Document:

Secured Convertible Term Note

 Exhibit 10.2 
  
 THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID
ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO BIODELIVERY SCIENCES INTERNATIONAL, INC. THAT SUCH REGISTRATION IS NOT REQUIRED. 
  
 SECURED CONVERTIBLE TERM NOTE 
  
 FOR VALUE RECEIVED, BIODELIVERY SCIENCES INTERNATIONAL, INC., a Delaware corporation (the “Company”),
promises to pay to LAURUS MASTER FUND, LTD., c/o M&C Corporate Services Limited, P.O. Box 309 GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands, Fax: 345-949-8080 (the “Holder”) or its registered
assigns or successors in interest, on order, the sum of Two Million Five Hundred Thousand Dollars ($2,500,000), together with any accrued and unpaid interest hereon, on February 22, 2008 (the “Maturity Date”) if not sooner paid.

  
 Capitalized terms used herein without definition shall have
the meanings ascribed to such terms in that certain Securities Purchase Agreement dated as of the date hereof by and between the Company and the Holder (as amended, modified and supplemented from time to time, the “Purchase
Agreement”). 
  
 The following terms shall apply to this
Secured Convertible Term Note (this “Note”): 
  
 ARTICLE I 
 CONTRACT RATE AND AMORTIZATION 
  
 1.1 Contract Rate. Subject to Sections 4.2 and 5.10, interest payable on the outstanding principal amount of this
Note (the “Principal Amount”) shall accrue at a rate per annum equal to the “prime rate” published in The Wall Street Journal from time to time (the “Prime Rate”), plus two percent (2%) (the
“Contract Rate”). The Contract Rate shall be increased or decreased as the case may be for each increase or decrease in the Prime Rate in an amount equal to such increase or decrease in the Prime Rate; each change to be effective as
of the day of the change in the Prime Rate. Subject to Section 1.2, the Contract Rate shall not be less than seven and one-half percent (7.5%). 
  
 1.2 Contract Rate Adjustments and Payments. The Contract Rate shall be calculated on the last business day of each calendar month hereafter (other
than for increases or decreases in the Prime Rate which shall be calculated and become effective in accordance with the terms of Section 1.1) until the Maturity Date (each a “Determination Date”) and shall be subject to adjustment
as set forth herein. If (i) the Company shall have registered the shares of the Common Stock underlying the conversion of this Note and each Warrant on a registration statement declared effective by the Securities and Exchange Commission (the
“SEC”), and 

 (ii) the market price (the “Market Price”) of the Common Stock as reported by Bloomberg, L.P. on the
Principal Market for the average of the ten (10) trading days immediately preceding a Determination Date exceeds the then applicable Fixed Conversion Price by at least twenty-five percent (25%), the Contract Rate for the succeeding calendar month
shall automatically be reduced by 100 basis points (100 b.p.) (1%) for each incremental twenty-five percent (25%) increase, pro rata, in the Market Price of the Common Stock above the then applicable Fixed Conversion Price. Notwithstanding the
foregoing (and anything to the contrary contained herein), in no event shall the Contract Rate be less than zero percent (0%). Interest shall be (i) calculated on the basis of a 360 day year, and (ii) payable monthly, in arrears, commencing on April
1, 2005 and on the first business day of each consecutive calendar month thereafter until the Maturity Date (and on the Maturity Date), whether by acceleration or otherwise. 
  
 1.3 Principal Payments. Amortizing payments of the aggregate principal amount outstanding under this Note at any time
(the “Principal Amount”) shall be made by the Company on June 1, 2005 and on the first business day of each succeeding month thereafter until the Maturity Date (each, an “Amortization Date”). Subject to
Article III below, commencing on the first Amortization Date, the Company shall make monthly payments to the Holder on each Repayment Date, each such payment in the amount of $75,758 (the “Monthly Principal Amount”) together with
any accrued and unpaid interest on such portion of the Principal Amount plus any and all other unpaid amounts which are then owing under this Note, the Purchase Agreement and/or any other Related Agreement (collectively, the “Monthly
Amount”). Any outstanding Principal Amount together with any accrued and unpaid interest and any and all other unpaid amounts which are then owing by the Company to the Holder under this Note, the Purchase Agreement and/or any other Related
Agreement shall be due and payable on the Maturity Date. 
  
 ARTICLE II 
 CONVERSION AND REDEMPTION 
  
 2.1 Payment of Monthly Amount. 
  
 (a) Payment in Cash or Common Stock. If the Monthly Principal Amount due (or a portion of such Monthly Principal
Amount if not all of the Monthly Principal Amount may be converted into shares of Common Stock pursuant to this Section 2.1 and Section 3.2) is required to be paid in cash pursuant to Section 2.1(b), then the Company shall pay the Holder an amount
in cash equal to the sum of (i) 103% of the Monthly Principal Amount plus (ii) 100% of the portion of the Monthly Amount in excess of the Monthly Principal Amount, in each case, due and owing to the Holder on the Amortization Date. If the Monthly
Amount may be paid in shares of Common Stock pursuant to Section 2.1(b), the number of such shares to be issued by the Company to the Holder on such Amortization Date (in respect of such portion of the Monthly Amount converted into shares of Common
Stock pursuant to Section 2.1(b)), shall be the number determined by dividing (i) the portion of the Monthly Amount converted into shares of Common Stock, by (ii) the then applicable Fixed Conversion Price. For purposes hereof, subject to Section
3.6 hereof, the initial “Fixed Conversion Price” means $3.10. 
  
 (b) Monthly Amount Conversion Conditions. Subject to Sections 2.1(a), 2.2, and 3.2 hereof, the Holder shall convert into shares of Common Stock all or 
  

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 a portion of the Monthly Amount due on each Amortization Date if the following conditions (the “Conversion
Criteria”) are satisfied: (i) the average closing price of the Common Stock as reported by Bloomberg, L.P. on the Principal Market for the ten (10) trading days immediately preceding such Amortization Date shall be greater than or equal to
115% of the Fixed Conversion Price and (ii) the amount of such conversion does not exceed twenty-five percent (25%) of the aggregate dollar trading volume of the Common Stock for the period of twenty-two (22) trading days immediately preceding such
Amortization Date. If subsection (i) of the Conversion Criteria is met but subsection (ii) of the Conversion Criteria is not met as to the entire Monthly Amount, the Holder shall convert only such part of the Monthly Amount that meets subsection
(ii) of the Conversion Criteria. Any portion of the Monthly Amount due on an Amortization Date that the Holder has not been able to convert into shares of Common Stock due to the failure to meet the Conversion Criteria shall be paid in cash by the
Company at the rate of (x) 103% of the Monthly Principal Amount otherwise due on such Amortization Date and (y) 100% of the Monthly Amount in excess of the Monthly Principal Amount otherwise due on such Amortization Date, in each case, within three
(3) business days of such Amortization Date. 
  
 2.2 No
Effective Registration. Notwithstanding anything to the contrary herein, none of the Company’s obligations to the Holder may be converted into Common Stock unless (a) either (i) an effective current Registration Statement (as defined in the
Registration Rights Agreement) covering the shares of Common Stock to be issued in connection with satisfaction of such obligations exists or (ii) an exemption from registration for resale of all of the Common Stock issued and issuable is available
pursuant to Rule 144 of the Securities Act and (b) no Event of Default (as hereinafter defined) exists and is continuing, unless such Event of Default is cured within any applicable cure period or otherwise waived in writing by the Holder.

  
 2.3 Optional Redemption in Cash. The Company may
prepay this Note (“Optional Redemption”) by paying to the Holder a sum of money equal to one hundred thirty percent (130%) of the Principal Amount outstanding at such time together with accrued but unpaid interest thereon and any
and all other sums due, accrued or payable to the Holder arising under this Note, the Purchase Agreement or any other Related Agreement (the “Redemption Amount”) outstanding on the Redemption Payment Date (as defined below). The
Company shall deliver to the Holder a written notice of redemption (the “Notice of Redemption”) specifying the date for such Optional Redemption (the “Redemption Payment Date”), which date shall be seven (7)
business days after the date of the Notice of Redemption (the “Redemption Period”). A Notice of Redemption shall not be effective with respect to any portion of this Note for which the Holder has previously delivered a Notice of
Conversion (as hereinafter defined) or for conversions elected to be made by the Holder pursuant to Section 3.3 during the Redemption Period. The Redemption Amount shall be determined as if the Holder’s conversion elections had been completed
immediately prior to the date of the Notice of Redemption. On the Redemption Payment Date, the Redemption Amount must be paid in good funds to the Holder. In the event the Company fails to pay the Redemption Amount on the Redemption Payment Date as
set forth herein, then such Redemption Notice will be null and void. 
  

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 ARTICLE III 
 HOLDER’S CONVERSION RIGHTS 
  
 3.1 Optional Conversion. Subject to the terms set forth in this Article III, the Holder shall have the right, but not the obligation, to convert all or any portion of the outstanding Principal Amount and/or accrued interest and fees
due and payable into fully paid and nonassessable shares of Common Stock at the Fixed Conversion Price. The shares of Common Stock to be issued upon such conversion are herein referred to as, the “Conversion Shares.” 
  
 3.2 Conversion Limitation. 
  
 Notwithstanding anything contained herein to the contrary, the Holder shall
not be entitled to convert pursuant to the terms of this Note an amount that would be convertible into that number of Conversion Shares which would exceed the difference between (i) 4.99% of the outstanding shares of Common Stock and (ii) the number
of shares of Common Stock beneficially owned by the Holder . For purposes of the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and Regulation 13d-3 thereunder. The
Conversion Shares limitation described in this Section 3.2 shall automatically become null and void without any notice to the Company upon the occurrence and during the continuance of an Event of Default, or upon 75 days prior notice to the Company,
except that at no time shall the number of shares of Common Stock beneficially owned by the Holder exceed 19.99% of the outstanding shares of Common Stock. Notwithstanding anything contained herein to the contrary, the aggregate number of shares of
Common Stock issuable by the Company and acquirable by the Holder at an average price below $3.10 per share pursuant to the terms of this Note, the Purchase Agreement or any other Related Agreement, shall not exceed an aggregate of 1,428,458 shares
of Common Stock (subject to appropriate adjustment for stock splits, stock dividends, or other similar recapitalizations affecting the Common Stock) (the “Maximum Common Stock Issuance”), unless the issuance of Common Stock
hereunder in excess of the Maximum Common Stock Issuance shall first be approved by the Company’s shareholders. If at any point in time and from time to time the number of shares of Common Stock issued pursuant to the terms of this Note, the
Purchase Agreement or any other Related Agreement, together with the number of shares of Common Stock that would then be issuable by the Company to the Holder in the event of a conversion or exercise pursuant to the terms of this Note, the Purchase
Agreement or any other Related Agreement, would exceed the Maximum Common Stock Issuance but for this Section 3.2, the Company shall promptly call a shareholders meeting and use its best efforts to solicit shareholder approval for the issuance of
the shares of Common Stock hereunder in excess of the Maximum Common Stock Issuance. Notwithstanding anything contained herein to the contrary, the provisions of this Section 3.2 are irrevocable and may not be waived by the Holder or the Company.

  
 3.3 Mechanics of Holder’s Conversion. In the event
that the Holder elects to convert this Note into Common Stock, the Holder shall give notice of such election by delivering an executed and completed notice of conversion (“Notice of Conversion”) to the Company and such Notice of
Conversion shall provide a breakdown in reasonable detail of the Principal Amount, accrued interest and fees that are being converted. On each Conversion Date (as hereinafter defined) and in accordance with its Notice of Conversion, the Holder shall
make the 
  

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 appropriate reduction to the Principal Amount, accrued interest and fees as entered in its records and shall provide
written notice thereof to the Company within two (2) business days after the Conversion Date. Each date on which a Notice of Conversion is delivered or telecopied to the Company in accordance with the provisions hereof shall be deemed a Conversion
Date (the “Conversion Date”). A form of Notice of Conversion is annexed hereto as Exhibit A. Pursuant to the terms of the Notice of Conversion, the Company will issue instructions to the transfer agent accompanied by an
opinion of counsel within two (2) business days of the date of the delivery to the Company of the Notice of Conversion and shall cause the transfer agent to transmit the certificates representing the Conversion Shares to the Holder by crediting the
account of the Holder’s designated broker with the Depository Trust Corporation (“DTC”) through its Deposit Withdrawal Agent Commission (“DWAC”) system within three (3) business days after receipt by the
Company of the appropriately completed Notice of Conversion (the “Delivery Date”). In the case of the exercise of the conversion rights set forth herein the conversion privilege shall be deemed to have been exercised and the
Conversion Shares issuable upon such conversion shall be deemed to have been issued upon the date of receipt by the Company of the Notice of Conversion. The Holder shall be treated for all purposes as the record holder of the Conversion Shares,
unless the Holder provides the Company written instructions to the contrary. 
  
 3.4 Late Payments. The Company understands that a delay in the delivery of the Conversion Shares in the form required pursuant to this Article beyond the Delivery Date could result in economic loss to the
Holder. As compensation to the Holder for such loss, the Company shall pay late payments to the Holder for any late issuance of Conversion Shares in the form required pursuant to this Article II upon conversion of this Note, in the amount equal to
$500 per business day after the Delivery Date. The Company shall make any payments incurred under this Section in immediately available funds upon demand. 
  
 3.5 Conversion Mechanics. The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing that
portion of the principal and interest and fees to be converted, if any, by the then applicable Fixed Conversion Price. In the event of any conversions of a portion of the outstanding Principal Amount pursuant to this Article III, such conversions
shall be deemed to constitute conversions of the outstanding Principal Amount applying to Monthly Amounts for the remaining Amortization Dates in chronological order. 
  
 3.6 Adjustment Provisions. The Fixed Conversion Price and number and kind of shares or other securities to be issued
upon conversion determined pursuant to this Note shall be subject to adjustment from time to time upon the happening of certain events while this conversion right remains outstanding, as follows: 
  
 (a) Reclassification. If the Company at any time shall, by
reclassification or otherwise, change the Common Stock into the same or a different number of securities of any class or classes, this Note, as to the unpaid Principal Amount and accrued interest thereon, shall thereafter be deemed to evidence the
right to purchase an adjusted number of such securities and kind of securities as would have been issuable as the result of such change with respect to the Common Stock (i) immediately prior to or (ii) immediately after, such reclassification or
other change at the sole election of the Holder. 
  

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 (b) Stock Splits, Combinations and Dividends. If the shares of Common Stock are subdivided or
combined into a greater or smaller number of shares of Common Stock, or if a dividend is paid on the Common Stock or any preferred stock issued by the Company in shares of Common Stock, the Fixed Conversion Price shall be proportionately reduced in
case of subdivision of shares or stock dividend or proportionately increased in the case of combination of shares, in each such case by the ratio which the total number of shares of Common Stock outstanding immediately after such event bears to the
total number of shares of Common Stock outstanding immediately prior to such event. 
  
 (c) Share Issuances. Subject to the provisions of this Section 3.6, if the Company shall at any time prior to the conversion or repayment in full of the Principal Amount issue any shares of Common Stock or
securities convertible into Common Stock to a Person other than the Holder (except (i) pursuant to Sections 3.6(a) or (b) above; (ii) pursuant to options, warrants, or other obligations to issue shares outstanding on the date hereof as disclosed in
the Exchange Act Filings and the schedules to the Purchase Agreement; or (iii) pursuant to options that may be issued under any employee incentive stock option and/or any qualified stock option plan adopted by the Company) for a consideration per
share (the “Offer Price”) less than the Fixed Conversion Price in effect at the time of such issuance, then the Fixed Conversion Price shall be immediately reset pursuant to the formula below. For purposes hereof, the issuance of
any security of the Company convertible into or exercisable or exchangeable for Common Stock shall result in an adjustment to the Fixed Conversion Price upon the issuance of such securities. 
  
 If the Corporation issues any additional shares pursuant to Section 3.6(c)
above then, and thereafter successively upon each such issue, the Fixed Conversion Price shall be adjusted by multiplying the then applicable Fixed Conversion Price by the following fraction: 
  

	
	A + B
	 (A + B) + [((C – D) x B) / C]

  
 A = Total amount of
shares convertible pursuant to this Note assuming the entire amount of the Note is converted. 
  
 B = Actual shares sold in the offering 
  
 C = Fixed Conversion Price 
  
 D = Offering price

  
 (d) Computation of Consideration. For purposes of any
computation respecting consideration received pursuant to Section 3.6(c) above, the following shall apply: 
  
 (i) in the case of the issuance of shares of Common Stock for cash, the consideration shall be the amount of such cash, provided 

  

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that in no case shall any deduction be made for any commissions, discounts or other expenses incurred by the Company for any underwriting of the issue or
otherwise in connection therewith; 
  
 (ii) in
the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined in good faith by the Board of Directors
of the Company (irrespective of the accounting treatment thereof); and 
  
 (iii) upon any such exercise, the aggregate consideration received for such securities shall be deemed to be the consideration received by the Company for the issuance of such securities plus the additional minimum
consideration, if any, to be received by the Company upon the conversion or exchange thereof (the consideration in each case to be determined in the same manner as provided in subsections (i) and (ii) of this Section 3.6(d)). 
  
 3.7 Reservation of Shares. During the period the conversion right
exists, the Company will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of Conversion Shares upon the full conversion of this Note. The Company represents that upon issuance, the
Conversion Shares will be duly and validly issued, fully paid and non-assessable. The Company agrees that its issuance of this Note shall constitute full authority to its officers, agents, and transfer agents who are charged with the duty of
executing and issuing stock certificates to execute and issue the necessary certificates for the Conversion Shares upon the conversion of this Note. 
  
 3.8 Registration Rights. The Holder has been granted registration rights with respect to the Conversion Shares as set forth in a Registration
Rights Agreement. 
  
 3.9 Issuance of New Note. Upon any
partial conversion of this Note, a new Note containing the same date and provisions of this Note shall, at the request of the Holder, be issued by the Company to the Holder for the principal balance of this Note and interest which shall not have
been converted or paid. Subject to the provisions of Article IV of this Note, the Company shall not pay any costs, fees or any other consideration to the Holder for the production and issuance of a new Note. 
  
 ARTICLE IV 
 EVENTS OF DEFAULT 
  
 4.1 Events of Default. The occurrence of any of the following events set forth in this Section 4.1 shall constitute an event of default (“Event of Default”) hereunder: 
  
 (a) Failure to Pay. The Company fails to pay when due any
installment of principal, interest or other fees hereon in accordance herewith, or the Company fails to pay any of the other Obligations (under and as defined in the Master Security Agreement) when due, and, in any such case, such failure shall
continue for a period of three (3) days following the date upon any such payment was due. 
  

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 (b) Breach of Covenant. The Company or any of its Subsidiaries breaches any covenant or any other
term or condition of this Note in any material respect and such breach, if subject to cure, continues for a period of fifteen (15) days after the occurrence thereof. 
  
 (c) Breach of Representations and Warranties. Any representation, warranty or statement made or furnished by the
Company or any of its Subsidiaries in this Note, the Purchase Agreement or any Related Agreement shall at any time be false or misleading in any material respect. 
  
 (d) Other Indebtedness. The occurrence of any event of default (or similar term) under any indebtedness which the
Company or any of its Subsidiaries is a party with third parties which permits the holder of such indebtedness to accelerate such indebtedness, solely to the extent that the principal amount of any such indebtedness exceeds, when taken together,
$100,000 in the aggregate. 
  
 (e) Bankruptcy. The Company
or any of its Subsidiaries shall (i) apply for, consent to or suffer to exist the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (ii) make a
general assignment for the benefit of creditors, (iii) commence a voluntary case under the federal bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition seeking to take advantage of any
other law providing for the relief of debtors, (vi) acquiesce to, or fail to have dismissed, within thirty (30) days, any petition filed against it in any involuntary case under such bankruptcy laws, or (vii) take any action for the purpose of
effecting any of the foregoing; 
  
 (f) Judgments. An
attachment or levy is made upon the Company or any of its Subsidiary’s assets having an aggregate value in excess of $100,000 or a judgment is rendered against the Company’s property involving a liability of more than $100,000 which shall
not have been vacated, discharged, stayed or bonded within thirty (30) days from the entry thereof; 
  
 (g) Insolvency. The Company or any of its Subsidiaries shall admit in writing its inability, or be generally unable to pay its debts as they
become due or cease operations of its present business; 
  
 (h)
Change in Control. Any “Person” or “group” (as such terms are defined in Sections 13(d) and 14(d) of the Exchange Act, as in effect on the date hereof) is or becomes the “beneficial owner” (as defined in Rules
13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of 35% or more on a fully diluted basis of the then outstanding voting equity interest of the Company (other than a “Person” or “group” that beneficially owns
35% or more of such outstanding voting equity interests of the Company on the date hereof) or (ii) the Board of Directors of the Company shall cease to consist of a majority of the Board of Directors of the Company on the date hereof (or directors
appointed by a majority of the Board of Directors in effect immediately prior to such appointment); 
  

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 (i) Indictment; Proceedings. The indictment or threatened indictment of the Company or any of its
Subsidiaries or any executive officer of the Company or any of its Subsidiaries under any criminal statute, or commencement or threatened commencement of criminal or civil proceeding against the Company or any of its Subsidiaries or any executive
officer of the Company or any of its Subsidiaries pursuant to which statute or proceeding penalties or remedies sought or available include forfeiture of any of the property of the Company or any of its Subsidiaries; 
  
 (j) Related Agreements. (i) An Event of Default shall occur under and
as defined in any Related Agreement, (ii) the Company or any of its Subsidiaries shall breach any term or provision of the Purchase Agreement or any Related Agreement in any material respect which is not cured within any applicable cure or grace
period, (iii) the Company or any of its Subsidiaries attempts to terminate, challenges the validity of, or its liability under, the Purchase Agreement or any Related Agreement, (iv) any proceeding (other than a proceeding commenced by the Purchaser)
shall be brought to challenge the validity, binding effect of the Purchase Agreement or any Related Agreement or (v) the Purchase Agreement or any Related Agreement ceases to be a valid, binding and enforceable obligation of the Company or any of
its Subsidiaries (to the extent such persons or entities are a party thereto); 
  
 (k) Stop Trade. An SEC stop trade order or Principal Market trading suspension of the Common Stock shall be in effect for ten (10) consecutive days or ten (10) days during a period of thirty (30) consecutive
days, excluding in all cases a suspension of all trading on a Principal Market, provided that the Company shall not have been able to cure such trading suspension within thirty (30) days of the notice thereof or list the Common Stock on another
Principal Market within sixty (60) days of such notice; or 
  
 (l) Failure to Deliver Common Stock or Replacement Note. The Company’s failure to deliver Common Stock to the Holder pursuant to and in the form required by this Note and the Purchase Agreement and, if such failure to deliver
Common Stock shall not be cured within two (2) business days or the Company is required to issue a replacement Note to the Holder and the Company shall fail to deliver such replacement Note within seven (7) business days. 
  
 4.2 Default Interest. Following the occurrence and during the
continuance of an Event of Default, the Company shall pay interest on this Note in an amount equal to two percent (2%) per month, and all outstanding obligations under this Note, the Purchase Agreement and each Related Agreement, including unpaid
interest, shall continue to accrue interest at such additional interest rate from the date of such Event of Default until the date such Event of Default is cured or waived. 
  

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 4.3 Default Payment. Following the occurrence and during the continuance of an Event of Default,
the Holder, at its option, may demand repayment in full of all obligations owing by Company to the Holder under this Note, the Purchase Agreement and/or any Related Agreement and/or may elect, in addition to all rights and remedies of the Holder
under the Purchase Agreement and the other Related Agreements and all obligations of the Company under the Purchase Agreement and the other Related Agreements, to require the Company to make a Default Payment (“Default Payment”).
The Default Payment shall be 130% of the outstanding principal amount of the Note, plus accrued but unpaid interest, all other fees then remaining unpaid, and all other amounts payable hereunder. The Default Payment shall be applied first to any
fees due and payable to the Holder pursuant to this Note and/or the other Related Agreements, then to accrued and unpaid interest due on this Note and then to the outstanding principal balance of this Note. The Default Payment shall be due and
payable immediately on the date that the Holder has exercised its rights pursuant to this Section 4.3. 
  
 ARTICLE V 
 MISCELLANEOUS 
  
 5.1 Conversion Privileges. The conversion privileges set forth in
Article III shall remain in full force and effect immediately from the date hereof until the date this Note is paid in full and irrevocably terminated. 
  
 5.2 Cumulative Remedies. The remedies under this Note shall be cumulative. 
  
 5.3 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder hereof in the exercise of any
power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights
and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available. 
  
 5.4 Notices. Any notice herein required or permitted to be given shall be in writing and provided in accordance with the terms of the Purchase
Agreement. 
  
 5.5 Amendment Provision. The term
“Note” and all references thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented, and any successor instrument as such
successor instrument may be amended or supplemented. 
  
 5.6
Assignability. This Note shall be binding upon the Company and its successors and assigns, and shall inure to the benefit of the Holder and its successors and assigns, and may be assigned by the Holder in accordance with the requirements of
the Security Agreement. The Company may not assign any of its obligations under this Note without the prior written consent of the Holder, any such purported assignment without such consent being null and void. 
  
 5.7 Cost of Collection. In case of any Event of Default under this
Note, the Company shall pay the Holder reasonable costs of collection, including reasonable attorneys’ fees. 
  

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 5.8 Governing Law, Jurisdiction and Waiver of Jury Trial. 
  
 (a) THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW (OTHER THAN THE PRINCIPLES SET FORTH IN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). 
  
 (b) THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS
LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY, ON THE ONE HAND, AND THE HOLDER, ON THE OTHER HAND, PERTAINING TO THIS NOTE OR ANY OF THE OTHER
RELATED AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS NOTE OR ANY OF THE RELATED AGREEMENTS; PROVIDED, THAT THE COMPANY ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE
COUNTY OF NEW YORK, STATE OF NEW YORK; AND FURTHER PROVIDED, THAT NOTHING IN THIS NOTE SHALL BE DEEMED OR OPERATE TO PRECLUDE THE HOLDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE
OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE HOLDER. THE COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH THE COMPANY HEREBY WAIVES ANY
OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. THE COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES
THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH IN THE PURCHASE AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF
THE COMPANY’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID. 
  
 (c) THE COMPANY DESIRES THAT ITS DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE COMPANY HERETO WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE HOLDER AND THE
COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS NOTE, ANY OTHER RELATED AGREEMENT OR THE TRANSACTIONS RELATED HERETO OR THERETO. 
  

 11 

 5.9 Severability. In the event that any provision of this Note is invalid or unenforceable under
any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid
or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Note. 
  
 5.10 Maximum Payments. Nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum rate permitted by such law, any payments in excess of such maximum rate shall be credited
against amounts owed by the Company to the Holder and thus refunded to the Company. 
  
 5.11 Security Interest and Guarantee. The Holder has been granted a security interest (i) in certain assets of the Company as more fully described in the Master Security Agreement dated as of the date hereof
and (ii) pursuant to the Stock Pledge Agreement dated as of the date hereof. The obligations of the Company under this Note are guaranteed by certain Subsidiaries of the Company pursuant to the Subsidiary Guaranty dated as of the date hereof.

  
 5.12 Construction. Each party acknowledges that its
legal counsel participated in the preparation of this Note and, therefore, stipulates that the rule of construction that ambiguities are to be resolved against the drafting party shall not be applied in the interpretation of this Note to favor any
party against the other. 
  
 [Balance of page intentionally left
blank; signature page follows] 
  

 12 

 IN WITNESS WHEREOF, the Company has caused this Secured Convertible Term Note to be signed in its
name effective as of this 22st day of February, 2005. 
  

			
	 BIODELIVERY SCIENCES
 INTERNATIONAL, INC.

		
	 By:
	 	     /S/ James A. McNulty

	 	 	 Name: James A. McNulty

	 	 	 Title: Chief Financial Officer

  
 WITNESS: 
  
     /S/ Michelle Brown 

  

 13 

 EXHIBIT A 
  
 NOTICE OF CONVERSION 
  

(To be executed by the Holder in order to convert all or part of 
 the Secured Convertible Term Note into Common Stock) 
  
 [Name and Address of Holder] 
  
 The undersigned hereby
converts $                     of the principal due on [specify applicable Repayment Date] under the Secured Convertible Term Note
dated February 22, 2005 (the “Note”) issued by BioDelivery Services International, Inc. (the “Company”) by delivery of shares of Common Stock of the Company on and subject to the conditions set forth in the Note.

  

			
	 1.      Date of Conversion
	 	  

		
	 2.      Shares To Be Delivered:
	 	  

  

			
	 BIODELIVERY SCIENCES
 INTERNATIONAL, INC.

		
	 By:
	 	  

	 Name:
	 	  

	 Title:Common Stock Purchase Warrant

 Exhibit 10.3 
  
 THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO BIODELIVERY SCIENCES INTERNATIONAL, INC. THAT SUCH REGISTRATION IS NOT REQUIRED. 
  
 Right to Purchase up to 350,000 Shares of Common Stock of  

BioDelivery Sciences International, Inc.  
 (subject to adjustment as provided herein) 
  
 COMMON
STOCK PURCHASE WARRANT 
  

			
	 No. _______________________
	 	Issue Date: February 22, 2005

  
 BIODELIVERY SCIENCES
INTERNATIONAL, INC., a corporation organized under the laws of the State of Delaware (the “Company”), hereby certifies that, for value received, LAURUS MASTER FUND, LTD., or assigns (the “Holder”), is entitled, subject to the
terms set forth below, to purchase from the Company (as defined herein) from and after the Issue Date of this Warrant and at any time or from time to time before 5:00 p.m., New York time, through the close of business February 22, 2012 (the
“Expiration Date”), up to 350,000 fully paid and nonassessable shares of Common Stock (as hereinafter defined), $0.001 par value per share, at the applicable Exercise Price per share (as defined below). The number and character of such
shares of Common Stock and the applicable Exercise Price per share are subject to adjustment as provided herein. 
  
 As used herein the following terms, unless the context otherwise requires, have the following respective meanings: 
  
 (a) The term “Company” shall include BioDelivery
Sciences International, Inc. and any corporation which shall succeed, or assume the obligations of, BioDelivery Sciences International, Inc. hereunder. 
  
 (b) The term “Common Stock” includes (i) the Company’s Common Stock, par value $0.01 per share; and (ii) any other
securities into which or for which any of the securities described in the preceding clause (i) may be converted or exchanged pursuant to a plan of recapitalization, reorganization, merger, sale of assets or otherwise. 
  
 (c) The term “Other Securities” refers to any
stock (other than Common Stock) and other securities of the Company or any other person (corporate or otherwise) which the holder of the Warrant at any time shall be entitled to receive, or shall have received, on the exercise of the Warrant, in
lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or Other Securities pursuant to Section 4 or otherwise. 

 (d) The “Exercise Price” applicable under this Warrant shall be a price of
$3.88. 
  
 1. Exercise of Warrant. 
  
 1.1. Number of Shares Issuable upon Exercise. From and after the date
hereof through and including the Expiration Date, the Holder shall be entitled to receive, upon exercise of this Warrant in whole or in part, by delivery of an original or fax copy of an exercise notice in the form attached hereto as Exhibit A (the
“Exercise Notice”), shares of Common Stock of the Company, subject to adjustment pursuant to Section 4. 
  
 1.2. Fair Market Value. For purposes hereof, the “Fair Market Value” of a share of Common Stock as of a particular date (the
“Determination Date”) shall mean: 
  
 (a) If the Company’s Common Stock is traded on the American Stock Exchange or another national exchange or is quoted on the National or SmallCap Market of The Nasdaq Stock Market, Inc. (“Nasdaq”), then the average closing or
last sale price, respectively, reported for the last ten (10) business days immediately preceding the Determination Date. 
  
 (b) If the Company’s Common Stock is not traded on the American Stock Exchange or another national exchange or on the Nasdaq but is
traded on the NASD OTC Bulletin Board, then the mean of the average of the closing bid and asked prices reported for the last ten (10) business days immediately preceding the Determination Date. 
  
 (c) Except as provided in clause (d) below, if the
Company’s Common Stock is not publicly traded, then as the Holder and the Company agree or in the absence of agreement by arbitration in accordance with the rules then in effect of the American Arbitration Association, before a single
arbitrator to be chosen by the Company and the Holder from a panel of persons qualified by education and training to pass on the matter to be decided. 
  
 (d) If the Determination Date is the date of a liquidation, dissolution or winding up, or any event deemed to be a liquidation,
dissolution or winding up pursuant to the Company’s charter, then all amounts to be payable per share to holders of the Common Stock pursuant to the charter in the event of such liquidation, dissolution or winding up, plus all other amounts to
be payable per share in respect of the Common Stock in liquidation under the charter, assuming for the purposes of this clause (d) that all of the shares of Common Stock then issuable upon exercise of the Warrant are outstanding at the Determination
Date. 
  
 1.3. Company Acknowledgment. The Company will, at
the time of the exercise of this Warrant, upon the request of the holder hereof acknowledge in writing its continuing obligation to afford to such holder any rights to which such holder shall continue to be entitled after such exercise in accordance
with the provisions of this Warrant. If the holder shall fail to make any such request, such failure shall not affect the continuing obligation of the Company to afford to such holder any such rights. 
  

 2 

 1.4. Trustee for Warrant Holders. In the event that a bank or trust company shall have been
appointed as trustee for the holders of this Warrant pursuant to Subsection 3.2, such bank or trust company shall have all the powers and duties of a warrant agent (as hereinafter described) and shall accept, in its own name for the account of the
Company or such successor person as may be entitled thereto, all amounts otherwise payable to the Company or such successor, as the case may be, on exercise of this Warrant pursuant to this Section 1. 
  
 2. Procedure for Exercise. 
  
 2.1. Delivery of Stock Certificates, Etc., on Exercise. The Company
agrees that the shares of Common Stock purchased upon exercise of this Warrant shall be deemed to be issued to the Holder as the record owner of such shares as of the close of business on the date on which this Warrant shall have been surrendered
and payment made for such shares in accordance herewith. As soon as practicable after the exercise of this Warrant in full or in part, and in any event within three (3) business days thereafter, the Company at its expense (including the payment by
it of any applicable issue taxes) will cause to be issued in the name of and delivered to the Holder, or as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct in compliance with applicable securities laws, a
certificate or certificates for the number of duly and validly issued, fully paid and nonassessable shares of Common Stock (or Other Securities) to which such Holder shall be entitled on such exercise, plus, in lieu of any fractional share to which
such holder would otherwise be entitled, cash equal to such fraction multiplied by the then Fair Market Value of one full share, together with any other stock or other securities and property (including cash, where applicable) to which such Holder
is entitled upon such exercise pursuant to Section 1 or otherwise. 
  
 2.2. Exercise. Payment may be made in cash or by certified or official bank check payable to the order of the Company equal to the applicable aggregate Exercise Price for the number of Common Shares specified in such Exercise Notice
(as such exercise number shall be adjusted to reflect any adjustment in the total number of shares of Common Stock issuable to the Holder per the terms of this Warrant) and the Holder shall thereupon be entitled to receive the number of duly
authorized, validly issued, fully-paid and non-assessable shares of Common Stock (or Other Securities) determined as provided herein. 
  
 3. Effect of Reorganization, Etc.; Adjustment of Exercise Price. 
  
 3.1. Reorganization, Consolidation, Merger, Etc. In case at any time or from time to time, the Company shall (a)
effect a reorganization, (b) consolidate with or merge into any other person, or (c) transfer all or substantially all of its properties or assets to any other person under any plan or arrangement contemplating the dissolution of the Company, then,
in each such case, as a condition to the consummation of such a transaction, proper and adequate provision shall be made by the Company whereby the Holder of this Warrant, on the exercise hereof as provided in Section 1 at any time after the
consummation of such reorganization, consolidation or merger or the effective date of such dissolution, as the case may be, shall receive, in lieu of the Common Stock (or Other Securities) issuable on such exercise prior to 

  

 3 

 
such consummation or such effective date, the stock and other securities and property (including cash) to which such Holder would have been entitled upon
such consummation or in connection with such dissolution, as the case may be, if such Holder had so exercised this Warrant, immediately prior thereto, all subject to further adjustment thereafter as provided in Section 4. 
  
 3.2. Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or assets, the Company, concurrently with any distributions made to holders of its Common Stock, shall, upon exercise of this Warrant, at its expense deliver or cause to be
delivered to the Holder the stock and other securities and property (including cash, where applicable) receivable by the Holder of this Warrant pursuant to Section 3.1, or, if the Holder shall so instruct the Company, to a bank or trust company
specified by the Holder and having its principal office in New York, NY as trustee for the Holder of this Warrant (the “Trustee”). 
  
 3.3. Continuation of Terms. Upon any reorganization, consolidation, merger or transfer (and any dissolution following any transfer) referred to in
this Section 3, this Warrant shall continue in full force and effect and the terms hereof shall be applicable to the shares of stock and other securities and property receivable on the exercise of this Warrant after the consummation of such
reorganization, consolidation or merger or the effective date of dissolution following any such transfer, as the case may be, and shall be binding upon the issuer of any such stock or other securities, including, in the case of any such transfer,
the person acquiring all or substantially all of the properties or assets of the Company, whether or not such person shall have expressly assumed the terms of this Warrant as provided in Section 4. In the event this Warrant does not continue in full
force and effect after the consummation of the transactions described in this Section 3, then, upon exercise of this Warrant, the Company’s securities and property (including cash, where applicable) receivable by the Holder of this Warrant will
be delivered to the Holder or the Trustee as contemplated by Section 3.2. 
  
 4. Extraordinary Events Regarding Common Stock. In the event that the Company shall (a) issue additional shares of the Common Stock as a dividend or other distribution on outstanding Common Stock, (b) subdivide
its outstanding shares of Common Stock, or (c) combine its outstanding shares of the Common Stock into a smaller number of shares of the Common Stock, then, in each such event, the Exercise Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Exercise Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such event and the denominator of which shall be the number of shares of
Common Stock outstanding immediately after such event, and the product so obtained shall thereafter be the Exercise Price then in effect. The Exercise Price, as so adjusted, shall be readjusted in the same manner upon the happening of any successive
event or events described herein in this Section 4. The number of shares of Common Stock that the holder of this Warrant shall thereafter, on the exercise hereof as provided in Section 1, be entitled to receive shall be adjusted to a number
determined by multiplying the number of shares of Common Stock that would otherwise (but for the provisions of this Section 4) be issuable on such exercise by a fraction of which (a) the numerator is the Exercise Price that would otherwise (but for
the provisions of this Section 4) be in effect, and (b) the denominator is the Exercise Price in effect on the date of such exercise (taking into account the provisions of this Section 4). 
  

 4 

 5. Certificate as to Adjustments. In each case of any adjustment or readjustment in the shares of
Common Stock (or Other Securities) issuable on the exercise of this Warrant, the Company at its expense will promptly cause its Chief Financial Officer or other appropriate designee to compute such adjustment or readjustment in accordance with the
terms of this Warrant and prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (a) the consideration received or receivable
by the Company for any additional shares of Common Stock (or Other Securities) issued or sold or deemed to have been issued or sold, (b) the number of shares of Common Stock (or Other Securities) outstanding or deemed to be outstanding, and (c) the
Exercise Price and the number of shares of Common Stock to be received upon exercise of this Warrant, in effect immediately prior to such adjustment or readjustment and as adjusted or readjusted as provided in this Warrant. The Company will
forthwith mail a copy of each such certificate to the holder of this Warrant and any Warrant agent of the Company (appointed pursuant to Section 11 hereof). 
  
 6. Reservation of Stock, Etc., Issuable on Exercise of Warrant. The Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of this Warrant, shares of Common Stock (or Other Securities) from time to time issuable on the exercise of this Warrant. 
  
 7. Assignment; Exchange of Warrant. Subject to compliance with applicable securities laws, this Warrant, and the rights evidenced hereby, may be
transferred by any registered holder hereof (a “Transferor”) in whole or in part. On the surrender for exchange of this Warrant, with the Transferor’s endorsement in the form of Exhibit B attached hereto (the “Transferor
Endorsement Form”) and together with evidence reasonably satisfactory to the Company demonstrating compliance with applicable securities laws, which shall include, without limitation, the provision of a legal opinion from the Transferor’s
counsel (at the Company’s expense) that such transfer is exempt from the registration requirements of applicable securities laws, the Company at its expense (but with payment by the Transferor of any applicable transfer taxes) will issue and
deliver to or on the order of the Transferor thereof a new Warrant of like tenor, in the name of the Transferor and/or the transferee(s) specified in such Transferor Endorsement Form (each a “Transferee”), calling in the aggregate on the
face or faces thereof for the number of shares of Common Stock called for on the face or faces of the Warrant so surrendered by the Transferor. 
  
 8. Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this
Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement or security reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender and
cancellation of this Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor. 
  
 9. Registration Rights. The Holder of this Warrant has been granted certain registration rights by the Company. These registration rights are set
forth in a Registration Rights Agreement entered into by the Company and Holder dated as of the date hereof, as the same may be amended, modified or supplemented from time to time. 
  

 5 

 10. Maximum Exercise. Notwithstanding anything contained herein to the contrary, the Holder shall
not be entitled to exercise this Warrant in connection with that number of shares of Common Stock which would exceed the difference between (i) 4.99% of the outstanding shares of Common Stock and (ii) the number of shares of Common Stock
beneficially owned by the Holder. For the purposes of the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act, as amended, and Regulation 13d-3 thereunder. The conversion
limitation described in this Section 10 shall automatically become null and void without any notice to the Company upon the occurrence and during the continuance of an Event of Default under and as defined in the Note made by the Company to the
Holder dated the date hereof (as amended, modified or supplemented from time to time, the “Note”), or upon 75 days prior notice to the Company, except that at no time shall the number of shares of Common Stock beneficially owned by the
Holder exceed 19.99% of the outstanding shares of Common Stock. Notwithstanding anything contained herein to the contrary, the aggregate number of shares of Common Stock issuable by the Company and acquirable by the Holder at an average price below
$3.10 per share pursuant to the terms of this Warrant, the Note, the Purchase Agreement (as defined in the Note), any Related Agreement (as defined in the Purchase Agreement) or otherwise, shall not exceed an aggregate of 1,428,458 shares of Common
Stock (subject to appropriate adjustment for stock splits, stock dividends, or other similar recapitalizations affecting the Common Stock) (the “Maximum Common Stock Issuance”), unless the issuance of Common Stock hereunder in
excess of the Maximum Common Stock Issuance shall first be approved by the Company’s shareholders. If at any point in time and from time to time the number of shares of Common Stock issued pursuant to the terms of this Warrant, the Note, the
Purchase Agreement or any Related Agreement, together with the number of shares of Common Stock that would then be issuable by the Company to the Holder in the event of a conversion or exercise pursuant to the terms of this Warrant, the Note, the
Purchase Agreement, any Related Agreement or otherwise, would exceed the Maximum Common Stock Issuance but for this Section 10, the Company shall promptly call a shareholders meeting to solicit shareholder approval for the issuance of the shares of
Common Stock hereunder in excess of the Maximum Common Stock Issuance. 
  
 11. Warrant Agent. The Company may, by written notice to the each Holder of the Warrant, appoint an agent for the purpose of issuing Common Stock (or Other Securities) on the exercise of this Warrant pursuant to Section 1, exchanging
this Warrant pursuant to Section 7, and replacing this Warrant pursuant to Section 8, or any of the foregoing, and thereafter any such issuance, exchange or replacement, as the case may be, shall be made at such office by such agent. 
  
 12. Transfer on the Company’s Books. Until this Warrant is
transferred on the books of the Company, the Company may treat the registered Holder hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary. 
  
 13. Notices, Etc. All notices and other communications from the Company to the Holder of this Warrant shall be mailed
by first class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company in writing by such Holder or, until any such Holder furnishes to the Company an address, then to, and at the address of, the last
Holder of this Warrant who has so furnished an address to the Company. 
  

 6 

 14. Miscellaneous. This Warrant and any term hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. This Warrant shall be governed by and construed in accordance with the laws of State of New York
without regard to principles of conflicts of laws. Any action brought concerning the transactions contemplated by this Warrant shall be brought only in the state courts of New York or in the federal courts located in the state of New York; provided,
however, that the Holder may choose to waive this provision and bring an action outside the state of New York. The individuals executing this Warrant on behalf of the Company agree to submit to the jurisdiction of such courts and waive trial by
jury. The prevailing party shall be entitled to recover from the other party its reasonable attorneys’ fees and costs. In the event that any provision of this Warrant is invalid or unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of this Warrant. The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any other provision hereof. The Company acknowledges that legal counsel participated in the preparation of this Warrant and, therefore, stipulates that the rule of
construction that ambiguities are to be resolved against the drafting party shall not be applied in the interpretation of this Warrant to favor any party against the other party. 
  
 [BALANCE OF PAGE INTENTIONALLY LEFT BLANK; 
 SIGNATURE PAGE FOLLOWS] 
  
  

 7 

 IN WITNESS WHEREOF, the Company has executed this Warrant as of the date first written above. 

 

							
	 	 	 	 	 BIODELIVERY SCIENCES
 INTERNATIONAL,
INC.

				
	WITNESS:	 	 	 	By:	 	 /S/ James A. McNulty

	 	 	 	 	Name:	 	James A. McNulty
	 /S/ Michelle Brown

	 	 	 	Title:	 	Chief Financial Officer

  

 8 

 Exhibit A 
  

FORM OF SUBSCRIPTION 
 (To Be Signed
Only On Exercise Of Warrant) 

			
	TO:	 	BioDelivery Sciences International, Inc.
		
	 	 	Attention:    Chief Financial Officer

  
 The undersigned,
pursuant to the provisions set forth in the attached Warrant (No.            ), hereby irrevocably elects to purchase
             shares of the Common Stock covered by such Warrant. 
  
 The undersigned herewith makes payment of the full Exercise Price for such shares at the price per share provided for in such Warrant, which is
$            . 
  
 The undersigned requests that the certificates for such shares be issued in the name of, and delivered to
                                       
  
 whose address is
                                        
                                        
    . 
  
 The undersigned represents and
warrants that all offers and sales by the undersigned of the securities issuable upon exercise of the within Warrant shall be made pursuant to registration of the Common Stock under the Securities Act of 1933, as amended (the “Securities
Act”) or pursuant to an exemption from registration under the Securities Act. 
  

									
				
	Dated:	 	  

	  	 	 	  

	 	 	 	  	 	 	 (Signature must conform to name of holder as
 specified on the face of the Warrant)

					
	 	 	 	  	 	 	Address:	 	  

					
	 	 	 	  	 	 	 	 	  

  
  

 A-1 

 Exhibit B 
  

FORM OF TRANSFEROR ENDORSEMENT 
 (To
Be Signed Only On Transfer Of Warrant) 
  
 For value received, the
undersigned hereby sells, assigns, and transfers unto the person(s) named below under the heading “Transferees” the right represented by the within Warrant to purchase the percentage and number of shares of Common Stock of BioDelivery
Sciences International, Inc. into which the within Warrant relates specified under the headings “Percentage Transferred” and “Number Transferred,” respectively, opposite the name(s) of such person(s) and appoints each such person
Attorney to transfer its respective right on the books of BioDelivery Sciences International, Inc. with full power of substitution in the premises. 
  

							
	 Transferees

	  	 Address

	  	 Percentage
 Transferred

	  	 Number
 Transferred

				
	  

	  	  

	  	
	  	

				
	  

	  	  

	  	
	  	

				
	  

	  	  

	  	
	  	

  

									
				
	Dated:	 	  

	  	 	 	  

	 	 	 	  	 	 	 (Signature must conform to name of holder as
 specified on the face of the Warrant)

					
	 	 	 	  	 	 	Address:	 	  

					
	 	 	 	  	 	 	 	 	  

				
	 	 	 	  	 	 	SIGNED IN THE PRESENCE OF:
				
	 	 	 	  	 	 	  

	 	 	 	  	 	 	(Name)
	ACCEPTED AND AGREED:	  	 	 	 	 	 
	[TRANSFEREE]	  	 	 	 	 	 
				
	  

	  	 	 	 	 	 
	(Name)

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