accountants, underwriters (excluding underwriting discounts and commissions relating to the Registrable Securities) and other Persons retained by the Company shall be borne by the Company. 
  
 (v) In connection with any registration statement in which the Lender is
participating pursuant to this Section 3.2(d), the Lender shall furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with any such registration statement or prospectus.

  
 ARTICLE 4. 
 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY 
  
 The Company hereby represents, warrants and covenants to the Lender as of the date hereof that: 
  
 4.1 Existence. The Company: (a) is duly organized, validly existing
and in good standing under the laws of the State of Delaware and (b) has the power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently
engaged. 
  
 4.2 Power; Authorization; Enforceable
Obligations. The Company: (i) has the power and authority, and the legal right, to make, deliver and perform this Agreement and to borrow the Loans hereunder, (ii) has taken all necessary action to authorize the execution, delivery and
performance of this Agreement, and the borrowing of the Loans on the terms and conditions of this Agreement and the conversion of the principal amounts of the Loans outstanding or the Obligations, as applicable, for shares of Common Stock on the
terms and under the circumstances provided for herein. Except for the required consent of Gold Bank pursuant to that certain Loan Agreement, dated April 22, 2003, between the Company and Gold Bank (such consent, the “Gold Bank
Loan”), and except as has been disclosed to the Lender, no consent or 
  

 7 

 authorization of, filing with, notice to or other similar act by or in respect of, any Governmental Authority or any
other Person (including Persons who are beneficiaries of Contractual Obligations of the Company) is required to be obtained or made by or on behalf of the Company in connection with the execution, delivery, performance, validity or enforceability of
this Agreement, the borrowing of the Loan hereunder or the conversion of the principal amounts of the Loans outstanding plus accrued interest for shares of Common Stock on the terms and under the circumstances provided for in Section 3.2 hereof.
This Agreement has been duly executed and delivered by the Company. This Agreement constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and except as enforceability may be subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law). 
  
 4.3 No Legal or Contractual Bar. Except for the Gold Bank Loan and except as previously disclosed to Lender, the execution, delivery and performance of this Agreement by the Company, the borrowing of the Loans hereunder and the use
of the proceeds thereof by the Company and the conversion of the principal amounts of the Loans outstanding plus accrued interest for shares of Common Stock under the circumstances provided for herein: (a) do not and will not violate any Requirement
of Law or Contractual Obligation of the Company or permit the acceleration of any obligation of the Company pursuant to any such Contractual Obligation and (b) do not and will not result in, or require, the creation or imposition of any Lien on any
on the Company’s properties or revenues pursuant to any such Requirement of Law or Contractual Obligation. 
  
 4.4 Litigation. Other than matters adequately covered by existing insurance or for which the Company is indemnified (subject only to reasonable and
customary deductibles) there are no: (i) actions, suits or legal, equitable, arbitrative or administrative proceedings pending, or to the knowledge of the Company, threatened against the Company or (ii) judgments, injunctions, writs, rulings or
orders by any Governmental Authority against the Company. 
  
 4.5
Certain Regulations. The Company is not (a) an “investment company,” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940; (b) a “holding
company,” or an “affiliate” of a “holding company” or a “Subsidiary company” of a “holding company,” within the meaning of the Public Utility Holding Company Act of 1935; or (c) to the knowledge of the
Company, subject to any other law, regulation or order restricting its ability to incur debt or to grant Liens. 
  
 4.6 Compliance with Laws. The Company has obtained all material approvals required by any Governmental Authority to carry on its business as now
being conducted. Each of such approvals is in full force and effect and the Company is in compliance in all material respects with the terms and conditions of such approvals, and is also in compliance in all material respects with all other
provisions of any applicable environmental law. 
  
 4.7 Title
to Property and Assets. The Company has good and marketable title to, or a valid leasehold in, all of the Company’s tangible and intangible assets, in each case free and clear of all Liens other than: (i) Liens for taxes not yet due or
other statutory liens relating to 
  

 8 

 governmental obligations which are not yet due, (ii) statutory Liens arising in the ordinary course of business, in each
case, which do not interfere with the use of the assets to which they relate for the purposes for which those assets were acquired and Liens in favor of the Lender, (iii) Liens previously disclosed to the Lender and (iv) the Liens specifically
referred to in this Agreement. 
  
 4.8 Brokers. No broker
or finder has acted for the Company in connection with this Agreement or the transactions contemplated thereby, and no broker or finder is entitled to any brokerage or finder’s fees or other commission in respect of such transactions based in
any way on agreements, arrangements or understandings made by or on behalf of the Company. 
  
 ARTICLE 5. 
 REPRESENTATIONS AND WARRANTIES OF THE LENDER 
  
 The Lender hereby represents and warrants to the Company that: 
  
 5.1 Accredited Investor. The Lender is an “accredited
investor” within the meaning of Rule 501 promulgated under the Securities Act. 
  
 5.2 Investment Experience; Access; Investigation. 
  
 (a) Access to Information. The Lender, in making its investment decision hereunder, represents that: (a) it has read, reviewed and relied solely on the publicly available information concerning the Company and
any independent investigation made by it and its representatives, if any; (b) it has been afforded an opportunity to request from the Company to review, and has received, all additional information requested from the Company, (c) it acknowledges
that no person has been authorized to give any information or to make any representation concerning the Company or the Loans, other than as contained in this Agreement, and if given or made, any such other information or representation has not been
relied upon as having been authorized by the Company. 
  
 (b)
Reliance on own Advisors. The Lender has relied completely on the advice of, or has consulted with, his or her own personal tax, investment, legal or other advisors and has not relied on the Company, or any of their affiliates, officers,
directors, attorneys, accountants, representatives, agents, advisors or any affiliates of any of the foregoing and each other person, if any, who controls any of the foregoing, within the meaning of Section 15 of the Securities Act, for any advice.

  
 (c) Capability to Evaluate. The Lender has such
knowledge and experience in financial and business matters, either directly or through its representatives or advisors, that it is capable of evaluating the merits and risks of the prospective investment, which risks are substantial. 
  
 (d) Ability to Bear Economic Risk. The Lender understands and
acknowledges that an investment in the Notes and the shares of Common Stock involve a high degree of risk. The Lender acknowledges that it has the ability to bear the economic risk of its investment pursuant to this Agreement. 
  

 9 

 (e) Investment; No Distribution. The Lender is acquiring the Notes and the Common Stock solely for
the Lender’s own account for investment purposes as a principal and not with a view to the resale or distribution of all or any part thereof. The Lender is aware that there may be legal and practical limits on the Lender’s ability to sell
or dispose of the any of the Notes and the Common Stock and, therefore, that the Lender must bear the economic risk of its investment for an indefinite period of time. It is possible that the Lender may incur a total loss of its investment. The
Lender has adequate means of providing for the Lender’s current needs and possible contingencies and does not have a need for liquidity of this investment. The Lender’s commitment to illiquid investments, including the investments provided
for herein, is reasonable in relation to the Lender’s net worth. 
  
 (f) No General Solicitation. None of the Notes and the Common Stock were offered to the Lender through, and the Lender is not aware of, any form of general solicitation or general advertising with respect to this Agreement and the
transactions contemplated hereby, including, without limitation: (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television, radio or via the Internet, and (ii)
any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. The Lender further understands that the Company is relying in part on this representation to ensure compliance with the Securities Act.

  
 ARTICLE 6. 
 CONDITIONS OF LENDING 
  
 The obligation of the Lender to make the any Loan hereunder is subject to the following conditions precedent, each of which may be waived in the
discretion of the Lender: 
  
 6.1 Representations and
Warranties. Each of the representations and warranties made by the Company pursuant to this Agreement (or in any amendment, modification or supplement hereto or thereto) shall, except to the extent that they relate to a particular date, be true
and correct in all material respects on and as of such date as if made on and as of such date. 
  
 6.2 No Default. The Company shall have complied with each and every covenant and agreement applicable to it contained in this Agreement and no Event of Default shall have occurred and be continuing on such date
or after giving effect to the applicable Loan. 
  
 6.3 Other
Documentation. The Lender shall have received such other documentation and information as it may reasonably request. 
  
 ARTICLE 7. 
 AFFIRMATIVE COVENANTS

  
 The Company hereby agrees that, from and after the date
hereof and so long as any Loan remains outstanding, and thereafter until payment in full of the Loan Amount (or until all Loans are converted into shares of Conversion Stock and the commitment of the Lender to make future loans has been terminated),
the Company shall: 
  
 7.1 Conduct of Business; Maintenance of
Existence; Compliance with Laws. Continue to engage in business of the same general type as conducted by the Company on the 
  

 10 

 Closing Date, and preserve, renew and keep in full force and effect its corporate existence and take all reasonable
action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of the business of the Company. The Company shall do or cause to be done all things necessary to ensure compliance by the Company in all material
respects with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, any Governmental Authority (including those with jurisdiction over matters pertaining to the environment and hazardous materials).

  
 7.2 Taxes. Timely pay all taxes except taxes being
contested in good faith by appropriate proceedings (which shall be reserved against on the Company’s books and records); provided that it shall pay any contested taxes upon commencement of proceedings to foreclose upon any property of the
Company to pay such taxes. 
  
 7.3 Maintenance of Properties
and Books and Records. (a) Maintain, preserve, protect and keep its material properties in good repair, working order and condition (ordinary wear and tear excepted), and make reasonable, necessary and proper repairs, renewals and replacements
so that its business carried on in connection therewith may be properly conducted at all times consistent with its past practices, and (b) Maintain a standard system of accounting that enables it timely to produce financial statements in accordance
with GAAP. 
  
 7.4 Maintenance of Insurance. Maintain
insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies of similar size engaged in similar businesses and owning similar properties in the same general
areas in which the Company operates. 
  
 ARTICLE 8.

 EVENTS OF DEFAULT 
  
 8.1 Event of Default. If any of the following events shall occur and be continuing: 
  
 (a) The Company shall fail to pay: (i) any principal of the Loan when due in accordance with the terms hereof or (ii) any
interest on the Loan, in either case within ten (10) Business Days of the date when due in accordance with the terms hereof; or 
  
 (b) The Company shall default in the observance or performance of any other covenant or agreement contained in this Agreement (including, without
limitation, the obligation to issue Conversion Stock when due in accordance with the terms hereof) and such default continues for fifteen (15) days after the date that the Lender has given written notice to the Company specifying such default and
requiring that it be remedied; or 
  
 (c) (i) The Company shall
commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with
respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of
a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the Company shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced

  

 11 

 against the Company any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in
the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged, unstayed or unbonded for a period of 60 days; or (iii) there shall be commenced against the Company any case, proceeding or other
action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for such relief which shall not have been vacated, discharged,
stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) the Company shall take any corporate action in furtherance of, or indicating its consent to, approval of or acquiescence in, any of the acts set forth in clause (i),
(ii), or (iii) above; or (v) the Company shall be generally unable to, or shall admit in writing its general inability to, pay its debts as they become due; or 
  

(d) Any representation or warranty made by the Company under this Agreement shall be false or incorrect in any material respect on the date such
representation or warranty was made; or 
  
 (e) This Agreement or
any Note shall, for any reason, fail or cease to be enforceable in any material respect; 
  
 then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of subsection (c) above with respect to the Company, automatically the Loan hereunder (with accrued interest
thereon) and all other amounts owing under this Agreement or any Note shall immediately become due and payable, (B) if such event is any other Event of Default, the Lender may, by written notice to the Company, declare the then outstanding Loan
Amount hereunder (including accrued but unpaid interest thereon) and all other amounts owing under this Agreement or any Note to be due and payable forthwith, whereupon the same shall immediately become due and payable, without presentment, demand,
protest or further notice of any kind, all of which are expressly waived by the Company, (C) the Lender may exercise all rights and remedies available to it in equity, at law, or pursuant to the provisions of this Agreement or otherwise, (D) the
Lender may terminate its commitment to make any future Loans to the Company (and such commitment automatically shall terminate if such event is an Event of Default specified in clause (i) or (ii) of subsection (c) above with respect to the Company).

  
 8.2 Remedies Not Exclusive. The remedies conferred upon
or reserved to the Lender in this Section 8 are intended to be in addition to, and not in limitation of, any other remedy or remedies available to the Lender. 
  

ARTICLE 9. 
 MISCELLANEOUS

  
 9.1 Indemnification by the Company. The Company
agrees to indemnify, defend and hold harmless the Lender and each of its successors, assigns, heirs, Subsidiaries, Affiliates and all of the officers, directors, employees, partners and agents (including attorneys and accountants) of each of the
aforementioned Persons, and each of them, from and against any and all losses, claims, damages, liabilities, reasonable expenses, costs of collection or foreclosure, workout or restructuring expenses, reasonable attorneys’ fees and
disbursements, demands, causes of action, suits, debts, obligations, rights, promises, acts, agreements and damages of any 
  

 12 

 kind or nature whatsoever, whether at law or in equity, whether known or unknown, foreseen or unforeseen, heretofore or
hereafter arising out of, relating to, or connected with the failure of any representation or warranty made by the Company herein or in any other documents or agreements contemplated hereby to be true in all material respects or the failure of the
Company to comply in all material respects with the covenants and agreements contained in this Agreement or in any other documents or agreements contemplated hereby (but excluding (i) any such losses, claims, damages, liabilities, expenses, demands,
causes of action, suits, debts, obligations, rights, promises, acts, agreements and damages of the Lender to the extent incurred by reason of the gross negligence or willful misconduct of the Lender or (ii) litigation solely between the Company, on
the one hand, and the Lender, on the other hand, in connection with this Agreement, any Note or in any way relating to the transactions contemplated hereby or thereby if, after final non-appealable judgment, the Lender is not the prevailing party or
parties in such litigation). The agreements in this subsection shall survive the termination of this Agreement. 
  
 9.2 Indemnification by Lender with Respect to Registration Matters. In connection with any registration statement in which the Lender is
participating pursuant to Section 3.2(d) hereof, the Lender shall, to the extent permitted by law, indemnify the Company, its officers, directors, employees, agents and representatives and each Person who controls the Company (within the meaning of
the Securities Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of material fact contained in the registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto resulting from such information provided by Lender or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading and not provided by
Lender; provided that the obligation to indemnify shall be be limited to the net amount of proceeds received by Lender from the sale of Registrable Securities pursuant to such registration statement. 
  
 9.3 Subordination Agreement. Lender and the Company hereby agree for
the benefit of the holders of any Indebtedness of the Company outstanding as of the date hereof (including Gold Bank) which by its terms is senior to the Loan (“Senior Indebtedness”) that, notwithstanding any provision of hereof or
of any Noteto the contrary, the payment and performance of the Loan is and shall be expressly subordinated and junior in right of payment to the prior indefeasible payment in cash in full of all Senior Indebtedness, whether now existing or hereafter
arising, and is hereby subordinated as a claim against the Company or any of the assets of the Company, whether such claim be in the event of any distribution of the assets of the Company upon any reorganization or composition or bankruptcy,
insolvency, receivership or other statutory or common law proceedings or arrangements involving the Company or the readjustment of its liabilities or any assignment for the benefit of creditors or any marshaling of its assets or liabilities or any
general failure of the Company to pay its debts as they become due. 
  
 9.4 Amendments. This Agreement and any terms hereof may not be amended, supplemented or modified except pursuant to a writing signed by both the Lender and the Company. 
  
 9.5 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in
writing (including by facsimile transmission), and, unless 
  

 13 

 otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered: (a) by hand, upon
receipt or (b) three (3) days after being deposited in the mail, postage prepaid, or (c) in the case of a facsimile transmission notice, when received (with confirmation of receipt), or (d) in the case of delivery by a nationally recognized
overnight courier, when received, in each case addressed to such addresses or fax number as may be hereafter notified by the respective parties hereto. 
  
 9.6 Successors and Assigns. The Company may not assign its rights or obligations under this Agreement or the Note without the consent of the
Lender. This Agreement shall be binding upon and inure to the benefit of the Company and the Lender and their respective successors and permitted assigns. 
  
 9.7 Further Assurances. Each party hereto, at the reasonable request of the other party hereto, shall execute and deliver such other instruments
and do and perform such other acts and things as may be necessary or desirable for effecting completely the consummation of this Agreement and the transactions contemplated hereby. 
  
 9.8 Captions. The captions of the Sections and Articles of this Agreement have been inserted for convenience only and
shall have no substantive effect. 
  
 9.9 Counterparts.
This Agreement may be executed in any number of counterparts (including by facsimile), each of which when so executed shall be deemed to be an original and all of which counterparts together shall constitute one and the same instrument. 

 
 9.10 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability
in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 
  
 9.11 Waiver of Jury Trial. To the extent not prohibited by applicable law which cannot be waived, each of the Company and the Lender hereby waives,
and covenants that it will not assert (whether as plaintiff, defendant or otherwise), any right to trial by jury in any forum in respect of any issue, claim, demand, action, or cause of action arising out of or based upon this Agreement, the subject
matter hereof, any note or the subject matter thereof, in each case whether now existing or hereafter arising and whether in contract or tort or otherwise. Each of the Company and the Lender acknowledge that it has been informed by the other parties
hereto that the provisions of this section constitute a material inducement upon which such other parties have relied, are relying and will rely in entering into this Agreement. Any party may file an original counterpart or a copy of this section
with any court as written evidence of the consent of the Company and the Lender to the waiver of its rights to trial by jury. 
  
 9.12 Governing Law. This Agreement and any note and the rights and obligations of the parties under this Agreement and any Note shall be governed
by, and construed and interpreted in accordance with, the internal laws of the State of New Jersey without regard to any conflicts of law provisions thereof. 
  

 14 

 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and
delivered on their behalf as of the date first above written. 
  

			
	LENDER:
	
	HOPKINS CAPITAL GROUP II, LLC
		
	 By:
	 	 /s/ Francis E. O’Donnell, Jr.

	 	 	 Name: Francis E. O’Donnell, Jr.

	 	 	 Title: Manager

	
	COMPANY:
	
	BIODELIVERY SCIENCES INTERNATIONAL, INC.
		
	 By:
	 	 /s/ James A. McNulty

	 	 	 Name: James A. McNulty

	 	 	 Title: Secretary, Treasurer and Chief Financial Officer

  
 [Signature Page
to Facility Loan Agreement] 
  

 15 

 EXHIBIT A 
  

FORM OF CONVERTIBLE NOTE 
  
 THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. 
  
 BIODELIVERY SCIENCES INTERNATIONAL, INC. 
  

			
	 $                    
	 	            , 200    

  
 BIODELIVERY
SCIENCES INTERNATIONAL, INC., a Delaware corporation (the “Company”), for value received, hereby promises to pay to the order of Hopkins Capital Group II, LLC (the “Lender”), the aggregate principal amount of
                    
($                    ) (the “Principal Amount”), together with accrued and unpaid interest on the Principal Amount, on March
31, 2006 (the “Maturity Date”), in such coin or currency of the United States of America as at the time of payment shall be legal tender therein for the payment of public and private debts. Capitalized terms used herein and not
otherwise defined shall have the meanings given to such terms in that certain Facility Loan Agreement, dated as of August 2, 2004, between the Company and the Lender (the “Loan Agreement”). 
  
 The obligations of the Company evidenced by this Note are mandatorily
repayable to the extent, in the manner, and on the dates provided for in the Loan Agreement, and this Note may be optionally convertible into the shares of Conversion Stock as set forth in and pursuant to the terms and conditions provided for in the
Loan Agreement. The Principal Amount, together with accrued and unpaid interest on the Principal Amount, may be prepaid by the Company at any time without penalty. 
  
 This Note shall accrue interest at a rate per annum equal to the Prime Rate with respect to the outstanding unpaid Principal
Amount plus any accrued but unpaid interest thereon compounding annually (the “Interest”) until the Principal Amount and such interest is paid in full. Such Interest shall accrue and be paid, together with all outstanding Principal
Amount, as provided in the Loan Agreement. Interest shall be calculated on the basis of a 365-day year and the actual number of days elapsed. 
  
 The Company hereby waives presentment, demand, protest, notice of dishonor, diligence and all other notices, any release or discharge arising from any
extension of time, discharge of a prior party, release of any or all of any security given from time to time for this Note, or other cause of release or discharge other than actual payment in full hereof. 
  
 Lender may, but is not obligated to, enter the amount of each Loan and the
amount of each payment or prepayment of principal or interest thereon on the appropriate spaces on the last page of this Note; provided, however, that the failure of the Lender to set forth such Loan, principal payments or other information shall
not in any manner affect the obligations of the Company to repay such Loan. 
  

 A-1 

 Lender shall not be deemed, by any act or omission, to have waived any of its rights or remedies
hereunder unless such waiver is in writing and signed by Lender and then only to the extent specifically set forth in such writing. A waiver with reference to one event shall not be construed as continuing or as a bar to or waiver of any right or
remedy as to a subsequent event. No delay or omission of Lender to exercise any right, whether before or after a default hereunder, shall impair any such right or shall be construed to be a waiver of any right or default, and the acceptance at any
time by Lender of any past-due amount shall not be deemed to be a waiver of the right to require prompt payment when due of any other amounts then or thereafter due and payable. 
  
 Upon any default hereunder, Lender may exercise all rights and remedies provided for herein and by law or equity, including,
but not limited to, the right to immediate payment in full of this Note. 
  
 The remedies of Lender as provided herein, or any one or more of them, or in law or in equity, shall be cumulative and concurrent, and may be pursued singularly, successively or together at Lender’s sole
discretion, and may be exercised as often as occasion therefor shall occur. 
  
 It is expressly agreed that if this Note is referred to an attorney or if suit is brought to collect or interpret this Note or any part hereof or to enforce or protect any rights conferred upon Lender by this Note or
any other document evidencing or securing this Note, then the Company promises and agrees to pay all costs, including attorneys’ fees, incurred by Lender unless, if after the non-appealable final judgement, the Lender is not the prevailing
party or parties in such litigation. 
  
 This Note shall be
governed by and construed and interpreted in accordance with, the internal laws of the State of New Jersey without regard for any conflicts of laws provisions thereof. 
  
 This is Note referred to in the Loan Agreement and is subject to and entitled to the benefits of said Loan Agreement,
including, but not limited to, acceleration and the right in certain circumstances to require that this Note be prepaid prior to the Maturity Date. 
  
 IN WITNESS WHEREOF, the Company has duly executed and delivered this Note as of the date first written above. 
  

			
	BIODELIVERY SCIENCES INTERNATIONAL, INC.
		
	 By:
	 	  

	 	 	 Name:

	 	 	 Title:

  

 A-2

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