Document:

EXHIBIT 10.2
                                                                    ------------

                         EXECUTIVE EMPLOYMENT AGREEMENT

     This Executive  Employment  Agreement (the "Agreement") is made this 31 day
of   August,   2002  by  and   between   Susan   Gould-Fogerite,   Ph.D.   ("Dr.
Gould-Fogerite") and BioDelivery Sciences International, Inc. (the "Company").

     WHEREAS,  the  Company  is  engaged  in the  business  of  researching  and
developing drug delivery technologies; and

     WHEREAS,  the Company and Dr.  Gould-Fogerite  are willing to continue  the
employment  relationship,  on the terms,  conditions  and covenants set forth in
this Agreement;

     NOW,  THEREFORE,  in  consideration  of  Dr.   Gould-Fogerite's   continued
employment with the Company and other good and valuable  consideration,  receipt
of  which  Dr.   Gould-Fogerite   and  the  Company  hereby   acknowledge,   Dr.
Gould-Fogerite and the Company agree, as follows:

     1. Position.  Dr. Gould-Fogerite agrees to her employment as Vice President
        --------
and Director of Innovations and Discovery. She further agrees to perform the job
duties and to carry out the responsibilities of that position,  as determined by
the Chief Executive Officer from time to time.

     2. Dr.  Gould-Fogerite's  Effort. Dr.  Gould-Fogerite  agrees to devote her
        -----------------------------
full working time and best  efforts,  skill and attention to her position and to
the business and interests of the Company.

     3.  Salary.  The  Company  shall pay Dr.  Gould-Fogerite  compensation  for
         ------
services rendered in the amount of One Hundred Forty Six Thousand Thirty Dollars
($146,030) per annum payable on a biweekly  basis.  Further,  the Company,  from
time to time, shall pay Dr. Gould Fogerite such bonuses, additional compensation
or other benefits as may be determined by the Executive  Compensation  Committee
of the  Board of  Directors.  Any  changes  in Dr.  Gould-Fogerite's  duties  or
compensation,  shall not in any way affect the promises of Dr. Gould-Fogerite as
set forth in this Agreement. Furthermore, Dr. Gould-Fogerite shall be reimbursed
for expenses properly documented as per the Company's policy.

     4.  Termination.  This  Agreement  and the  status and  obligations  of Dr.
         -----------
Gould-Fogerite  thereunder  as an  employee  of  the  Company  (except  for  the
provisions of paragraph 5 through 9 inclusive,  11 through 14  inclusive)  shall
cease and terminate effective upon the close of business August 31, 2005, unless
further extended by the parties hereto in writing; provided, that upon such date

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said termination  shall not affect all rights that Dr.  Gould-Fogerite  may have
pursuant to any of the  Company's  retirement  plans,  supplementary  retirement
plans, profit sharing and savings plans, healthcare,  401 (k) any other employee
benefit plans sponsored by the Company,  which, in accordance with its terms, is
applicable to Dr. Gould-Fogerite.

          4.1 Death or Disability.  This Agreement shall automatically terminate
              -------------------
     upon  the  death of Dr.  Gould-Fogerite  and all of her  rights  hereunder,
     including  the  rights to  receive  compensation  and  benefits,  except as
     otherwise required by law, shall terminate. The Company may, at its option,
     terminate  this  Agreement  in the event that Dr.  Gould-Fogerite  shall be
     physically or mentally incapacitated which shall make her unable to perform
     the  duties  assigned  to her for more  than  ninety  (90)  days in any one
     hundred  eighty  (180) day period.  In the event of a dispute as to whether
     Dr.  Gould-Fogerite  is physically or mentally unable to perform her duties
     hereunder,  the  Company  shall  select an  impartial  physician  to make a
     determination  as  to  Dr.   Gould-Fogerite's   incapacity,   if  any.  Dr.
     Gould-Fogerite agrees to submit to appropriate medical examinations for the
     purposes  of such  determination.  Such  termination  shall not  affect Dr.
     Gould-Fogerite's  rights  and  obligations  under  paragraphs  5  through 9
     inclusive,  11 through 14  inclusive,  all of which shall survive the early
     termination or expiration of this Agreement.

          4.2 The  Company's  Right to Terminate  with  Notice.  The Company may
              ------------------------------------------------
     terminate this Agreement upon 30 days written notice to Dr. Gould-Fogerite.
     In case of termination under this section, the Company may elect to pay Dr.
     Gould-Fogerite  a base rate of  $146,030  for the notice  period in lieu of
     permitting her to continue working.  Aside from payment as herein provided,
     the  Company  shall  have  no  further  obligations  to Dr.  Gould-Fogerite
     following termination. The period during which Dr. Gould-Fogerite shall not
     compete  with the Company in the event of  termination  under this  section
     shall be  shortened  from  three  (3)  years to one (1) year  from  date of
     termination.

          4.3 Termination for Cause.  Notwithstanding the immediately  preceding
              ---------------------
     paragraph  or anything  elsewhere  herein  contained to the  contrary,  the
     Company may  terminate  this  Agreement and all of its  obligations  to Dr.
     Gould-Fogerite,  with notice and effective unless Dr  Gould-Fogerite  cures
     the  breach  within 60 days,  in the  event  that:  (i) Dr.  Gould-Fogerite
     breaches  any  term  of  this  Agreement;  (ii)  if Dr.  Gould-Fogerite  is
     convicted of or enters a no contest plead to any felony or crime  involving
     moral  turpitude,  or if she pleads guilty to a lesser included  offence or
     crime in exchange for withdrawal of a felony  indictment,  felony charge by
     information, or is charged with a crime involving moral turpitude,  whether
     the charge  arises  under the laws of the United  States or any other state
     therein;   (iii)  Dr.  Gould-Fogerite  fails  to  perform  the  duties  and
     obligations assigned her by the Board of Directors of the Company; (iv) the
     Company  reasonably  suspects  that  she has  engaged  in  illegal  drug or
     substance use or abuse; (v) she wrongfully appropriates for personal use or
     benefit  any  property  or money  of the  Company  entrusted  to her by the
     Company;  (vi) she disregards any legal  directions of the Chief  Executive
     Officer or the Board of  Directors  of the  Company;  (vii) she  materially

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     violates Company policies or procedures;  (viii) she takes any actions that
     might  damage  the  reputation  of the  Company  or its  ability to receive
     approvals of its drug delivery systems from the Food and Drug Adminstration
     (excluding,  however, actions protected by "whistleblower" legislation); or
     (ix) Dr. Gould-Fogerite resigns her employment. In the event of termination
     for any of the reasons set forth herein Dr.  Gould-Fogerite  shall be bound
     by all of the terms of this Agreement that survive termination.

     5. Confidentiality. Dr. Gould-Fogerite shall keep confidential for a period
        ---------------
of three  years  for  patented  technology  and five  years  for  patent-pending
technology,  except as the Company  may  otherwise  consent in writing,  and not
disclose,  or make any use of except for the benefit of the Company, at any time
either during or subsequent to Dr. Gould-Fogerite's  performance of services for
the Company,  any trade  secrets,  knowledge,  data or other  information of the
Company  relating to products,  processes,  know how,  technical data,  designs,
formulas,  test  data,  customer  lists,  business  plans,  marketing  plans and
strategies, and product pricing strategies or other subject matter pertaining to
any  business  of the  Company or any of its  clients,  customers,  consultants,
licensees  or  affiliates  which  Dr.  Gould-Fogerite  may  produce,  obtain  or
otherwise  learn of during the  course of Dr.  Gould-Fogerite's  performance  of
services and after its termination  (collectively  "Confidential  Information").
Dr.  Gould-Fogerite shall not deliver,  reproduce,  or in any way allow any such
Confidential Information to be delivered to or used by any third parties without
the specific  direction or consent of a duly  authorized  representative  of the
Company.  The  terms  of  this  paragraph  shall  survive  termination  of  this
Agreement.

     6.  Return  of  Confidential   Material.   Upon  the  completion  or  other
         -----------------------------------
termination of Dr. Gould-Fogerite's services for the Company, Dr. Gould-Fogerite
shall  promptly  surrender  and deliver to the Company all  records,  materials,
equipment,  drawings,  documents,  lab notes  and  books and data of any  nature
pertaining to any  invention,  trade secret or  confidential  information of the
Company or to Dr.  Gould-Fogerite's  services,  and Dr.  Gould-Fogerite will not
take with her any  description  containing  or  pertaining  to any  Confidential
Information,  knowledge  or data of the  Company  which Dr.  Gould-Fogerite  may
produce or obtain during the course of her services. The terms of this paragraph
shall survive termination of this Agreement.

     7. Assignment of Inventions.  Dr.  Gould-Fogerite shall assign and transfer
        ------------------------
to the Company her entire right, title and interest in and to all Inventions (as
used in this  Agreement,  "Inventions"  shall  include,  but not be limited  to,
ideas,  improvements,  designs and  discoveries),  whether or not patentable and
whether or not reduced to  practice,  made or  conceived  by Dr.  Gould-Fogerite
(whether made solely by Dr.  Gould-Fogerite  or jointly with others)  during the
period Dr. Gould-Fogerite  performs services for the Company which relate in any
manner to cochleate or other forms of delivery  technologies or to the actual or
anticipated  business,  work or research and  development  of the Company or its
affiliates,  or  result  from  or are  suggested  by any  task  assigned  to Dr.
Gould-Fogerite or any work performed by Dr.  Gould-Fogerite  for or on behalf of
the Company or any of its  affiliates.  All  Inventions are the sole property of
the Company.  The terms of this  paragraph  shall  survive  termination  of this
Agreement.

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     8. Disclosure of Inventions: Patents. In connection with Inventions:
        ---------------------------------

     (a) Dr.  Gould-Fogerite will disclose all Inventions promptly in writing to
     the person to whom Dr.  Gould-Fogerite  reports at the Company, with a copy
     to the  President of the  Company,  in order to permit the Company to enjoy
     rights to which it may be entitled under this Agreement.

     (b) Dr.  Gould-Fogerite  will, at the Company's  request promptly execute a
     written  assignment  of title to the  Company  for any  Invention,  and Dr.
     Gould-Fogerite  will preserve any Invention as confidential  information of
     the Company: and

     (c) Upon request, Dr. Gould-Fogerite will assist the Company or its nominee
     (at  the  Company's  expense)  during  and at any  time  subsequent  to Dr.
     Gould-Fogerite's   performance   of  services  for  the  Company  in  every
     reasonable way in obtaining for its own benefit patents and copyrights' for
     Inventions in any and all countries,  which  Inventions shall be and remain
     the sole and exclusive  property of the Company or its nominee,  whether or
     not patented or copyrighted.  Dr.  Gould-Fogerite  will execute such papers
     and perform such lawful acts as the Company  deems to be necessary to allow
     it to  exercise  all  rights,  title  and  interest  in  such  patents  and
     copyrights.

     The terms of this paragraph shall survive termination of this Agreement.

     9.  Execution  of  Documents.   In  connection  with  paragraph  8(c),  Dr.
         ------------------------
Gould-Fogerite  will  execute,  acknowledge  and  deliver to the  Company or its
nominee  upon  request  and  at  its  expense  all  such  documents,   including
applications  for patents and copyrights and assignments of inventions,  patents
and copyrights to be issued therefore, as the Company may determine necessary or
desirable to apply for and obtain letters, patents, and copyrights on Inventions
in any and all  countries  and/or to protect the  interest of the Company or its
nominee in  Inventions,  patents and copyrights and to vest title thereto in the
Company or its nominee. The terms of this paragraph shall survive termination of
this Agreement.

     10.  Maintenance  of Records.  Dr.  Gould-Fogerite  will keep and  maintain
          -----------------------
adequate  and  current   written   records  of  all   Inventions   made  by  Dr.
Gould-Fogerite (in the form of notes, sketches, drawings and as may be specified
by the  Company),  which  records  shall be  available  to and  remain  the sole
property of the Company at all times.

     11.  Prior  Inventions.  It is  understood  that  all  Inventions,  if any,
          ------------------
patented  or  unpatented  which Dr.  Gould-Fogerite  made  prior to the time the
Company and Dr. Gould-Fogerite began to consider Dr.  Gould-Fogerite's  possible
performance  of  services  are  excluded  from the  scope of the  Agreement.  To
preclude any possible uncertainty, Dr. Gould-Fogerite has set forth on Exhibit A
attached hereto a complete list of all such prior inventions,  including numbers
of  all  patents  and  patent  applications,  and a  brief  description  of  all
unpatented  inventions  which are not the property of another party  (including,
without  limitation  a  current  or  previous  contracting  party).

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The list is complete  with the exception of the  pre-existing  patents which Dr.
Gould Fogerite has assigned to the  Universities and to which the Company is the
exclusive licensee and if no items are included on Exhibit A, Dr. Gould-Fogerite
has no such prior  inventions.  Dr.  Gould-Fogerite  will  notify the Company in
writing before Dr.  Gould-Fogerite  makes any disclosure or performs any work on
behalf of the Company  which  appears to threaten or conflict  with  proprietary
rights Dr.  Gould-Fogerite claims in any such invention or idea. In the event of
Dr.  Gould-Fogerite's  failure to give such notice, Dr. Gould-Fogerite will make
no claim against the Company with respect to any such  inventions or ideas.  The
terms of this paragraph shall survive termination of this Agreement.

     12.  Competition - For purposes of this  Agreement  "Competitive  Activity"
          -----------
shall  mean the  development,  manufacturing  or sale of any  lipid  based  drug
delivery system.

                  a. Dr. Gould-Fogerite will not do, or intend to do, any of the
following, either directly or indirectly, during Dr. Gould-Fogerite's employment
with  the   Company  and  during  the  period  of  three  (3)  years  after  Dr.
Gould-Fogerite's  cessation  of  employment  with the  Company,  anywhere in the
world.  In the  event  that  Dr.  Gould-Fogerite  improperly  competes  with the
Company,  the period during which she engages in such  competition  shall not be
counted  in  determining  the  duration  of the the three  (3) year  non-compete
restriction.

          i. Own,  manage,  operate,  control,  consult  for,  be an  officer or
     director  of,  work for, or be  employed  in any  capacity by any  company,
     eleemosynary   institution  or  any  other  business,   entity,  agency  or
     organization  which is in any way  involved in the  research,  development,
     distribution,  sale or  commercialization  of  lipid  based  drug  delivery
     technologies.  During her employment  with the Company,  and with the prior
     written  consent  of the Board of  Directors  of BDSI,  she may engage as a
     director, consultant,  advisor, or reviewer for non-competing companies. In
     the event of termination and during the relevant  non-compete  period,  Dr.
     Gould-Fogerite may be employed by a non-for-profit  such as a University or
     governmental  agency so long as her work is not funded by or  beneficial to
     another lipid-based drug delivery technology company other than BDSI.

          ii. Solicit prior or current  customers of the Company or any entities
     with which the  Company  has  undertaken  joint  studies  or  developmental
     activities  for any purpose in  competition  (as defined  herein)  with the
     Company; or

          iii.  Solicit  any then  current  employees  employed  by the  Company
     without the Company's consent.

     Dr. Gould-Fogerite and Company agree that the phrase "Dr. Gould-Fogerite's

cessation of employment with the Company" as used in this  Agreement,  refers to

any  separation  from  her  employment  at the  Company  either  voluntarily  or

involuntarily,  either with cause or without cause, or whether the separation is

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at the behest of the Company or Dr. Gould-Fogerite  (hereinafter referred to and

defined as "Dr. Gould-Fogerite's Cessation of Employment").

                  b.  This  Agreement  expressly   authorizes  and  permits  Dr.
Gould-Fogerite  to continue  her present  relationship  with the  University  of
Medicine and  Dentistry of New Jersey  provided  Dr.  Gould-Fogerite  assign any
compensation  received  from the  University  of Medicine  and  Dentistry of New
Jersey   during  the  term  of  this   Agreement   over  to  the  Company.   Dr.
Gould-Fogerite's participation in income from the pre-existing exclusive license
between the Company and the  Universities  is  specifically  excluded  from this
assignment  of income to the Company and said  royalty or  sub-licensing  income
shall belong to Dr. Gould-Fogerite.

          13. Other Obligations.
              -----------------

               (a) Dr. Gould-Fogerite acknowledges that the Company from time to
          time  may  have  agreements  with  other  persons  or  with  the  U.S.
          Government,   or  agencies  thereof,   which  impose   obligations  or
          restrictions  on the  Company  regarding  inventions  made  during the
          course of work thereunder or regarding the confidential nature of such
          work. Dr.  Gould-Fogerite  will be bound by all such  obligations  and
          restrictions  and will take all  action  necessary  to  discharge  the
          obligations of the Company thereunder.

               (b) All of Dr. Gould-Fogerite's  obligations under this Agreement
          shall be subject  to any  applicable  agreements  with,  and  policies
          issued by the Company to which Dr. Gould-Fogerite is subject.

     14.  Trade  Secrets  of  Others.  Dr.  Gould-Fogerite  represents  that Dr.
          --------------------------
Gould-Fogerite's  performance  of all the terms of this Agreement as employee to
the Company  does not and will not breach any  agreement  to keep in  confidence
proprietary  information,  knowledge or data acquired by Dr.  Gould-Fogerite  in
confidence or in trust, and Dr. Gould-Fogerite will not disclose to the Company,
or the Company to use, any  confidential or proprietary  information or material
belonging to any other person or entity. Dr.  Gould-Fogerite will not enter into
any agreement, either written or oral, which is in conflict with this Agreement.

     15. Injunctive Relief. Dr.  Gould-Fogerite  acknowledges that any breach or
         -----------------
attempted breach by Dr. Gould-Fogerite of this Agreement or any provision hereof
shall cause the Company  irreparable harm for which any adequate monetary remedy
does not  exist.  Accordingly,  in the event of any such  breach  or  threatened
breach, the Company shall be entitled to obtain injunctive  relief,  without the
necessity  of  posting  a bond or  other  surety,  restraining  such  breach  or
threatened breach.

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<PAGE>

     16. Modification.  This Agreement may not be changed,  modified,  released,
         ------------
discharged,  abandoned,  or otherwise amended, in whole or in part, except by an
instrument  in writing,  signed by Dr.  Gould-Fogerite  and by the Company.  Any
subsequent  change or  changes  in Dr.  Gould-Fogerite's  relationship  with the
Company or Dr.  Gould-Fogerite's  compensation  shall not affect the validity or
scope of this Agreement.

     17.  Entire  Agreement.  Dr.  Gould-Fogerite  acknowledges  receipt of this
          -----------------
Agreement, and agrees that with respect to the subject matter thereof, it is Dr.
Gould-Fogerite's  entire  agreement with the Company,  superseding  any previous
oral or written communications, representations, understandings with the Company
or any office or representative thereof.

     18.  Severability.  In the event that any  paragraph  or  provision of this
          ------------
Agreement  shall be held to be illegal or  unenforceable,  the entire  Agreement
shall not fall on account thereof,  but shall otherwise remain in full force and
effect,  and such paragraph or provision shall be enforced to the maximum extent
permissible.

     19.  Successors  and  Assigns.  This  Agreement  shall be binding  upon Dr.
          ------------------------
Gould-Fogerite's heirs, executors, administrators or other legal representatives
and is for the benefit of the Company, its successors and assigns.

     20.  Governing  Law.  This  Agreement  shall be governed by the laws of the
          --------------
State of New Jersey  except for any  conflicts  of law rules  thereof that might
direct the application of the substantive law of another state.

     21. Counterparts. This Agreement may be signed in two counterparts, each of
         ------------
which shall be deemed an original  and both of which shall  together  constitute
one agreement.

     22. Arbitration. In the event that either Dr. Gould-Fogerite, her spouse or
         -----------
any other person claiming  benefits on behalf of or through Dr.  Gould-Fogerite,

or the Company has a claim or dispute  based upon this  Agreement  including the

interpretation or application of the terms and provisions of this Agreement, the

sole and  exclusive  remedy is for that party to submit  the  dispute to binding

arbitration  in  accordance  with  the  rules  of  arbitration  of the  American

Arbitration  Association in New Jersey. Any arbitrator selected to arbitrate any

such dispute will have the power to interpret this Agreement.  Any determination

or  decision  by the  arbitrator  shall be binding  upon the  parties and may be

enforced in any court of law. The expenses of the arbitrator will be paid 50% by

the Company and 50% by Dr.  Gould-Fogerite,  her spouse or other person,  as the

case may be. The parties agree that this arbitration provision does not apply to

the right of Dr. Gould-Fogerite to file a charge, testify, assist or participate

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in any  manner in an  investigation,  hearing  or  proceeding  before  the Equal

Employment  Opportunity Commission or any other agency pertaining to any matters

covered by this Agreement and within the jurisdiction of the agency.

     23. No Waiver.  No waiver by the Company of any breach of this Agreement by
         ---------
Dr. Gould-Fogerite shall constitute a waiver of any subsequent breach.

     24.  Notice.  Any notice hereby  required or permitted to be given shall be
          ------
sufficiently  given if in writing and upon  mailing by  registered  or certified
mail,  postage  prepaid,  to either  party at the  address of such party or such
othis address as shall have been  designated by written  notice by such party to
the other party.

EXECUTED as of the date set forth below.

Dated:   8/31/02
      --------------

                                  BIODELIVERY SCIENCES INTERNATIONAL, INC.

                                   By:   /s/Francis E. O'Donnell
                                       -------------------------------------
                                         Name:    Francis E. O'Donnell, Jr.
                                         Title:   President, CEO

                                         /s/Susan Gould-Fogerite
                                       -------------------------------------
                                         Susan Gould-Fogerite, Ph.D.

                                       38
<PAGE>

                                    EXHIBIT A
                                    ---------

                                PRIOR INVENTIONS

BIODELIVERY SCIENCES INTERNATIONAL, INC. (the "Company")

Gentlemen:

The following is a complete list of all inventions or improvements  patented or,
unpatented, that have been made or conceived or first reduced to practice by the
undersigned  alone or jointly  with others prior to the time the Company and the
undersigned  first began to consider the  undersigned's  performance of services
for  the  Company.   The  undersigned  desires  to  remove  the  inventions  and
improvements listed, if any, from the operation of the foregoing Agreement.

Check one:

    X             No inventions or improvements.
-----------

                  As follows:
---------

                  Additional sheets attached.
---------

Dated:      8/31/02                       /s/ Susan Gould-Fogerite
       ------------------        --------------------------------------------
                                          Susan Gould-Fogerite, Ph.D.

                                       39EXHIBIT 10.3
                                                                    ------------

                         EXECUTIVE EMPLOYMENT AGREEMENT

         This Executive  Employment  Agreement (the "Agreement") is made this 31
day of  August,  2002 by and  between  James  A.  McNulty  ("Mr.  McNulty")  and
BioDelivery Sciences International, Inc. (the "Company").

     WHEREAS,  the  Company  is  engaged  in the  business  of  researching  and
developing drug delivery technologies; and

     WHEREAS, the Company and Mr. McNulty are willing to continue the employment
relationship,  on  the  terms,  conditions  and  covenants  set  forth  in  this
Agreement;

     NOW, THEREFORE, in consideration of Mr. McNulty's continued employment with
the  Company  and other good and  valuable  consideration,  receipt of which Mr.
McNulty and the Company hereby  acknowledge,  Mr. McNulty and the Company agree,
as follows:

     1.  Position.  Mr.  McNulty agrees to continue his employment as Secretary,
         --------
Treasurer  and Chief  Financial  Officer of the  Company.  He further  agrees to
perform the job duties and to carry out the  responsibilities  of that position,
as determined by the Chief Executive Officer from time to time.

     2. Mr. McNulty's Effort. Mr. McNulty agrees to devote his full working time
        --------------------
and best  efforts,  skill and  attention to his position and to the business and
interests of the Company.  However, at the discretion of the Board of Directors,
Mr.  McNulty may be reduced  from a full-time  employee to a part time  employee
upon 30 days written notice.

     3. Salary.  The Company  shall pay Mr.  McNulty  compensation  for services
        ------
rendered in the amount of One Hundred  Eighty Five Thousand  Dollars  ($185,000)
per annum payable on a monthly basis.  Further, the Company,  from time to time,
shall pay Mr. McNulty such bonuses, additional compensation or other benefits as
may be  determined  by the  Executive  Compensation  Committee  of the  Board of
Directors. In particular,  the company shall pay Mr. McNulty a one-time bonus of
$17,500 upon the signing of the first term sheet for a license to the  Company's
technology exceeding $1M in up-front payments and another $17,500 bonus upon the
Company  receiving the upfront  payment of said $1M license.  Any changes in Mr.
McNulty's  duties or  compensation,  shall not in any way affect the promises of
Mr. McNulty as set forth in this  Agreement.  Furthermore,  Mr. McNulty shall be
reimbursed for expenses properly documented as per the Company's policy.

                                       40
<PAGE>

     Where Mr.  McNulty's  status is changed  from a  full-time  to a  part-time
employee  pursuant to Section 2 above,  Mr. McNulty's salary of $185,000 will be
reduced pro rata assuming a 40 hour work week for a full-time employee.

     4.  Termination.  This  Agreement  and the  status and  obligations  of Mr.
         -----------
McNulty  thereunder as an employee of the Company  (except for the provisions of
paragraph 5 through 8 inclusive)  shall cease and terminate  effective  upon the
close of business August 31, 2005 unless further  extended by the parties hereto
in writing;  provided, that upon such date said termination shall not affect all
rights that Mr.  McNulty may have  pursuant to any of the  Company's  retirement
plans,  supplementary  retirement  plans,  profit  sharing  and  savings  plans,
healthcare,  401 (k) any other employee  benefit plans sponsored by the Company,
which, in accordance with its terms, is applicable to Mr. McNulty.

          4.1 Death or Disability.  This Agreement shall automatically terminate
              -------------------
     upon the death of Mr.  McNulty and all of his rights  hereunder,  including
     the  rights to  receive  compensation  and  benefits,  except as  otherwise
     required by law, shall terminate. The Company may, at its option, terminate
     this  Agreement  in the  event  that Mr.  McNulty  shall be  physically  or
     mentally  incapacitated  which  shall make him unable to perform the duties
     assigned to him for more than  ninety  (90) days in any one hundred  eighty
     (180) day period.  In the event of a dispute as to whether  Mr.  McNulty is
     physically or mentally unable to perform his duties hereunder,  the Company
     shall  select an  impartial  physician  to make a  determination  as to Mr.
     McNulty's  incapacity,  if any. Mr. McNulty agrees to submit to appropriate
     medical   examinations  for  the  purposes  of  such  determination.   Such
     termination  shall not affect Mr.  McNulty's  rights and obligations  under
     paragraphs 5 through 9  inclusive,  11 through 14  inclusive,  all of which
     shall survive the early termination or expiration of this Agreement.

          4.2 The  Company's  Right to Terminate  with  Notice.  The Company may
              ------------------------------------------------
     terminate this Agreement upon 30 days prior notice to Mr. McNulty.  In case
     of termination under this section, the Company may elect to pay Mr. McNulty
     a base rate of $185,000,  or the part-time  status reduced rate pursuant to
     Sections 2 and 3 of this Agreement,  for a period of six months, in lieu of
     permitting him to continue working.  Aside from payment as herein provided,
     the Company  shall have no further  obligations  to Mr.  McNulty  following
     termination.

          4.3 Termination for Cause.  Notwithstanding the immediately  preceding
              ---------------------
     paragraph  or anything  elsewhere  herein  contained to the  contrary,  the
     Company may  terminate  this  Agreement and all of its  obligations  to Mr.
     McNulty, with notice but effective immediately,  in the event that: (a) Mr.
     McNulty  breaches  any  term  of  this  Agreement;  (b) if Mr.  McNulty  is
     convicted of or enters a no contest plead to any felony or crime  involving
     moral  turpitude,  or if he pleads guilty to a lesser  included  offence or
     crime in exchange for withdrawal of a felony  indictment,  felony charge by
     information, or is charged with a crime involving moral turpitude,  whether
     the charge  arises  under the laws of the United  States or any other state
     therein;  (iii) Mr.  McNulty  fails to perform  the duties and  obligations

                                       41
<PAGE>

     assigned him by the Board of  Directors  of the  Company;  (iv) the Company
     reasonably suspects that he has engaged in illegal drug or substance use or
     abuse;  (v) he  wrongfully  appropriates  for  personal  use or benefit any
     property or money of the Company  entrusted to him by the Company;  (vi) he
     disregards any legal directions of the Chief Executive Officer or the Board
     of Directors of the Company;  (vii) he materially violates Company policies
     or procedures; (viii) he takes any actions that might damage the reputation
     of the Company or its  ability to receive  approvals  of its drug  delivery
     systems from the Food and Drug Adminstration  (excluding,  however, actions
     protected by "whistleblower"  legislation); or (ix) Mr. McNulty resigns his
     employment.  In the event of  termination  for any of the reasons set forth
     herein  Mr.  McNulty  shall be bound by all of the terms of this  Agreement
     that survive termination.

     5.  Confidentiality.  Mr.  McNulty shall keep  confidential,  except as the
         ---------------
Company may otherwise consent in writing,  and not disclose,  or make any use of
except for the benefit of the Company,  at any time either  during or subsequent
to Mr.  McNulty's  performance  of services for the Company,  any trade secrets,
knowledge,  data or other  information  of the  Company  relating  to  products,
processes,  know how, technical data,  designs,  formulas,  test data,  customer
lists,  business  plans,  marketing  plans and  strategies,  and product pricing
strategies or other subject matter  pertaining to any business of the Company or
any of its clients,  customers,  consultants,  licensees or affiliates which Mr.
McNulty  may  produce,  obtain or  otherwise  learn of during  the course of Mr.
McNulty's  performance  of  services  and  after its  termination  (collectively
"Confidential Information"). Mr. McNulty shall not deliver, reproduce, or in any
way allow any such  Confidential  Information  to be delivered to or used by any
third  parties  without the specific  direction or consent of a duly  authorized
representative  of the  Company.  The  terms  of this  paragraph  shall  survive
termination of this Agreement.

     6.  Return  of  Confidential   Material.   Upon  the  completion  or  other
         -----------------------------------
termination  of Mr.  McNulty's  services  for the  Company,  Mr.  McNulty  shall
promptly surrender and deliver to the Company all records, materials, equipment,
drawings,  documents,  lab notes and books and data of any nature  pertaining to
any invention, trade secret or confidential information of the Company or to Mr.
McNulty's  services,  and Mr.  McNulty  will not take  with him any  description
containing or pertaining to any Confidential  Information,  knowledge or data of
the Company  which Mr.  McNulty  may produce or obtain  during the course of his
services.  The  terms  of  this  paragraph  shall  survive  termination  of this
Agreement.

     7.  Competition  - For purposes of this  Agreement  "Competitive  Activity"
         -----------
shall  mean the  development,  manufacturing  or sale of any  lipid  based  drug
delivery system.

                  a.  Mr.  McNulty  will not do,  or  intend  to do,  any of the
following,  either directly or indirectly,  during Mr. McNulty's employment with
the  Company  and  during  the  period of three (3)  years  after Mr.  McNulty's
cessation of employment  with the Company,  anywhere in the world.  In the event
that Mr. McNulty's improperly competes with the Company, the period during which
he engages in such competition  shall not be counted in determining the duration
of the the three (3) year non-compete restriction.

                                       42
<PAGE>

               i. Own, manage, operate,  control,  consult for, be an officer or
          director  of, work for, or be employed in any capacity by any company,
          eleemosynary  institution  or any other  business,  entity,  agency or
          organization   which  is  in  any  way   involved  in  the   research,
          development,  distribution,  sale or  commercialization of lipid based
          drug delivery technologies; or

               ii.  Solicit  prior or current  customers  of the  Company or any
          entities  with  which the  Company  has  undertaken  joint  studies or
          developmental  activities for any purpose in  competition  (as defined
          herein) with the Company; or

               iii. Solicit any then current  employees  employed by the Company
          without the Company's consent.

          Mr. McNulty and Company agree that the phrase "Mr. McNulty's cessation

of  employment  with  the  Company"  as used in this  Agreement,  refers  to any

separation   from  his   employment  at  the  Company   either   voluntarily  or

involuntarily,  either with cause or without cause, or whether the separation is

at the behest of the Company or Mr. McNulty (hereinafter referred to and defined

as "Mr. McNulty's Cessation of Employment").

     b. Should Mr.  McNulty's status change from full-time to a part-time basis,
this  Agreement  expressly  authorizes  and permits Mr.  McNulty to continue his
relationship with Hopkins Capital.

     8. Other Obligations. All of Mr. McNulty's obligations under this Agreement
        -----------------
shall be subject to any applicable  agreements  with, and policies issued by the
Company to which Mr. McNulty is subject.

     9.  Confidential  Information of Others.  Mr. McNulty  represents  that Mr.
         -----------------------------------
McNulty's  performance  of all the terms of this  Agreement  as  employee to the
Company  does  not and will  not  breach  any  agreement  to keep in  confidence
proprietary information, knowledge or data acquired by Mr. McNulty in confidence
or in trust, and Mr. McNulty will not disclose to the Company, or the Company to
use, any  confidential or proprietary  information or material  belonging to any
other person or entity.  Mr. McNulty will not enter into any  agreement,  either
written or oral, which is in conflict with this Agreement.

     10.  Injunctive  Relief.  Mr.  McNulty  acknowledges  that  any  breach  or
          ------------------
attempted  breach by Mr. McNulty of this Agreement or any provision hereof shall
cause the Company  irreparable harm for which any adequate  monetary remedy does
not exist.  Accordingly,  in the event of any such breach or threatened  breach,
the Company shall be entitled to obtain injunctive relief, without the necessity
of posting a bond or other surety, restraining such breach or threatened breach.

                                       43
<PAGE>

     11. Modification.  This Agreement may not be changed,  modified,  released,
         ------------
discharged,  abandoned,  or otherwise amended, in whole or in part, except by an
instrument in writing,  signed by Mr. McNulty and by the Company. Any subsequent
change  or  changes  in Mr.  McNulty's  relationship  with  the  Company  or Mr.
McNulty's compensation shall not affect the validity or scope of this Agreement.

     12. Entire Agreement.  Mr. McNulty  acknowledges receipt of this Agreement,
         ----------------
and agrees that with respect to the subject matter thereof,  it is Mr. McNulty's
entire  agreement  with the Company,  superseding  any previous  oral or written
communications,  representations,  understandings with the Company or any office
or representative thereof.

     13.  Severability.  In the event that any  paragraph  or  provision of this
          ------------
Agreement  shall be held to be illegal or  unenforceable,  the entire  Agreement
shall not fall on account thereof,  but shall otherwise remain in full force and
effect,  and such paragraph or provision shall be enforced to the maximum extent
permissible.

     14.  Successors  and  Assigns.  This  Agreement  shall be binding  upon Mr.
          ------------------------
McNulty's heirs, executors, administrators or other legal representatives and is
for the benefit of the Company, its successors and assigns.

     15.  Governing  Law.  This  Agreement  shall be governed by the laws of the
          --------------
State of New Jersey  except for any  conflicts  of law rules  thereof that might
direct the application of the substantive law of another state.

     16. Counterparts. This Agreement may be signed in two counterparts, each of
         ------------
which shall be deemed an original  and both of which shall  together  constitute
one agreement.

     17.  Arbitration.  In the event the Mr.  McNulty,  his  spouse or any other
          -----------
person  claiming  benefits on behalf of or through Mr.  McNulty,  has a claim or

dispute based upon this agreement including the interpretation or application of

the terms and provisions of this Agreement, the sole and exclusive remedy is for

that party to submit the dispute to binding  arbitration in accordance  with the

rules of arbitration of the American Arbitration  Association in New Jersey. Any

arbitrator  selected  to  arbitrate  any such  dispute  will  have the  power to

interpret this Agreement.  Any determination or decision by the arbitrator shall

be  binding  upon the  parties  and may be  enforced  in any  court of law.  The

expenses  of the  arbitrator  will be  paid  50% by the  Company  and 50% by Mr.

McNulty,  his spouse or other person, as the case may be. The parties agree that

this arbitration  provision does not apply to the right of Mr. McNulty to file a

charge,  testify,  assist or  participate  in any  manner  in an  investigation,

                                       44
<PAGE>

hearing or proceeding before the Equal Employment  Opportunity Commission or any

other agency  pertaining to any matters covered by this Agreement and within the

jurisdiction of the agency.

     18. No Waiver.  No waiver by the Company of any breach of this Agreement by
         ---------
Mr. McNulty shall constitute a waiver of any subsequent breach.

     19.  Notice.  Any notice hereby  required or permitted to be given shall be
          ------
sufficiently  given if in writing and upon  mailing by  registered  or certified
mail,  postage  prepaid,  to either  party at the  address of such party or such
othis address as shall have been  designated by written  notice by such party to
the other party.

                                       45

<PAGE>

EXECUTED as of the date set forth below.

Dated:     August 31, 2002.

BIODELIVERY SCIENCES INTERNATIONAL, INC.

                                     By:         /s/ Francis E. O'Donnell
                                          -----------------------------------
                                          Name:  Francis E. O'Donnell, Jr.
                                                 Title:   President, CEO

                                                 /s/ James A. McNulty
                                          -----------------------------------
                                                 James A. McNulty

                                       46

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