Document:

Promissory Note

 Exhibit 10.1 
 Confidential Treatment Requested For Portions of This Exhibit Denoted With “****” 
 PROMISSORY NOTE 
  
  

			
	 $1,000,000.00
	 	Dated as of April 2, 2007

  
 BioDelivery
Sciences International (the “Company”) promises to pay to the order of Hopkins Capital Group II, LLC (the “Lender”) the principal sum of One Million Dollars and No cents ($1,000,000.00) in lawful money of the United States of
America, on the terms and conditions described below. 
 1.      Principal. The
principal balance of this Note shall be repayable on June 30, 2007. 
 2.      Interest. No interest shall accrue on the unpaid principal balance of this Note. 
 3.      Application of Payments. All payments shall be applied first to payment in full of any costs incurred in the collection of any sum due under this Note, including (without
limitation) reasonable attorney’s fees, then to the payment in full of any late charges and finally to the reduction of the unpaid principal balance of this Note. 
 4.      Events of Default. The following shall constitute Events of Default: 
 (a)      Failure to Make Required Payments. Failure by Company to pay the principal of this Note within five (5) business days following the date when due.

 (b)      Voluntary Bankruptcy, Etc. The commencement by Company of a voluntary case under
the Federal Bankruptcy Code, as now constituted or hereafter amended, or any other applicable federal or state bankruptcy, insolvency, reorganization, rehabilitation or other similar law, or the consent by it to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of Company or for any substantial part of its property, or the making by it of any assignment for the benefit of creditors, or the failure
of Company generally to pay its debts as such debts become due, or the taking of corporate action by Company in furtherance of any of the foregoing. 
 (c)      Involuntary Bankruptcy, Etc. The entry of a decree or order for relief by a court having jurisdiction in the premises in respect of Company in an involuntary case under the
Federal Bankruptcy Code, as now or hereafter constituted, or any other applicable federal or state bankruptcy, insolvency or other similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of
Company or for any substantial part of its property, or ordering the winding-up 
  

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 or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect
for a period of 60 consecutive days. 
 5.      Remedies. 
 (a)      Upon the occurrence of an Event of Default specified in Section 4(a), Lender may, by written
notice to Company, declare this Note to be due and payable, whereupon the principal amount of this Note, and all other amounts payable hereunder, shall become immediately due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived, anything contained herein or in the documents evidencing the same to the contrary notwithstanding. 
 (b)      Upon the occurrence of an Event of Default specified in Sections 4(b) and 4(c), the unpaid principal balance of, and all other sums payable with regard to, this Note shall
automatically and immediately become due and payable, in all cases without any action on the part of Lender. 
 6.      Waivers. Company and all endorsers and guarantors of, and sureties for, this Note waive presentment for payment, demand, notice of dishonor, protest, and notice of protest with regard to the
Note, all errors, defects and imperfections in any proceedings instituted by Lender under the terms of this Note, and all benefits that might accrue to Company by virtue of any present or future laws exempting any property, real or personal, or any
part of the proceeds arising from any sale of any such property, from attachment, levy or sale under execution, or providing for any stay of execution, exemption from civil process, or extension of time for payment; and Company agrees that any real
estate that may be levied upon pursuant to a judgment obtained by virtue hereof, on any writ of execution issued hereon, may be sold upon any such writ in whole or in part in any order desired by Lender. 
 7.      Unconditional Liability. Company hereby waives all notices in connection with the delivery,
acceptance, performance, default, or enforcement of the payment of this Note, and agrees its liability shall be unconditional, without regard to the liability of any other party, and shall not be affected in any manner by any indulgence, extension
of time, renewal, waiver or modification granted or consented to by Lender, and consents to any and all extensions of time, renewals, waivers, or modifications which may be granted by Lender with respect to the payment or other provisions of this
Note, and agrees that additional Company, endorsers, guarantors, or sureties may become parties hereto without notice to them or affecting their liability hereunder. 
 8.      Notices. Any notice called for hereunder shall be deemed properly given if (i) sent by certified mail, return receipt requested,
(ii) personally delivered, (iii) dispatched by any form of private or governmental express mail or delivery service providing receipted delivery or (iv) sent by telefacsimile or (v) to the following addresses or to such other
address as either party may designate by notice in accordance with this Section: 
  

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 If to Company: 
   BioDelivery Sciences International 
   2501 Aerial Center Parkway 
   Suite 205

   Morrisville, NC 27560 
   Attn: Mark A. Sirgo, Pharm.D. 
   Fax:
(919) 653-5161 
 If to Lender: 
   Hopkins Capital Group II, LLC 
   324 Hyde Park
Avenue 
   Suite 350 
   Tampa FL 33606 
   Attn: Frank E. O’Donnell

   Fax: (813) 258-1658 
 Notice shall be deemed given on the earlier of (i) actual receipt by the receiving party, (ii) the date shown on a telefacsimile transmission confirmation, (iii) the date reflected
on a signed delivery receipt, or (iv) two (2) Business Days following tender of delivery or dispatch by express mail or delivery service. 
 9.        Option To Enter Into Royalty Purchase. As further consideration for the loan made by Lender evidenced hereby, Company and Lender each have the right, to be
exercised in such party’s sole discretion, to participate in and enter into, and to cause the non-exercising party to participate in and enter into, a royalty purchase agreement, on substantially similar terms and conditions as set forth on
Exhibit A attached hereto, for a period of six (6) months from the date of this Note. 
 10.      Construction. THIS NOTE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE DOMESTIC, INTERNAL LAW, BUT NOT THE LAW OF CONFLICT OF LAWS, OF THE STATE OF NEW YORK. 
 11.      Severability. Any provision contained in this Note which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction. 
  

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 IN WITNESS WHEREOF, Company, intending to be legally bound hereby, has caused this
Note to be duly executed by its Chief Executive Officer the day and year first above written. 
  

					
	 BIODELIVERY SCIENCES INTERNATIONAL

			
	 By:
	 	 /s/ Mark A. Sirgo
	 	
		 	       Mark A. Sirgo
	 	
		 	       President and Chief Executive Officer
	 	

  

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 EXHIBIT A 
 Form of Royalty Purchase Agreement 
  

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 FORM OF 
 PURCHASE AGREEMENT 
 THIS PURCHASE AGREEMENT dated as of
                    ,              (the “Effective Date”),
among Hopkins Capital Group II, LLC (“HCG”), BioDelivery Sciences International, Inc. (“BioDelivery”), and Arius Pharmaceuticals, Inc., a wholly-owned subsidiary of BioDelivery (“Subsidiary”, and
together with BioDelivery, the “Company”). HCG and Company are sometimes referred to herein individually as a “Party” and collectively as “Parties”. 
 WHEREAS, Company is developing the compound currently identified as fentanyl in conjunction with the BEMA Technology; and 
 WHEREAS, Company and HCG would like to set forth the terms and conditions pursuant to which HCG shall pay the Company US$5,000,000 and,
in return, upon approval of the Fentanyl Product and subsequent commercialization of the Fentanyl Product, Company shall make payments to HCG based upon, among other things, revenue of the Company generated in connection with sales of the Fentanyl
Product. 
 NOW, THEREFORE, in consideration of the foregoing premises and the representations, covenants and agreements
contained herein, the Parties, intending to be legally bound, hereby agree as follows: 
 ARTICLE 1 
 DEFINITIONS 
 The
following terms, whether used in the singular or plural, shall have the following meanings: 
 1.1
      “Affiliate” means any Person directly or indirectly controlled by, controlling or under common control with, a Party, but only for so long as such control shall continue. For purposes of this
definition, “control” (including, with correlative meanings, “controlled by”, “controlling” and “under common control with”) means, with respect to a Person, possession, direct or indirect, of (a) the
power to direct or cause direction of the management and policies of such Person (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise), or (b) at least fifty percent (50%) of the
voting securities (whether directly or pursuant to any option, warrant or other similar arrangement) or other comparable equity interests. For the avoidance of doubt, neither of the Parties shall be deemed to be an “Affiliate” of the
other. 
 1.2       “Approval” means the approval by the relevant Governmental
Authority(ies) required for the initial launch, marketing and sale of a Product for human therapeutic use in a particular jurisdiction (including but not limited, in jurisdictions other than the United States, to all pricing and reimbursement
approvals). 
 1.3       “QLT” means QLT USA, Inc., a Delaware corporation.

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 1.4      “QLT License” means that
certain License Agreement executed between QLT and Subsidiary, dated May 27, 2004, as amended, attached hereto as Schedule 1.4, as the same may be amended from time to time. 
 1.5      “Arius Two License” means that certain License Agreement executed between
Subsidiary and Arius Two, Inc. (“Arius Two”), dated August 2, 2006, as amended, attached hereto as Schedule 1.5, as the same may be amended from time to time. 
 1.6      “BEMA” or “BEMA Technology” means (i) with respect to the
United States of America (and its territories and protectorates), the bioerodible mucoadhesive drug delivery technology claimed in the Patent Rights licensed to Subsidiary pursuant to the QLT License and (ii) with respect to all countries other
than the United States of America (and its territories and protectorates), the bioerodible mucoadhesive drug delivery technology claimed in the Patent Rights licensed to Subsidiary pursuant to the Arius Two License. 
 1.7      “Business Day” means a day that is not a Saturday, Sunday or a day on which
banking institutions in New York, New York are authorized by Law to remain closed. 
 1.8      “Change of Control” shall mean a (a) change in ownership or control of a Party effected through any of the following transactions: (i) a merger, consolidation or other
reorganization, unless securities representing more than fifty percent (50%) of the total combined voting power of the voting securities of the successor corporation are immediately thereafter beneficially owned, directly or indirectly and in
substantially the same proportion, by the persons who beneficially owned such Party’s outstanding voting securities immediately prior to such transaction, (ii) any transfer or other disposition of all or substantially all of such
Party’s assets, (iii) the acquisition, directly or indirectly by any person or related group of persons (other than such Party or a person that directly or indirectly controls, is controlled by, or is under common control with, such
Party), of beneficial ownership of securities possessing more than fifty percent (50%) of the total combined voting power of such Party’s outstanding securities or (b) a change in the power to direct or cause the direction of the
management and policies of a Party, directly or indirectly, whether through ownership of voting securities or by contract or otherwise. 
 1.9      “Commercially Reasonable Efforts” means, with respect to a Party, the efforts which would be used by that Party consistent with its normal business practices,
which in no event shall be less than the level of efforts and resources expended by comparable small cap biotechnology companies with respect to a product or potential product at a similar stage in its development or product life, taking into
account product labeling, market potential, medical and clinical considerations, the regulatory environment, financing environment, patent and other proprietary position and competitive market conditions in the therapeutic area, all as measured by
the facts and circumstances at the time such efforts are due. 
 1.10     “Company Patent
Rights” means the Patent Rights Controlled by the Company to the extent that they claim BEMA or Fentanyl Product, including without limitation the Patent Rights set forth in Schedule 1.10. 
  

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 1.11      “Compound” means fentanyl,
including without limitation metabolites or prodrugs thereof, and any hydrates, conjugates, salts, esters, isomers, polymorphs or analogues of any of the foregoing. 
 1.12      “Confidential Information” has the meaning set forth in Section 5.2. 
 1.13      “Control” means, when used in reference to intellectual property, the possession
of the ability to grant a license or sublicense as provided for herein without (i) requiring the consent of a third party or (ii) violating the terms of any agreement or other arrangement with any third party. 
 1.14      “Fentanyl Product” means, on a country-by-country and product-by-product basis,
any product covered by the Company Patent Rights in the country of sale that contains the Compound alone or in combination with one or more other substances. 
 1.15      “First Commercial Sale” means the first commercial sale, following Approval, of a Product for human therapeutic use by the Company, an
Affiliate thereof, or any sublicensee of either of the foregoing. 
 1.16      “GAAP” means US generally accepted accounting principles. 
 1.17      “Governmental Authority” means any court, tribunal, arbitrator, agency, department, legislative body, commission or other instrumentality of (a) any government of any country,
(b) any foreign, federal, state, county, city or other political subdivision thereof or (c) any supranational body. 
 1.18      “Laws” means all laws, statutes, rules, codes, regulations, orders, judgments and/or ordinances of any Governmental Authority. 
 1.19      “Net Sales” means the gross amounts billed or invoiced by Company and its
Affiliates, sublicensees and distributors, and each of their successors and assigns, for sales of the Products throughout the world, less the following deductions to the extent included in the gross invoiced sales price: 
 (a)     bona fide discounts (including but not limited to cash discounts, trade discounts, quantity
discounts, and prompt payment discounts), credits, rebates, refunds, allowances, cost of free goods, adjustments, rejections, recalls and returns, including rebates, refunds, allowances, or credits granted with respect thereto, and charge-back
payments granted to managed health care organizations or to Governmental Authorities, their agencies, and purchasers and reimbursers or to trade customers, recorded on the Company’s books in accordance with generally accepted accounting
principles, including but not limited to wholesalers and chain and pharmacy buying groups, provided that such items relate to the Product and only the portion of such items related to the Product shall be deducted; and 
 (b)     taxes, tariffs and similar obligations, duties or other governmental charges (other than
income or corporation taxes) levied on, absorbed or otherwise imposed on sales of the Product; 
  

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 If any such sales to third parties are made in transactions that are not at
arm’s length between the buyer and the seller, then the gross amount to be included in the calculation of Net Sales shall be the amount that would have been invoiced had the transaction been conducted at arm’s length, subject to deductions
set forth in subparagraphs (a) and (b) above. Such amount that would have been invoiced shall be determined, wherever possible, by reference to the average selling price of the relevant Product in arm’s-length transactions in such
country. Notwithstanding the foregoing, amounts received by Company or its Affiliates, sublicensees or distributors for the sale of Products (i) among Company and its Affiliates, sublicensees or distributors for resale or (ii) for research
or development purposes shall not, in either case, be included in the computation of Net Sales hereunder. Net Sales shall be determined from books and records maintained in accordance with GAAP, consistently applied throughout the organization and
across all products of the entity whose sales of Products are giving rise to Net Sales. 
 Net Sales of a Combination Product
(as defined below) shall be calculated as if the invoiced sales price for a Product included within the Combination Product is (i) the average sales price at which Company, its Affiliate, or a sublicensee or distributor thereof sells, in the
calendar quarter of the applicable sale, the Product alone and not as a part of the Combination Product in the applicable country or, if the Product is not offered in a country except as part of the Combination Product, the average sales price at
which the Product is sold alone across all countries in which such Product is sold, or (ii) to the extent the applicable Product has not been sold other than in a Combination Product, the amount reasonably specified between Company or its
Affiliate, sublicensee, or distributor and any other party to an agreement regarding that Combination Product as the portion of the sales price attributable to the Product. In the event that Company includes a Product as part of a single bundled
sale of separate products with separately stated prices, the Net Sales attributable to such Product shall be the higher of (i) the separately stated price stated for such Product sold in such bundled sale or (ii) the average price at which
such Product is sold in the applicable country in a non-bundled sale or, if not sold in the applicable country in a non-bundled sale, the average price at which such Product is sold in a non-bundled sale across all countries in which such Product is
sold. For purposes of this paragraph, “Combination Product” means a Product that is sold together with any other products and/or services at a unit price, whether packaged together or separately with another pharmaceutical product or other
device, equipment, instrumentation, or other components (other than solely containers or packaging exclusively for the Product). 
 1.20      “Other Products” means, on a country-by-country and product-by-product basis, any products covered by Company Patent Rights that are not Fentanyl Products. 
 1.21      “Patent Rights” means patents and patent applications and all substitutions,
divisions, continuations, continuations-in-part, any patent issued with respect to any such patent applications, any reissue, reexamination, renewal or extension (including any supplemental patent certificate) of any such patent, and any
confirmation patent or registration patent or patent of addition based on any such patent, and all counterparts thereof in any country. 
 1.22      “Person” means any natural person or any corporation, company, partnership, joint venture, firm or other entity, including without limitation a Party.

  

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 1.23      “Product” means Fentanyl
Product or Other Product. 
 1.24      “Shortfall Amount” has the meaning set
forth in Section 4.3.3. 
 ARTICLE 2 
 PRODUCT DEVELOPMENT; INTELLECTUAL PROPERTY 
 2.1      Development Diligence. Company shall use Commercially Reasonable Efforts to develop a Fentanyl Product. 
 2.2      Intellectual Property. Company shall use Commercially Reasonable Efforts to prepare, file, prosecute and maintain the Company Patent Rights owned by
Company. Where Company Patent Rights, are not owned by Company, Company shall use Commercially Reasonable Efforts to enforce such Company Patent Rights in accordance with the terms of the instrument or agreement granting Company such rights.

 ARTICLE 3 
 REGULATORY
REPORTING 
 Company shall notify HCG promptly in writing upon (i) each receipt of an Approval of Fentanyl Product
in the United States or any member country of the European Union, (ii) First Commercial Sale of Fentanyl Product in the United States, and (iii) First Commercial Sale of Fentanyl Product in any member country of the European Union.

 ARTICLE 4 
 COMMERCIALIZATION AND FINANCIAL PROVISIONS 
 4.1      Commercialization
Efforts. Company shall use Commercially Reasonable Efforts to market, distribute, sell and otherwise commercialize the Fentanyl Product. 
 4.2      Upfront Fees. HCG shall pay to Company an upfront payment amount of Five Million Dollars ($5,000,000) upon execution of this Agreement as consideration for the
Company’s obligation to pay the amounts described below. 
 4.3      HCG Payments.

    4.3.1      Payments based on Net Sales. Commencing with respect to
the first calendar quarter following the First Commercial Sale of a Fentanyl Product in the United States, Company will pay to HCG, on a quarterly basis, an amount based upon Net Sales of Fentanyl Products in the United States as follows:

 (a)      **** of the first **** of Net Sales of Fentanyl Products in the United
States; and 
 (b)      **** of Net Sales of Fentanyl Products in the United States
exceeding the first **** of Net Sales of Fentanyl Products in the United States. 
  

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 4.3.2      Minimum HCG Payments. Commencing
with respect to the first complete calendar year following the First Commercial Sale of a Fentanyl Product, if the payments made by Company to HCG pursuant to Section 4.3.1 with respect to any particular calendar year hereunder are less than
****, Company shall pay to HCG an amount equal to the difference between **** and the aggregate payments previously paid to HCG with respect to such calendar year (the “Shortfall Amount”), which Shortfall Amount payment shall be
made to HCG at the time the payment for the fourth calendar quarter of such calendar year is paid to HCG pursuant to the terms of Section 4.3.6. Notwithstanding the foregoing, (i) the Company’s obligations under this
Section 4.3.2 shall terminate once the Company’s total payments to HCG under this Agreement total **** and (ii) the Company shall not be required to pay any amounts to HCG under this Section 4.3.2 to the extent such payment would
cause the Company’s payments to HCG under this Agreement to exceed ****. 
 4.3.3      No US Fentanyl Product Approval. If Approval of the Fentanyl Product in the United States is not obtained by December 31, 2008 but Approval of the Fentanyl Product is obtained in any
country of the European Union prior to June 30, 2009, then, notwithstanding anything to the contrary, (i) the Company’s payment obligations under Sections 4.3.1 and 4.3.2 shall terminate and (ii) commencing with respect to the
later of (A) the third calendar quarter of 2009 or (B) the first calendar quarter following the First Commercial Sale of a Fentanyl Product in the European Union, Company will pay to HCG, on a quarterly basis, an amount based upon Net
Sales of Fentanyl Products as follows: 
 (a)      **** of the first **** of Net Sales of
Fentanyl Products in the European Union and United States; and 
 (b)      **** of Net
Sales of Fentanyl Products in the European Union exceeding the first **** of Net Sales of Fentanyl Products in the European Union and United States. 
 4.3.4      Termination Payment. The Company shall have the right, at any time, to terminate all payment obligations to HCG under this Agreement by providing written notice to HCG
and paying HCG an amount equal to the greater of (i) **** or, if such notice is given after the Company’s first quarterly payment under Section 4.3.1 or 4.3.3 of this Agreement, (ii) an amount equal to the product of
**** times the amount of the most recent quarterly payment paid to HCG pursuant to Section 4.3.5 (excluding, for purposes of such calculation, any amounts paid by the Company to HCG under Section 4.3.2 above). For purposes of
clarification but not limitation, if the Company exercises the right provided under this Section 4.3.4 prior to its first payment to HCG under Section 4.3.1 or 4.3.3, the Company may exercise such right by providing notice and a payment of
**** to HCG. Upon providing notice and payment to HCG under this Section 4.3.4, this Agreement and all payment obligations of the Company under this Agreement shall terminate. 
 Notwithstanding anything to the contrary contained in this Section, the Company shall have the right, at any time, to refund to HCG the
upfront payment amount of Five Million 
  

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 Dollars ($5,000,000) to the extent that the Company has received notice from any regulatory authority
that this Agreement violates any foreign, federal, state or local statute, law, rule or regulation, or to the extent that the Company has received an opinion of counsel that this Agreement is a material violation of any agreement or instrument to
which the Company is a party. Upon payment of such amount to HCG by the Company, this Agreement shall terminate and neither party shall have any claim or right or action against the other party. 
 4.3.5      Timing of Payments. All amounts due HCG pursuant to Section 4.3.1 or 4.3.3, as
applicable, shall be payable quarterly in arrears and such payments shall be made by Company to HCG within ninety (90) days after March 31, June 30, September 30 and December 31 of each year. Each quarterly payment shall be
accompanied by a written statement as described in Section 4.3.6. 
 4.3.6      Written Statement. Along with each remittance of payments pursuant to Section 4.3.1 or 4.3.3 to HCG, Company shall include a report covering: (i) the gross sales of all Products
subject to this Agreement sold by Company, its Affiliates and sublicensees, (ii) the Net Sales of all Products subject to this Agreement sold by Company, its Affiliates and its sublicensees, during the calendar quarter and the detailed
calculation of the reconciliation between gross sales and Net Sales subject to this Agreement, showing those items allowed to be deducted from gross sales pursuant to the definition of Net Sales; (iii) the amounts payable in US Dollars with
respect to Net Sales subject to this Agreement; (iv) the exchange rates used in determining the amount of Dollars. If no sales of Products subject to this Agreement have been made during any reporting period, Company will provide a statement to
this effect to HCG. 
 4.3.7      HCG Warrant. The Company shall simultaneously with
the execution hereof transfer to HCG a warrant for the purchase of Four Hundred Seventy Five Thousand (475,000) shares of Common Stock of the Company with a strike price of Five Dollars and Fifty Five Cents ($5.55) per share with a term
extending until the date which is two years from the date of the first Approval of a Product. 
 4.4      Payment Currency. All amounts due under this Agreement shall be paid to the designated Party in United States dollars. The US dollar equivalent of Net Sales incurred in a currency other than
U.S. Dollars shall be calculated using the methodology set forth in any license, strategic or collaborative partnership agreement with a third party generating such sales, or otherwise using the average of the spot rate (the “Closing mid-point
rates” found in the “Dollar spot forward against the Dollar” table published by The Financial Times, or any other publication agreed to by the Parties) prevailing during the calendar quarter of the applicable payment. 
 4.5      Payments. All payments under this Agreement shall be made on or before the due date by
electronic transfer in immediately available funds to the respective account designated in writing by HCG prior to such payment. All payments under this Agreement shall bear interest from thirty days following the date due until paid at a rate equal
to one half of one percent per month calculated on the number of days such payments are paid after the date such payments are due. 
  

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 4.6      Books and Records. Company shall keep
comprehensive books and records relating to this Agreement in accordance with GAAP. Such books and records shall document all gross sales and Net Sales, and include all information subject to audit pursuant to Section 4.7. All such books and
records shall be maintained for three (3) years following the relevant year or such longer period as is required by Law. 
 4.7      Audits. These audit and adjustment provisions apply with respect to all payments due or owing pursuant to this Agreement. HCG shall have the right to have the applicable books and records of
Company audited under appropriate confidentiality provisions for the sole purpose of verifying the accuracy of all financial, accounting and numerical information and calculations under this Agreement. Any such audit shall be conducted no more than
once each year, and upon at least twenty (20) Business Days’ advance notice during normal business hours and in a manner that does not interfere unreasonably with the business of Company. The results of any such audit shall be delivered in
writing to each Party. Any underpayment or overbilling determined by such audit shall promptly be paid or refunded by Company. If Company has underpaid or overbilled amounts due under this Agreement by more than five percent (5%) over any
reporting period, Company shall also reimburse HCG for the cost of such audit (with the cost of the audit to be paid by HCG in all other cases), plus interest in accordance with Section 4.5, from the date of any such underpayment or
overpayment. 
 4.8      Withholding; Taxes. Notwithstanding anything to the contrary,
in the event any of the payments made by Company pursuant to this Article 4 become subject to withholding taxes under the laws of any jurisdiction, such amounts payable shall be reduced by the amount of taxes deducted and withheld, and Company shall
pay the amounts of such taxes to the proper Governmental Authority in a timely manner and promptly transmit to HCG an official tax certificate or other evidence of such tax obligations together with proof of payment from the relevant Governmental
Authority of all amounts deducted and withheld sufficient to enable HCG to claim such payment of taxes. Any such withholding taxes required under applicable law to be paid or withheld shall be an expense of, and borne solely by, HCG. Company will
provide HCG with reasonable assistance, at HCG’ expense, to enable HCG to recover such taxes as permitted by law. 
 4.9      Blocked Currency. Notwithstanding anything to the contrary, in each country where the local currency is blocked and cannot be removed from the country under such country’s applicable law,
amounts accrued in that country shall be paid to HCG in such country in local currency by deposit in a local bank designated by HCG, unless the Parties otherwise agree. 
 4.10    HCG Repayment Right. Notwithstanding anything herein to the contrary, during the period: (a) beginning from the date that the Company secures a commercial
partner for a Fentanyl Product, and at which point such commercial partner provides cumulatively at least **** of payments (a “Fentanyl Product Payment”) and (b) ending upon the Company’s public announcement of the commercial
launch of such Fentanyl Product, HCG may exercise a right (the “Repayment Right”), by written notice to the Company, to terminate this agreement and require that the Company refund to HCG an amount equal to Five Million Dollars
($5,000,000). It is agreed that in the event a commercial partner for a Fentanyl Product is not secured and/or a cumulative Fentanyl Product Payment equal to at least 
  

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 **** is not secured, HCG may nonetheless exercise its Repayment Right at any time after
January 1, 2009 and prior to the close of business on June 30, 2009. The Company agrees that, in the event it receives the Fentanyl Product Payment, it shall place Five Million Dollars ($5,000,000) of such Fentanyl Product Payment in a
restricted bank account and shall not, without the prior written consent of HCG, draw upon or utilize such funds until the expiration of the Repayment Right. 
 ARTICLE 5 
 CONFIDENTIAL INFORMATION 
 5.1    Treatment of Confidential Information. During the term of this Agreement and for five (5) years
thereafter, HCG shall maintain Confidential Information (as defined in Section 5.2) of the Company in confidence, and shall not disclose, divulge or otherwise communicate such Confidential Information to others (except for employees, agents and
advisors under obligations of confidentiality) or use it for any purpose other than for tax or accounting purposes, and HCG agrees to exercise reasonable efforts to prevent and restrain the unauthorized disclosure of such Confidential Information by
any of its directors, officers, employees, consultants, subcontractors, licensees, auditors or agents, which reasonable efforts shall be at least as diligent as those generally used by HCG in protecting its own confidential and proprietary
information. HCG acknowledges that the confidentiality provisions of this Agreement shall be deemed to be an agreement to keep the Confidential Information in confidence as contemplated by Regulation FD promulgated by the Securities and Exchange
Commission. In addition, HCG acknowledges and agrees that some of the Confidential Information may be considered “material non-public information” for purposes of the federal securities laws (“Insider Information”) and
that HCG and its officers, employees, agents and affiliates will abide by all securities laws relating to the handling of and acting upon Insider Information. 
 5.2    Confidential Information. “Confidential Information” means all trade secrets or other proprietary information, including without limitation any
proprietary data and materials (whether or not patentable or protectable as a trade secret), regarding Company’s technologies, products, business or objectives or regarding the Products or otherwise (including the Company’s business plans
and results of operations generally), which is disclosed by Company to HCG. Notwithstanding the foregoing, there shall be excluded from the foregoing definition of Confidential Information any of the foregoing that: 
  5.2.1      either before or after the date of the disclosure to HCG is lawfully
disclosed to HCG, with no obligation of confidentiality, by third parties not in violation of any obligation to the Company; or 
  5.2.2      either before or after the date of the disclosure to HCG becomes published or generally known to the public through no fault or omission on the part of HCG or its
Affiliates; or 
  5.2.3      is required to be disclosed by HCG to comply
with applicable securities and other Laws, to defend or prosecute litigation or to comply with governmental regulations or the regulations or requirements of any stock exchange, provided that HCG 
  

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 Confidential Treatment Requested For Portions of This Exhibit Denoted With “****”

  

 provides prior notice of such disclosure to the Company and, subject to the
reasonable advice and comment of the Company, takes reasonable and lawful actions to avoid and/or minimize the degree of such disclosure. 
 5.3      Confidentiality of this Agreement. The material financial terms of this Agreement shall be Confidential Information of the Company and, as such, shall be subject to the
provisions of this Article 5. 
 5.4      Registration and Filing of the Agreement.
To the extent, if any, that a Party concludes in good faith that it is required to file or register this Agreement or a notification thereof with any Governmental Authority, including without limitation the US Securities and Exchange Commission, or
the US Federal Trade Commission, in accordance with applicable Laws, such Party shall inform the other Party thereof. Should either Party be required to submit or obtain any such filing, registration or notification, they shall cooperate, each at
its own expense, in such filing, registration or notification and shall execute all documents reasonably required in connection therewith. In such filing, registration or notification, the Parties shall use commercially reasonable efforts to agree
in advance on which provisions of this Agreement they will request confidential treatment of. The Parties shall promptly inform each other as to the activities or inquiries of any such Governmental Authority relating to this Agreement, and shall
reasonably cooperate to respond to any request for further information therefrom on a timely basis. 
 5.5      Press Releases and Other Disclosures. No press release or other public announcement concerning the existence or terms of this Agreement shall be made, either directly or indirectly, by either
Party hereto, without first obtaining the written approval of the other Party. Once any public announcement or disclosure has been approved in accordance with this Section, then either Party may appropriately communicate information contained in
such permitted announcement or disclosure. Notwithstanding the foregoing provisions of this Article 5, Company may (a) disclose the existence and terms of this Agreement where required, as reasonably determined by Company, by applicable Law, by
applicable stock exchange or Nasdaq regulation or by order or other ruling of a competent court and (b) disclose the existence and terms of this Agreement under obligations of confidentiality to auditors, legal counsel and investment bankers in
connection with exploring the issuance of securities in a public transaction. Notwithstanding the foregoing provisions of this Section Article 5, HCG may (a) disclose the existence and terms of this Agreement where required, as reasonably
determined by the HCG, by applicable Law, by applicable stock exchange or Nasdaq regulation or by order or other ruling of a competent court and (b) disclose the existence and terms of this Agreement under obligations of confidentiality to
agents, auditors, advisors, contractors and investors and to potential agents, auditors, advisors, contractors and investors in connection with such HCG’ activities hereunder and in connection with such Party’s financing activities.

 ARTICLE 6 
 REPRESENTATIONS AND WARRANTIES 
 6.1      Mutual Representations and
Warranties. Company and HCG each represents and warrants that it (a) is duly organized, validly existing, and in good standing under the Laws of its incorporation; (b) is duly qualified and in good standing under the Laws of each

  

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 Confidential Treatment Requested For Portions of This Exhibit Denoted With “****”

  

 jurisdiction where its ownership or lease of property or the conduct of its business requires such
qualification, where the failure to be so qualified would have a material adverse effect on its financial condition or its ability to perform its obligations hereunder; (c) has the requisite corporate power and authority and the legal right to
conduct its business as now conducted and hereafter contemplated to be conducted; (d) has or will obtain all necessary licenses, permits, consents, or approvals from or by, and has made or will make all necessary notices to, all Governmental
Authorities having jurisdiction over such Party, to the extent required for the ownership and operation of its business, where the failure to obtain such licenses, permits, consents or approvals, or to make such notices, would have a material
adverse effect on its financial condition or its ability to perform its obligations hereunder; and (e) is in compliance with its charter documents. 
 6.2      Acknowledgement by the Parties. Company and HCG each hereby warrants, represents and acknowledges that this Agreement and the obligations of the Company under this
Agreement do not involve the sale, license, encumbrance or other transfer of any specific asset or right of the Company and that the obligation to make payments hereunder is a general obligation of the Company and not an encumbrance on any Company
asset. HCG acknowledges and agrees that this Agreement does not grant to HCG any security interest in or to any asset or right of the Company and that the references to specific assets under this Agreement are included solely for the purpose of
determining the timing and amount of payments due to HCG hereunder. By entering into this Agreement, HCG acknowledges that the Company has (i) previously granted a security interest in certain assets that will be used to determine the timing
and amount of payments under this Agreement; and (ii) has full power, right and authority to sell, transfer, license or encumber in any manner, any of the assets of the Company, subject to restrictions or limitations contained in any of the
Company’s agreements existing as of the date hereof. 
 ARTICLE 7 
 LIMITATION ON LIABILITY 
 NEITHER PARTY HERETO WILL BE LIABLE
FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, EXEMPLARY OR PUNITIVE DAMAGES ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT, OR FOR LOST PROFITS ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF SUCH
DAMAGES. 
 ARTICLE 8 
 TERM AND TERMINATION 
 8.1    Term. This Agreement shall be effective as of the
Effective Date and, unless terminated earlier pursuant to Section 4.3.4 above, shall continue in force until, on a country-by-country and product-by-product basis, the expiration of the last Valid Claim of an applicable Company Patent Right
covering such product in such country. 
 8.2    Accrued Rights; Surviving Obligations.
Notwithstanding any termination or expiration of this Agreement, neither Party shall be relieved of any obligations incurred prior to such termination or expiration, including without limitation payment obligations accrued prior to 
  

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 Confidential Treatment Requested For Portions of This Exhibit Denoted With “****”

  

 such termination, provided that, notwithstanding the foregoing, in the event of a termination
pursuant to Section 4.3.4 above, the Company shall be relieved of all payment obligations upon such termination except (i) the payment due under Section 4.3.4 and (ii) any quarterly payments overdue at the time of such
termination. Sections 1, 5, 7, and 9 will survive termination or expiration of this Agreement. Upon any termination or expiration of this Agreement HCG shall promptly return to the Company all written Confidential Information, and all copies
thereof, of the Company. 
 ARTICLE 9 
 MISCELLANEOUS 
 9.1      Governing Law. This
Agreement shall be governed by and interpreted in accordance with the internal laws of the State of New York, without regard to its conflicts of laws rules. The parties to this Agreement each consent to the in personam jurisdiction and venue of such
courts. The parties agree that service of process upon them in any such action may be made if delivered in person, by courier service, by telegram, by telefacsimile or by first class mail, and shall be deemed effectively given upon receipt.

 9.2      Waiver. Waiver by a Party of a breach hereunder by the other Party shall not
be construed as a waiver of any succeeding breach of the same or any other provision. No delay or omission by a Party to exercise or avail itself of any right, power or privilege that it has or may have hereunder shall operate as a waiver of any
right, power or privilege by such Party. No waiver shall be effective unless made in writing with specific reference to the relevant provision(s) of this Agreement and signed by a duly authorized representative of the Party granting the waiver.

 9.3      Notices. All notices, instructions and other communications hereunder or in
connection herewith shall be in writing, shall be sent to the address below and shall be: (a) delivered personally; (b) sent by registered or certified mail, return receipt requested, postage prepaid; (c) sent via a reputable
nationwide overnight courier service; or (d) sent by facsimile transmission. Any such notice, instruction or communication shall be deemed to have been delivered upon receipt if delivered by hand, three (3) Business Days after it is sent
by registered or certified mail, return receipt requested, postage prepaid, one (1) Business Day after it is sent via a reputable nationwide overnight courier service, or when transmitted with electronic confirmation of receipt, if transmitted
by facsimile (if such transmission is on a Business Day; otherwise, on the next Business Day following such transmission). 
 Notices to Company shall be addressed to: 
 BioDelivery Sciences
International, Inc. 
 2501 Aerial Center Parkway, Suite 205 
 Morrisville, NC 27560 
 Facsimile: 919-653-5161 
 Attention: Mark A. Sirgo,
Pharm.D. 
  

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 Confidential Treatment Requested For Portions of This Exhibit Denoted With “****”

  

   Notices to HCG shall be addressed to: 
   Hopkins Capital Group II, LLC 
   324 South Hyde Park Ave., Suite 350 
   Tampa, Florida 33606 
   Facsimile: (813) 258-6912 
 Either Party may change its address by
giving notice to the other Party in the manner provided above. 
 9.4      Entire
Agreement. This Agreement (including Schedules) and the Warrant contains the complete understanding of the Parties with respect to the subject matter herein and supersedes all prior understandings and writings relating to such subject matter.
This Agreement may be altered, amended or changed only by a writing making specific reference to this Agreement and signed by duly authorized representatives of Company and HCG. 
 9.5      Headings. Headings in this Agreement are for convenience of reference only and shall not be
considered in construing this Agreement. 
 9.6      Severability. If any provision of
this Agreement is held unenforceable by a court or tribunal of competent jurisdiction because it is invalid or conflicts with any Law of any relevant jurisdiction, the validity of the remaining provisions shall not be affected. In such event, the
Parties shall negotiate a substitute provision that, to the extent possible, accomplishes the original business purpose. 
 9.7      Assignment. Except as otherwise provided herein, neither this Agreement nor any of the rights or obligations hereunder may be assigned by Company without the prior consent of HCG; provided,
however, that Company may assign this Agreement to an Affiliate or upon a Change of Control of Company without the consent of the other Party. Any attempted assignment by Company in violation hereof shall be void. 
 9.8      Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of
the Parties hereto and their respective successors and permitted assigns, including without limitation, any successor or assignee of the Company Intellectual Property, who shall be bound by the obligations of Company in this Agreement. 

9.9      Counterparts; Facsimile Signatures. This Agreement may be executed in two counterparts,
each of which shall be deemed an original, but both of which together shall constitute one and the same instrument. Signatures provided by facsimile transmission shall be deemed to be original signatures. 
 9.10    Third-Party Beneficiaries. None of the provisions of this Agreement shall be for the benefit of or
enforceable by any third party, including, without limitation, any creditor of either Party. No such third party shall obtain any right under any provision of this Agreement or shall by reason of any such provision make any claim in respect of any
debt, liability or obligation (or otherwise) against either Party. 
  

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 9.11      Relationship of the Parties. Each
Party shall bear its own costs incurred in the performance of its obligations hereunder without charge or expense to the other, except as expressly provided in this Agreement. Neither Party shall have any responsibility for the hiring, termination
or compensation of the other Party’s employees or for any employee compensation or benefits of the other Party’s employees. No employee or representative of a Party shall have any authority to bind or obligate the other Party to this
Agreement for any sum or in any manner whatsoever, or to create or impose any contractual or other liability on the other Party without said other Party’s approval. Nothing in this Agreement shall be construed to establish a relationship of
partners or joint venturers between the Parties. 
 [SIGNATURE PAGE FOLLOWS] 
  

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 Confidential Treatment Requested For Portions of This Exhibit Denoted With “****”

  

 IN WITNESS WHEREOF, the Parties have signed this Agreement as of the Effective Date.

  

			
	 BIODELIVERY SCIENCES
 INTERNATIONAL, INC.

		
	 By:
	 	  

		 	     Name:

		 	     Title:

	
	 ARIUS PHARMACEUTICALS, INC.

		
	 By:
	 	  

		 	     Name:

		 	     Title:

	
	 HOPKINS CAPITAL GROUP II, LLC

		
	 By:
	 	  

		 	     Name:

		 	     Title:

  

 Confidential Treatment Requested For Portions of This Exhibit Denoted With “****”

  

 SCHEDULE 1.4 
 QLT LICENSE 

 Confidential Treatment Requested For Portions of This Exhibit Denoted With “****”

  

 SCHEDULE 1.5 
 ARIUS TWO LICENSE 

 Confidential Treatment Requested For Portions of This Exhibit Denoted With “****”

  

 SCHEDULE 1.10 
 COMPANY PATENT RIGHTS 
  

									
	 Docket Number/Subcase
 Case Type
	 	         Country
         Client
	  	 Application/Patent
 Number/Date
	 	 Status
 Publication Date

				
	 BSZ-0076-1/
	 	         United States of America
	  	 60/750191
	 	 Pending

	 PRO
	 	         BioDelivery Sciences Interntl, Inc.
	  	 13-Dec-2005
	 	
		 	 Title:  ABUSE RESISTANT TRANMUCOSAL DRUG DELIVERY DEVICE

				
	 BSZ-0076-2/
	 	         United States of America
	  	 60/764619
	 	 Pending

	 PRO
	 	         BioDelivery Sciences Interntl, Inc.
	  	 02-Feb-2006
	 	
		 	 Title:  ABUSE RESISTANT TRANMUCOSAL DRUG DELIVERY DEVICE

				
	 BSZ-0088-1/
	 	         United States of America
	  	 60/832725
	 	 Pending

	 PRO
	 	         BioDelivery Sciences Interntl, Inc.
	  	 21-Jul-2006
	 	
		 	 Title:  TRANSMUCOSAL DELIVERY DEVICES WITH ENHANCED UPTAKE

				
	 BSZ-0088-2/
	 	         United States of America
	  	 60/839504
	 	 Pending

	 PRO
	 	         BioDelivery Sciences Interntl, Inc.
	  	 23-Aug-2006
	 	
		 	 Title:  TRANSMUCOSAL DELIVERY DEVICES WITH ENHANCED UPTAKE

				
	 BSZ-0089-1/
	 	         United States of America
	  	 60/832726
	 	 Pending

	 PRO
	 	         BioDelivery Sciences Interntl, Inc.
	  	 21-Jul-2006
	 	
		 	 Title:  TRANSMUCOSAL DELIVERY DEVICES WITH ENHANCED UPTAKE

				
	 BSZ-0092CA/
	 	         Canada
	  	 2268187
	 	 Pending

	 PCT
	 	         BioDelivery Sciences Interntl, Inc.
	  	 16-Oct-1997
	 	
		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092CPDVCN/
	 	         United States of America
	  	 10/962833
	 	 Published

	 CON
	 	         BioDelivery Sciences Interntl, Inc.
	  	 12-Oct-2004
	 	 03-Mar-2005

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092CPDVCN2/
	 	         United States of America
	  	 11/069089
	 	 Published

	 CON
	 	         BioDelivery Sciences Interntl, Inc.
	  	 01-Mar-2005
	 	 07-Jul-2005

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

 Confidential Treatment Requested For Portions of This Exhibit Denoted With “****”

  

							
	 BSZ-0092CPDVRCE/
	 	         United States of America
	  	 09/684682
	 	 Pending

	 RCE
	 	         BioDelivery Sciences Interntl, Inc.
	  	 04-Oct-2000
	 	
		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACE

				
	 BSZ-0092CPRCE/
	 	         United States of America
	  	 09/069703
	 	 Pending

	 CIP
	 	         BioDelivery Sciences Interntl, Inc.
	  	 29-Apr-1998
	 	
		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092JP/
	 	         Japan
	  	 98519467
	 	 Pending

	 PCT
	 	         BioDelivery Sciences Interntl, Inc.
	  	 16-Oct-1997
	 	
		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092JPDV/
	 	         Japan
	  	 2005182632
	 	 Pending

	 DIV
	 	         BioDelivery Sciences Interntl, Inc.
	  	 16-Oct-1997
	 	
		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092PC2CA/
	 	         Canada
	  	 2329128
	 	 Pending

	 PCT
	 	         BioDelivery Sciences Interntl, Inc.
	  	 29-Apr-1999
	 	
		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092PC2JP/
	 	         Japan
	  	 2000-054511
	 	 Published

	 PCT
	 	         BioDelivery Sciences Interntl, Inc.
	  	 29-Apr-1999
	 	 08-May-2002

		 	 Title:  BIOERODABLE FILM FOR DELIVERY OF PHARMACEUTICAL COMPOUNDS TO

		 	         MUCOSAL SURVACES
	  		 	
				
	 BSZ-0092PC2JPDV/
	 	         Japan
	  	 2005233505
	 	 Published

	 DIV
	 	         BioDelivery Sciences Interntl, Inc.
	  	 29-Apr-1999
	 	 24-Nov-2005

		 	 Title:  BIOERODABLE FILM FOR DELIVERY OF PHARMACEUTICAL COMPOUNDS TO

		 	         MUCOSAL SURVACES
	  		 	
				
	 BSZ-0093AU/
	 	         Australia
	  	 200426264974
	 	 Pending

	 PCT
	 	         BioDelivery Sciences Interntl, Inc.
	  	 20-Feb-2006
	 	
		 	 Title:  ADHESIVE BIOERODIBLE TRANSMUCOSAL DRUG DELIVERY SYSTEM

				
	 BSZ-0093CA/
	 	         Canada
	  	 2535846
	 	 Pending

	 PCT
	 	         BioDelivery Sciences Interntl, Inc.
	  	 16-Aug-2004
	 	
		 	 Title:  ADHESIVE BIOERODIBLE TRANSMUCOSAL DRUG DELIVERY SYSTEM

				
	 BSZ-0093CN/
	 	         United States of America
	  	 11/355312
	 	 Pending

	 CON
	 	         BioDelivery Sciences Interntl, Inc.
	  	 15-Feb-2006
	 	
		 	 Title:  ADHESIVE BIOERODIBLE TRANSMUCOSAL DRUG DELIVERY SYSTEM

 Confidential Treatment Requested For Portions of This Exhibit Denoted With “****”

  

							
	 BSZ-0093EP/
	 	         European Patent Convention
	  	 04 78 1250.8
	 	 Published

	 EPC
	 	         BioDelivery Sciences Interntl, Inc.
	  	 16-Aug-2004
	 	 31-May-2006

		 	 Title:  ADHESIVE BIOERODIBLE TRANSMUCOSAL DRUG DELIVERY SYSTEM

				
	 BSZ-0093JP/
	 	         Japan
	  	 2006-523962
	 	 Pending

	 PCT
	 	         BioDelivery Sciences Interntl, Inc.
	  	 16-Aug-2004
	 	
		 	 Title:  ADHESIVE BIOERODIBLE TRANSMUCOSAL DRUG DELIVERY SYSTEM

				
	 BSZ-0093MX/
	 	         Mexico
	  	 PA/a/2006/001776
	 	 Pending

	 PCT
	 	         BioDelivery Sciences Interntl, Inc.
	  	 16-Aug-2004
	 	
		 	 Title:  ADHESIVE BIOERODIBLE TRANSMUCOSAL DRUG DELIVERY SYSTEM

				
	 BSZ-0094AU/
	 	         Australia
	  	 2003000238670
	 	 Pending

	 PCT
	 	         BioDelivery Sciences Interntl, Inc.
	  	 11-Apr-2003
	 	
		 	 Title:  PROCESS FOR LOADING A DRUG DELIVERY DEVICE

				
	 BSZ-0095/
	 	         United States of America
	  	 10/763063
	 	 Pending

	 PRI
	 	         BioDelivery Sciences Interntl, Inc.
	  	 22-Jan-2004
	 	
		 	 Title:  BIOERODIBLE FILM FOR DELIVERY OF PHARMACEUTICAL COMPOUNDS TO

		 	         MUCOSAL SURFACES
	  		 	
				
	 BSZ-0092/
	 	         United States of America
	  	 5800832
	 	 Granted

	 PRI
	 	         BioDelivery Sciences Interntl, Inc.
	  	 01-Sep-1998
	 	   18-Oct-2016

		 	 Title:  BIOERODABLE FILM FOR DELIVERY OF PHARMACEUTICAL COMPOUNDS TO

		 	         MUCOSAL SURVACES
	  		 	
				
	 BSZ-0092AT/
	 	         Austria
	  	 973497
	 	 Granted

	 EPC
	 	         BioDelivery Sciences Interntl, Inc.
	  	 11-Dec-2002
	 	   16-Oct-2017

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092AU/
	 	         Australia
	  	 729516B
	 	 Granted

	 PCT
	 	         BioDelivery Sciences Interntl, Inc.
	  	 17-May-2001
	 	   16-Oct-2017

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092AUDV/
	 	         Australia
	  	 769500
	 	 Granted

	 DIV
	 	         BioDelivery Sciences Interntl, Inc.
	  	 13-May-2004
	 	   16-Oct-2017

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

 Confidential Treatment Requested For Portions of This Exhibit Denoted With “****”

  

							
	 BSZ-0092BE/
	 	         Belgium
	  	 973497
	 	 Granted

	 EPC
	 	         BioDelivery Sciences Interntl, Inc.
	  	 11-Dec-2002
	 	   16-Oct-2017

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092CH/
	 	         Switzerland
	  	 973497
	 	 Granted

	 EPC
	 	         BioDelivery Sciences Interntl, Inc.
	  	 11-Dec-2002
	 	   16-Oct-2017

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092CN/
	 	         United States of America
	  	 6159498
	 	 Granted

	 CON
	 	         BioDelivery Sciences Interntl, Inc.
	  	 12-Dec-2000
	 	   18-Oct-2016

		 	 Title:  BIOERODABLE FILM FOR DELIVERY OF PHARMACEUTICAL COMPOUNDS TO

		 	         MUCOSAL SURFACES

				
	 BSZ-0092DE/
	 	         Germany
	  	 973497
	 	 Granted

	 EPC
	 	         BioDelivery Sciences Interntl, Inc.
	  	 11-Dec-2002
	 	   16-Oct-2017

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092DK/
	 	         Denmark
	  	 973497
	 	 Granted

	 EPC
	 	         BioDelivery Sciences Interntl, Inc.
	  	 11-Dec-2002
	 	   16-Oct-2017

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092EP/
	 	         European Patent Convention
	  	 973497
	 	 Granted

	 EPC
	 	         BioDelivery Sciences Interntl, Inc.
	  	 11-Dec-2002
	 	   16-Oct-2017

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092ES/
	 	         Spain
	  	 973497
	 	 Granted

	 EPC
	 	         BioDelivery Sciences Interntl, Inc.
	  	 11-Dec-2002
	 	   16-Oct-2017

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092FI/
	 	         Finland
	  	 973497
	 	 Granted

	 EPC
	 	         BioDelivery Sciences Interntl, Inc.
	  	 11-Dec-2002
	 	   16-Oct-2017

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092FR/
	 	         France
	  	 973497
	 	 Granted

	 EPC
	 	         BioDelivery Sciences Interntl, Inc.
	  	 11-Dec-2002
	 	   16-Oct-2017

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

 Confidential Treatment Requested For Portions of This Exhibit Denoted With “****”

  

							
	 BSZ-0092GB/
	 	         United Kingdom
	  	 973497
	 	 Granted

	 EPC
	 	         BioDelivery Sciences Interntl, Inc.
	  	 11-Dec-2002
	 	   16-Oct-2017

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092GR/
	 	         Greece
	  	 973497
	 	 Granted

	 EPC
	 	         BioDelivery Sciences Interntl, Inc.
	  	 11-Dec-2002
	 	   16-Oct-2017

		 	 Title:   PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092IE/
	 	         Ireland
	  	 973497
	 	 Granted

	 EPC
	 	         BioDelivery Sciences Interntl, Inc.
	  	 11-Dec-2002
	 	   16-Oct-2017

		 	 Title:   PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092IT/
	 	         Italy
	  	 973497
	 	 Granted

	 EPC
	 	         BioDelivery Sciences Interntl, Inc.
	  	 11-Dec-2002
	 	   16-Oct-2017

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092NL/
	 	         Netherlands
	  	 973497
	 	 Granted

	 EPC
	 	         BioDelivery Sciences Interntl, Inc.
	  	 11-Dec-2002
	 	   16-Oct-2017

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092PC2AT/
	 	         Austria
	  	 1079813
	 	 Granted

	 EPC
	 	         BioDelivery Sciences Interntl, Inc.
	  	 09-Feb-2005
	 	   29-Apr-2019

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092PC2AU/
	 	         Australia
	  	 746339B
	 	 Granted

	 PCT
	 	         BioDelivery Sciences Interntl, Inc.
	  	 01-Aug-2002
	 	   29-Apr-2019

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092PC2BE/
	 	         Belgium
	  	 1079813
	 	 Granted

	 EPC
	 	         BioDelivery Sciences Interntl, Inc.
	  	 09-Feb-2005
	 	   29-Apr-2019

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092PC2CH/
	 	         Switzerland
	  	 1079813
	 	 Granted

	 EPC
	 	         BioDelivery Sciences Interntl, Inc.
	  	 09-Feb-2005
	 	   29-Apr-2019

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

 Confidential Treatment Requested For Portions of This Exhibit Denoted With “****”

  

							
	 BSZ-0092PC2DE/
	 	         Germany
	  	 1079813
	 	 Granted

	 EPC
	 	         BioDelivery Sciences Interntl, Inc.
	  	 09-Feb-2005
	 	   29-Apr-2019

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092PC2DK/
	 	         Denmark
	  	 1079813
	 	 Granted

	 EPC
	 	         BioDelivery Sciences Interntl, Inc.
	  	 09-Feb-2005
	 	   29-Apr-2019

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092PC2EP/
	 	         European Patent Convention
	  	 1079813
	 	 Granted

	 EPC
	 	         BioDelivery Sciences Interntl, Inc.
	  	 09-Feb-2005
	 	   29-Apr-2019

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092PC2ES/
	 	         Spain
	  	 1079813
	 	 Granted

	 EPC
	 	         BioDelivery Sciences Interntl, Inc.
	  	 09-Feb-2005
	 	   29-Apr-2019

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092PC2FI/
	 	         Finland
	  	 1079813
	 	 Granted

	 EPC
	 	         BioDelivery Sciences Interntl, Inc.
	  	 09-Feb-2005
	 	   29-Apr-2019

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092PC2FR/
	 	         France
	  	 1079813
	 	 Granted

	 EPC
	 	         BioDelivery Sciences Interntl, Inc.
	  	 09-Feb-2005
	 	   29-Apr-2019

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092PC2GB/
	 	         United Kingdom
	  	 1079813
	 	 Granted

	 EPC
	 	         BioDelivery Sciences Interntl, Inc.
	  	 09-Feb-2005
	 	   29-Apr-2019

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092PC2GR/
	 	         Greece
	  	 1079813
	 	 Granted

	 EPC
	 	         BioDelivery Sciences Interntl, Inc.
	  	 09-Feb-2005
	 	   29-Apr-2019

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092PC2IE/
	 	         Ireland
	  	 1079813
	 	 Granted

	 EPC
	 	         BioDelivery Sciences Interntl, Inc.
	  	 09-Feb-2005
	 	   29-Apr-2019

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

 Confidential Treatment Requested For Portions of This Exhibit Denoted With “****”

  

							
	 BSZ-0092PC2IT/
	 	         Italy
	  	 1079813
	 	 Granted

	 EPC
	 	         BioDelivery Sciences Interntl, Inc.
	  	 09-Feb-2005
	 	   29-Apr-2019

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092PC2LU/
	 	         Luxembourg
	  	 1079813
	 	 Granted

	 EPC
	 	         BioDelivery Sciences Interntl, Inc.
	  	 09-Feb-2005
	 	   29-Apr-2019

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092PC2NL/
	 	         Netherlands
	  	 1079813
	 	 Granted

	 EPC
	 	         BioDelivery Sciences Interntl, Inc.
	  	 09-Feb-2005
	 	   29-Apr-2019

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092PC2PT/
	 	         Portugal
	  	 1079813
	 	 Granted

	 EPC
	 	         BioDelivery Sciences Interntl, Inc.
	  	 09-Feb-2005
	 	   29-Apr-2019

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092PC2SE/
	 	         Sweden
	  	 1079813
	 	 Granted

	 EPC
	 	         BioDelivery Sciences Interntl, Inc.
	  	 09-Feb-2005
	 	   29-Apr-2019

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACES

				
	 BSZ-0092SE/
	 	         Sweden
	  	 973497
	 	 Granted

	 EPC
	 	         BioDelivery Sciences Interntl, Inc.
	  	 11-Dec-2002
	 	   16-Oct-2017

		 	 Title:  PHARMACEUTICAL CARRIER DEVICE SUITABLE FOR DELIVERY OF

		 	         PHARMACEUTICAL COMPOUNDS TO MUCOSAL SURFACESExhibit 10.1

 

NETWORK CN INC.

 

2007 STOCK OPTION/STOCK ISSUANCE PLAN  

 

ARTICLE ONE  

 

GENERAL PROVISIONS  

 

I.    PURPOSE OF THE PLAN 

 

This Plan is intended to promote the interests of Network CN Inc. (the “Corporation”), by providing eligible persons employed by or serving the Corporation or any Subsidiary or Parent with the opportunity to acquire a proprietary interest, or otherwise increase their proprietary interest, in the Corporation as an incentive for them to continue in such employ or service. 

 

Capitalized terms herein shall have the meanings assigned to such terms in the attached Appendix. 

 

II.     STRUCTURE OF THE PLAN 

 

A. The Plan shall be divided into two separate equity programs: 

 

(1) the Option Grant Program under which eligible persons may, at the discretion of the Plan Administrator, be granted options to purchase shares of Common Stock, and 

 

(2) the Stock Issuance Program under which eligible persons may, at the discretion of the Plan Administrator, be issued shares of Common Stock directly, either through the immediate purchase of such shares or as a bonus for services rendered the Corporation (or any Parent or Subsidiary). 

 

B. The provisions of Articles One and Four shall apply to both equity programs under the Plan and shall accordingly govern the interests of all persons under the Plan.

 

III.    ADMINISTRATION OF THE PLAN

 

A.    The Board shall administer the Plan. However, any or all administrative functions otherwise exercisable by the Board may be delegated to the Committee. Members of the Committee shall serve for such period of time as the Board may determine and shall be subject to removal by the Board at any time. The Board may also at any time terminate the functions of the Committee and reassume all powers and authority previously delegated to the Committee. The initial Committee and Plan Administrator shall be the Chief Executive Officer of the Corporation; provided that he/she remains a director of the Corporation.

 

B.    The Plan Administrator shall have full power and authority (subject to the provisions of the Plan) to establish such rules and procedures as it may deem appropriate for proper administration of the Plan and to make such determinations under, and issue such interpretations of, the Plan and any outstanding options or stock issued under the Plan as it may deem necessary or advisable. Decisions of the Plan Administrator shall be final and binding on all parties who have an interest in the Plan or any option grant or stock issued under the Plan. 

 

C.    The Plan Administrator shall have full authority to determine, (1) with respect to the grants made under the Option Grant Program, which eligible persons are to receive such grants, the time or times when those grants are to be made, the number of shares to be covered by each such grant, the status of the granted option as either an Incentive Option or a Non-Statutory Option, the time or times when each option is to become exercisable, the vesting schedule (if any) applicable to the option shares and the maximum term for which the option is to remain outstanding, and (2) with respect to stock issuances made under the Stock Issuance Program, which eligible persons are to receive such issuances, the time or times when those issuances are to be made, the number of shares to be issued to each Participant, the vesting schedule (if any) applicable to the issued shares and the consideration to
be paid by the Participant for such shares. Each option grant or stock issuance approved by the Plan Administrator shall be evidenced by the appropriate documentation. 

 

 

   IV.    ELIGIBILITY 

 

   A.    The persons eligible to participate in the Plan are as follows: 

 

(1) employees; 

 

(2) members of the Board and the members of the board of directors of any Parent or Subsidiary; and 

 

(3) independent contractors who provide services to the Corporation (or any Parent or Subsidiary).

 

 

V.     STOCK SUBJECT TO THE PLAN

 

A.    The shares issuable under the Plan shall be shares of authorized but unissued or reacquired shares of Common Stock. The maximum number of shares of Common Stock that may be issued and outstanding or subject to options outstanding under the Plan shall not exceed seven million five hundred thousand (7,500,000) shares. 

 

B.     Shares of Common Stock subject to outstanding options shall be available for subsequent issuance under the Plan to the extent (1) the options expire or terminate for any reason prior to exercise in full or (2) the options are cancelled in accordance with the cancellation and re-grant provisions of Article Two. Unvested Shares issued under the Plan and subsequently repurchased by the Corporation, at a price per share not greater than the option exercise or direct issue price paid per share, pursuant to the Corporation’s repurchase rights under the Plan shall be added back to the number of shares of Common Stock reserved for issuance under the Plan and shall accordingly be available for reissuance through one or more subsequent option grants or direct stock issuances under the Plan. 

 

C.     Should any change be made to the Common Stock by reason of any stock split, stock dividend, reverse stock split, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration, appropriate adjustments shall be made to (1) the maximum number and/or class of securities issuable under the Plan and (2) the number and/or class of securities and the exercise price per share in effect under each outstanding option in order to prevent the dilution or enlargement of benefits thereunder. The adjustments determined by the Plan Administrator shall be final and binding. In no event shall any such adjustments be made in connection with the conversion of one or more outstanding shares of the Corporation’s preferred stock into shares of Common Stock. 

 

D.     The grant of options or the issuance of shares of Common Stock under the Plan shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. 

 

 

ARTICLE TWO 

 

OPTION GRANT PROGRAM  

 

I     OPTION TERM

 

A.    Agreement

 

Each option shall be in such form and shall contain such terms and conditions as the Board or Committee shall deem appropriate. All Options shall be separately designated Incentive Stock Options or Non-Statutory Stock Options at the time of grant, and, if certificates are issued, a separate certificate or certificates will be issued for shares of Common Stock purchased on exercise of each type of Option. The provisions of separate Options need not be identical, but each Option shall be subject to the terms and conditions of the Plan: 

 

   B.    Exercise Price. 

 

(1) The Plan Administrator shall fix the exercise price per share, subject to any requirements of U.S. federal and state securities laws. However, with respect to Incentive Stock Options, (a) if the option is granted to a 10% Stockholder, the exercise price per share must not be less than 110% of the Fair Market Value per share of Common Stock on the date the option is granted, and (b) if the option is granted to an Optionee who is not a 10% Stockholder, the exercise price per share shall not be less than 100% of the Fair Market Value per share of Common Stock on the date the option is granted. Notwithstanding the foregoing, options may be granted with a per share exercise price other than as required above pursuant to a merger or other corporate transaction.

 

(2) The exercise price shall become immediately due upon exercise of the option and shall, subject to the provisions of Section I of Article Four and the documents evidencing the option, be payable in cash or check made payable to the Corporation. Should the Common Stock be registered under Section 12 of the 1934 Act at the time the option is exercised, then the exercise price (and any applicable withholding taxes) may also be paid as follows: 

 

(a) in shares of Common Stock held for the requisite period, if any, necessary to avoid a charge to the Corporation’s earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date, or 

 

(b) to the extent the option is exercised for Vested Shares, through a special sale and remittance procedure pursuant to which the Optionee shall concurrently provide irrevocable instructions (i) to a Corporation-designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased shares plus all applicable income and employment taxes required to be withheld by the Corporation by reason of such exercise and (ii) to the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale. 

 

Except to the extent such sale and remittance procedure is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date. 

 

   C.    Exercise and Term of Options. Each option shall be exercisable at such time or times, during such period and for such number of shares as shall be determined by the Plan Administrator and set forth in the documents evidencing the option grant. However, no Incentive Stock Option shall have a term in excess of ten years measured from the option grant date. 

 

   D.    Effect of Termination of Service. 

 

(1) The following provisions shall govern the exercise of any options granted to the Optionee that remain outstanding at the time the Optionee’s Service ceases: 

 

 

(a) Should the Optionee cease to remain in Service for any reason other than death, Disability or Misconduct, then each option shall be exercisable for the number of shares subject to the option that were Vested Shares at the time the Optionee’s Service ceased and shall remain exercisable until the close of business on the earlier of (i) the three month anniversary of the date Optionee’s Service ceased or (ii) the expiration date of the option. 

 

(b) Should the Optionee cease to remain in Service by reason of death or Disability, then each option shall be exercisable for the number of shares subject to the option which were Vested Shares at the time of the Optionee’s Service ceased and shall remain exercisable until the close of business on the earlier of (i) the twelve month anniversary of the date Optionee’s Service ceased or (ii) expiration date of the option. 

 

(c) No additional vesting will occur after the date the Optionee’s Service ceases, and the option shall immediately terminate with respect to the Unvested Shares. Upon the expiration of any post-Service exercise period or (if earlier) upon the expiration date of the term of the option, the option shall terminate with respect to the Vested Shares. 

 

(d) Should the Optionee’s Service be terminated for Misconduct or should the Optionee otherwise engage in Misconduct, then each outstanding option granted to the Optionee shall terminate immediately with respect to all shares. 

 

(2) Understanding that there may be adverse tax and accounting consequences to doing so, the Plan Administrator shall have the discretion, exercisable either at the time an option is granted or at any time while the option remains outstanding, to: 

 

(a) extend the period of time for which the option is to remain exercisable following the Optionee’s cessation of Service for such period of time as the Plan Administrator shall deem appropriate, but in no event beyond the expiration of the option, and/or 

 

(b) permit the option to be exercised, during the applicable post-Service exercise period, not only with respect to the number of Vested Shares for which such option is exercisable at the time of the Optionee’s cessation of Service but also with respect to one or more additional installments in which the Optionee would have vested under the option had the Optionee continued in Service. 

 

   E.     
Stockholder Rights. The holder of an option shall have no stockholder rights with respect to the shares subject to the option until such person shall have exercised the option, paid the exercise price and become the recordholder of the purchased shares. 

 

   F.     Unvested Shares. The Plan Administrator shall have the discretion to grant options that are exercisable for Unvested Shares. Should the Optionee’s Service cease while the shares issued upon the early exercise of the Optionee’s option are still unvested, the Corporation shall have the right to repurchase, any or all of those Unvested Shares at the lower of (1) the exercise price paid per share, or (2) the Fair Market Value per share on the date the Optionee’s Service ceased. Once the Corporation exercises its repurchase right, the Optionee shall have no further stockholder rights with respect to those shares. The terms upon which such repurchase right shall be exercisable (including the period and procedure for exercise and the appropriate vesting schedule for the purchased
shares) shall be established by the Plan Administrator and set forth in the document evidencing such repurchase right. Any such repurchase must be made in accordance with applicable corporate law. The Plan Administrator may set the vesting schedule, subject to applicable U.S. federal and state securities laws. 

 

  G.      Limited Transferability of Options. An Incentive Option shall be exercisable only by the Optionee during his or her lifetime and shall not be assignable or transferable other than by will or by the laws of inheritance following the Optionee’s death. A Non-Statutory Option may be assigned in whole or in part during the Optionee’s lifetime to one or more members of the Optionee’s family (as defined in Rule 701 promulgated by the Securities and Exchange Commission) or to a trust established exclusively for one or more such family members or to the Optionee’s former spouse, to the extent such assignment is in connection with the Optionee’s estate plan or pursuant to a domestic relations order. The terms applicable
to the assigned portion 

 

 

shall be the same as those in effect for the option immediately prior to such assignment and shall be set forth in such documents issued to the assignee as the Plan Administrator may deem appropriate. 

 

II.    INCENTIVE OPTIONS 

 

The terms specified below shall be applicable to all Incentive Options. Except as modified by the provisions of this Section II, all the provisions of Articles One, Two and Four shall be applicable to Incentive Options. Options that are specifically designated as Non-Statutory Options shall not be subject to the terms of this Section II. 

 

A. Eligibility. Incentive Options may only be granted to Employees. 

 

B. Dollar Limitation. The aggregate Fair Market Value of the shares of Common Stock (determined as of the respective date or dates of grant) for which one or more options granted to any Employee under the Plan (or any other option plan of the Corporation or any Parent or Subsidiary) may for the first time become exercisable as Incentive Options during any one calendar year shall not exceed $100,000. 

 

C. Term of Option Granted to a 10% Stockholder. If any Employee to whom an Incentive Option is granted is a 10% Stockholder, then the option term shall not exceed five years measured from the date the option is granted. 

 

III.    CHANGE IN CONTROL 

 

A. The shares subject to each option outstanding under the Plan at the time of a Change in Control shall automatically become Vested Shares, and each such option shall, immediately prior to the effective date of the Change in Control, become exercisable for all of the shares of Common Stock at the time subject to that option. However, the shares subject to an outstanding option shall not become Vested Shares on an accelerated basis if and to the extent: (1) such option is assumed by the successor corporation (or parent thereof) or otherwise continued in full force and effect pursuant to the terms of the Change in Control transaction or (2) such option is to be replaced with a cash incentive program of the Corporation or any successor corporation which preserves the spread existing on the Unvested Shares at the time of the Change in Control and
provides for subsequent payout of that spread no later than the time the Optionee would vest in those Unvested Shares or (3) the acceleration of such option is subject to other limitations imposed by the Plan Administrator. 

 

B. All outstanding repurchase rights under the Option Grant Program shall also terminate automatically, and the shares of Common Stock subject to those terminated rights shall immediately become Vested Shares, in the event of any Change in Control, except to the extent: (1) those repurchase rights are assigned to the successor corporation (or parent thereof) or otherwise continued in effect pursuant to the terms of the Change in Control transaction, (2) the property (including cash payments) issued with respect to Unvested Shares is to be held in escrow and released in accordance with the vesting schedule in effect for the Unvested Shares pursuant to the Change in Control transaction or (3) such accelerated vesting is precluded by other limitations imposed by the Plan Administrator. 

 

C. Immediately following the consummation of the Change in Control, all outstanding options shall terminate, except to the extent assumed by the successor corporation (or parent thereof) or otherwise continued in effect pursuant to the terms of the Change in Control transaction. 

 

D. Each option that is assumed in connection with a Change in Control or otherwise continued in effect shall be appropriately adjusted, immediately after such Change in Control, to apply to the number and class of securities which would have been issuable to the Optionee in consummation of such Change in Control, had the option been exercised immediately prior to such Change in Control. Appropriate adjustments shall also be made to (1) the number and class of securities available for issuance under the Plan following the consummation of such Change in Control and (2) the exercise price payable per share under each outstanding option, provided the aggregate exercise price payable for such securities shall remain the same. To the extent the holders of the Common Stock receive cash consideration for their Common Stock in consummation of the Change
in Control, the successor corporation may, in connection with the assumption of
the outstanding options under this Plan, 

 

 

substitute one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per share of Common Stock in such Change in Control. 

 

E. The Plan Administrator shall have the discretion, exercisable either at the time the option is granted or at any time while the option remains outstanding, to structure one or more options so that the option shall become immediately exercisable and some or all of the shares subject to those options shall automatically become Vested Shares (and some or all of the repurchase rights of the Corporation with respect to the Unvested Shares subject to those options shall immediately terminate) upon the occurrence of a Change in Control or another specified event, or the Optionee’s Involuntary Termination within a designated period following a specified event. 

 

F. In addition, the Plan Administrator may provide that one or more of the Corporation’s outstanding repurchase rights with respect to some or all of the shares held by the Optionee at the time of a Change in Control or other specified event, or the Optionee’s Involuntary Termination following a specified event, shall immediately terminate on an accelerated basis, and the shares subject to those terminated rights shall become Vested Shares at that time. 

 

G. The portion of any Incentive Option accelerated in connection with a Change in Control shall remain exercisable as an Incentive Option only to the extent the applicable $100,000 limitation set forth in Section II.C. of Article Two is not exceeded. To the extent such dollar limitation is exceeded, the accelerated portion of such option shall be exercisable as a Non-Statutory Option under the federal tax laws. 

 

IV.    CANCELLATION AND REGRANT OF OPTIONS 

 

The Plan Administrator shall have the authority to effect, at any time and from time to time, with the consent of the affected option holders, the cancellation of any or all outstanding options under the Plan and to grant in substitution therefor new options covering the same or different number of shares of Common Stock. 

 

ARTICLE THREE 

 

STOCK ISSUANCE PROGRAM  

 

	
             
 	
            I.
 	
            STOCK ISSUANCE TERMS 
 

 

 A.   Stock Awards 

 

  Each stock bonus agreement and restricted stock purchase agreement shall be in such form and shall contain such terms and conditions as the Board or Committee shall deem appropriate. The term and conditions as the Board shall deem appropriate. The terms and conditions of such stock bonus and restricted stock purchase agreements may change from time to time, and the terms and conditions of separate stock bonus or restricted stock purchase agreements need not be identical, but each stock bonus and restricted stock purchase agreement shall be subject to the terms and conditions of the Plan. 

 

B.   Purchase Price. 

 

(1) The Plan Administrator shall fix the purchase price per share, subject to any requirements of U.S. federal and state securities laws. 

 

(2) Shares of Common Stock may be issued under the Stock Issuance Program for any of the following items of consideration which the Plan Administrator may deem appropriate in each individual instance: 

 

(a) cash or check made payable to the Corporation, 

 

(b) past services rendered to the Corporation (or any Parent or Subsidiary), or 

 

 

(c) a promissory note to the extent permitted by Section I of Article Four. 

 

C.   
Vesting Provisions. 

 

    (1)   Shares of Common Stock issued under the Stock Issuance Program may, in the discretion of the Plan Administrator, be Vested Shares or may vest in one or more installments over the Participant’s period of Service or upon attainment of specified performance objectives. 

 

   (2)   Any new, substituted or additional securities or other property (including money paid other than as a regular cash dividend) which the Participant may have the right to receive with respect to the Participant’s Unvested Shares by reason of any stock dividend, stock split, reverse stock split, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration shall be issued subject to (a) the same vesting requirements applicable to the Participant’s Unvested Shares treated as if acquired on the same date as the Unvested Shares and (b) such escrow arrangements as the Plan Administrator shall deem appropriate. 

 

    (3)   The Participant shall have full stockholder rights with respect to any shares of Common Stock issued to the Participant under the Stock Issuance Program, whether or not the Participant’s interest in those shares is vested. Accordingly, the Participant shall have the right to vote such shares and to receive any regular cash dividends paid on such shares. 

 

    (4)   Should the Participant cease to remain in Service while holding one or more Unvested Shares issued under the Stock Issuance Program or should the performance objectives not be attained with respect to one or more such Unvested Shares, then the Corporation shall have the right to repurchase the Unvested Shares at the lower of (a) the purchase price paid per share or (b) the Fair Market Value per share on the date Participant’s Service ceased or the performance objective was not attained. The terms upon which such repurchase right shall be exercisable shall be established by the Plan Administrator and set forth in the document evidencing such repurchase right. Any repurchase must be made in compliance with the relevant provisions of California law. 

 

    (5)   The Plan Administrator may in its discretion waive the surrender and cancellation of one or more Unvested Shares (or other assets attributable thereto) which would otherwise occur upon the non-completion of the vesting schedule applicable to those shares. Such waiver shall result in the immediate vesting of the Participant’s interest in the shares of Common Stock as to which the waiver applies. Such waiver may be effected at any time, whether before or after the Participant’s Service ceases or he or she attains the applicable performance objectives. 

 

	
             
 	
            II.
 	
            CHANGE IN CONTROL 
 

 

A. Upon the occurrence of a Change in Control, all outstanding repurchase rights under the Stock Issuance Program shall terminate automatically, and the shares of Common Stock subject to those terminated rights shall immediately become Vested Shares, except to the extent: (1) those repurchase rights are assigned to the successor corporation (or parent thereof) or otherwise continued in effect pursuant to the terms of the Change in Control transaction, (2) the property (including cash payments) issued with respect to the Unvested Shares is held in escrow and released in accordance with the vesting schedule in effect for the Unvested Shares pursuant to the terms of the Change in Control transaction, or (3) such accelerated vesting is precluded by other limitations imposed by the Plan Administrator. 

 

B.  The Plan Administrator shall have the discretionary authority, exercisable either at the time the Unvested Shares are issued or any time while the Corporation’s repurchase rights with respect to those shares remain outstanding, to provide that those rights shall automatically terminate in whole or in part on an accelerated basis, and some or all of the shares of Common Stock subject to those terminated rights shall immediately become Vested Shares, in the event of a Change of Control or other event or the Participant’s Service is terminated by reason of an Involuntary Termination within a designated period following a Change in Control or any other specified event. 

 

 

ARTICLE FOUR 

 

MISCELLANEOUS  

 

	
             
 	
            I.
 	
            FINANCING 
 

 

The Plan Administrator may permit any Optionee or Participant to pay the option exercise price under the Option Grant Program or the purchase price for shares issued under the Stock Issuance Program by delivering a full-recourse, interest bearing promissory note secured by the purchased shares. The Plan Administrator, after considering the potential adverse tax and accounting consequences, shall set the remaining terms of the note. In no event may the maximum credit available to the Optionee or Participant exceed the sum of (A) the aggregate option exercise price or purchase price payable for the purchased shares (less the par value of those shares) plus (B) any applicable income and employment tax liability incurred by the Optionee or the Participant in connection with the option exercise or share purchase. 

 

	
             
 	
            II.
 	
            FIRST REFUSAL RIGHTS 
 

 

Upon the grant of options or shares, the Corporation may impose a right of first refusal with respect to any proposed disposition by the Optionee or Participant (or any successor in interest) of any shares of Common Stock issued under the Plan. Such right of first refusal shall be exercisable and lapse in accordance with the terms established by the Plan Administrator and set forth in the document evidencing such right. 

 

	
             
 	
            III.
 	
            SHARE ESCROW/LEGENDS 
 

 

Unvested Shares may, in the Plan Administrator’s discretion, be held in escrow by the Corporation until the Unvested Shares vest or may be issued directly to the Participant or Optionee with restrictive legends on the certificates evidencing the fact that the Participant or Optionee does not have a vested right to them. 

 

	
             
 	
            IV.
 	
            EFFECTIVE DATE AND TERM OF PLAN 
 

 

A.  The Plan shall become effective when adopted by the Board, but no Incentive Stock Options granted under the Plan may be exercised until the Corporation’s stockholders approve the Plan. Subject to such limitation, the Plan Administrator may grant options and issue shares under the Plan at any time after the effective date of the Plan and before the date fixed herein for termination of the Plan. 

 

B.  The Plan shall terminate upon the earlier of (1) the expiration of the ten year period measured from the date the Plan is adopted by the Board or (2) termination by the Board. All options and unvested stock issuances outstanding at the time of the termination of the Plan shall continue in effect in accordance with the provisions of the documents evidencing those options or issuances. 

 

	
             
 	
            V.
 	
            AMENDMENT OR TERMINATION OF THE PLAN 
 

 

A.  The Board shall have complete and exclusive power and authority to amend or terminate the Plan or any awards made thereunder in any or all respects. However, no such amendment or termination shall adversely affect the rights and obligations with respect to options or unvested stock issuances at the time outstanding under the Plan unless the Optionee or the Participant consents to such amendment or termination. In addition, certain amendments may require stockholder approval pursuant to applicable laws and regulations. 

 

B.  Although there may be adverse accounting consequences to doing so, options may be granted under the Option Grant Program and shares may be issued under the Stock Issuance Program which are in each instance in excess of the number of shares of Common Stock then available for issuance under the Plan, provided any excess shares actually issued under those programs shall be held in escrow until there is obtained stockholder approval of an amendment sufficiently increasing the number of shares of Common Stock available for issuance under the Plan. If such stockholder approval is not obtained within twelve months after the date the first such excess grants or issuances are made, then (1) any unexercised options granted on the basis of such excess shares shall terminate and (2) the Corporation shall promptly refund to the Optionees
and the 

 

 

Participants the exercise or purchase price paid for any excess shares issued under the Plan and held in escrow, together with interest (at the applicable Short Term Federal Rate) for the period the shares were held in escrow, and such shares shall thereupon be automatically cancelled. 

 

	
             
 	
            VI.
 	
            USE OF PROCEEDS 
 

 

Any cash proceeds received by the Corporation from the sale of shares of Common Stock under the Plan shall be used for any corporate purpose. 

 

	
             
 	
            VII.
 	
            WITHHOLDING 
 

 

The Corporation’s obligation to deliver shares of Common Stock upon the exercise of any options granted under the Plan or upon the issuance or vesting of any shares issued under the Plan shall be subject to the satisfaction of all applicable income and employment tax withholding requirements. 

 

	
             
 	
            VIII. 
 	
            REGULATORY APPROVALS 
 

 

The implementation of the Plan, the granting of any options under the Plan and the issuance of any shares of Common Stock (A) upon the exercise of any option or (B) under the Stock Issuance Program shall be subject to the Corporation’s procurement of all approvals and permits required by regulatory authorities having jurisdiction over the Plan, the options granted under it and the shares of Common Stock issued pursuant to it. 

 

	
             
 	
            IX.
 	
            NO EMPLOYMENT OR SERVICE RIGHTS 
 

 

Nothing in the Plan shall confer upon the Optionee or the Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Parent or Subsidiary employing or retaining such person) or of the Optionee or the Participant, which rights are hereby expressly reserved by each, to terminate such person’s Service at any time for any reason, with or without cause. 

 

 

 

APPENDIX  

 

The following definitions shall be in effect under the Plan: 

 

A.  
Board shall mean the Corporation’s Board of Directors. 

 

B.  Change in Control shall mean a change in ownership or control of the Corporation effected through any of the following transactions: 

 

    (i) a stockholder-approved merger, consolidation or other reorganization in which securities representing more than 50% of the total combined voting power of the Corporation’s outstanding securities are beneficially owned, directly or indirectly, by a person or persons different from the person or persons who beneficially owned those securities immediately prior to such transaction; 

 

    (ii) a stockholder-approved sale, transfer or other disposition of all or substantially all of the Corporation’s assets; or 

 

    (iii) the acquisition, directly or indirectly, by any person or related group of persons (other than the Corporation or a person that directly or indirectly controls, is controlled by, or is under common control with, the Corporation), of beneficial ownership (within the meaning of Rule 13-d3 of the 1934 Act) of securities possessing more than 50% of the total combined voting power of the Corporation’s outstanding securities from a person or persons other than the Corporation. 

 

In no event shall any public offering of the Corporation’s securities be deemed to constitute a Change in Control. In no event shall a merger of the Corporation’s Parent with the Corporation constitute a Change in Control. 

 

C. 
Code shall mean the Internal Revenue Code of 1986, as amended. 

 

D. 
Committee shall mean a committee of one or more Board members appointed by the Board to exercise one or more administrative functions under the Plan. 

 

E.  
Common Stock shall mean the Corporation’s common stock. 

 

F.  Corporation shall mean Network CN Inc., a Delaware corporation, or the successor to all or substantially all of the assets or the voting stock of Network CN Inc. which has assumed the Plan. 

 

G.  Disability shall mean the inability of the Optionee or the Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that is expected to result in death or has lasted or can be expected to last for a continuous period of twelve months or more. 

 

H.  Employee shall mean an individual who is in the employ of the Corporation (or any Parent or Subsidiary), subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance. 

 

I.   
Exercise Date shall mean the date on which the option has been exercised in accordance with the applicable option documentation. 

 

J.   Fair Market Value per share of Common Stock on any relevant date shall be determined in accordance with the following provisions: 

 

(i) If the Common Stock is at the time listed on the Nasdaq Stock Market, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question, as such price is reported by the National Association of Securities Dealers on the Nasdaq Stock Market and published in The Wall Street Journal. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. 

 

   (ii)   If the Common Stock is at the time listed on any stock exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question on the
stock 

 

 

exchange
determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange and published in The Wall Street Journal. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. 

 

   (iii)  If the sales prices of the Common Stock is at the time quoted in the over-the-counter market on the electronic bulletin board, the last reported sales price or, if no such price is reported for such security, the average of the bid prices of all market makers for such security as reported in the “pink sheets” by the National Quotation Bureau, Inc., in each case for such date or, is such date was not a trading day for such security, on the next preceding date that was a trading day. 

 

   (iv)  If the Common Stock is at the time neither listed on any stock exchange or the Nasdaq Stock Market or quoted in the over-the-counter market on the electronic bulletin board or in the “pink sheets” by the National Quotation Bureau, Inc., then the Fair Market Value shall be determined by the Plan Administrator after taking into account such factors as the Plan Administrator shall deem appropriate but shall be determined without regard to any restriction other than a restriction which, by its term will never lapse.

 

K. Incentive Option shall mean an option that satisfies the requirements of Code Section 422. 

 

L.  
Involuntary Termination shall mean the termination of the Service of any individual which occurs by reason of: 

 

(i)  such individual’s involuntary dismissal or discharge by the Corporation (or any Parent or Subsidiary) for reasons other than Misconduct, or 

 

(ii) such individual’s voluntary resignation following (A) a change in his or her position with the Corporation (or any Parent or Subsidiary) which materially reduces his or her duties and responsibilities, (B) a reduction in his or her base salary by more than 15%, unless the base salaries of all similarly situated individuals are reduced by the Corporation or any Parent or Subsidiary employing the individual, or (C) a relocation of such individual’s place of employment by more than fifty miles, provided and only if such change, reduction or relocation is effected without the individual’s written consent. 

 

M. 
Misconduct shall mean the commission of any act of fraud, embezzlement or dishonesty by the Optionee or Participant, any unauthorized use or disclosure by such person of confidential information or trade secrets of the Corporation (or any Parent or Subsidiary), or any other intentional misconduct by such person adversely affecting the business or affairs of the Corporation (or any Parent or Subsidiary) in a material manner; provided, however, that if the term or concept has been defined in an employment agreement between the Corporation and the Optionee or Participant, then Misconduct shall have the definition set forth in such employment agreement. The foregoing definition shall not in any way preclude or restrict the right of the Corporation
(or any Parent or Subsidiary) to discharge or dismiss any Optionee, Participant or other person in the Service of the Corporation (or any Parent or Subsidiary) for any other acts or omissions, but such other acts or omissions shall not be deemed, for purposes of the Plan, to constitute grounds for termination for Misconduct. 

 

N. 1934 Act shall mean the Securities Exchange Act of 1934, as amended. 

 

O. Non-Statutory Option shall mean an option that does not satisfy the requirements of Code Section 422. 

 

P. Option Grant Program shall mean the option grant program in effect under the Plan. 

 

Q. Optionee shall mean any person to whom an option is granted under the Plan. 

 

R. Parent shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation, provided each corporation in the unbroken chain (other than the
Corporation) 

 

 

owns, at the time of the determination, stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. 

 

S. Participant shall mean any person who is issued shares of Common Stock under the Stock Issuance Program. 

 

T. Plan shall mean the Network CN Inc. 2007 Stock Option/Stock Issuance Plan, as set forth in this document. 

 

U. Plan Administrator shall mean either the Board or the Committee acting in its capacity as administrator of the Plan. 

 

V. Service shall mean the provision of services to the Corporation (or any Parent or Subsidiary) by a person in the capacity of an Employee, a member of the board of directors or an independent contractor, except to the extent otherwise specifically provided in the documents evidencing the option grant. 

 

W. Stock Issuance Agreement shall mean the agreement entered into by the Corporation and the Participant at the time of issuance of shares of Common Stock under the Stock Issuance Program. 

 

X. Stock Issuance Program shall mean the stock issuance program in effect under the Plan. 

 

Y. Subsidiary shall mean any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, provided each corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. 

 

Z. 10% Stockholder shall mean the owner of stock (after taking into account the constructive ownership rules of Section 424(d) of the Code) possessing more than 10% of the total combined voting power of all classes of stock of the Corporation (or any Parent or Subsidiary). 

 

AA. Unvested Shares shall mean shares of Common Stock which have not vested in accordance with the vesting schedule applicable to those shares or any special vesting acceleration provisions and which are subject to the Corporation’s repurchase right. 

 

BB.  Vested Shares shall mean shares of Common Stock which have vested in accordance with the vesting schedule applicable to those shares or any special vesting acceleration provisions and which are no longer subject to the Corporation’s repurchase right.

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