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                                                                    EXHIBIT 10.3

                               LICENSE AGREEMENT
                                    BETWEEN
                             ALBANY MEDICAL COLLEGE
               UNIVERSITY OF MEDICINE AND DENTISTRY OF NEW JERSEY
                                      AND
                           BIODELIVERY SCIENCES, INC.
                                  DATED AS OF
                               SEPTEMBER 26, 1995

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                               LICENSE AGREEMENT

         This LICENSE AGREEMENT (this "Agreement") effective as of
_____________________, 1995, by and among ALBANY MEDICAL COLLEGE, having its
principal place of business at 47 New Scotland Avenue, Albany, New York 12208
and the UNIVERSITY OF MEDICINE AND DENTISTRY OF NEW JERSEY, ("UMDNJ") having its
principal place of business at 65 Bergen Street, Newark, NJ 07107-3001
(hereinafter collectively "UNIVERSITIES") and BIODELIVERY SCIENCES, INC., a
Delaware corporation having its principal place of business at 42 Buckman Drive,
Lexington, Massachusetts 02173 (hereinafter "BDS").

                             PRELIMINARY STATEMENTS

         1.       UNIVERSITIES have exclusive rights to certain technology
relating to cochleates, liposomes and proteoliposomes which have been developed
at UNIVERSITIES by the Inventors.

         2.       BDS recognizes that the technology represents a valuable
source for development of processes relating to the preparation of chemicals and
biologicals for manufacture, use and/or sale in the Territory.

         3.       UNIVERSITIES and BDS are entering into this Agreement to
provide for UNIVERSITIES to grant a license, and BDS to obtain a license, for
the manufacture, use and/or sale of processes and products developed based on
such technology in the Territory.

         4.       BDS and UMDNJ are considering entering into a Research
Agreement to provide for BDS to sponsor research at UMDNJ, and for UMDNJ, acting
through its Investigators, to conduct further research and development of such
technology at UMDNJ.

         NOW, THEREFORE, in consideration of the various promises and
undertakings set forth herein, the Parties agree as follows:

ARTICLE 1 - DEFINITIONS

         As used herein, capitalized terms shall have the following meanings:

         1.1      "Affiliate", with respect to any Party, shall mean any person
or entity controlling, controlled by, or under common control with such Party.
For these purposes, "control" shall refer to (i) the possession, directly or
indirectly, of the power to direct the management or policies of a person or
entity, whether through the ownership of voting securities, by contract or
otherwise or (ii) the ownership, directly or indirectly, of at least 50% of the
voting securities or other ownership interest of a person or entity.

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         1.2      "BDS Research Program" shall mean any research and development
conducted by or on behalf of BDS pursuant to a Research Agreement which relates
to the Licensed Technology in the Field.

         1.3      "Commercial Sale" shall mean (i) any sale which transfers to a
purchaser physical possession and title to any Components, or (ii) any use,
lease or sale of any Process, in any country in the Territory by BDS or an
Affiliate or sublicensee of BDS after all required marketing and pricing
approval has been granted by the governing health authority of such country.

         1.4      "Component" shall mean any component product used in the
Field, the manufacture, use or sale of which is: (i) based upon, derived from,
identified through or related to any Licensed Technology; and (ii) covered by
one or more Licensed Patents and would infringe a Valid Claim thereof.

         1.5      "Effective Date of this Agreement" shall mean the date first
written above.

         1.6      "Field" shall mean cochleates, liposomes and proteoliposomes
for all living systems, including human, animal, plant, microbial, life science,
health care, nutrition and cosmetics applications of the Licensed Technology.

         1.7      "First Commercial Sale" shall mean the first Commercial Sale
of a Product in any country in the Territory.

         1.8      "Invention" shall mean any new or useful process, manufacture,
compound or composition of matter, patentable or unpatentable, or any
improvement thereof, conceived or first reduced to practice, or demonstrated to
have utility during the conduct of, any Sponsored Research Program or any BDS
Research Program with UNIVERSITIES.

         1.9      "Inventors" shall mean the inventors named on UNIVERSITIES'
current United States and foreign patents and patent applications as set forth
in Exhibit A.

         1.10     "Investigator(s)" shall mean initially Dr. Raphael Mannino and
Dr. Susan Gould-Fogerite, so long as they are associated with UMDNJ, and any
other University Personnel who become involved in any Sponsored Research
Programs or who otherwise agree to become involved in the collaboration between
BDS and UMDNJ pursuant to the proposed Research Agreement or any other
agreements between BDS and UMDNJ.

         1.11     "Joint Invention" shall mean any Invention for which it is
determined, in accordance with applicable law, that both: (i) employees or
agents of BDS or any other persons obligated to assign such Invention to BDS,
and (ii) employees

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or agents of UMDNJ or any other persons obliged to assign such Invention to
UMDNJ, are joint inventors of such Invention.

         1.12     "Licensed Patents" shall mean any current and future patent or
patent application, owned or controlled by UNIVERSITIES by way of transfer of
rights from any Investigator or Inventor, or any of the same jointly owned or
controlled by BDS and UNIVERSITIES by way of transfer of rights from any
Investigator or Inventor embodying the Licensed Technology in the Field
throughout the Territory, including any substitutions, extensions, renewals,
continuations, continuations-in-part, divisions, patents-of-additions, and/or
reissues thereof, and any current and future patent or patent application, or
portion thereof, which is a foreign counterpart in any country in the Territory
to any of the foregoing, including any substitutions, extensions, renewals,
continuations, continuations-in-part, divisions, patents-of-additions, and/or
reissues thereof. UNIVERSITIES' current U.S. and foreign patents and patent
applications which relate to the Licensed Technology and which exist on the
Effective Date of this Agreement are set forth on Exhibit A.

         1.13     "Licensed Technology" shall mean any and all information, and
all patentable and non-patentable inventions (including, without limitation, all
Inventions and Joint Inventions), improvements, discoveries, claims, formulae,
processes, methods, trade secrets, technologies, data and know how owned or
controlled by UNIVERSITIES by way of transfer of rights from any Investigator or
Inventor or to which UNIVERSITIES have the right to grant licenses or
sublicenses by way of transfer of rights from any Investigator or Inventor
before or during the term of this Agreement and: (i) derived from research
projects conducted at UMDNJ by any of the Inventors or any of UMDNJ's
Investigators with respect to the cochleate, liposome and proteoliposome
technology described in Exhibit B, provided that, with respect to research
conducted after the Effective Date of this Agreement, excluding any research
conducted using third party funding, or (ii) claimed, covered or disclosed in
any patent or patent application listed in Exhibit A which relates to the
cochleate, liposome and proteoliposome technology described in Exhibit B, or
(iii) derived from any Sponsored Research Program or any BDS Research Program.

         1.14     "Net Sales" shall mean the gross amount invoiced for all
Products used, leased or sold by BDS and/or its Affiliates in arm's length sales
to unrelated third parties (excluding sales to sublicensees for their resale),
less deductions for:

                  (a)      commissions, trade, quantity and cash discounts or
rebates actually allowed or given;

                  (b)      credits, allowances or refunds given or made for
rejected, outdated or returned Components, if applicable;

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                  (c)      any tax or government charge (other than an income
tax) levied on the sale, transportation or delivery of a Product and borne by
the seller thereof;

                  (d)      any prepaid or invoiced charges for freight, postage,
shipping, import or export taxes, insurance or charges for returnable
containers;

                  (e)      in those cases when the cost to BDS of manufacturing
or supplying a Component is at least as great as the fair market value thereof,
BDS's fully-allocated cost for the manufacture or supply of the Component; and

                  (f)      in those cases when the cost to BDS of operating,
financing or servicing a healthcare center which uses a Process are at least as
great as the fair market value of the Process, BDS's fully-allocated cost of
operating, financing or servicing the healthcare center.

         1.15     "Party" shall mean UNIVERSITIES or BDS and, when used in the
plural, shall mean UNIVERSITIES and BDS.

         1.16     "Post-Commercialization Income" shall mean the gross revenues
received by BDS and/or its Affiliates from any sublicensee, after the First
Commercial Sale of a Product by such sublicensee, for all Products used, leased
or sold by such sublicensee in arm's length sales to unrelated third parties,
excluding, however, in the case of a Component, any portion thereof that is
attributable to BDS's fully-allocated cost for the manufacture or supply of such
Component to such sublicensee.

         1.17     "Process" shall mean any process or method in the Field, the
use or sale of which is (i) based upon, derived from, identified through or
related to any Licensed Technology; and (ii) covered by one or more Licensed
Patents and would infringe a Valid Claim thereof.

         1.18     "Product" shall mean any Component or any Process.

         1.19     "Publication" means any written or oral publication or
disclosure resulting from or involving the Licensed Technology or the subject
matter of any Sponsored Research Program or BDS Research Program, and includes
but is not limited to a publication or disclosure in books, journals, theses,
the media, trade publications, scientific meetings, poster sessions, and
symposia.

         1.20     "Research Agreement" shall mean that certain possible research
collaboration and funding agreement between UMDNJ and BDS whereby BDS sponsors
UMDNJ, acting through its Investigators, to conduct further research and
development of the Licensed Technology.

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         1.21     "Sponsored Research Program" shall mean any research conducted
by UMDNJ, acting through the laboratories of any Investigator(s), in
collaboration with BDS pursuant to the Research Agreement.

         1.22     "Sublicense Income" shall mean all consideration received from
sublicensees of BDS with respect to the Licensed Patents or the Licensed
Technology prior to the First Commercial Sale of a Product by such sublicensee
excluding (a) payments made by a sublicensee in consideration of equity or debt
securities of BDS, (b) payments made by a sublicensee to support specific
research activities designated by the sublicensee to be undertaken by BDS, and
(c) payments made upon the achievement by BDS or the sublicensee of specified
milestones or benchmarks relating to the development of Licensed Patents or
Licensed Technology sublicensed to the sublicensee except if such achievement
payments are in consideration for the grant or exercise of a sublicense under
the Licensed Technology or Licensed Patents.

         1.23     "Territory" shall mean the entire world.

         1.24     "University Personnel" means any UMDNJ employee, student or
consultant who participates in any Sponsored Research Program or any BDS
Research Program in any manner or who acquires knowledge of any test data,
clinical information or any other information resulting from any Sponsored
Research Program or any BDS Research Program which is deemed a trade secret or
confidential or proprietary to BDS or UMDNJ, such as any professor, technician,
any associate or student (including a pre-or post-doctoral student), any
independent contractor (including any consultant under an obligation of
confidentiality), or any research collaborator.

         1.25     "Valid Claim" shall mean a claim of any issued or granted
Licensed Patent which has not been held invalid or unenforceable by final
decision of a court or other governmental agency of competent jurisdiction,
unappealable or unappealed within the time allowed for appeal, and which is not
admitted to be invalid or unenforceable through reissue, disclaimer or
otherwise.

ARTICLE 2 - REPRESENTATIONS AND WARRANTIES

         2.1      Representations and Warranties of Both Parties. Each Party
represents and warrants to the other Party that: (i) it is free to enter into
this Agreement; (ii) in so doing, it will not violate any other agreement to
which it is a party; and (iii) it has taken all corporate action necessary to
authorize the execution and delivery of this Agreement and the performance of
its obligations under this Agreement.

         2.2      Representations and Warranties of UNIVERSITIES. UNIVERSITIES
hereby represent and warrant that:

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                  (a)      They are the owners of all of the Licensed Patents
listed on Exhibit A, and have the exclusive right to grant licenses therefor,
except as provided in Section 2.3;

                  (b)      They are the owners of, or are the licensees of, all
of the Licensed Technology in existence on the date of this Agreement, and have
the right to grant licenses or sublicenses therefor;

                  (c)      To the best of their knowledge, all the Licensed
Patents listed on Exhibit A are in full force and effect and have been
maintained to date;

                  (d)      They are not aware of any asserted or unasserted
claim or demand against the Licensed Patents listed on Exhibit A;

                  (e)      To the best of their knowledge, none of the Licensed
Patents listed on Exhibit A infringe upon any patent or other proprietary rights
of any other third party; and

                  (f)      They have not entered into any agreement with any
third party which is in conflict with the rights granted to BDS pursuant to this
Agreement.

         2.3      Representation and Covenant Regarding U.S. Government Funding.
The Parties acknowledge that the receipt of United States government funding by
UNIVERSITIES with respect to the Licensed Technology would require certain
rights to be granted to the United States Government pursuant to 35 U.S.C.
Sections 200-212 which may be inconsistent with BDS's plans for commercial
development of Products. Therefore, UNIVERSITIES represent and warrant to BDS
that none of the research conducted by or on behalf of UNIVERSITIES relating to
the Licensed Technology was funded by the United States government unless
UNIVERSITIES either: (i) have obtained a waiver from the United States
government relating to the United States government's rights with respect to the
Licensed Technology, or (ii) have institutional agreements with the United
States government which allow UNIVERSITIES to grant the rights provided under
this Agreement to BDS; copies of the foregoing waivers or institutional
agreements will be provided to BDS upon its request; and UMDNJ covenants and
agrees that no further research conducted by or on behalf of UMDNJ will be
funded by the United States government in the future, unless either of the
foregoing conditions are satisfied or BDS gives prior written approval.

         2.4      Disclaimer of Other Warranties. EXCEPT AS EXPRESSLY PROVIDED
IN SECTIONS 2.2 AND 2.3, NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS A
REPRESENTATION MADE, OR WARRANTY GIVEN, BY UNIVERSITIES THAT ANY PATENT WILL
ISSUE BASED UPON ANY PENDING PATENT APPLICATION, THAT ANY PATENT WHICH ISSUES
WILL

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BE VALID, OR THAT THE RESULTS OF ANY SPONSORED RESEARCH PROGRAM OR THE PRODUCTS
WILL NOT INFRINGE THE PATENT OR PROPRIETARY RIGHTS OF ANY THIRD PARTY.
FURTHERMORE, UNIVERSITIES MAKE NO OTHER REPRESENTATIONS OR WARRANTIES, EXPRESS
OR IMPLIED, WITH RESPECT TO THE LICENSED TECHNOLOGY, THE LICENSED PATENTS, THE
RESULTS OF ANY SPONSORED RESEARCH PROGRAM OR THE PRODUCTS, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
UNIVERSITIES SHALL NOT BE LIABLE FOR ANY DIRECT, CONSEQUENTIAL, PUNITIVE OR
OTHER DAMAGES SUFFERED BY BDS OR ANY OTHER PERSON RESULTING FROM THE USE OF ANY
PRODUCT.

ARTICLE 3 - LICENSE GRANT

         3.1      Grant of License. Subject to the terms and conditions of this
Agreement, UNIVERSITIES hereby grant to BDS, without the need for any further
action, an exclusive license throughout the Territory, with the right to grant
sublicenses (subject to Section 3.6), to manufacture, use and sell Products in
the Field, under the Licensed Technology and Licensed Patents.

         3.2      Reservation of Rights. The license granted in Section 3.1 is
exclusive to BDS, except that UNIVERSITIES reserve the right to use and permit
the use of the Licensed Technology and the Licensed Patents by non-profit
organizations for research purposes, without cost to BDS and subject to the
confidentiality provisions of this Agreement, solely for educational and
research purposes on a non-commercial basis.

         3.3      BDS's Development Efforts. BDS shall use commercial due
diligence to develop and commercialize Products based on the rights and license
granted under this Agreement. BDS shall have the right, in its sole discretion,
to develop and commercialize Products itself, or through sublicensees, strategic
partners or joint ventures, as it deems appropriate, so long as commercial due
diligence is used for such development and commercialization. For purposes of
this Agreement, "commercial due diligence" shall mean that BDS is using
reasonable commercial efforts to achieve commercialization of Products. In
connection with the exercise of commercial due diligence, BDS shall be available
on an annual basis to meet with UNIVERSITIES to describe and discuss the status
of BDSI commercial due diligence.

         3.4      Failure to Use Due-Diligence. In the event that BDS shall fail
to use commercial due diligence for any Product in any country in the Territory
in which Licensed Patents exist for sixty (60) days following notice to such
effect by UNIVERSITIES as required in Section 10.7, and such Licensed Patent for
such Product in such country was obtained at the request of BDS pursuant to
Section 6.1, UNIVERSITIES may convert BDS's license for such Product in such
country to a non-exclusive license.

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         3.5      Failure to Raise Funding. In the event that BDS, in a period
of eighteen (18) months following the effective date of this Agreement, should
fail to raise a funding commitment of at least One Million United States Dollars
($1,000,000), UNIVERSITIES may terminate BDS' license.

         3.6      Right to Grant Sublicenses. The right of BDS to grant
sublicenses may not be exercised unless the sublicensee provides funding to BDS
and the proceeds are used by BDS for BDS and not for items such as stockholder
dividends. This Section 3.6 shall remain in effect until the requirements of
Section 3.5 have been satisfied by BDS.

ARTICLE 4 - ROYALTY AND OTHER PAYMENTS

         4.1      As partial consideration to UNIVERSITIES for the licenses and
other rights granted to BDS under this Agreement, BDS shall issue to each
UNIVERSITY two percent (2%) of the outstanding common shares of BDS as of this
date. The number of shares of stock which shall be issued hereunder to each
UNIVERSITY is seventy three (73). Attached is a copy of BDS's Certificate of
Incorporation and By-Laws. BDS shall issue to UNIVERSITIES additional shares of
common stock at such time or times as may be necessary to assure that each
UNIVERSITY's shares of stock in BDS will, without further contribution of
capital by a UNIVERSITY, continue to comprise two percent (2%) of the
outstanding common stock of BDS on a fully diluted basis until the valuation of
BDS exceeds Five Million Dollars ($5,000,000). However, this antidilution right
shall not apply in respect of dilution resulting from options or other
compensatory stock issuances of an aggregate amount not to exceed 15% (post
issuance and fully diluted) of the outstanding shares (or share equivalents) of
BDS common stock. After such anti-dilution protection lapses, UNIVERSITIES shall
possess a preemptive right to maintain their stock ownership percentage by the
purchase of additional equity at the price therefor paid by such outside
investors.

         4.2      UNIVERSITIES hereby represent and warrant that they are
acquiring the shares referred to above for investment and not with a view to the
distribution thereof, and that they are knowledgeable and experienced in
investments of the nature contemplated hereby and are able to assess the risks
and merits thereof.

         4.3      Sublicense Income. (a) In the event that BDS and/or its
Affiliates receive Sublicense Income from any sublicensee, BDS shall pay to
UNIVERSITIES an amount with respect to each sublicense determined as follows:

                           (i) 25% of the first $50,000 of Sublicense Income
from such sublicensee;

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                           (ii)     20% of the Sublicense Income between $50,001
and $150,000 from such sublicensee; and

                           (iii)    15% of any Sublicense Income in excess of
$150,000 from such sublicensee.

                  (b)      Such payments shall be made within sixty (60) days
after receipt by BDS of the applicable Sublicense Income.

         4.4      Running Royalties. As further consideration of the license and
other rights granted to BDS under this Agreement, BDS shall pay to UNIVERSITIES
a royalty, commencing on the First Commercial Sale of a Product by BDS, its
Affiliates or its sublicensees, as follows:

                  (a)      For Commercial Sales made by BDS and its Affiliates,
BDS shall pay to UNIVERSITIES a royalty equal to 3% of Net Sales.

                  (b)      For Commercial Sales made by any sublicensee of BDS
or its Affiliates, BDS shall pay to UNIVERSITIES a royalty equal to 25% of BDS's
Post-Commercialization Income.

                  (c)      For any Product relating solely to Joint Inventions,
and which does not utilize any Licensed Technology other than Joint Inventions,
and which is not covered by a Licensed Patent other than jointly owned Licensed
Patents, the royalty rates set forth in Sections 4.4(a) and 4.4(b) shall be
reduced by 50% with respect to such Product in the Territory.

                  (d)      BDS shall notify UNIVERSITIES if, in its opinion, its
manufacture, use, lease or sale, or that any of its Affiliates or sublicensees,
of any Product in any country in the Territory would infringe a patent belonging
to a third party. If it should prove in UNIVERSITIES' and BDS's reasonable
judgment impractical or impossible for BDS or any of its Affiliates or
sublicensees to make, use, lease or sell any Product without obtaining a royalty
bearing license from such third party under such patent or patents in said
country, then, effective upon obtaining a license from such third party, BDS
shall be entitled to a credit against the payments due hereunder of any amount
equal to the royalty paid to such third party, not to exceed the amount of the
royalty payment due under this Agreement, arising from the manufacture, use,
lease or sale of Products covered by such license in said country.

                  (e)      The royalties required under this Article 4 shall be
payable with respect to each Product only upon the existence of Licensed Patents
covering any such Product.

         4.5      Adverse Economic Conditions. In the event that BDS can
demonstrate to the reasonable satisfaction of UNIVERSITIES that the royalties
due under Section 4.4 do not provide BDS with a reasonable profit margin for the
Products, then the

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Parties shall have, upon BDS's request, good faith discussions regarding a
reduction of the royalty rates paid to UNIVERSITIES by BDS under Section 4.4.

         4.6      Right to Documentation. Upon such a request under Section 4.5,
UNIVERSITIES shall have the right to request reasonable documentation of BDS's
calculations to determine BDS's profit margin for the Products and to request
discussion of such calculations with appropriate representatives of BDS. If
UNIVERSITIES wish to review data and information relevant to BDS's determination
of BDS's profit margin for the Products, BDS shall disclose to UNIVERSITIES such
data and information to a reasonable extent.

         4.7      Effect of No Agreement. In the event that the Parties, despite
good faith discussions, cannot reach an agreement as to a reduction of royalty
rates as provided in Section 4.6, BDS may, in its discretion, either: (i)
terminate its license as to any or all Products, or (ii) retain its exclusive
license to the Products subject to royalties as provided in Section 4.4.

         4.8      Obligation to Pay Royalties. The obligation to pay royalties
to UNIVERSITIES under this ARTICLE 4 is imposed only once with respect to the
same unit of Product regardless of the number of Licensed Patents or Licensed
Technology pertaining thereto. Payments of running royalties due under this
ARTICLE 4 based on Net Sales shall be deemed to accrue when Products are
shipped, provided or billed, whichever event shall first occur. Payments of
running royalties due under this ARTICLE 4 based on Post-Commercialization
Income shall be deemed to accrue when BDS receives such Post Commercialization
Income.

ARTICLE 5 - PAYMENTS AND REPORTS

         5.1      Payment. All running royalty payments due pursuant to Section
4.4 shall be paid quarterly within sixty (60) days after the end of each
calendar quarter. Each such payment shall be accompanied by a statement of the
amount of Net Sales and Post Commercialization Income during such calendar
quarter and the amount of royalties due on such Net Sales and Post
Commercialization Income.

         5.2      Mode of Payment. BDS shall make all payments required under
this Agreement in the United States in United States Dollars. The royalty
payments due shall be translated at the rate of exchange at which United State
Dollars are listed in The Wall Street Journal for the currency of the country in
which the royalty is accrued for the last business day of the calendar quarter
in which such sales were made.

         5.3      Records Retention. BDS and its Affiliates shall keep complete
and accurate records pertaining to the sale of Products in the Territory and
covering all transactions from

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which Net Sales or Post-Commercialization Income are derived for a period of
three (3) calendar years after the year in which such sales occurred, and in
sufficient detail to permit UNIVERSITIES to confirm the accuracy of royalty
calculations hereunder.

         5.4      Audit Request. At the request and expense of UNIVERSITIES,
BDS, its Affiliates and sublicensees shall permit an independent, certified
public accountant appointed by UNIVERSITIES acceptable to BDS or its Affiliates,
at reasonable times and upon reasonable notice, to examine those records and all
other material documents relating to or relevant to Net Sales, Sublicense Income
and Post-Commercialization income in the possession or control of BDS, its
Affiliates or sublicensees, for a period of three (3) years after such royalties
have accrued, as may be necessary to: (i) determine the correctness of any
report or payment made under this Agreement; or (ii) obtain information as to
the royalties payable for any calendar quarter in the case of BDS's or its
Affiliate's failure to report or pay pursuant to this Agreement. Said accountant
shall not disclose to UNIVERSITIES any information other than information
relating to said reports, royalties, and payments. Results of any such
examination shall be made available to both Parties. UNIVERSITIES shall bear the
full cost of the performance of any such audit, unless such audit demonstrates
underpayment of royalties of BDS of more than ten percent (10%) from the amount
of the original royalty payment made by BDS. In such event, BDS shall bear the
full cost of the performance of such audit.

         5.5      Taxes. In the event that BDS or its Affiliates are required to
withhold any tax to the revenue authorities in any country in the Territory
regarding any payment to UNIVERSITIES due to the laws of such country, such
amount shall be deducted by BDS or its Affiliates, and it shall notify
UNIVERSITIES and promptly furnish UNIVERSITIES with copies of any tax
certificate or other documentation evidencing such withholding.

ARTICLE 6 - PATENT PROSECUTION; ENFORCEMENT; INFRINGEMENT

         6.1      Patent Prosecution and Maintenance.

                  (a)      UNIVERSITIES shall continue to have full
responsibility for and shall control the preparation and prosecution of all
patent applications and the maintenance of all patents related to the Licensed
Technology and included in the Licensed Patents, provided that all actions
related thereto requested by BDS, including, without limitation, the filing and
prosecution of foreign patent applications, shall be taken by UNIVERSITIES and
BDS shall be a full participant in the preparation and review of all filings.
UNIVERSITIES agree to take all actions reasonably necessary to diligently
prosecute and maintain any patents or patent applications in the countries which
BDS determines patent applications will be

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filed and prosecuted, and where the patents will be maintained. The Parties
acknowledge and agree that they intend for UNIVERSITIES to file and prosecute
patent applications and maintain patents in all major commercial markets where
viable patent protection is available.

                  (b)      Following BDS's taking of a license and when BDS has
the funding therefor, but in no event later than two (2) years after the date
hereof, BDS shall reimburse UNIVERSITIES for all reasonable fees and expenses
(including, without limitation, legal fees, filing and maintenance fees or other
governmental charges) incurred, whether before or after the date of such
exercise, in connection with the filing and prosecution of such patent
applications and maintenance of such patents, including patent applications and
patents relating to Inventions and Joint Inventions.

                  (c)      UNIVERSITIES shall use qualified independent patent
counsel to file and prosecute all patent applications required pursuant to
Section 6.1(a). BDS or its representatives shall be entitled to meet and confer
with such patent counsel at reasonable times and places. UNIVERSITIES shall
promptly provide copies to BDS of any communications from any patent office
relating to the Licensed Technology or the Licensed Patents, and allow BDS and
its patent counsel the opportunity to attend (either in person or by phone) any
conferences (conducted in person or by phone) to be made with or to any patent
office regarding the Licensed Technology or the Licensed Patents. In addition,
filing deadlines permitting, at least thirty (30) days prior to the filing of
any patent application, amendment thereto, or response to any patent office
action related to the Licensed Technology or the Licensed Patents, UNIVERSITIES
shall provide BDS with a copy of each such patent application, amendment or
response and will provide BDS and its legal counsel with an opportunity to
consult with UNIVERSITIES and its patent counsel regarding the filing and
contents of any such application, amendment or response, and the advice and
suggestions of BDS and its legal counsel shall be seriously taken into
consideration by UNIVERSITIES and its legal counsel in connection with such
filing. UNIVERSITIES shall also provide BDS with copies of any patentability
search reports made by patent counsel, including patents located, a copy of each
patent application, and each patent that issues thereon.

                  (d)      UMDNJ agrees to provide promptly to BDS complete
written disclosure of any Invention made by UMDNJ. BDS and UMDNJ shall mutually
determine whether such Invention is patentable. If the Parties determine that
such Invention is patentable, UMDNJ shall proceed with the preparation and
prosecution of a patent application covering such invention if desired by BDS.

                                     - 12 -
<PAGE>   14

                  (e)      In the event that the Parties elect to file one or
more patent applications comprising Joint Inventions, the Parties shall confer
on how the preparation and prosecution of such applications shall be
accomplished. Once the Parties agree on how to proceed with respect to the
preparation and filing of patent applications comprising Joint Inventions, all
other provisions of this Section 6.1 shall govern such preparation, filing,
maintenance and prosecution.

                  (f)      Both Parties agree to cooperate with the other Party
to execute all lawful papers and instruments, to make all rightful oaths and
declarations and to provide consultation and assistance as may be necessary in
the preparation, prosecution, maintenance, and reinforcement of all such patent
applications and patents.

         6.2      Notification of Infringement. If either Party learns of an
infringement or threatened infringement by a third party of any Licensed Patent
granted hereunder within the Territory, such Party shall promptly notify the
other Party and shall provide such other Party with available evidence of such
infringement. Section 6.3 shall then be applicable.

         6.3      Patent Enforcement. BDS shall have the first right, but not
the duty, to institute patent infringement actions against third parties based
on any Licensed Patent under this Agreement. If BDS does not institute an
infringement proceeding against an offending third party within ninety (90) days
after receipt of notice from UNIVERSITIES, UNIVERSITIES shall have the right,
but not the duty, to institute such an action. The costs and expenses of any
such action (including fees of attorneys and other professionals) shall be borne
by the Party instituting the action, or, if the Parties elect to cooperate in
instituting and maintaining such action, such costs and expenses shall be borne
by the Parties in such proportions as they may agree in writing. Each Party
shall execute all necessary and proper documents and take such actions as shall
be appropriate to allow the other Party to institute and prosecute such
infringement actions. Any award paid by third parties as a result of such an
infringement action (whether by way of settlement or otherwise) shall be paid to
the Party who instituted and maintained such action, or, if both Parties
instituted and maintained such action, such award shall be allocated among the
Parties in proportion to their respective contributions to the costs and
expenses incurred in such action.

         6.4      Infringement Action by Third Parties.

                  (a)      In the event of the institution of any claim or suit
by a third party against BDS for patent infringement involving the manufacture,
use, lease or sale of any Product in the Territory and not due to actions,
omissions or modifications of BDS or its sublicenses, BDS shall promptly

                                     - 13 -
<PAGE>   15

notify UNIVERSITIES in writing of such suit. BDS shall have the right to defend
such claim or suit at its own expense, and UNIVERSITIES hereby agree to assist
and cooperate with BDS, at their own expense, to the extent necessary in the
defense of such suit. During the pendency of such claim or action, BDS shall
continue to make all payments due under this Agreement, but shall have a credit
against royalties otherwise payable hereunder in an amount no greater than fifty
percent (50%) of the amount of such royalties otherwise payable hereunder as a
result of out-of-pocket costs and expenses incurred by BDS in defending against
such claim or suit.

                  (b)      If as a result of any judgment, award, decree or
settlement resulting from a claim or action instituted by a third party, BDS is
required to pay a royalty or other amounts to such third party, BDS shall
continue to pay running royalties for such Products in the country which is the
subject of such action, but shall be entitled to a credit against such payments
in an amount equal to the royalty paid to such third party, but in no event
shall such credit be more than the royalties due hereunder for such Products in
such country which is the subject of such action in any calendar quarter. In
addition, if BDS is required to pay damages to such third party, and such
damages are not otherwise reimbursed by UNIVERSITIES, BDS shall be entitled to a
credit against such payments in an amount equal to such damages, to the extent
effectively paid by BDS to such third party, but in no event shall the total
credit provided hereunder be more than such royalties due hereunder for such
Products in such country which is the subject of such action in any calendar
quarter.

         ARTICLE 7 - PUBLICATION; CONFIDENTIALITY

         7.1      Notification. BDS acknowledges that the basic objective of
research activities at UMDNJ is the generation of knowledge and its expeditious
dissemination. However, both Parties also recognize the importance of acquiring
patent protection on Inventions. Consequently, any proposed Publication by
University Personnel shall comply with this Article 7. At least fifteen (15)
days before a proposed Publication is to be submitted to a third party,
University Personnel shall provide BDS with a copy thereof. If University
Personnel wish to make an oral presentation involving confidential proprietary
information not yet submitted for patent application, they will provide BDS with
a copy of the abstract (if one is submitted) at least fifteen (15) days before
it is to be submitted. University Personnel will also provide to BDS a copy of
the text, if any, of the presentation, including all slides, posters, and any
other visual aids, at least fifteen (15) days before the presentation is made.

         7.2      Review of Proposed Publications. BDS will review the proposed
Publication, manuscript abstract, text or any other material provided under
Section 7.1 to determine if patentable

                                     - 14 -
<PAGE>   16

subject matter is disclosed. BDS will notify University Personnel within fifteen
(15) days of receipt of the proposed Publication or other material if BDS, in
its sole discretion, determines that patentable subject matter is or may be
disclosed, or if BDS, in its sole discretion, believes confidential or
proprietary information is or may be disclosed. If it is determined by BDS that
patent applications should be filed, the University Personnel shall delay their
publication or presentation for a period not to exceed ninety (90) days from
BDS's receipt of the proposed Publication or other material to allow time for
the filing of patent applications covering patentable subject matter. In the
event that the delay needed to complete the filing of any necessary patent
application will exceed the ninety (90) day period, UMDNJ and University
Personnel will discuss with BDS the need for obtaining an extension of the
publication delay beyond the ninety (90) day period. The publication delay shall
not exceed one hundred five (105) days from the date that the proposed
Publication or other material was first submitted to BDS for review, except
that, by mutual agreement, as provided in this Section, this delay may be
extended past the one hundred five (105) day period for purposes of filing
patent applications. If it is determined by BDS and UMDNJ that confidential or
proprietary information is being disclosed, BDS, UMDNJ and University Personnel
will consult among themselves in good faith to arrive at an agreement on
mutually acceptable modifications to the proposed Publication to avoid such
disclosure.

         7.3      Use of Name. UNIVERSITIES agree not to use directly or
indirectly BDS's name without BDS's prior written consent except that UMDNJ may
acknowledge BDS's funding of any sponsored Research Programs in scientific
publications and in listings of Sponsored Research Programs. BDS agrees not to
use directly or indirectly UNIVERSITIES' names, the name of any Investigator or
University Personnel, or the name of any trustee, officer faculty member,
student or employee thereof, without UMDNJ's prior written consent, except that
BDS may refer to any University Personnel who is serving as a member of BDS's
Scientific Advisory Board or as a consultant to BDS and include a statement of
his experience and qualifications and his current and past positions at UMDNJ.
Notwithstanding the foregoing, BDS and UNIVERSITIES may include an accurate
description of the terms of this Agreement to the extent required under federal
or state securities or other disclosure laws and internal communications; and
BDS may use UNIVERSITIES' names in various documents used by BDS for capital
raising and financing purposes.

         7.4      Confidentiality; Exceptions. Except to the extent expressly
authorized by this Agreement or otherwise agreed in writing, the Parties agree
that, for the term of this Agreement and for three (3) years thereafter, the
receiving Party shall keep completely confidential and shall not publish or
otherwise

                                     - 15 -
<PAGE>   17

disclose and shall not use for any purpose other than proper performance
hereunder any information furnished to it by the other Party pursuant to this
Agreement, except to the extent that it can be established by the receiving
Party by competent proof that such information:

                  (a)      was already known to the receiving Party, other than
under an obligation of confidentiality, at the time of disclosure by the other
Party;

                  (b)      was generally available to the public or otherwise
part of the public domain at the time of its disclosure to the receiving Party;

                  (c)      became generally available to the public or otherwise
part of the public domain after its disclosure and other than through any act or
omission of the receiving Party in breach of this Agreement;

                  (d)      was disclosed to the receiving Party, other than
under an obligation of confidentiality, by a third party who had no obligation
to the disclosing Party not to disclose such information to others; or

                  (e)      was independently developed by or for the receiving
Party by persons not having access to such information, as determined by the
written records of such party.

         Each Party may disclose the other's information to the extent such
disclosure is reasonably necessary in filing or prosecuting patent applications,
prosecuting or defending litigation, complying with applicable governmental
regulations, undertaking basic research with outside collaborators, or
conducting preclinical or clinical trials provided that if a Party is required
to make any such disclosure of the other Party's secret or confidential
information it will, except where impracticable for necessary disclosures, for
example to physicians conducting studies or to health authorities, give
reasonable advance notice to the other Party of such disclosure requirement and,
except to the extent inappropriate in the case of patent applications, will use
its best efforts to secure confidential treatment of such information required
to be disclosed.

         ARTICLE 8 - INDEMNIFICATION

         8.1      Indemnification. BDS shall defend, indemnify and hold
UNIVERSITIES, their directors, trustees, faculty members, officers and
employees, harmless from and against any and all third party claims, suits or
demands, threatened or filed, ("Claims") for liability, damages, losses, costs
and expenses (including the costs and expenses of attorneys and other
professionals), at both trial and appellate levels, relating to the
distribution, testing, manufacture, use, lease, sale,

                                     - 16 -
<PAGE>   18

consumption on or application of Products by BDS, its Affiliates or its
sublicensees pursuant to this Agreement, including, without limitation, claims
for any loss, damage, or injury to persons or property, or loss of life,
relating to the promotion and advertising of Products and/or interactions and
communications with governmental authorities, physicians or other third parties.
The foregoing indemnification shall not apply to any Claims caused solely by the
negligence of UNIVERSITIES or any University Personnel.

         8.2      Notice. In the event that UNIVERSITIES seek indemnification
under Section 8.1, UNIVERSITIES agree to (i) promptly inform BDS of any Claim,
(ii) permit BDS to assume direction and control of the defense or claims
resulting therefrom (including the right to settle it at the sole discretion of
BDS), and (iii) cooperate as reasonably requested (at the expense of BDS) in the
defense of the Claim. Notwithstanding the foregoing, UNIVERSITIES shall have the
right to participate in the defense or prosecution of any Claim, including
hiring their own counsel at their own expense, and BDS shall cooperate with
UNIVERSITIES if UNIVERSITIES do so participate.

         8.3      Insurance

                  (a)      Prior to the first human clinical trials of a Product
under this Agreement, BDS shall obtain and maintain broad form comprehensive
general liability insurance and products liability insurance with a reputable
and financially secure insurance carrier, to cover such activities of BDS and
BDS's contractual indemnity under this Agreement. Such insurance shall provide
minimum annual limits of liability of $1,000,000.00 per occurrence and
$3,000,000 in the aggregate with respect to all occurrences being indemnified
under this Agreement. Such insurance policy shall be purchased and kept in force
for the period of five (5) years after the cessation of sales of all Products
under this Agreement.

                  (b)      In the event that BDS chooses to rely on any
strategic partners of BDS to satisfy any of the requirements for insurance under
this Section 8.3, then BDS shall provide details of such coverage to
UNIVERSITIES for its information. Any such coverage must substantially comply
with the form, scope and amounts set forth in this Section 8.3 which are
applicable to such insurance. In the event that any such insurance is a
self-insured plan, BDS shall determine that such strategic partner's
self-insured plan is adequate given the financial condition of such strategic
partner. At UNIVERSITIES's request, which shall not be more frequently than
annually, BDS shall provide UNIVERSITIES with a certificate of such insurance or
written verification by such strategic partner of such self-insurance.

                                     - 17 -
<PAGE>   19

                  (c)      At UNIVERSITIES's request, which shall not be more
frequently than annually, BDS shall provide UNIVERSITIES evidence of any
insurance obtained pursuant to Section 8.3(a). BDS shall not, and shall not
permit any strategic partner to, cancel or materially reduce the coverage of any
policy of insurance required under this Section 8.3 without giving UNIVERSITIES
thirty (30) days prior written notice thereof.

ARTICLE 9 - TERM; TERMINATION

         9.1      Term.   This Agreement shall commence as of the Effective
Date of this Agreement and, unless sooner terminated as provided hereunder,
shall terminate as to each Product and as to each country in the Territory, upon
the expiration of the last to expire of the Licensed Patents necessary for the
manufacture, use or sale of such Product in such country.

         9.2      Breach.   Failure by either Party to comply with any of the
material obligations contained in this Agreement shall entitle the other Party
to give to the Party in default notice specifying the nature of the default and
requiring it to cure such default. If such default is not cured within sixty
(60) days after the receipt of such notice (or, if such default cannot be cured
within such sixty (60) day period, if the Party in default does not commence and
diligently continue actions to cure such default), the notifying Party shall be
entitled, without prejudice to any of its other rights conferred on it by this
Agreement, in addition to any other remedies available to it by law or in
equity, to terminate this Agreement by giving written notice to take effect
within thirty (30) days after such notice unless the defaulting Party shall cure
such default within said thirty (30) days. The right of either Party to
terminate this Agreement, as hereinabove provided, shall not be affected in any
way by its waiver or failure to take action with respect to any previous
default.

         9.3      Termination by BDS.   BDS shall have the right to terminate
the licenses granted herein, in whole or as to any Product in any country in the
Territory, at any time, and from time to time, by giving notice in writing to
UNIVERSITIES. Such termination shall be effective thirty (30) days from the date
such notice is given, and all BDS's rights associated therewith shall cease as
of that date, subject to Section 9.4.

         9.4      Rights to Sell Stock on Hand.   Upon the termination of any
license granted herein, in part or in whole or as to any Product, for any reason
other than a failure to cure a material breach of the Agreement by BDS, BDS
shall have the right for one (1) year or such longer period as the Parties may
reasonably agree to dispose of all Components or substantially completed
Components then on hand to which such termination applies, and royalties shall
be paid to UNIVERSITIES with respect to such Components as though this Agreement
had not terminated.

                                     - 18 -
<PAGE>   20
         9.5      Termination of Sublicenses.   Upon any termination of this
Agreement, all sublicenses granted by BDS under this Agreement shall terminate
simultaneously, subject, nevertheless, to Section 9.4.

         9.6      Effect of Termination.

                  (a)   Upon the termination of any license granted herein as
to any Product in any country in the Territory other than pursuant to Section
9.1, BDS and its Affiliates and sublicensees shall promptly: (i) return to
UNIVERSITIES all relevant records, materials or confidential information of
UNIVERSITIES concerning the Licensed Technology relating to such Product in such
country in the possession or control of BDS or any of its Affiliates or
sublicensees; and (ii) assign to UNIVERSITIES, or UNIVERSITIES' designee, its
registrations with governmental health authorities, licensees, and approvals of
such Product in such Country.

                  (b)   Following expiration of the term of this Agreement,
in whole or in part, pursuant to Section 9.1, BDS shall have the royalty-free
non-exclusive right within the Field to continue to manufacture, use, lease and
sell the Products, including the right to grant sublicenses therefor, as
heretofore licensed in Section 4.1.

         9.7      Surviving Rights.   Termination of this Agreement shall
not terminate BDS's obligation to pay all royalties which shall have accrued
hereunder. The Parties' obligations under ARTICLES 7, 8 and 9 and Sections 10.6,
10.10 and 10.11 shall survive termination.

         9.8      Accrued Rights, Surviving Obligations.   Termination,
relinquishment or expiration of this Agreement for any reason shall be without
prejudice to any rights which shall have accrued to the benefit of either Party
under this Agreement prior to such termination, relinquishment or expiration.
Such termination, relinquishment or expiration shall not relieve either Party
from obligations which are expressly indicated to survive termination or
expiration of this Agreement.

ARTICLE 10 - MISCELLANEOUS PROVISIONS

         10.1     Relationship of Parties.   Nothing in this Agreement is or
shall be deemed to constitute a partnership, agency, employee or joint venture
relationship between the Parties. No Party shall incur any debts or make any
commitments for the other, except to the extent, if at all, specifically
provided herein.

         10.2     Assignment.   Except as otherwise provided herein, neither
this Agreement nor any interest hereunder shall be assignable by any Party
without the prior written consent of

                                     - 19 -
<PAGE>   21

the other; provided, however, that either Party may assign this Agreement to any
wholly-owned subsidiary or to any successor by merger or sale of substantially
all of its assets to which this Agreement relates in a manner such that the
assignor shall remain liable and responsible for the performance and observance
of all its duties and obligations hereunder. This Agreement shall be binding
upon the successors and permitted assigns of the parties and the name of a Party
appearing herein shall be deemed to include the names of such Party's successors
and permitted assigns to the extent necessary to carry out the intent of this
Agreement. Any assignment not in accordance with this Section 10.2 shall be
void.

         10.3     Further Actions.   Each Party agrees to execute, acknowledge
and deliver such further instructions, and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.

         10.4     Force Majeure.   Neither Party shall be liable to the other
for loss or damages nor shall have any right to terminate this Agreement for any
default or delay attributable to any act of God, flood, fire, explosion, strike,
lockout, labor dispute, shortage of raw materials, casualty, accident, war,
revolution, civil commotion, act of public enemies, blockage or embargo,
injunction, law, order, proclamation, regulation, ordinance, demand or
requirement of any government or subdivision, authority or representative of any
such government, or any other cause beyond the reasonable control of such Party,
if the Party affected shall give prompt notice of any such cause to the other
Party. The Party giving such notice shall thereupon be excused from such of its
obligations hereunder as it is thereby disabled from performing for so long as
it is so disabled and for thirty (30) days thereafter. Notwithstanding the
foregoing, nothing in this Section 10.4 shall excuse or suspend the obligation
to make any payment due hereunder in the manner and at the time provided.

         10.5     No Trademark Rights.   Except as otherwise provided
herein, no right, express or implied, is granted by this Agreement to use in any
manner the name "BDS" or "UNIVERSITIES" or any other trade name or trademark of
the other party in connection with the performance of this Agreement.

         10.6     Public Announcements.   Except as required by law, neither
Party shall make any public announcement concerning this Agreement or the
subject matter hereof without the prior written consent of the other. In the
event of a required public announcement, the Party making such announcement
shall provide the other with a copy of the proposed text prior to such
announcement.

         10.7     Notices.   All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or by
facsimile transmission (receipt

                                     - 20 -
<PAGE>   22

verified), telexed, mailed by registered or certified mail (return receipt
requested), postage prepaid, or sent by express courier service, to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice; provided, that notice of a change of address shall be
effective only upon receipt thereof):

                  (a)      If to BDS, addressed to:

                           BioDelivery Sciences, Inc.
                           42 Buckman Drive
                           Lexington, MA 02173-6040

                           with a copy to each of the following:

                           Raphael J. Mannino, Ph.D.
                           22 Victoria Drive
                           Annandale, NJ 08801

                           Susan Gould-Fogerite, Ph.D.
                           6 Cynthia Court
                           Annandale, NJ 08801

                  (b)      If to UMDNJ, addressed to:

                           University of Medicine and Dentistry of New Jersey
                           Office of Patents and Licensing
                           45 Knightsbridge Road
                           P.O. Box 6810
                           Piscataway, New Jersey 08855-0101
                           Facsimile No.: (908) 235-4449

                  (c)      If to Albany Medical College addressed to:

                           James E. Peterson, Ph.D.
                           Director of Research Administration
                           Albany Medical College
                           47 New Scotland Avenue
                           Albany, NY 12202

         10.8     Amendment.   No amendment, modification or supplement of
any provision of this Agreement shall be valid or effective unless made in
writing and signed by a duly authorized officer of each Party. This Agreement
may be executed in a series of counterparts, all of which, when taken together,
shall constitute one and the same instrument.

         10.9     Waiver.   No provision of this Agreement shall be waived by
any act, omission or knowledge of a Party or its agents or employees except by
an instrument in writing expressly waiving such provision and signed by the
waiving Party.

                                     - 21 -
<PAGE>   23

         10.10    Governing Law.   This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New Jersey.

         10.11    Consent to Jurisdiction.   The Parties hereby irrevocably
submit to the exclusive jurisdiction of any New Jersey State or Federal court
sitting in the State of New Jersey for any action or proceeding arising out of
or relating to this Agreement, and the Parties hereby irrevocably agree that all
claims in respect of any such action or proceeding may be heard and determined
in New Jersey State court or, to the extent permitted by law, in such Federal
court. The Parties hereby irrevocably waive, to the fullest extent they may
effectively do so, the defense of an inconvenient forum to the maintenance of
any such action or proceeding.

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

         10.13    Entire Agreement of the Parties.   This Agreement constitutes
and contains the entire understanding and agreement of the Parties and cancels
and supersedes any and all prior negotiations, correspondence, understandings
and agreements, whether oral or written, between the Parties respecting the
subject matter hereof.

         IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed by its duly authorized officer as of the day and year first above
written.

UNIVERSITY OF MEDICINE AND
DENTISTRY OF NEW JERSEY                 ALBANY MEDICAL COLLEGE

By:                                     By: /s/ James E. Peterson
   ----------------------------------      -----------------------------------

Name:                                   Name: JAMES E PETERSON, Ph.D.
     --------------------------------        ---------------------------------

Title:                                  Title: DIRECTOR OF RESEARCH ADMIN.
      -------------------------------         --------------------------------

                                               8/22/95

                                     - 22 -
<PAGE>   24

BIODELIVERY SCIENCES, INC.

By: /s/ Irving A. Berstein
   ----------------------------------

Name: Irving A. Berstein
     --------------------------------

Title: Chairman and C.E.O.
      -------------------------------

         The undersigned is an Inventor (as defined in this Agreement) and is
executing this Agreement to acknowledge that he or she has read and understands
this Agreement and acknowledges receipt of a copy hereof.

Signature: /s/ Raphael J. Mannino
          ---------------------------

Print Name: Raphael J. Mannino
           --------------------------

Date: 13 Sept. 1995
     --------------------------------

         The undersigned is an Inventor (as defined in this Agreement) and is
executing this Agreement to acknowledge that he or she has read and understands
this Agreement and acknowledges receipt of a copy hereof.

Signature: /s/ Susan Gould-Fogerite
          ---------------------------

Print Name: Susan Gould-Fogerite
           --------------------------

Date: 8/13/95
     --------------------------------

                                     - 23 -
<PAGE>   25

                                                                       EXHIBIT A

                U.S. and Foreign Patents and Patent Applications
                      Relating to the Licensed Technology

                                 (See Attached)

                                     - 24 -
<PAGE>   26

                                                                       EXHIBIT A

                                LICENSED PATENTS

United States Patent Number 4,663,161 Issued May 5, 1987

United States Patent Number 4,871,488 Issued October 3, 1989

United States Patent Application Serial Number 08/130,986 Filed
October 4, 1993. Corres. International Application
PCT/US94/10913 Filed September 30, 1994.

United States Patent Application Serial Number 08/394,70 Filed
February 22, 1995. Corres. International Application, PCT
___________________ Filed ___________________.

                                     - 25 -
<PAGE>   27

                                                                       EXHIBIT B

                              LICENSED TECHNOLOGY

         All work or effort conceived or initiated by either Investigator while
employed at either University.

                                     - 26 -<PAGE>   1
                                                                    EXHIBIT 10.4

                               RESEARCH AGREEMENT

         THIS AGREEMENT effective this 1st day of April, 2001, by and between
BioDelivery Sciences International, Inc. ("Sponsor") and the University of
Medicine and Dentistry of New Jersey ("University").

                                   WITNESSETH

         WHEREAS, the research program contemplated by this Agreement is of
mutual interest and benefit to University and to Sponsor, will further the
instructional and research objectives of University in a manner consistent with
its status as a nonprofit, tax-exempt, educational institution, and may derive
benefits for both Sponsor and University through inventions, improvements and/or
discoveries.

         NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein contained, the parties hereto agree to the following:

ARTICLE 1 - DEFINITIONS

As used herein, the following terms shall have the following meanings:

1.1      "Project" shall mean the project described in Appendix A and additional
         research supported by Sponsor under this agreement, under the direction
         of the Principal Investigator.

1.2      "Contract Period" shall mean April 1, 2001 through December 31, 2005.

1.3      "University Intellectual Property" shall mean individually and
         collectively all inventions, improvements and/or discoveries which are
         conceived and/or made (i) by one or more employees of University, or,
         (ii) jointly by one or more employees of University and by one or more
         employees of Sponsor in the performance of the Project, as set forth in
         Article 6.

1.4      "Sponsor Intellectual Property" shall mean individually and
         collectively all inventions, improvements and/or discoveries which are
         conceived and/or made by one or more employees of Sponsor, as set forth
         in Article 6.

1.5      "Principal Investigator" shall mean Raphael J. Mannino, Ph.D.

ARTICLE 2 - RESEARCH WORK

2.1      University shall allocate space in accordance with the requirements
         noted in Appendix B and commence the performance of the Project
         promptly after the effective date of this Agreement, and shall use
         reasonable efforts to perform such Project substantially in accordance
         with the terms and conditions of this Agreement. The Sponsor and
         University shall enter into the real estate lease agreement attached
         hereto as Appendix C for the space provided for by Sponsor

                                       1
<PAGE>   2
         by University. Said lease shall be for a period of five (5) years
         commencing on April 1, 2001.

2.2      In the event that the Principal Investigator becomes unable or
         unwilling to continue the Project, either Leila Zarif, Ph.D. or Susan
         Gould-Forgerite, Ph.D. may, at the Sponsor's election, be substituted
         as Principal Investigator. If Sponsor is unwilling to select either Dr.
         Zarif or Dr. Gould-Forgerite as Principal Investigator or if the person
         selected is unable or unwilling to continue the Project, and a mutually
         acceptable substitute is not available, University and/or Sponsor shall
         have the option to terminate this Agreement upon at least ninety (90)
         days prior written notice to the other party.

2.3      Employees of Sponsor or other invitees of Sponsor rendering services
         for Sponsor in connection with the Project or other projects as Sponsor
         shall deem, shall have the right to be present and perform services at
         the space provided in University's facility. The Parties agree that
         certain University personnel will become the Sponsor's employees as of
         June 1, 2001. Those employees that will remain employees of the
         University are shown on Appendix B. BDSI shall provide evidence that it
         holds general liability insurance of at least $1,000,000.00 and that
         such insurance is applicable to its personnel and other invitees
         working at University space. BDSI warrants that it is in full
         compliance with all aspects of New Jersey worker compensation law for
         its employees. BDSI acknowledges that the right of its employees to be
         present and perform services at University's facility will cease upon
         the expiration or termination of this Agreement. BDSI shall furnish
         copies of invention disclosures resulting from work being performed, by
         University employees, at University facilities, to University's Office
         of Patents and Licensing for review in confidence by University.

2.4      Sponsor shall have the right to bring materials used in performance of
         their Projects to and from the University without the need for case by
         case approval by the University.

2.5      The Sponsor shall approve all expenses charged to grants including
         salaries and also shall approve assignment of employees to grant.

ARTICLE 3 - REPORTS AND CONFERENCES

3.1      Written program reports shall be provided by the Principal Investigator
         acting through the University to Sponsor every three (3) months, and a
         final report shall be submitted by University within thirty (30) days
         after the conclusion of the Contract Period or earlier termination of
         this Agreement.

3.2      During the term of this Agreement, representatives of University will
         meet with representatives of Sponsor at times and places mutually
         agreed upon to discuss the progress and results, as well as ongoing
         plans, or changes therein, of the Project to be performed hereunder.

                                       2
<PAGE>   3

ARTICLE 4 - COSTS, BILLINGS, AND OTHER SUPPORT

4.1      Total costs to Sponsor hereunder are shown on Appendix B. Payment shall
         be made by Sponsor according to the schedule set forth in Appendix B.

4.2      Purchased items shall be handled as follows:

         4.2.1    All equipment, supplies and animals purchased hereunder shall
                  remain the property of Sponsor both during and after the term
                  hereof.

         4.2.2    Sponsor shall have the right to purchase such equipment,
                  supplies and animals itself rather than through University.

4.3      In the event of early termination of this Agreement, Sponsor shall pay
         all costs incurred by the University pursuant to Appendix B as of the
         date of termination, including non-cancellable obligations.

ARTICLE 5 - PUBLICATIONS

5.1      Sponsor recognizes that under University policy, the results of the
         Project are publishable. Accordingly, University researchers engaged in
         the Project shall be permitted to present at symposia, national, or
         regional professional meetings, and to publish in journals, theses or
         desertions, or otherwise of their own choosing, methods and results of
         the Project; provided, however, that Sponsor shall have been furnished
         copies of any proposed publication or presentation at least three (3)
         months in advance of the submission of such proposed publication or
         presentation to a journal, editor, or other third party. Sponsor shall
         have: one (1) month, after receipt of said copies, to object to such
         proposed presentation or proposed publication because there is
         patentable subject matter which needs protection. In the event that
         Sponsor makes such objection, said researcher(s) shall refrain from
         making such publication or presentation for a maximum of two (2)
         months from the date of receipt of such objection in order for
         University or Sponsor, as the case may be, to file patent
         application(s) with the United States Patent and Trademark Office
         and/or foreign patent office(s) directed to the patentable subject
         matter contained in the proposed publication or presentation.

ARTICLE 6 - INTELLECTUAL PROPERTY

6.1      All rights and title to University Intellectual Property shall belong
         to University, subject to the terms and conditions of this Agreement.

         6.1.1    All rights and title to Sponsor Intellectual Property shall
                  belong to Sponsor, subject to the terms of this Agreement.

                                       3
<PAGE>   4

6.2      Rights to inventions, improvements and/or discoveries, whether
         patentable or copyrightable or not, relating to the Project made solely
         by employees of Sponsor shall belong to Sponsor. Such inventions,
         improvements and/or discoveries made by Sponsor will not be subject to
         the terms and conditions of this Agreement.

6.3      University will promptly notify Sponsor of any University Intellectual
         Property conceived and/or made during the Contract Period under the
         Project. Sponsor will direct that patent applications or other
         applications for other intellectual property protection be filed.
         Sponsor shall promptly prepare, file, and prosecute such U.S. and
         foreign application in Sponsor's name. University Intellectual Property
         improvements, and discoveries patentable or copyrightable shall be
         governed by the License Agreement by and between Sponsor and University
         dated 26th day of September, 1995. Sponsor shall bear all costs
         incurred in connection with such preparation, filing, prosecution and
         maintenance of U.S. and foreign application(s) directed to said
         University Intellectual Property. Sponsor shall make sure that such
         application(s) will cover, to the best of Sponsor's knowledge, all
         items of commercial interest and importance. Sponsor shall be
         responsible for making decisions regarding scope and content of
         application(s) to be filed and prosecution thereof, and University
         shall be given an opportunity to review and provide input thereto.
         Sponsor shall keep University advised as to all developments with
         respect to such application(s) and shall promptly supply to University
         copies of all papers received and filed in connection with the
         prosecution thereof in sufficient time for University to comment
         thereon. If Sponsor elects not to file patent applications or other
         applications for other intellectual property, it shall so notify the
         University and thereafter the University shall have the rights set
         forth in paragraph 6.4 below.

6.4      If Sponsor decides to discontinue the financial support of the
         prosecution or maintenance of the protection, University shall be free
         to file or continue prosecution or maintain any such application(s),
         and to maintain any protection issuing thereon in the U.S. and in any
         foreign country at University's sole expense.

6.5      If Principal Investigator leaves the employ of University, all patents
         and other intellectual property rights with respect to projects
         underway, initiated or conceived while such Principal Investigator was
         employed by University shall remain licensed to Sponsor pursuant to
         University's license agreement with Sponsor.

ARTICLE 7 - GRANT OF RIGHTS

7.1      All University Intellectual Property (as defined in Section 1.3) shall
         automatically be licensed to Sponsor pursuant to the terms and
         conditions of the existing License Agreement among University, Sponsor
         and Albany Medical College.

                                       4
<PAGE>   5

ARTICLE 8 - TERM AND TERMINATION

8.1      This Agreement shall become effective upon the date first hereinabove
         written and shall continue in effect for the full duration of the
         Contract Period unless sooner terminated in accordance with the
         provisions of this Article 8.

8.2      In the event that either party shall commit any breach of or default in
         any of the terms or conditions of this Agreement, and also shall fail
         to remedy such default or breach within ninety (90) days after the
         receipt of written notice thereof from the other party hereto, the
         party giving notice may, at its option and in addition to any other
         remedies which it may have at law or in equity, terminate this
         Agreement by sending notice of termination in writing to the other
         party to such effect, and such termination shall be effective as of the
         date of the receipt of such notice. University shall promptly return to
         Sponsor uncommitted funds, withholding only that amount needed to
         discharge obligations incurred as noted in Section 8.3.

8.3      Termination of this Agreement by either Party for any reason shall not
         affect the rights and obligations of the parties accrued prior to the
         effective date of termination of this Agreement. No termination of this
         Agreement, however effectuated, shall affect the Sponsor's rights and
         duties under Article 7 hereof, or release the parties hereto from their
         rights and obligations under Articles 4, 5, 6, 7, 9 and 13, nor shall a
         termination of this Agreement affect any other agreements between the
         University and the Sponsor.

ARTICLE 9 - INDEPENDENT CONTRACTOR

9.1      In the performance of all services hereunder:

         9.1      University shall be deemed to be and shall be an independent
                  contractor and, as such, University shall not be entitled to
                  any benefits applicable to employees of Sponsor.

         9.2      Neither party is authorized or empowered to act as agent for
                  the other for any purpose and shall not on behalf of the other
                  enter into any contract, warranty or representation as to any
                  matter. Neither shall be bound by the acts or conduct of the
                  other.

ARTICLE 10 - INSURANCE

10.1     University warrants and represents that University has adequate
         liability insurance, such protection being applicable to officers,
         employees and agents while acting within the scope of their employment
         by University.

                                       5
<PAGE>   6

10.2     Each party hereby assumes any and all risks of personal injury and
         property damage attributable to the negligent acts or omissions of that
         party and the officers, employees, invitees, and agents thereof.

ARTICLE 11 - GOVERNING LAW

11.1     This Agreement shall be governed and construed in accordance with the
         laws of the State of New Jersey.

ARTICLE 12 - ASSIGNMENT

12.1     This Agreement shall not be assigned by either party without the prior
         written consent of the parties hereto.

ARTICLE 13 - NON-DISCLOSURE

13.1     Anything in this Agreement to the contrary notwithstanding, any and all
         knowledge, knowhow, practices, processes, or other information
         ("Confidential Information") disclosed or submitted which is designated
         as confidential information by either party to the other shall be
         received and maintained by the receiving party in strict confidence and
         shall not be disclosed to any third party. Furthermore, neither party
         shall use Confidential Information of the other party for any purpose
         other than those purposes specified in this Agreement. Each employee of
         a party receiving Confidential Information shall be apprised of the
         duty and obligation to maintain Confidential Information in confidence
         and not to use such Information for any purpose other than in
         accordance with the terms and conditions of this Agreement.

13.2     Nothing contained herein will in any way restrict or impair either
         party's right to use, disclose or otherwise deal with any Confidential
         Information of the other party which at the time of its receipt:

         13.2.1   Is generally available in the public domain, or thereafter
                  becomes available to the public through no act of the
                  receiving party; or

         13.2.2   Was independently known prior to receipt thereof, or made
                  available to such receiving party as a matter of lawful right
                  by a third party.

13.3     The obligations for protection of Confidential Information of the other
         party shall remain in effect for a period of five (5) years after the
         termination or expiration of this Agreement.

                                       6
<PAGE>   7
ARTICLE 14 - AGREEMENT MODIFICATION

14.1     Any agreement to change the terms of this Agreement in any way shall be
         valid only if the change is made in writing and approved by mutual
         agreement of authorized representatives of the parties hereto.

ARTICLE 15 - NOTICES

15.1     Notices, invoices, communications and payments hereunder shall be
         deemed made if given by registered or certified envelope, postage
         prepaid, and addressed to the party to receive such notice, invoice or
         communication at the address given below, or such other address as may
         hereafter be designated by notice in writing:

If to Sponsor:

         Dr. Raphael J. Mannino
         BioDelivery Sciences International, Inc.
         UMDNJ-New Jersey Medical School
         Admin. Building 4
         185 South Orange Ave.
         Newark, New Jersey 07103

With a copy to:

         Catherine S. Gidlow
         Bearden, Breckenridge & Gidlow, L.L.C.
         7701 Forsyth Blvd., Suite 375
         St. Louis, Missouri 63105

If to University:

         University of Medicine and Dentistry of New Jersey
         Legal Management
         65 Bergen Street
         Newark, NJ 07107

With a copy to:

         University of Medicine and Dentistry of New Jersey
         Patents and Licensing
         3rd Floor
         Liberty Plaza
         335 George Street
         New Brunswick, NJ 08901

                                       7
<PAGE>   8

ARTICLE 16 - ENTIRE AGREEMENT

16.1     The terms of this Research Agreement and of that certain lease of even
         date herewith, represent the entire rights and obligations of the
         parties one to the other and supercede and cancel the prior Research
         Agreements, rights and obligations of the parties one to the other.

IN WITNESS WHEREOF, the parties have executed this Agreement in duplicate as of
the day and year first above written.

BIODELIVERY SCIENCES                         UNIVERSITY OF MEDICINE AND
INTERNATIONAL, INC.                          DENTISTRY OF NEW JERSEY

By:    /s/ Leila Zarif                       By:    /s/ Denise Mulkern
       --------------------------                   --------------------------
       Leila Zarif                                  Denise Mulkern
Title: Vice President & Treasurer            Title: Vice President for Finance
                                                    & Treasurer

                                       8
<PAGE>   9

                                   APPENDIX A

                                RESEARCH PROJECTS

SPACE ALLOCATION

Space required for the performance of this research project will include 8,000
sq. ft. of research and office space located in ADMC Building 4, and use of
UMDNJ Departmental equipment, together with additional space as needed in the
Research Animal Facility.

SCOPE OF RESEARCH

BioDelivery Sciences International, Inc. supports the research mission of The
University of Medicine and Dentistry to investigate fundamental processes in
biomedical sciences. To this end, this research grant will support research in
the areas immunology, cell growth regulation, and drug delivery.

ANTIGEN SPECIFIC MANIPULATION OF THE IMMUNE RESPONSE USING CELL MEMBRANE DERIVED
LIPOSOME VACCINES.

         Antigen-specific regulation of the immune response allows for
alteration of the response to antigen without causing undesirable side effects
that are often associated with non-specific immunotherapy. The ability to
specifically focus the immune system to designated antigens in order to enhance
or inhibit the immune response provides the ultimate potential to 1- produce
safer and more effective vaccines and immunotherapies, and 2- design
immunosuppressive formulations for use against autoimmune diseases.

         The use of liposome vaccines as therapeutic agents offers a unique
advantage because they can be formulated to include specific antigens while, at
the same time, their composition is immunologically inert and they can be easily
modified. Formulation of liposomes from cell membranes offers an additional
advantage in that they are able to present antigen to TH cells within the
context of the antigen presenting cell membrane molecules, thereby more closely
mimicking natural antigen presentation.

         Within the past 10 years it has become clear that each stage of the
immune response is controlled not only by antigen-receptor interactions, by also
by costimulatory, accessory molecules such as CD 80 and CD 86. Experimental
evidence suggests that CD80 and CD86 play important roles in the regulation of
the immune response to different antigens. The goal of this study is to
investigate the individual roles of CD80 and CD86 in the modulation of the
humoral immune response to influenza virus as a well understood and easily
manipulated model system.

         Membrane extracts from B cells that have been exposed to virus in
vitro, are used to formulate liposome vaccines. To study the immunological
consequence of CD80 and/or CD86 is the immune response, these molecules are
depletion and removed from the membrane extracts

                                       9
<PAGE>   10

prior to vaccine formulation. The vaccines were administered to immunologically
naive mice, who are later challenged and boosted with whole, UV-inactivated
virus.

         Thus far we have observed that removal of CD80 from the membrane
liposomes caused a significant increase in the humoral immune response to flu
antigen. The total immunoglobulin (Ig) titer was greater than the titer achieved
from animals treated with non-depleted, virus-exposed B cell membrane liposome
formulations. The IgG1 titer was nearly three times as great as the positive
control at 14 days after the first whole virus challenge and was more than
double the positive control titer at 14 days after the second whole virus
challenge.

         Depletion of CD86, as well as depletion of both CD80 and CD86 invoked
lower influenza-specific total Ig titers, and therefore down regulated the
immune response.

         The major finding of this study thus far is that depletion of
costimulatory molecules from membrane liposome vaccine formulations
significantly changes the humoral immune response to a specific antigen.

         This work is being performed by Ms. Christine A. Woititz, a graduate
student in the Department of Pathology and Laboratory Medicine, UMDNJ-New
Jersey Medical School.

FINDING THE GENES RESPONSIBLE FOR GROWTH CONTROL USING A REVERSIBLE INHIBITOR OF
TRANSFORMED CELL GROWTH

         It has been suggested that the cell surface membrane plays a direct
role in maintaining and regulating cell growth. For example, non-transformed
cells have different surface membrane configurations than transformed cells.
Transformed cells as well as mitotic cells have been associated with an
agglutinable surface configuration. Investigations have established a
correlation between the agglutinable surface configurations and the growth of
both normal and transformed cells.

         "Covering up" this agglutinable cell surface using the non-toxic,
nonagglutinable form of Concanavalin A (Con A), succinylated Con A (SCA),
restores normal growth regulation. As a result, cells grow to densities similar
to untransformed cells. This growth inhibition is reversible either by the
replacement of media containing SCA with fresh media, or by the addition of
a-methyl mannoside (a-MM), a specific inhibitor of Con A.

         Cell cycle analysis of SV40 transformed 3T3 cells that have undergone
growth inhibition with SCA tended to accumulate in the G1 phase of the cell
cycle, whereas SV40 transformed 3T3 cells not treated with SCA tended to
accumulate in the S and G2 phases. Similarly 3T3 fibroblasts accumulate in the
G1 phase during growth arrest due to high cell densities or nutrient starvation.
Time lapse cinemicroscopy studies of 3T3 cells treated with SCA have shown
increased cell-cell adhesion between daughter cells after mitosis and cells that
have come into contact with each other while migrating, again in a manner which
mimics density dependent growth inhibition. The exact biochemical mechanism of
contact inhibition is unknown.

         SCA may be interacting with the cell membrane and causing an overall
change in the cell surface membrane. Another possible mechanism is that SCA is
interacting with a specific

                                       10
<PAGE>   11

membrane receptor triggering a signal transduction cascade that leads to the
synthesis of a second messenger. If this is the case, then it should be possible
to identify the immediate genes responsible for growth inhibition induced by
SCA.

         The goal of this study is to investigate the gene expression patterns
stimulated by SCA using two malignant tumor cell lines, Saos-2 (osteosarcoma)
and RD (rhabdomyosarcoma). Both are malignant mesenchymal neoplasms of
childhood. Rhabdomyosarcoma is a skeletal muscle neoplasm occurring primarily in
the first decade of life, while osteosarcoma, a bone neoplasm, occurs primarily
in the second decade of life.

         Our current working hypothesis is that SCA controls growth inhibition
by interacting with cell surface receptors and triggering a signal transduction
cascade thus resulting in the activation of growth inhibitory genes and/or down
regulation of cell growth stimulatory genes. Our plan is to study the gene
expression patterns of tumor cells in response to SCA via DNA Microarray
technology. When genes with immediate changes in expression are characterized,
the pathway and receptors responsible for controlling cell cycle inhibition can
be determined.

         The identification of genes that are functionally related to the early
phases of neoplastic transformation could ultimately lead to new targets for
cancer drug therapy and approaches to cancer gene therapy.

This work is being performed by Ms. Diane Nordstrom a graduate student in the
Department of Pathology and Laboratory Medicine, UMDNJ-New Jersey Medical
School.

COCHLEATE MEDIATED DELIVERY OF DRUGS TO MACROPHAGE IN VITRO

         Particle scavenging cells, such as macrophage, are the first line of
defense against many microbial infections. However, many microbes, which induce
severe human clinical infections, have been shown to infect macrophage and avoid
destruction. Indeed, macrophage are one of the major strategic areas of survival
and replication for a number of pathogens including Candida, Mycobacteria, HIV,
Leishmania, and Chlamydia.

         Cochleate delivery vehicles are stable phospholipid-calcium crystalline
precipitates composed of simple, naturally occurring materials. They have a
unique multilayered structure consisting of a large, continuous, solid, lipid
bilayer sheet rolled up in a spiral, with little or no internal aqueous space.
Cochleates are stabilized at low pH, and deliver their contents through membrane
fusion.

         Amphotericin B (AmB), is still the most powerful drug against human
fungal diseases. Cochleates have been shown to be highly effective in vivo as
delivery vehicles for AmB in murine models of human fungal infections. The
mechanism of drug delivery mediated by cochleates is, thus far, unknown. It is
possible that in vivo, macrophage play an important role in the removal and
uptake of cochleates, via an endocytotic mechanism.

                                       11
<PAGE>   12

         Since macrophage also play an important role in the host defense and
clearance of fungi and parasites, it is important to further investigate the
interaction between macrophage and cochleates.

         The hypothesis that is being tested in this study is that cochleates
can be taken up by macrophage into endocytic vacuoles; cochleates remain stable
within the vacuoles, and slowly release their contents in an active form.

         J774A.1 macrophage are used as an in vitro model system to investigate
the hypothesis that drug-cochleate formulations are taken up by macrophage,
concentrated within the vacuoles, and allow gradual release of encochleated
drug.

         In this study Rhodamine-labeled cochleates as well as the safety and
efficacy of AmB cochleates (CAMB) in vitro are assessed. Efficacy of CAMB
against C. albicans was assessed using both prophylactic and post-infection
dosing. When macrophage were incubated with CAMB overnight and washed, challenge
with CA resulted in a CFU count close to zero. Microscopic observation reveals
that CAMB are not toxic to the macrophage even at the highest doses studied. The
CAMB are accumulated by the macrophage at high levels resulting in large
distended vacuoles. It is suggested that the CAMB are concentrated within the
vacuoles and are released gradually over time.

         Fluorescence was observed within the vacuoles up to 72 hrs. More
dramatically, we found that Amphotericin B cochleates at low doses (0.lug
AmB/mL) protect macrophage from challenge by C. albicans.

         These data indicate that, in vitro, CAMB become accumulated within the
macrophage, and are non-toxic, and that the AmB is released in a biologically
active form. These observations suggest that, in vivo, low doses of CAMB can be
administered. Amphotericin B cochleates may become concentrated at the cellular
site of infection, and may provide protection for macrophage if prophylactically
administered prior to challenge with C. albicans.

         Further studies will investigate other drug cochleate formulations, in
order to investigate the direct effect of cochleates on macrophage function. In
addition, the compositions of cochleates will be changed in order to investigate
the relationship between the physical and chemical characteristics of
cochleates, and their potential as drug delivery vehicles.

         This work is being performed by Ms. Sara Krause, a graduate student in
the Department of Pathology and Laboratory Medicine, UMDNJ-New Jersey
Medical School.

                                       12
<PAGE>   13

                                   APPENDIX B

         Research Agreement Between UMDNJ and BioDelivery Sciences
International, Inc.

<TABLE>
<CAPTION>
PERSONNEL                                             SALARY AND FRINGE BENEFITS
---------                                             --------------------------
<S>                                                   <C>
Personnel including Fringe Benefits at 8% for
graduate students(1)                                         $ 51,840.00

SUPPLIES

Chemicals(2)                                                 $ 40,000.00

                           Total Direct Costs                $ 91,840.00

Indirect Costs @ 8% of Direct Costs                          $  7,347.00(3)
Facilities Use Charge - Dean Medical School(4)               $ 40,000.00
                                                             -----------

                           TOTAL BUDGET                      $139,187.00
                                                             ===========
</TABLE>

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

(1) Includes three (3) graduate students at $17,280 each.
(2) Estimated expenses, to be adjusted semi-annually as to exact costs
(3) for 2001, for 2002, indirect costs will be 12% of Direct Costs, for 2003,
indirect costs will be 16% of direct costs, for 2004, indirect costs will be 20%
of direct costs and for 2005, indirect costs will be 24% of direct costs.
(4) This refers to the 8,000 square foot lab space being utilized by BDSI at 185
South Orange Ave, Bldg. 4., which shall be leased to Sponsor by a real estate
lease agreement to be executed on or around April 1, 2001.

                                       13
<PAGE>   14
                                      LEASE
                                   COVER PAGE

1.01 PARTIES

<TABLE>
<CAPTION>
Landlord                                                          Tenant
--------                                                          ------
<S>                                                               <C>
University of Medicine and Dentistry of New Jersey                BioDelivery Sciences International, Inc.
</TABLE>

1.02 NOTICES

<TABLE>
<CAPTION>
Notice to Landlord                                                Notice to Tenant
------------------                                                ----------------
<S>                                                               <C>
University of Medicine and Dentistry of New Jersey                Dr. Raphael J. Mannino
Legal Management                                                  BioDelivery Sciences International, Inc.
65 Bergen Street                                                  UMDNJ-New Jersey Medical School
Newark, NJ 07107                                                  Admin. Building 4
                                                                  185 South Orange Ave.
                                                                  Newark, NJ 07103

<CAPTION>

Copy of Notice (if any)                                           Copy of Notice (if any)
-----------------------                                           -----------------------
<S>                                                               <C>
University of Medicine and Dentistry of New Jersey                Catherine S. Gidlow
Office of the Vice President for Research                         Bearden, Breckenridge & Gidlow, L.L.C.
UMDNJ SSB 1414                                                    7701 Forsyth Boulevard, Suite 375
65 Bergen Street                                                  St. Louis, Missouri 63105
Newark, N.J. 07107
Attention: Bill Stephenson, PhD., Vice President
</TABLE>

1.04 LEASED PREMISES     8,000 square feet of research and office space located
                         in ADMC Building 4 and use of UMDNJ Departmental
                         equipment

1.05 USE     To investigate fundamental processes in biomedical sciences.

1.06 TERM   Commencement Date:  April 1, 2001
                         Term:  Fifty-seven (57) months
             Termination Date:  December 31, 2005

1.08 TENANT IMPROVEMENT ALLOWANCE   NONE

2.01 RENT

<TABLE>
<CAPTION>
                                              Monthly
                Annual Base Rent             Base Rent
                ----------------             ---------
<S>             <C>                         <C>
Year 1            $40,080.00                $ 3,340.00
Year 2            $46,080.00                $ 3,840.00
Year 3            $52,080.00                $ 4,340.00
Year 4            $58,080.00                $ 4,840.00
Year 5            $64,080.00                $ 5,340.00
</TABLE>

                                       1

<PAGE>   15

                                      LEASE
                          BIOMEDICAL RESEARCH FACILITY

                       SECTION 1. PARTIES, PREMISES, TERM

1.01 PARTIES. The parties to this Lease (hereinafter referred to as "Landlord"
or "Tenant" or collectively as the "parties") are shown on the page entitled
"LEASE COVER PAGE" (hereinafter referred to as the "Cover Page"), which Cover
Page is an integral part of this Lease. The provisions set forth on the Cover
Page are incorporated herein by this reference.

1.02 NOTICES. Any notice, demand, request, consent, approval or other
communication which either party hereto is required or desires to give or make
to the other shall be in writing and shall be deemed validly given when
personally delivered or when deposited in the United States mails, registered or
certified, return receipt requested, addressed to the party to whom it is
directed at the address shown on the Cover Page, or at such different or
additional addresses as either party by notice similarly given may designate.

1.03 LEASED PREMISES. Landlord leases to Tenant and Tenant leases from Landlord
the premises identified on the Cover Page (hereinafter referred to as the
"Leased Premises"). An approximate outline and location of the Leased Premises
is shown on EXHIBIT A annexed hereto.

1.04 USE. The Leased Premises shall be used and occupied for the research and
development of cochleate applications in biotechnology and for such other uses
as may be permitted by law. Two thousand square feet of the Leased Premises
shall be made available to research assistants working with Tenant who are
students or employees of the Landlord.

1.05 TERM. This Lease shall commence on April 1, 2001 and shall terminate on
December 31, 2005.

SECTION II. RENT, SERVICES

2.01 RENT. Tenant shall pay to Landlord beginning on the first day of each month
during the term, the monthly installments of Rent set forth on the Cover Page
without any set-off or deduction except as specifically permitted hereunder.

2.02 SERVICES. So long as Tenant is not in default hereunder, Landlord shall
provide the following to the Leased Premises: (i) Adequate heating, ventilating
and air conditioning services (the "HVAC System"); and (ii) Utilities necessary
to Tenant for the conduct of its research; (iii) lighting replacement, public
restroom supplies, window washing with reasonable frequency, and janitorial
services to the Leased Premises.

2.03 ACCESS. So long as no Event of Default has occurred hereunder, Tenant shall
have access to the Building at all times.

2.04 SERVICE INTERRUPTION. Tenant acknowledges that any one or more of the
utility connections to be provided by the Landlord may be suspended or
interrupted by reason of accident, weather, repair, alterations or the making of
necessary improvements, strikes, lockouts, governmental requirements or causes
beyond the reasonable control of Landlord. No interruption, change or
malfunction of any of the connections to be furnished by Landlord hereunder
shall constitute an eviction or disturbance of Tenant's use and possession of
the Leased Premises or render Landlord liable for damages or entitle Tenant to
be relieved from any of its obligations hereunder or grant Tenant any right of
set-off or recoupment unless such suspension or interruption of the services to
be provided by Landlord hereunder is caused by a breach of this Lease on the
part of Landlord. Landlord will promptly and diligently attempt to restore any
service interruption.

2.05 PARKING. Tenant shall have the right to use at least 15 parking spaces in
parking lots near or adjacent to the building in which the Leased Premises is
located, at the same cost as Landlord regularly charges others for similar
parking rights. Notwithstanding the foregoing, Landlord shall have the right to
relocate the parking to another area provided such relocated parking is
reasonably convenient. Landlord may also relocate the parking during repairs to
the parking lots.

2.06 BROKERAGE COMMISSION. Landlord and Tenant each warrant to the other that
neither has had any dealings with any broker or agent in connection with this
Lease.

                                       2
<PAGE>   16

SECTION III RIGHTS AND REMEDIES AND DAMAGE OR OTHER TAKING

3.01 DAMAGE OR DESTRUCTION. If at any time during the Lease term the Leased
Premises shalt be damaged or destroyed in whole or in part by fire or other
casualty so as to render any portion of the Leased Premises wholly unfit for
occupancy and if the Leased Premises cannot be repaired by Landlord and Tenant
within ninety (90) construction days from the happening of said damage, then
either party may elect within ten (10) business days from the date of the
casualty, to terminate this Lease on the tenth (10th) business day after such
election. If the Lease is not terminated by reason of such casualty, then
Landlord shall repair and restore the Building and such portions of the Leased
Premises as are insured by Landlord pursuant hereto. Tenant shall be responsible
for refurbishing, restoring or repurchasing its personal property located within
the Leased Premises. Tenant and Landlord shall act with all reasonable speed and
promptness, subject to delays arising from shortage of labor or material, acts
of God, war or other conditions beyond Landlord's reasonable control, to repair
and restore the Building. In the event that neither party elects to terminate
this Lease, Landlord shall be only required to expend for Tenant improvements
the proceeds of any policy of insurance on Tenant's leasehold improvements
required to be held by Landlord pursuant to this Lease. Landlord shall hold such
proceeds in trust for use in the restoration and replacement of Tenant's
leasehold improvements. Rent shall abate proportionately during the period that
Landlord is performing its restoration for any portion of the Leased Premises
that is unfit for use by Tenant in the ordinary conduct of its business.
Landlord and Tenant agree to cooperate, one with the other, to repair and
restore the Building and the Leased Premises with all due haste. To that end,
Tenant, and Tenant's contractor shall be given access to the Leased Premises as
soon as possible in order to repair, restore and/or install or reinstall
Tenant's trade fixtures and personalty.

3.02 BUILDING REGULATIONS. Tenant shall abide by the reasonable building rules
and regulations adopted by Landlord, but no such rules or regulations shall
unreasonably impair Tenant's use and enjoyment of the Leased Premises for the
purposes set forth herein.

3.03 RIGHT OF ENTRY. Landlord and its agents, after giving Tenant reasonable
prior notice, shall have the right to enter the Leased Premises for the purpose
of examining the same, or for making any repairs, alterations or additions which
Landlord deems necessary for the safety or maintenance of the Building or the
Leased Premises; provided, however, in the case of an emergency, Landlord shall
not be required to give Tenant prior notice of its intent to enter upon the
Leased Premises. Except in the event of an emergency, Landlord will advise
Tenant of the purpose for entry, and shall endeavor not to disturb Tenant's use
of the Leased Premises during such entry.

3.04 QUIET ENJOYMENT. Landlord agrees that, subject to the terms, covenants and
conditions of this Lease, Tenant may, upon observing and complying with the
terms, covenants and conditions contained herein, peaceably and quietly occupy
the Leased Premises.

3.05 ASSIGNMENT AND SUBLETTING. Tenant shall not assign or encumber this Lease,
nor sublet nor permit the Leased Premises or any part thereof to be used by
others not described in the preceding sentence, without first obtaining the
written consent of the Landlord in each instance, which consent shall not be
unreasonably withheld. Notwithstanding any assignment or subletting, the Tenant
shall remain liable and bound by the covenants, restrictions and conditions of
this Lease and Landlord shall be permitted to enforce the provisions of this
instrument directly against the undersigned Tenant. Any assignee or subtenant
shall also be bound by the covenants, restrictions and conditions of this Lease.
Notwithstanding the foregoing, Tenant may assign or sublet the Leased Premises
or any part thereof, without the written consent of Landlord to any entity
affiliated with Tenant or to any entity affiliated with an affiliate of Tenant
or to any biomedical research entity into which Tenant is merged or to which all
or substantially all of the assets of Tenant are transferred; provided however,
Tenant shall give Landlord notice of any such assignment or subletting, which
notice shall be in writing and accompanied by a true copy of the proposed
documents of assignment or subletting. Landlord's interest in this Lease may be
assigned by Landlord in connection with the sale or other conveyance of the
property in which the Leased Premises are located, and upon such assignment the
obligations of Landlord arising hereunder subsequent to the assignment shall
become obligations solely of such assignee.

3.06 LANDLORD DEFAULTS. In the event that Landlord shall fail to perform any of
its obligations herein set forth, Tenant shall give Landlord written notice of
same, which notice shall set forth with specificity the nature of the obligation
that Landlord has failed to perform. Thereafter, Landlord shall have thirty (30)
days to cure such failure, excepting, however, if such failure cannot be readily
cured within thirty (30) days, then Landlord shall not be declared in default of
its obligations hereunder so long as Landlord commences to cure such failure and
diligently continues to cure such failure to completion. In the event that
Landlord fails to cure any such default within the time period specified
therefor, Tenant may, if it so elects, terminate this Lease, sue for monetary
damages and/or pursue any other remedy available at law or in equity. Landlord
and Tenant acknowledge that actual damages in the event of a default are
difficult to calculate with certainty. Therefore, the maximum amount of damages
to which Tenant might be entitled in the event of a Landlord default hereunder
shall be limited to the gross rent that would have been payable by Tenant for
the unexpired term of the Lease.

                                       3

<PAGE>   17

3.07 TENANT IMPROVEMENTS. The Leased Premises are being let to Tenant in "as is"
condition. No alteration, addition, improvement or refinishing (collectively
herein sometimes called "Alteration") of or to the Leased Premises shall be made
by Tenant which Alteration involves structural changes, changes or openings to
the roof, or any changes or improvements visible from the exterior of the
Building, or the cost of which Alteration is estimated to exceed Twenty-five
Thousand Dollars ($25,000.00) without the prior written consent of Landlord.
Plans for any Alterations shall be submitted to Landlord's Facility Planning and
Construction Department for review and approval prior to commencement of any
work on the Leased Premises. Landlord shall have the right to require Tenant to
remove and restore any of the work described as Landlord's Work on the Plans and
Specifications in the event that Tenant makes any Alteration to Landlord's Work
for which either (i) consent of Landlord was not requested, or (ii) consent to
such Alteration was given by Landlord upon condition that Tenant remove such
Alteration at the end of the Lease. In either event, Tenant shall remove such
Alteration and restore and repair any damage to Landlord's Work caused by such
removal.

3.08 MECHANICS' AND MATERIALMEN'S LIENS. Tenant shall not permit any liens to be
filed against the real property or the Leased Premises or against the Tenant's
leasehold interest by reason of work, labor, services or materials supplied or
claimed to have been supplied to the Tenant or anyone holding the Leased
Premises through or under the Tenant or for any other cause whatsoever relating
to Tenant's use or occupancy of the Leased Premises, whether prior or subsequent
to the commencement of the term hereof. If any such lien shall at any time be
filed against the Leased Premises and Tenant shall fail to remove same or fail
to give adequate security to Landlord for any damage, cost or liability which
might be sustained by Landlord by reason of such lien within thirty (30) days
after the filing thereof, such failure shall constitute an Event of Default
under the provisions of this Lease. If Tenant has a contractor performing
alterations to the Leased Premises, such contractor shall provide Landlord with
evidence of insurance coverage covering damage to property and injury to persons
in amounts satisfactory to Landlord as well as evidence of workers' compensation
insurance in amounts required by the State of New Jersey.

3.09 ENVIRONMENTAL OBLIGATIONS. (A) Tenant shall not cause or permit its
employees, agents, assignees or subtenants to cause any pollutants, hazardous or
toxic substances, or wastes, or contaminated materials designated or regulated
(hereinafter called collectively "Contaminants") under any Environmental Laws or
regulations (as hereinafter defined) to be manufactured, placed, stored, located
or disposed of on, under or at the Leased Premises in violation of any federal,
state or local ordinance, law, rule or regulation. Tenant agrees to indemnify,
defend and hold Landlord harmless from and against any claims, damages, actions,
liabilities, causes of action, suits, investigations and judgments of any nature
whatsoever, including, without limitation, attorneys' fees and expenses,
incurred by Landlord in connection with any breach by Tenant (or any breach by
any of the employees, agents, assignees or subtenants of Tenant) of the
representations and warranties set forth in this paragraph. Tenant covenants and
agrees that it will process, transfer and dispose of all Medical Waste (as
hereinafter defined) generated on the Leased Premises in such a manner so as not
to violate any Environmental Laws (as hereinafter defined). During the term of
this Lease, Tenant shall give Landlord immediate telephonic notice followed by
immediate written notice of any suspected release of Medical Waste or
Contaminants onto the Leased Premises or the real property on which the Leased
Premises are located as soon as Tenant becomes aware of same. Tenant shall
require all assignees and/or subtenants to provide Landlord with similar
telephonic notice followed by written notice of any suspected release of Medical
Waste or Contaminants onto the Leased Premises or the real property on which the
Leased Premises are located. The indemnification obligations under this
paragraph shall survive the termination or expiration of this Lease.

(B) As used herein, the following words have the following meanings:

(a) "Contaminants" means any pollutants, hazardous or toxic substances, or
wastes, or contaminated materials including asbestos, urea formaldehyde,
petroleum products, pesticides, PCBs and all other materials and substances
designated or regulated as pollutants or contaminated materials under any
Environmental Laws or regulation promulgated thereunder.

(b) "Medical Waste" means any toxic substance, waste or contaminated material
and all other materials designated or regulated pollutants or contaminated
materials under any Environmental Laws as commonly used or generated in the
regular course of the practice of medicine or in the provision of any services
ancillary thereto.

(c) "Environmental Laws" means the Clean Water Act, the Clean Air Act, the
Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Superfund Amendment and
Reauthorization Act, the Toxic Substances Control Act, the Occupational Safety
and Health Act and any other federal, state or local environmental statute, rule
or regulation as enacted or amended from time to time and all licenses, orders,
permits, certificates or like authorizations promulgated under any of the
foregoing.

(C) Landlord may require that Tenant arrange for disposal of its Hazardous
Wastes (including Medical Wastes) or that or alternatively, Landlord may require
that Tenant arrange for such disposal on its own.

3.10 WASTE AND MISUSE. During the term of this Lease, Tenant shall neither
commit nor permit its employees, agents, assignees or co-tenants to commit any
waste, misuse or neglect of the Building or the Leased Premises, its

                                       4
<PAGE>   18

apparatus or appurtenances, and shall pay for all damages caused by any such
waste, misuse or neglect. Tenant shall be responsible for any damage to
Landlord's property or equipment that it uses and shall cause such damage to be
repaired.

3.11 DEFAULT BY TENANT. The following shall be deemed to be "Events of Default"
by Tenant under this Lease:

(a) FAILURE TO PAY RENT. The failure by Tenant to pay any installment of rent or
Additional Rent or any part thereof on or before the date when due.
Notwithstanding the first sentence of this paragraph, Landlord agrees that it
will give Tenant notice of non-payment of rent when due, and Tenant shall not be
default hereunder until five (5) business days have expired from the date of
such notice.

(b) ABANDONMENT OF THE LEASED PREMISES OR CESSATION OF ALL OPERATIONS. The
abandonment without the intention of fulfilling Tenant's obligations hereunder,
of all of the Leased Premises for more than Seven (7) consecutive business days.

(c) EXECUTION OR ATTACHMENT LIEN. If an execution or attachment lien shall be
issued against Tenant's interest in the Leased Premises or any property located
therein, and such execution or attachment shall not be vacated or removed by
Court Order, satisfaction, bonding or otherwise, within a period of thirty (30)
days after the issuance thereof. Landlord agrees that it will give Tenant up to
sixty (60) days to have an execution or attachment vacated, removed, satisfied,
or bonded over in the event that Landlord, under the terms of a deed of trust
that may encumber the property from time to time, is given sixty (60) days to
similarly securitize the property for Landlord's lender; or

(d) INSOLVENCY. If Tenant becomes insolvent, makes an assignment for the benefit
of creditors, or makes a transfer in fraud of creditors, any of which shall be
deemed to materially affect Tenant's ability to perform the terms and
conditions of this Lease; or

(e) BANKRUPTCY. If any petition shall be filed against Tenant in any court,
whether or not pursuant to any statute of the United States or any state, in any
bankruptcy, reorganization, composition, extension arrangement or insolvency
proceedings, and Tenant shall thereafter be adjudicated a bankrupt, or such
petition shall be approved by the Court, or if such proceedings shall not be
dismissed within sixty (60) days after the institution of the same, or if no
action is taken by the Tenant's trustee in bankruptcy to assume this Lease
within the sixty (60) day period and:

(1) Cure, or provide adequate assurance that the Trustee will promptly cure,
such Event of Default;

(2) Compensate, or provide adequate assurance that the Trustee will promptly
compensate Landlord for any actual pecuniary loss to Landlord resulting from
such Event of Default; and

(3) Provide adequate assurance of future performance under the Lease.

Or, if Tenant files any voluntary petition in bankruptcy, reorganization,
composition, extension, arrangement or insolvency or for protection against the
claims of its creditors, or admits in writing its inability to pay its debts as
the same mature, the same shall be an Event of Default hereunder.

(f) FAILURE TO PERFORM TERMS. If Tenant shall fail to perform any other terms,
covenants or conditions of this Lease other than those to which reference is
made in paragraphs 3.11(a)-(e), inclusive, other than the payment of money, on
the part of Tenant to be performed or observed, and such failure shall continue
for thirty (30) days after written notice thereof from Landlord to Tenant;
provided, however, if the failure cannot be reasonably cured within thirty (30)
days, then such failure shall not constitute an Event of Default so long as
Tenant commences to cure such failure within thirty (30) days and thereafter
diligently continues to pursue cure without interruption until same has been
completed.

3.12 REMEDIES ON DEFAULT. Upon the occurrence of an Event of Default, Landlord,
without further notice, may (in addition to and/or as an alternative to all
other legal remedies but subject to the trustee in bankruptcy's rights): (a)
Terminate this Lease and Tenant's right to possession of the Leased Premises; or
(b) Terminate only the Tenant's right to possession of the Leased Premises,
without terminating this Lease or releasing Tenant in whole or in part from
Tenant's obligations hereunder for the full term hereof; or (c) Without
terminating this Lease or Tenant's right to possession of the Leased Premises,
enter upon the Leased Premises and do and perform whatever Tenant is obligated
to do under the terms of this Lease.

In the event Landlord exercises its right under subparagraph (a) or (b)
immediately above, Landlord may expel and remove Tenant, or any other person or
persons in occupancy of the Leased Premises, together with their goods and
chattels, with process of law, using such force as may be necessary in the
judgment of Landlord or its agents, all without being liable for any prosecution
or damage therefor.

                                       5

<PAGE>   19

3.13 CONTINUING OBLIGATIONS AND APPLICATION OF RENTS. In the event Landlord
shall elect to exercise its rights under paragraph 3.12 above, Landlord may
recover forthwith from Tenant all reasonable charges, costs and damages
recoverable hereunder and Landlord shall make reasonable effort to relet the
Leased Premises or any part thereof for the account of the Tenant, to any
person, firm or corporation for such rent and term (including a term beyond the
term hereof), and upon such conditions as Landlord, in Landlord's reasonable
discretion, shall determine, and Landlord shall apply all rents received upon
such a reletting as follows: (a) First to the payment of such reasonable
expenses as Landlord may have incurred in recovering possession of the Leased
Premises, including reasonable legal expenses and attorney's fees, (whether or
not suit is filed), and in putting the same into good order or condition, or
preparing or altering the same for rental and reletting, and all other
reasonable expenses, commissions, and charges paid, assumed or incurred by
Landlord in or relating to reletting of the Leased Premises; and (b) Then to the
fulfillment of the covenants of Tenant hereunder.

If the consideration collected by Landlord upon any such reletting is not
sufficient to satisfy in full all of Tenant's covenants hereunder together with
payment of all costs and expenses above enumerated, then Tenant shall pay to
Landlord the amount of the deficiency monthly, or, upon demand, in full.

3.14 SURRENDER AND TERMINATION. Upon the termination of this Lease, whether by
lapse of time or otherwise, Tenant shall, without demand, surrender and deliver
up the Leased Premises peaceably to Landlord, in as good a condition as when
received, normal wear and tear excepted and damage by fire and other casualty
excepted. If Tenant shall remain in possession of the Leased Premises, or any
part thereof, one day after the termination of this Lease, whether by lapse of
time or otherwise, Tenant shall be deemed guilty of an unlawful detainer of the
Leased Premises under the statutes of the State of New Jersey and shall be
subject to eviction and removal forcibly or otherwise with process of law. After
commencement of suit for damages suffered and/or possession of the Leased
Premises, Landlord may receive and collect any rent and other sums due from
Tenant, and the payment of said rent shall not waive or affect said suit. All
rights of Landlord for an Event of Default shall be in addition to and without
prejudice to any remedy or remedies, which Landlord may have at law or in equity
for nonpayment of rent or for breaches of the covenants and agreements hereof.

3.15 LIABILITY. All personal property in the Leased Premises shall be kept
therein at the risk of the Tenant only, and unless damage to personal property
is caused by Landlord's negligence or willful misconduct or Landlord's failure
to provide the services that it is obligated to provide or its failure to repair
within a reasonable time after notice thereof, such items, structures and
systems as Landlord is obligated to repair, Landlord shall not be liable for any
damage to such personal property. Landlord shall not be liable for any damage
done or occasioned by or from electric current, plumbing, gas, water, steam,
sewage, odors, or the bursting, leaking, running or failure of operation of any
radiator, tank, water closet, washstand, waste pipe, air conditioning or any
other apparatus in, above, upon or about the Leased Premises, nor for damage
occasioned by water, snow, or ice being upon any sidewalk or entranceway, or
through such entranceway or any skylight, roof or any other opening in said
Building or Leased Premises, nor for loss resulting from theft or mysterious
disappearance, or any interference with light or air, nor for any damages
arising from the action or negligence of Tenant, co-tenants, subtenants or other
occupants of the Building or of any owners or occupants of adjacent or
contiguous property, except to the extent caused by Landlord's negligence,
willful misconduct or failure to repair within a reasonable time after receipt
of notice from Tenant that such repairs are required. Notwithstanding the
foregoing, Landlord shall not be relieved of its obligation to make repairs to
the Leased Premises, which it is obligated to make within a reasonable time
after receipt of notice from Tenant that such repairs are required.

3.16 INSURANCE. Tenant shall carry workers' compensation insurance covering all
of its employees (including students, if such students are employees of Tenant)
to the full extent required by the laws of the State of New Jersey. In addition,
Tenant shall carry such other types and kinds of insurance and in such amounts
as may be reasonably required by Landlord. If required, such policies of
insurance shall name Landlord as an additional insured. Upon request of
Landlord, evidence of all required policies of insurance shall be delivered to
Landlord. All such policies shall provide for at least twenty (20) days prior
written notice to Landlord before cancellation.

3.18 REMEDIES AND ENFORCEMENT. All of the remedies herein are cumulative, and
given without impairing any other rights or remedies of Landlord or Tenant. The
prevailing party in any dispute between Landlord and Tenant shall pay and
discharge all reasonable costs, expenses and attorney's fees that shall arise
from enforcing the covenants of this Lease. Failure by Landlord or Tenant to
exercise all of its rights hereunder in the event of breach shall not be deemed
a waiver of such rights as to subsequent breaches of covenants.

3.19 BENEFITS. All the terms of this Lease shall extend to and be binding upon
the respective heirs, executors, administrators, successors and assigns of the
respective parties hereto.

3.20 CONDEMNATION. (a) LEASED PREMISES. If all of the Leased Premises are taken
by condemnation or conveyed by deed in lieu of condemnation, this Lease shall
terminate on the date so taken or conveyed, and the Rent shall be prorated as of
that date. If part of the Leased Premises is taken by condemnation or deed in
lieu thereof, and the Leased Premises are thereby rendered not reasonably
suitable for the continued conduct of Tenant's business, taking into
consideration the

                                       6
<PAGE>   20

nature, size and scope of such business immediately prior to the taking, then
Tenant may terminate this Lease within (30) days following such taking or
conveyance by written notice to Landlord, and, in the event of such termination,
all Rent shall be abated as of the date of taking or conveyance. If Tenant does
not so elect, then with respect to the part of the Leased Premises not taken or
conveyed, the Base Rent shall be reduced by the number of rentable square feet
that the condemned part within the Leased Premises bears to the total rentable
square footage of the Leased Premises, and in such event Landlord shall restore
the Leased Premises to an architecturally complete unit, but in no event shall
Landlord be required to expend any sums in excess of that awarded or paid to
Landlord for the taking or for the conveyance in lieu thereof.

(b) COMPENSATION. All compensation awarded or paid shall belong to and be the
property of the Landlord, but the foregoing shall not be construed to preclude
the Tenant from prosecuting any claim directly against the condemning authority
in such condemnation proceedings for loss of business, or depreciation to,
damage to, or cost of removal of or for the value of stock, trade fixtures,
furniture, and other personal property belonging to the Tenant so long as no
such claim shall have the effect of diminishing or otherwise adversely affecting
the Landlord's award or compensation except as provided herein.

3.21 SUBORDINATION AND NONDISTURBANCE. At the election of any mortgagee holding
a mortgage now or hereafter placed of record affecting the real property on
which the Leased Premises are located, Tenant shall execute a subordination
agreement subordinating this Lease to the lien of the mortgage provided that any
mortgagee seeking to subordinate this Lease to the lien of its mortgage shall
grant Tenant a non-disturbance agreement recognizing all of the rights granted
Tenant under this Lease. If a mortgagee seeks evidence of subordination from
Tenant, Tenant shall deliver, within thirty (30) days of Landlord's request
therefor, a non-disturbance and subordination agreement in substance and form
reasonably satisfactory to Landlord's mortgagee and the Tenant, but this
obligation shall not require Tenant to give up any rights which it may have
under this Lease.

At the request of any mortgagee, Tenant shall, within thirty (30) days, execute
and deliver such documents as may be reasonably required by a mortgagee
attorning to the mortgagee or to any purchaser at any foreclosure sale so long
as such mortgagee or any purchaser at any foreclosure sale simultaneously
delivers to Tenant a non-disturbance agreement confirming, inter alia, that so
long as Tenant is not in default under the terms of this Lease, Tenant shall be
entitled to possession of the Leased Premises and all other rights and
privileges herein granted.

                                   ARTICLE IV.
                                  MISCELLANEOUS

4.01 RELEASING. Landlord may show the Leased Premises to prospective tenants
during the last 180 days of the Term during reasonable hours after giving Tenant
prior oral notice and Landlord may exhibit a "For Lease" sign on the Leased
Premises.

4.02 RECORDING OF LEASE MEMORANDUM. If desired by Tenant and permitted by
Landlord, Tenant may record a Memorandum of Lease so long as Landlord approves
the form and content of said Memorandum of Lease. All costs associated with
recording a Memorandum of Lease shall be paid by Tenant.

4.03 LANDLORD'S RESPONSIBILITIES. The term "Landlord" as used in this Lease, so
far as covenants or obligations on the part of the Landlord are concerned, shall
be limited to mean and include only the owners at the time in question of the
fee simple title to the Building, and in the event of the sale of said fee
simple estate, then provided that the party to whom the fee estate is
transferred or assigned assumes in writing all of the obligations of the
Landlord hereunder, then the party conveying said fee simple estate shall be
automatically relieved after the date of transfer, of all liability with respect
to the performance of any obligations on the part of the Landlord contained in
this Lease arising out of acts thereafter occurring or covenants thereafter to
be performed, it being intended hereby that all the obligations contained in
this Lease on the part of the Landlord shall be binding upon Landlord, its
successors and assigns, only in respect of their respective periods of ownership
of said fee simple estate.

4.04 TITLES. It is agreed that the titles of particular paragraphs of this Lease
are inserted only as a matter of convenience and for reference, and are not a
part of this Lease, nor in any way to define, limit or describe the scope or
intent of the particular paragraph to which they refer.

4.05 CONSENT NOT UNREASONABLY WITHHELD. Unless otherwise specifically provided,
whenever consent or approval of Landlord or Tenant is required under the terms
of this Lease, such consent or approval shall not be unreasonably withheld or
delayed. If either party withholds any consent or approval, requested by the
other, such party shall upon written request, deliver to the other party a
written statement giving the reasons therefor.

4.06 AUTHORITY OF TENANT. Tenant and the person or persons executing this Lease
in its behalf, each separately warrant that they have the authority to do so on
behalf of Tenant and fully obligate Tenant to all terms and provisions of

                                       7
<PAGE>   21

this Lease. If Tenant is a corporation, Tenant warrants that it has legal
authority to operate and is authorized to do business in the state in which the
Leased Premises are situated.

4.07 ENTIRE AGREEMENT. This Lease constitutes the sole and entire contract
between the parties relating to the Leased Premises. No representations as to
the Leased Premises have been made by the Landlord to the Tenant either directly
or indirectly prior to or at the execution of this Lease that are not herein
expressed. The terms, covenants and conditions of this Lease may not be changed
orally but only by an instrument in writing signed by the parties hereto. This
Lease and that certain research agreement by and between the parties sets forth
all of the rights and obligations of the parties one to the other and supercede
and cancel any rights or obligations of the parties one to the other contained
or arising as a result of any prior agreements.

4.08 EARLY TERMINATION. Notwithstanding anything contained herein to the
contrary, including the obligations of Landlord under section 3.21 hereof,
Landlord shall have the right to terminate this Lease should the capital plan of
the Landlord call for, or if the Landlord desires to renovate or deconstruct the
building in which the Leased Premises is located. Such termination shall be
effective on the later of (i) the anniversary of the date on which this Lease is
executed or six (6) months after Tenant receives notice of Landlord's intent to
terminate this Lease. Notice of termination shall be given in writing.

         IN WITNESS WHEREOF, the parties have executed this Lease as of the 8th
day of May, 2001, it being agreed that the Lease relates to property in the
State of New Jersey and shall be construed in accordance with the laws thereof.

LANDLORD:                               TENANT:
University of Medicine                  BioDelivery Sciences International, Inc.
  and Dentistry of New Jersey

By:  /s/ Denise Mulkern                 By:  /s/ Leila Zarif
   -------------------------------         -------------------------------------
       Denise Mulkern                              Leila Zarif
Title: Vice President for Finance       Title: E. V.P. Research & Development
        and Treasurer
Date:  5/8/01                           Date:  5/8/01

                                       8

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