-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AIjajvuLUvqs9RxgFR4A/4i55Gt1lfEsuJ5UV9Ul0N9MQVsBNuuI4L5ko7UjIcOR LZ2E59waFttQHwBnYjUG2w== 0001193125-06-128281.txt : 20060612 0001193125-06-128281.hdr.sgml : 20060612 20060612163808 ACCESSION NUMBER: 0001193125-06-128281 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20060612 DATE AS OF CHANGE: 20060612 GROUP MEMBERS: ARGERIS KARABELAS GROUP MEMBERS: CDC OPERATIONS LLC GROUP MEMBERS: DAVID R. RAMSAY GROUP MEMBERS: JAN LESCHLY SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: BIODELIVERY SCIENCES INTERNATIONAL INC CENTRAL INDEX KEY: 0001103021 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 352089858 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-57907 FILM NUMBER: 06900230 BUSINESS ADDRESS: STREET 1: 2501 AERIAL CENTER PARKWAY STREET 2: SUITE 205 CITY: MORRISVILLE STATE: NC ZIP: 27560 BUSINESS PHONE: 919-653-5160 MAIL ADDRESS: STREET 1: 2501 AERIAL CENTER PARKWAY STREET 2: SUITE 205 CITY: MORRISVILLE STATE: NC ZIP: 27560 FORMER COMPANY: FORMER CONFORMED NAME: MAS ACQUISITION XXIII CORP DATE OF NAME CHANGE: 20000111 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CDC IV LLC CENTRAL INDEX KEY: 0001365385 IRS NUMBER: 204153867 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 47 HULFISH STREET STREET 2: SUITE 310 CITY: PRINCETON STATE: NJ ZIP: 08542 BUSINESS PHONE: 609-683-8300 MAIL ADDRESS: STREET 1: 47 HULFISH STREET STREET 2: SUITE 310 CITY: PRINCETON STATE: NJ ZIP: 08542 SC 13D 1 dsc13d.htm SCHEDULE 13D Schedule 13D

OMB APPROVAL

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 13D

 

Under the Securities Exchange Act of 1934

(Amendment No.     )1

 

 

 

BIODELIVERY SCIENCES INTERNATIONAL, INC.


(Name of Issuer)

 

Common Stock, $0.001 par value per share


(Title of Class of Securities)

 

09060J106


(CUSIP Number)

 

David R. Ramsay

CDC IV, LLC

47 Hulfish Street, Suite 310

Princeton, New Jersey 08542

609-683-8300


(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

 

May 16, 2006


(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box.  ¨

Note:   Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.

 

1   The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).


CUSIP No. 09060J106    13D    Page 2 of 10 Pages

 

  1  

NAMES OF REPORTING PERSONS.

I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)

   
                CDC IV, LLC    
  2   CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*  
  (a)  ¨  
    (b)  ¨    
  3   SEC USE ONLY  
         
  4   SOURCE OF FUNDS* (SEE INSTRUCTIONS)  
                AF    
  5   CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)   ¨
         
  6   CITIZENSHIP OR PLACE OF ORGANIZATION  
                State of Delaware    
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH
    7  SOLE VOTING POWER
 
                  0
    8  SHARED VOTING POWER
 
                  3,505,120
    9  SOLE DISPOSITIVE POWER
 
                  0
  10  SHARED DISPOSITIVE POWER
 
                  3,505,120
11   AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON    
   

            3,505,120 shares of common stock comprised of: (i) a warrant to purchase 601,120 shares of

            the Issuer’s common stock, issued in February 2006; and (ii) 2,000,000 shares of the Issuer’s

            common stock and a warrant to purchase 904,000 shares of the Issuer’s common stock,

            issued in May, 2006.

   
12   CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)*   ¨
         
13   PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)  
                26.1%    
14   TYPE OF REPORTING PERSON*  
                OO    

 


CUSIP No. 09060J106    13D    Page 3 of 10 Pages

 

  1  

NAMES OF REPORTING PERSONS.

I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)

   
                CDC Operations LLC    
  2   CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*  
  (a)  ¨  
    (b)  ¨    
  3   SEC USE ONLY  
         
  4   SOURCE OF FUNDS* (SEE INSTRUCTIONS)  
                AF    
  5   CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)   ¨
         
  6   CITIZENSHIP OR PLACE OF ORGANIZATION  
                State of Delaware    
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH
    7  SOLE VOTING POWER
 
                  0
    8  SHARED VOTING POWER
 
                  3,505,120
    9  SOLE DISPOSITIVE POWER
 
                  0
  10  SHARED DISPOSITIVE POWER
 
                  3,505,120
11   AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON    
   

            3,505,120 shares of common stock comprised of: (i) a warrant to purchase 601,120 shares of

            the Issuer’s common stock, issued in February 2006; and (ii) 2,000,000 shares of the Issuer’s

            common stock and a warrant to purchase 904,000 shares of the Issuer’s common stock,

            issued in May, 2006.

   
12   CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)*   ¨
         
13   PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)  
                26.1%    
14   TYPE OF REPORTING PERSON*  
                OO    

 


CUSIP No. 09060J106    13D    Page 4 of 10 Pages

 

  1  

NAMES OF REPORTING PERSONS.

I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)

   
                David R. Ramsay    
  2   CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*  
  (a)  ¨  
    (b)  ¨    
  3   SEC USE ONLY  
         
  4   SOURCE OF FUNDS* (SEE INSTRUCTIONS)  
                AF    
  5   CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)   ¨
         
  6   CITIZENSHIP OR PLACE OF ORGANIZATION  
                United States of America    
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH
    7  SOLE VOTING POWER
 
                  0
    8  SHARED VOTING POWER
 
                  3,505,120
    9  SOLE DISPOSITIVE POWER
 
                  0
  10  SHARED DISPOSITIVE POWER
 
                  3,505,120
11   AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON    
   

            3,505,120 shares of common stock comprised of: (i) a warrant to purchase 601,120 shares of

            the Issuer’s common stock, issued in February 2006; and (ii) 2,000,000 shares of the Issuer’s

            common stock and a warrant to purchase 904,000 shares of the Issuer’s common stock,

            issued in May, 2006.

   
12   CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)*   ¨
         
13   PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)  
                26.1%    
14   TYPE OF REPORTING PERSON*  
                IN    

 


CUSIP No. 09060J106    13D    Page 5 of 10 Pages

 

  1  

NAMES OF REPORTING PERSONS.

I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)

   
                Argeris Karabelas    
  2   CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*  
  (a)  ¨  
    (b)  ¨    
  3   SEC USE ONLY  
         
  4   SOURCE OF FUNDS* (SEE INSTRUCTIONS)  
                AF    
  5   CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)   ¨
         
  6   CITIZENSHIP OR PLACE OF ORGANIZATION  
                United States of America    
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH
    7  SOLE VOTING POWER
 
                  0
    8  SHARED VOTING POWER
 
                  3,505,120
    9  SOLE DISPOSITIVE POWER
 
                  0
  10  SHARED DISPOSITIVE POWER
 
                  3,505,120
11   AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON    
   

            3,505,120 shares of common stock comprised of: (i) a warrant to purchase 601,120 shares of

            the Issuer’s common stock, issued in February 2006; and (ii) 2,000,000 shares of the Issuer’s

            common stock and a warrant to purchase 904,000 shares of the Issuer’s common stock,

            issued in May, 2006.

   
12   CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)*   ¨
         
13   PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)  
                26.1%    
14   TYPE OF REPORTING PERSON*  
                IN    

 


CUSIP No. 09060J106    13D    Page 6 of 10 Pages

 

  1  

NAMES OF REPORTING PERSONS.

I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)

   
                Jan Leschly    
  2   CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*  
  (a)  ¨  
    (b)  ¨    
  3   SEC USE ONLY  
         
  4   SOURCE OF FUNDS* (SEE INSTRUCTIONS)  
                AF    
  5   CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)   ¨
         
  6   CITIZENSHIP OR PLACE OF ORGANIZATION  
                United States of America    
NUMBER OF
SHARES
BENEFICIALLY
OWNED BY
EACH
REPORTING
PERSON
WITH
    7  SOLE VOTING POWER
 
                  0
    8  SHARED VOTING POWER
 
                  3,505,120
    9  SOLE DISPOSITIVE POWER
 
                  0
  10  SHARED DISPOSITIVE POWER
 
                  3,505,120
11   AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON    
   

            3,505,120 shares of common stock comprised of: (i) a warrant to purchase 601,120 shares of

            the Issuer’s common stock, issued in February 2006; and (ii) 2,000,000 shares of the Issuer’s

            common stock and a warrant to purchase 904,000 shares of the Issuer’s common stock,

            issued in May, 2006.

   
12   CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)*   ¨
         
13   PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)  
                26.1%    
14   TYPE OF REPORTING PERSON*  
                IN    

 


Item 1. Security and Issuer

This statement relates to the common stock, $0.001 par value per share of BioDelivery Sciences International, Inc., a Delaware corporation (the “Issuer”). The Issuer’s principle executive office is 2501 Aerial Center Parkway, Suite 205, Morrisville, North Carolina 07103.

Item 2. Identity and Background

This statement is being filed on behalf of CDC IV, LLC, a Delaware limited liability company (“CDC IV”). CDC Operations LLC, a Delaware limited liability company, is the manager of CDC IV (“CDC Operations”) and David R. Ramsay, Argeris Karabelas and Jan Leschly, each a Partner of CDC Operations, each has voting and dispositive power over the securities held by CDC IV. CDC IV is engaged in the business of investing in, and strategic partnering with, life science companies, with a particular focus on later stage pharmaceutical and biotechnology enterprises with its principal offices located at 47 Hulfish Street, Suite 310, Princeton, New Jersey, 08542.

During the last five years prior to the date hereof, neither CDC IV, CDC Operations, David R. Ramsay, Argeris Karabelas nor Jan Leschly has been convicted in a criminal proceeding or been a party to a civil proceeding ending in a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws, or finding any violation with respect to such laws.

Item 3. Source and Amount of Funds or Other Consideration

On July 15, 2005, the Issuer and CDC IV, as successor in interest to Clinical Development Capital LLC, entered into a Clinical Development and License Agreement with Arius Pharmaceuticals, Inc. (the “Clinical Development and License Agreement”), pursuant to which CDC IV was to provide $7 million in funding for clinical development of BEMA™ Fentanyl and receive a warrant to purchase 601,120 shares of the Issuer’s common stock at a price per share of $2.91. Following an upfront payment of $2 million made in February 2006, the Issuer was receiving monthly payments in accordance with the Clinical Development and License Agreement. On May 16, 2006, the Issuer and CDC IV, LLC amended the Clinical Development and License Agreement pursuant to which the balance of the $7 million funds previously committed by CDC IV (approximately $4.2 million) was accelerated and the aggregate $7 million commitment was converted into 2 million shares of the Issuer’s common stock at a price per share of $3.50, plus a warrant to purchase 904,000 shares of the Issuer’s common stock at a price per share of $3.00.

Item 4. Purpose of Transaction

On July 15, 2005, the Issuer and CDC IV, as successor in interest to Clinical Development Capital LLC, entered into the Clinical Development and License Agreement with Arius Pharmaceuticals, Inc., pursuant to which CDC IV was to provide $7 million in funding for clinical development of BEMA™ Fentanyl and receive a warrant to purchase 601,120 shares of the Issuer’s common stock at a price per share of $2.91. Following an upfront payment of $2 million made in February 2006, the Issuer was receiving monthly payments in accordance with

 

Page 7 of 10


the Clinical Development and License Agreement. On May 16, 2006, the Issuer and CDC IV, LLC amended the Clinical Development and License Agreement pursuant to which the balance of the $7 million funds previously committed by CDC IV (approximately $4.2 million) was accelerated and the aggregate $7 million commitment was converted into 2 million shares of the Issuer’s common stock at a price per share of $3.50, plus a warrant to purchase 904,000 shares of the Issuer’s common stock at a price per share of $3.00. Neither CDC IV, CDC Operations, David R. Ramsay, Argeris Karabelas nor Jan Leschly has any plans that would result in:

(a) The acquisition by any person of additional securities of the Issuer, or the disposition of securities of the Issuer;

(b) An extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Issuer or any of its subsidiaries;

(c) A sale or transfer of a material amount of assets of the Issuer of any of its subsidiaries;

(d) Any change in the present board of directors or management of the Issuer, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board;

(e) Any material change in the present capitalization or dividend policy of the Issuer;

(f) Any other material change in the Issuer’s business or corporate structure including but not limited to, if the Issuer is a registered closed-end investment company, any plans or proposals to make any changes in its investment policy for which a vote is required by section 13 of the Investment Company Act of 1940;

(g) Changes in the Issuer’s charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Issuer by any person;

(h) Causing a class of securities of the Issuer to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association;

(i) A class of equity securities of the Issuer becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Act; or

(j) Any action similar to any of those enumerated above.

Item 5. Interest in Securities of the Issuer

(a) As more fully described in Items 3 and 4 above, CDC IV is the beneficial owner of 3,505,120 shares of the Issuer’s common stock, representing 26.1% of the Issuer’s shares of common stock outstanding (based upon 11,948,146 shares of common stock outstanding, as reported in the Issuer’s Quarterly Report on Form 10-QSB for the quarterly period ended March 31, 2006). As the manager of CDC IV, CDC Operations and David R. Ramsay, Argeris

 

Page 8 of 10


Karabelas and Jan Leschly, the Partners of CDC Operations, may be deemed the beneficial owner of the shares of the Issuer’s common stock held by CDC IV. CDC Operations and Messrs. Ramsay, Karabelas and Leschly each disclaims beneficial ownership of the securities and this report shall not be deemed an admission that any of Messrs. Ramsay, Karabelas and Leschly or CDC Operations is the beneficial owner of such securities for purposes of Section 16 or for any other purpose, except to the extent of their pecuniary interest therein.

(b) By virtue of its status as manager of CDC IV, CDC Operations and David R. Ramsay, Argenris Karabelos and Jan Leschly, as Partners of CDC Operations and the individuals with voting and dispositive power of the securities held by CDC IV, may be deemed to share voting and dispositive power with CDC IV with respect to the 3,505,120 shares of Issuer’s common stock held by CDC IV. CDC Operations and Messrs. Ramsay, Karabelas and Leschly each disclaims beneficial ownership of the securities and this report shall not be deemed an admission that any of Messrs. Ramsay, Karabelas and Leschly or CDC Operations is the beneficial owner of such securities for purposes of Section 16 or for any other purpose, except to the extent of their pecuniary interest therein.

(c) During the past sixty days prior to the date hereof, neither CDC IV, CDC Operations, David R. Ramsay, Argeris Karabelas nor Jan Leschly, or, to the knowledge of each of the above, any executive officer, director or managing member of CDC IV or CDC Operating, has engaged in any transaction in the Issuer’s common stock.

(d) No person, other than CDC IV, CDC Operations, David R. Ramsay, Argeris Karabelas and Jan Leschly, is known to have the right to receive or the power to direct the receipt of dividends from, or any proceeds from the sale of, the shares of common stock beneficially owned by CDC IV.

(e) Not applicable.

Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer

See Items 3 and 4 above. Additionally, the following agreements are attached hereto and incorporated by reference:

A copy of the Securities Purchase Agreement, dated May 16, 2006, between the Issuer and CDC IV, LLC is attached hereto as Exhibit A.

A copy of the Amended and Restated Registration Rights Agreement, dated as of May 16, 2006, by and between the Issuer and CDC IV is attached hereto as Exhibit B

A copy of the Warrant, dated May 16, 2006, made by the Issuer in favor of CDC IV is attached hereto as Exhibit C.

A copy of the Amended and Restated Warrant, dated February 15, 2006, made by the Issuer in favor of CDC IV is attached hereto as Exhibit D.

 

Page 9 of 10


Except for the agreements and instruments described in the response to Items 3 and 4 and included in this Item 6, to the knowledge of CDC IV, CDC Operations, David R. Ramsay, Argeris Karabelas and Jan Leschly, there are no contracts, arrangements, understanding or relationships (legal or otherwise) among the persons named in Item 2 and between such persons and any person with respect to any securities of the Issuer.

Item 7. Material to Be Filed as Exhibits

 

Exhibit  

Name

A   Securities Purchase Agreement, dated May 16, 2006, between the Issuer and CDC IV, LLC
B   Amended and Restated Registration Rights Agreement, dated as of May 16, 2006, by and between the Issuer and CDC IV
C   Warrant, dated May 16, 2006, made by the Issuer in favor of CDC IV
D   Amended and Restated Warrant, dated February 15, 2006, made by the Issuer in favor of CDC IV

 

Page 10 of 10


SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

 

Dated: June 9, 2006   CDC IV, LLC
  By:  

/s/ David R. Ramsay

  Name:   David R. Ramsay
  Title:   Authorized Signatory
Dated: June 9, 2006   CDC OPERATIONS LLC
  By:  

/s/ David R. Ramsay

  Name:   David R. Ramsay
  Title:   Partner
Dated: June 9, 2006  

/s/ David R. Ramsay

  David R. Ramsay
Dated: June 9, 2006  

/s/ Argeris Karabelas

  Argeris Karabelas
Dated: June 9, 2006  

/s/ Jan Leschly

  Jan Leschly

Attention: Intentional misstatements or omissions of fact constitute Federal criminal violations

(See 18 U.S.C. 1001)

EX-99.(A) 2 dex99a.htm SECURITIES PURCHASE AGREEMENT, DATED MAY 16, 2006 Securities Purchase Agreement, dated May 16, 2006

Exhibit A

SECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement, dated on and as of the date set forth on the signature page hereto (this “Agreement”), is made between BioDelivery Sciences International, Inc., a corporation organized under the laws of the State of Delaware (the “Company”) and CDC IV, LLC, a limited liability company organized under the laws of the State of Delaware (the “Purchaser”) and any assignee of Purchaser who becomes a party hereto.

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Regulation D promulgated thereunder, the Company desires to offer, issue and sell to the Purchaser (the “Offering”), and the Purchaser desires to purchase from the Company, shares (the “Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”), and warrants to purchase shares of Common Stock (the “Warrants”), with an exercise price per share equal to $3.50. The Shares and the Warrants are collectively referred to herein as the “Securities”.

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which is hereby acknowledged, the Company and the Purchaser agree as follows:

A. Subscription

(1) Subject to the conditions to closing set forth herein, the Purchaser hereby irrevocably subscribes for and agrees to purchase Securities in exchange for the payment by Purchaser of $4,166,666.66 and for amending that certain Clinical Development and License Agreement, dated as of July 14, 2005, by and among the Company, Arius Pharmaceuticals, Inc., a wholly-owned subsidiary of the Company (“Arius”) and Purchaser, an assignee of Clinical Development Capital LLC (the “Clinical Development and License Agreement”), to among other matters, remove all payment obligations of Purchaser under Section 6.4 of that Clinical Development and License Agreement and remove certain obligations of the Company and Arius to make a $7,000,000 milestone payment to Purchaser under Section 6.5.1 of that Clinical Development and License Agreement. The Securities to be issued to the Purchaser hereunder shall consist of (i) 2,000,000 Shares, and (ii) a Warrant to purchase 904,000 shares of Common Stock.

(2) For purposes of this Agreement, the “Offering Price” of the Shares shall be $3.50 per Share.

(3) The purchase and sale shall take place at a closing mutually agreed upon by the Company and the Purchaser (the “Closing”). In the event there is more than one closing, the term “Closing” shall apply to each such closing unless otherwise specified herein.

(4) The Company shall, at the Closing: (i) issue to the Purchaser stock certificates representing 2,000,000 shares of Common Stock purchased at such Closing under this Agreement; (ii) issue to the Purchaser a Warrant to purchase 904,000 shares of Common Stock;


(iii) deliver to the Purchaser a duly executed Amended and Restated Registration Rights Agreement, made and entered into as of the date of Closing, by and between the Company and Purchaser (the “Amended and Restated Registration Rights Agreement”); and (iv) cause to be delivered to the Purchaser an opinion of Wyrick Robbins Yates & Ponton LLP substantially in the form of Exhibit A hereto and reasonably acceptable to counsel for the Purchaser.

(5) The Purchaser acknowledges and agrees that this Agreement shall be binding upon such Purchaser upon the execution and delivery to the Company, of such Purchaser’s signed counterpart signature page to this Agreement.

(6) The Purchaser acknowledges and agrees that the purchase of Shares and Warrants by such Purchaser pursuant to the Offering is subject to all the terms and conditions set forth in this Agreement.

B. Representations and Warranties of the Purchaser

The Purchaser hereby represents and warrants to the Company, and agrees with the Company as follows:

(1) The Purchaser has carefully read this Agreement and the form of Warrant attached hereto as Exhibit B (collectively the “Offering Documents”), and is familiar with and understands the terms of the Offering. Specifically, and without limiting in any way the foregoing representation, the Purchaser has carefully read and considered the Company’s financial statements included in the Company’s annual report on Form 10-KSB for the fiscal year ended December 31, 2005 (the “Form 10-KSB”), the subsection of the Form 10-KSB entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the section of the Form 10-KSB entitled “Item 1. Business,” the financial results contained in each of the Company’s quarterly reports on Form 10-QSB for each of the periods ending subsequent to December 31, 2005, and the subsection of each such Form 10-QSB entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and fully understands all of the risks related to the purchase of the Securities. The Purchaser has carefully considered and has discussed with the Purchaser’s professional legal, tax, accounting and financial advisors, to the extent the Purchaser has deemed necessary, the suitability of an investment in the Securities for the Purchaser’s particular tax and financial situation and has determined that the Securities being subscribed for by the Purchaser are a suitable investment for the Purchaser. The Purchaser recognizes that an investment in the Securities involves substantial risks, including the possible loss of the entire amount of such investment.

(2) The Purchaser acknowledges that (i) the Purchaser has had the opportunity to request copies of any documents, records, and books pertaining to this investment and (ii) any such documents, records and books that the Purchaser requested have been made available for inspection by the Purchaser, the Purchaser’s attorney, accountant or advisor(s).

(3) The Purchaser and the Purchaser’s advisor(s) have had a reasonable opportunity to ask questions of and receive answers from representatives of the Company or persons acting on behalf of the Company concerning the Offering and all such questions have been answered to the full satisfaction of the Purchaser.

 

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(4) The Purchaser is not subscribing for Securities as a result of or subsequent to any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar, meeting or conference whose attendees have been invited by any general solicitation or general advertising.

(5) The Purchaser has sufficient knowledge and experience in financial, tax and business matters to enable the Purchaser to utilize the information made available to the Purchaser in connection with the Offering, to evaluate the merits and risks of an investment in the Securities and to make an informed investment decision with respect to an investment in the Securities on the terms described in the Offering Documents.

(6) The Purchaser will not sell or otherwise transfer the Securities without registration under the Securities Act of 1933, as amended (the “Securities Act”) and applicable state securities laws or an applicable exemption therefrom. The Purchaser acknowledges that neither the offer nor sale of the Securities has been registered under the Securities Act or under the securities laws of any state. The Purchaser represents and warrants that the Purchaser is acquiring the Securities for the Purchaser’s own account, for investment and not with a view toward resale or distribution within the meaning of the Securities Act. The Purchaser has not offered or sold the Securities being acquired nor does the Purchaser have any present intention of selling, distributing or otherwise disposing of such Securities either currently or after the passage of a fixed or determinable period of time or upon the occurrence or non-occurrence of any predetermined event or circumstances in violation of the Securities Act. The Purchaser is aware that (i) the Securities are not currently eligible for sale in reliance upon Rule 144 promulgated under the Securities Act and (ii) the Company has no obligation to register the Securities subscribed for hereunder, except as provided in the Amended and Restated Registration Rights Agreement.

(7) The Purchaser acknowledges that the certificates representing the Shares, the Warrants and, upon the exercise of the Warrants, the shares of Common Stock issuable upon exercise of the Warrants (the “Warrant Shares”), be stamped or otherwise imprinted with a legend substantially in the following form:

The securities represented hereby have not been registered under the Securities Act of 1933, as amended, or any state securities laws and neither the securities nor any interest therein may be offered, sold, transferred, pledged or otherwise disposed of except pursuant to an effective registration under such act or an exemption from registration, which, in the opinion of counsel reasonably satisfactory to this corporation, is available.

Certificates evidencing the Shares and the Warrant Shares shall not be required to contain such legend or any other legend (i) following any sale of such Shares or Warrant Shares pursuant to Rule 144, or (ii) if such Shares or Warrant Shares are eligible for sale under Rule 144(k) or have been sold pursuant to the Registration Statement (as hereafter defined), or (iii) such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the Staff of the Securities and Exchange Commission), in each such case (i) through (iii) to the extent reasonably determined by the

 

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Company’s legal counsel. At such time and to the extent a legend is no longer required for the Shares or Warrant Shares, the Company will use its best efforts to no later than five (5) trading days following the delivery by a Purchaser to the Company or the Company’s transfer agent of a legended certificate representing such Shares or Warrant Shares (together with such accompanying documentation or representations as reasonably required by counsel to the Company), deliver or cause to be delivered a certificate representing such Shares or Warrant Shares that is free from the foregoing legend.

(8) The information contained in the purchaser questionnaire in the form of Exhibit C attached hereto (the “Purchaser Questionnaire”) delivered by the Purchaser in connection with this Agreement is complete and accurate in all respects, and the Purchaser is an “accredited investor” as defined in Rule 501 of Regulation D under the Securities Act on the basis indicated therein. The Purchaser shall indemnify and hold harmless the Company and each officer, director or control person, who is or may be a party or is or may be threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of or arising from any actual or alleged misrepresentation or misstatement of facts or omission to represent or state facts made or alleged to have been made by the Purchaser to the Company or omitted or alleged to have been omitted by the Purchaser, concerning the Purchaser or the Purchaser’s authority to invest or financial position in connection with the Offering, including, without limitation, any such misrepresentation, misstatement or omission contained in the Agreement or any other document submitted by the Purchaser, against losses, liabilities and expenses for which the Company or any officer, director or control person has not otherwise been reimbursed (including attorney’s fees, judgments, fines and amounts paid in settlement) actually and reasonably incurred by the Company or such officer, director or control person in connection with such action, suit or proceeding.

(9) The information contained in the selling stockholder questionnaire in the form of Exhibit D attached hereto (the “Selling Stockholder Questionnaire”) delivered by the Purchaser in connection with this Agreement is complete and accurate in all respects.

C. Representations and Warranties of the Company

The Company hereby makes the following representations and warranties to the Purchaser as of the date hereof and as of the date of Closing, which representations and warranties shall survive the Closing and the purchase and sale of the Securities.

(1) Organization, Good Standing and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has full corporate power and authority to conduct its business as currently conducted. The Company is duly qualified to do business as a foreign corporation and is in good standing in all jurisdictions in which the character of the property owned or leased or the nature of the business transacted by it makes qualification necessary, except where the failure to be so qualified would not have a material adverse effect on the business, properties, prospects, financial condition or results of operations of the Company (a “Material Adverse Effect”).

 

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(2) Capitalization. The authorized capital stock of the Company consists of 50,000,000 shares of stock of all classes. The authorized capital stock is divided into 45,000,000 shares of Common Stock, $0.001 par value per share and 5,000,000 shares of Preferred Stock, $0.001 par value per share (the “Preferred Stock”). As of March 31, 2006, there were 11,943,637 shares of Common Stock issued and outstanding and 1,988,235 shares of Preferred Stock issued and outstanding. As of March 31, 2006, the Company had reserved 2,100,000 shares of Common Stock for issuance to employees, directors and consultants pursuant to the Company’s Stock Option Plan, of which 2,280,785 shares of Common Stock are subject to outstanding, unexercised options as of such date. The Company has outstanding publicly held warrants to purchase 2,085,000 shares of common stock and warrants to purchase 1,948,765 shares of common stock issued. The Company also has outstanding debt convertible into 1,839,091 shares of common stock. Other than as set forth above or as contemplated in this Agreement, there are no other options, warrants, calls, rights, commitments or agreements of any character to which the Company is a party or by which either the Company is bound or obligating the Company to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of the Company or obligating the Company to grant, extend or enter into any such option, warrant, call, right, commitment or agreement.

(3) Issuance; Reservation of Shares. The issuance of the Shares has been duly and validly authorized by all necessary corporate and stockholder action, and the Shares, when issued and paid for pursuant to this Agreement, will be validly issued, fully paid and non-assessable shares of Common Stock of the Company. The issuance of the Warrants has been duly and validly authorized by all necessary corporate and stockholder action, and the Warrant Shares, when issued upon the due exercise of the Warrants, will be validly issued, fully paid and non-assessable shares of Common Stock of the Company. The Company has reserved, and will reserve, at all times that the Warrants remain outstanding, such number of shares of Common Stock sufficient to enable the full exercise of the Warrants.

(4) Authorization; Enforceability. The Company has all corporate right, power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. All corporate action on the part of the Company, its directors and stockholders necessary for the authorization, execution, delivery and performance of this Agreement by the Company, the authorization, sale, issuance and delivery of the Securities contemplated herein and the performance of the Company’s obligations hereunder has been taken. This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms and subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies, and to limitations of public policy. The issuance and sale of the Securities contemplated hereby will not give rise to any preemptive rights or rights of first refusal on behalf of any person.

(5) No Conflict; Governmental and Other Consents.

(a) The execution and delivery by the Company of this Agreement and the consummation of the transactions contemplated hereby will not result in the violation of any law, statute, rule, regulation, order, writ, injunction, judgment or decree of any court or governmental

 

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authority to or by which the Company is bound, or of any provision of the Certificate of Incorporation or Bylaws of the Company, and will not conflict with, or result in a breach or violation of, any of the terms or provisions of, or constitute (with due notice or lapse of time or both) a default under, any lease, loan agreement, mortgage, security agreement, trust indenture or other agreement or instrument to which the Company is a party or by which it is bound or to which any of its properties or assets is subject, nor result in the creation or imposition of any lien upon any of the properties or assets of the Company except to the extent that any such violation, conflict or breach would not be reasonably likely to have a Material Adverse Effect. No holder of any of the securities of the Company or any of its Subsidiaries has any rights (“demand,” “piggyback” or otherwise) to have such securities registered by reason of the intention to file, filing or effectiveness of a Registration Statement.

(b) No consent, approval, authorization or other order of any governmental authority or other third-party is required to be obtained by the Company in connection with the authorization, execution and delivery of this Agreement or with the authorization, issue and sale of the Securities, except such post-Closing filings as may be required to be made with the Securities and Exchange Commission (the “SEC”), The NASDAQ Stock Market, Inc. (“NASDAQ”) and with any state or foreign blue sky or securities regulatory authority.

(6) Litigation. There are no pending, or to the Company’s knowledge threatened, legal or governmental proceedings against the Company, which, if adversely determined, would be reasonably likely to have a Material Adverse Effect on the Company. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board or body (including, without limitation, the SEC) pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries wherein an unfavorable decision, ruling or finding could adversely affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations under this Agreement.

(7) Accuracy of Reports. All reports required to be filed by the Company within the two years prior to the date of this Agreement (the “SEC Reports”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), have been filed with the SEC, complied at the time of filing in all material respects with the requirements of their respective forms and, except to the extent updated or superseded by any subsequently filed report, including, without limitation, the amendments to the Company’s annual report on Form 10-KSB for the year ended December 31, 2005 and the quarterly reports on Form 10-QSB for each of the periods subsequent to December 31, 2005, were complete and correct in all material respects as of the dates at which the information was furnished, and contained (as of such dates) no untrue statements of a material fact nor omitted to state any material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading.

(8) Financial Information. The Company’s financial statements that appear in the SEC Reports have been prepared in accordance with United States generally accepted accounting principles (“GAAP”), except in the case of unaudited statements, as permitted by Form 10-QSB of the SEC or as may be indicated therein or in the notes thereto, applied on a consistent basis throughout the periods indicated and such financial statements fairly present in all material respects the financial condition and results of operations of the Company as of the dates and for the periods indicated therein.

 

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(9) Accounting Controls. The Company and each of its subsidiaries maintains a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

(10) Sarbanes-Oxley Act of 2002. The Company is, and will be, at all times during the period the Company must maintain effectiveness of the Registration Statement as provided herein, in compliance, in all material respects, with all applicable provisions of the Sarbanes-Oxley Act of 2002 and all rules and regulations promulgated thereunder or implementing the provisions thereof that are in effect and is taking reasonable steps to ensure that it will be in compliance with other applicable provisions of the Sarbanes-Oxley Act of 2002 not currently in effect upon the effectiveness of such provisions.

(11) Absence of Certain Changes. Since the date of the Company’s financial statements in the latest of the SEC Reports, there has not occurred any undisclosed event that has caused a Material Adverse Effect or any occurrence, circumstance or combination thereof that reasonably would be likely to result in such Material Adverse Effect.

(12) Investment Company. The Company is not an “investment company” within the meaning of such term under the Investment Company Act of 1940, as amended, and the rules and regulations of the SEC thereunder.

(13) Subsidiaries. To the extent required under applicable SEC rules, Exhibit 21.1 to the Form 10-KSB sets forth each subsidiary of the Company, showing the jurisdiction of its incorporation or organization. For the purposes of this Agreement, “subsidiary” shall mean any company or other entity of which at least 50% of the securities or other ownership interest having ordinary voting power for the election of directors or other persons performing similar functions are at the time owned directly or indirectly by the Company or any of its other subsidiaries.

(14) Indebtedness. The financial statements in the SEC Reports reflect, to the extent required, as of the date thereof all outstanding secured and unsecured Indebtedness (as defined below) of the Company or any subsidiary, or for which the Company or any subsidiary has commitments. For purposes of this Agreement, “Indebtedness” shall mean (a) any liabilities for borrowed money or amounts owed in excess of $50,000 (other than trade accounts payable incurred in the ordinary course of business), (b) all guaranties, endorsements and other contingent obligations in respect of Indebtedness of others, whether or not the same are or should be reflected in the Company’s balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (c) the present value of any lease payments in excess of $50,000 due under leases required to be capitalized in accordance with GAAP. Neither the Company nor any subsidiary is in default with respect to any Indebtedness.

 

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(15) Certain Fees. No brokers’, finders’ or financial advisory fees or commissions will be payable by the Company or any subsidiary with respect to the transactions contemplated by this Agreement.

(16) Material Agreements. Except as set forth in the SEC Reports, neither the Company nor any subsidiary is a party to any written or oral contract, instrument, agreement, commitment, obligation, plan or arrangement, a copy of which would be required to be filed with the SEC as an exhibit to Form 10-KSB (each, a “Material Agreement”). The Company and each of its subsidiaries has in all material respects performed all the obligations required to be performed by them to date under the foregoing agreements, have received no notice of default by the Company or the subsidiary that is a party thereto, as the case may be, and, to the Company’s knowledge, are not in default under any Material Agreement now in effect, the result of which would be reasonably likely to have a Material Adverse Effect.

(17) Transactions with Affiliates. Except as set forth in the SEC Reports, there are no loans, leases, agreements, contracts, royalty agreements, management contracts or arrangements or other continuing transactions with aggregate obligations of any party exceeding $60,000 between (a) the Company, any subsidiary or any of their respective customers or suppliers on the one hand, and (b) on the other hand, any person who would be covered by Item 404(a) of Regulation S-K or any company or other entity controlled by such person.

(18) Taxes. The Company and each of the subsidiaries has prepared and filed all federal, state, local, foreign and other tax returns for income, gross receipts, sales, use and other taxes and custom duties (“Taxes”) required by law to be filed by it, except for tax returns, the failure to file which, individually or in the aggregate, do not and would not have a Material Adverse Effect on the Company and its subsidiaries taken as a whole. Such filed tax returns are complete and accurate, except for such omissions and inaccuracies which, individually or in the aggregate, do not and would not have a Material Adverse Effect on the Company and its subsidiaries taken as a whole. The Company and each subsidiary has paid or made provisions for the payment of all Taxes shown to be due on such tax returns and all additional assessments, and adequate provisions have been and are reflected in the financial statements of the Company and the subsidiaries for all current Taxes to which the Company or any subsidiary is subject and which are not currently due and payable, except for such Taxes which, if unpaid, individually or in the aggregate, do not and would not have a Material Adverse Effect on the Company and its subsidiaries, taken as a whole. None of the federal income tax returns of the Company or any subsidiary for the past five years has been audited by the Internal Revenue Service. The Company has not received written notice of any assessments, adjustments or contingent liability (whether federal, state, local or foreign) in respect of any Taxes pending or threatened against the Company or any subsidiary for any period which, if unpaid, would have a Material Adverse Effect on the Company and the subsidiaries taken as a whole.

(19) Insurance. The Company and its subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as the Company believes are prudent and customary in the businesses in which the Company and its

 

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subsidiaries are engaged. Neither the Company nor any of its subsidiaries has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without an increase in cost significantly greater than general increases in cost experienced for similar companies in similar industries with respect to similar coverage.

(20) Environmental Matters. Except as disclosed in the SEC Reports, all real property owned, leased or otherwise operated by the Company and its subsidiaries is free of contamination from any substance, waste or material currently identified to be toxic or hazardous pursuant to, within the definition of a substance which is toxic or hazardous under, or which may result in liability under, any Environmental Law (as defined below), including, without limitation, any asbestos, polychlorinated biphenyls, radioactive substance, methane, volatile hydrocarbons, industrial solvents, oil or petroleum or chemical liquids or solids, liquid or gaseous products, or any other material or substance (“Hazardous Substance”) which has caused or would reasonably be expected to cause or constitute a threat to human health or safety, or an environmental hazard in violation of Environmental Law or to result in any environmental liabilities that would be reasonably likely to have a Material Adverse Effect. Neither the Company nor any of its subsidiaries has caused or suffered to occur any release, spill, migration, leakage, discharge, disposal, uncontrolled loss, seepage, or filtration of Hazardous Substances that would reasonably be expected to result in environmental liabilities that would be reasonably likely to have a Material Adverse Effect. The Company and each subsidiary has generated, treated, stored and disposed of any Hazardous Substances in compliance with applicable Environmental Laws, except for such non-compliances that would not be reasonably likely to have a Material Adverse Effect. The Company and each subsidiary has obtained, or has applied for, and is in compliance with and in good standing under all permits required under Environmental Laws (except for such failures that would not be reasonably likely to have a Material Adverse Effect) and neither the Company nor any of its subsidiaries has any knowledge of any proceedings to substantially modify or to revoke any such permit. There are no investigations, proceedings or litigation pending or, to the Company’s knowledge, threatened against the Company, any of its subsidiaries or any of the Company’s or its subsidiaries’ facilities relating to Environmental Laws or Hazardous Substances. “Environmental Laws” shall mean all federal, national, state, regional and local laws, statutes, ordinances and regulations, in each case as amended or supplemented from time to time, and any judicial or administrative interpretation thereof, including orders, consent decrees or judgments relating to the regulation and protection of human health, safety, the environment and natural resources.

(21) Intellectual Property Rights and Licenses. The Company and its subsidiaries own or have the right to use any and all information, know-how, trade secrets, patents, copyrights, trademarks, trade names, software, formulae, methods, processes and other intangible properties that are of a such nature and significance to the business that the failure to own or have the right to use such items would have a Material Adverse Effect (“Intangible Rights”). The Company (including its subsidiaries) has not received any notice that it is in conflict with or infringing upon the asserted intellectual property rights of others in connection with the Intangible Rights, and, to the Company’s knowledge, neither the use of the Intangible Rights nor the operation of the Company’s businesses is infringing or has infringed upon any intellectual property rights of others. All payments have been duly made that are necessary to maintain the Intangible Rights in force. No claims have been made, and to the Company’s knowledge, no claims are

 

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threatened, that challenge the validity or scope of any material Intangible Right of the Company or any of its subsidiaries. The Company and each of its subsidiaries have taken reasonable steps to obtain and maintain in force all licenses and other permissions under Intangible Rights of third parties necessary to conduct their businesses as heretofore conducted by them, and now being conducted by them, and as expected to be conducted, and neither the Company nor any of its subsidiaries is or has been in material breach of any such license or other permission.

(22) Labor, Employment and Benefit Matters.

(a) There are no existing, or to the best of the Company’s knowledge, threatened strikes or other labor disputes against the Company or any of its subsidiaries that would be reasonably likely to have a Material Adverse Effect. There is no organizing activity involving employees of the Company or any of its subsidiaries pending or, to the Company’s or its subsidiaries’ knowledge, threatened by any labor union or group of employees. There are no representation proceedings pending or, to the Company’s or its subsidiaries’ knowledge, threatened with the National Labor Relations Board, and no labor organization or group of employees of the Company or its subsidiaries has made a pending demand for recognition.

(b) Neither the Company nor any of its subsidiaries is, or during the five years preceding the date of this Agreement was, a party to any labor or collective bargaining agreement and there are no labor or collective bargaining agreements which pertain to employees of the Company or its subsidiaries.

(c) Each employee benefit plan is in compliance with all applicable law, except for such noncompliance that would not be reasonably likely to have a Material Adverse Effect.

(d) Neither the Company nor any of its subsidiaries has any liabilities, contingent or otherwise, including without limitation, liabilities for retiree health, retiree life, severance or retirement benefits, which are not fully reflected, to the extent required by GAAP, on the Balance Sheet or fully funded. The term “liabilities” used in the preceding sentence shall be calculated in accordance with reasonable actuarial assumptions.

(e) None of the Company nor any of its subsidiaries (i) has terminated any “employee pension benefit plan” as defined in Section 3(2) of ERISA (as defined below) under circumstances that present a material risk of the Company or any of its subsidiaries incurring any liability or obligation that would be reasonably likely to have a Material Adverse Effect, or (ii) has incurred or expects to incur any outstanding liability under Title IV of the Employee Retirement Income Security Act of 1974, as amended and all rules and regulations promulgated thereunder (“ERISA”).

(23) Compliance with Law. The Company is in compliance in all material respects with all applicable laws, except for such noncompliance that would not reasonably be likely to have a Material Adverse Effect. The Company has not received any notice of, nor does the Company have any knowledge of, any violation (or of any investigation, inspection, audit or other proceeding by any governmental entity involving allegations of any violation) of any applicable law involving or related to the Company which has not been dismissed or otherwise

 

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disposed of that would be reasonably likely to have a Material Adverse Effect. The Company has not received notice or otherwise has any knowledge that the Company is charged with, threatened with or under investigation with respect to, any violation of any applicable law that would reasonably be likely to have a Material Adverse Effect. Neither the Company nor any of its subsidiaries nor any employee or agent of the Company or any subsidiary has made any contribution or other payment to any official of, or candidate for, any federal, state or foreign office in violation of any law. The Company and its directors, officers, employees and agents have complied in all material respects with the Foreign Corrupt Practices Act of 1977, as amended, and any related rules and regulations.

(24) Ownership of Property. Except as set forth in the Company’s financial statements included in the SEC Reports, each of the Company and its subsidiaries has (i) good and marketable fee simple title to its owned real property, if any, free and clear of all liens, except for liens which do not individually or in the aggregate have a Material Adverse Effect; (ii) a valid leasehold interest in all leased real property, and each of such leases is valid and enforceable in accordance with its terms (subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies, and to limitations of public policy) and is in full force and effect, and (iii) good title to, or valid leasehold interests in, all of its other properties and assets free and clear of all liens, except for liens disclosed in the SEC Reports or which otherwise do not individually or in the aggregate have a Material Adverse Effect.

(25) Compliance with NASDAQ Listing Requirements. The Company is in compliance in all material respects with all currently effective NASDAQ continued listing requirements and corporate governance requirements. The Company’s Common Stock is registered pursuant to Section 12(g) of the Exchange Act and is listed on The NASDAQ Stock Market, Inc. Capital Market (the “NASDAQ Capital Market”), trading in the Common Stock has not been suspended, and the Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act or de-listing the Common Stock from the NASDAQ Capital Market, nor to the Company’s knowledge is the National Association of Securities Dealers, Inc. (“NASD”) currently contemplating terminating such listing. The Company and the Common Stock meet the criteria for continued listing and trading on the NASDAQ Capital Market.

(26) Form S-3 Eligibility. As of the Closing Date, the Company is eligible to register the Shares and the Warrant Shares for resale by the Purchaser on Form S-3 promulgated under the Securities Act.

(27) No Integrated Offering. Assuming the accuracy of the Purchaser’s representations and warranties set forth in Section B hereof, neither the Company, nor any of its affiliates or other person acting on the Company’s behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security under circumstances that would cause the Offering of the Securities to be integrated with prior offerings by the Company for purposes of the Securities Act, when integration would cause the Offering not to be exempt from the requirements of Section 5 of the Securities Act.

 

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(28) General Solicitation. Neither the Company nor, its knowledge, any person acting on behalf of the Company, has offered or sold any of the Securities by any form of “general solicitation” within the meaning of Rule 502 under the Securities Act. To the knowledge of the Company, no person acting on its behalf has offered the Securities for sale other than to the Purchaser and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.

(29) No Manipulation of Stock. The Company has not taken and will not, in violation of applicable law, take, any action designed to or that might reasonably be expected to cause or result in stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of the Securities.

(30) No Registration. Assuming the accuracy of the representations and warranties made by, and compliance with the covenants of, the Purchaser in Section B hereof, no registration of the Securities under the Securities Act is required in connection with the offer and sale of the Securities by the Company to the Purchaser as contemplated by this Agreement.

(31) Form D. The Company agrees to file one or more Forms D with respect to the Securities on a timely basis as required under Regulation D under the Securities Act to claim the exemption provided by Rule 506 of Regulation D and to provide a copy thereof to the Purchaser and their counsel promptly after such filing.

(32) Certain Future Financings and Related Actions. The Company will not sell, offer to sell, solicit offers to buy or otherwise negotiate in respect of any “security” (as defined in the Securities Act) that is or could be integrated with the sale of the Securities in a manner that would require the registration of the Securities under the Securities Act.

(33) Disclosure. The Company understands and confirms that the Purchaser will rely on the foregoing representations in effecting transactions in securities of the Company. All disclosure provided by the Company to the Purchaser regarding the Company, its business and the transactions contemplated hereby furnished by or on the behalf of the Company are true and correct in all material respects and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. To the Company’s knowledge, no material event or circumstance has occurred or information exists with respect to the Company or any of its Subsidiaries or its or their business, properties, operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed.

D. Understandings

The Purchaser understands, acknowledges and agrees with the Company as follows:

(1) The Purchaser hereby acknowledges and agrees that the subscription hereunder is irrevocable by the Purchaser, and that, except as required by law, the Purchaser is not entitled to cancel, terminate or revoke this Agreement or any agreements of the Purchaser hereunder and that if the Purchaser is an individual this Agreement shall survive the death or disability of the

 

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Purchaser and shall be binding upon and inure to the benefit of the parties and their heirs, executors, administrators, successors, legal representatives and permitted assigns.

(2) No federal or state agency or authority has made any finding or determination as to the accuracy or adequacy of the Offering Documents or as to the fairness of the terms of the Offering nor any recommendation or endorsement of the Securities. Any representation to the contrary is a criminal offense. In making an investment decision, Purchaser must rely on its own examination of the Company and the terms of the Offering, including the merits and risks involved.

(3) The Offering is intended to be exempt from registration under the Securities Act by virtue of Section 4(2) of the Securities Act and the provisions of Regulation D thereunder, which is in part dependent upon the truth, completeness and accuracy of the statements made by the Purchaser herein and in the Purchaser Questionnaire.

(4) Notwithstanding the registration obligations described in the Amended and Restated Registration Rights Agreement, there can be no assurance that the Purchaser will be able to sell or dispose of the Securities. It is understood that in order not to jeopardize the Offering’s exempt status under Section 4(2) of the Securities Act and Regulation D, any transferee may, at a minimum, be required to fulfill the investor suitability requirements thereunder.

(5) The Purchaser acknowledges that the Offering is confidential and non-public and agrees that all information about the Offering shall be kept in confidence by the Purchaser until the public announcement of the Offering by the Company.

(6) The Purchaser acknowledges that the foregoing restrictions on the Purchaser’s use and disclosure of any such confidential, non-public information contained in the above-described documents restricts the Purchaser from trading in the Company’s securities to the extent such trading is on the basis of material, non-public information of which the Purchaser is aware.

(7) The Purchaser agrees that beginning on the date hereof until the Offering is publicly announced by the Company (which the Company has represented will occur as soon as practicable), the Purchaser will not enter into any Short Sales. For purposes of the foregoing sentence, a “Short Sale” by a Purchaser means a sale of Common Stock that is marked as a short sale and that is executed at a time when such Purchaser has no equivalent offsetting long position in the Common Stock, exclusive of the Shares. For purposes of determining whether a Purchaser has an equivalent offsetting long position in the Common Stock, all Common Stock that would be issuable upon exercise in full of all options then held by such Purchaser (assuming that such options were then fully exercisable, notwithstanding any provisions to the contrary, and giving effect to any exercise price adjustments scheduled to take effect in the future) shall be deemed to be held long by such Purchaser.

(8) Notwithstanding anything contained herein, the number of shares of Common Stock issued or issuable by the Company:

(i) upon exercise of all or any portion of the Warrant and

 

13


(ii) upon exercise of the warrant to purchase Common Stock issued to Purchaser in July 2005 (the “July 2005 Warrant”).

when added together with the 2 million shares of Common Stock issued to Purchaser pursuant to the Securities Purchase Agreement (collectively, the “Aggregated Shares”), shall not exceed 19.99% of the outstanding shares of Common Stock as of May 16, 2006 (the “Maximum Common Stock Issuance”), unless the issuance of that number of Aggregated Shares that would result in Purchaser owning in excess of the Maximum Common Stock Issuance shall first be approved by the Company’s stockholders.

(b) Notwithstanding anything contained herein, the provisions of this paragraph D(8) are irrevocable and may not be waived or modified by Purchaser or the Company (including, without limitation, any modification providing for an alternative outcome should Company stockholder approval not be obtained).

E. Covenants of the Company

(1) The Company hereby agrees that, for a period of forty-five (45) days after effectiveness of the Registration Statement, it shall not issue or sell any Common Stock of the Company, any warrants or other rights to acquire Common Stock or any other securities that are convertible into Common Stock, with the exception of issuances or sales related to a strategic or collaborative combination or transaction or to an employee, director, consultant, supplier, lender or lessor, or any option grant or issuance, so long as no integration or aggregation that would violate the rules and regulations of the Securities and Exchange Commission and/or NASDAQ results.

(2) Until the effectiveness of the Registration Statement, the Company shall not file any registration statement, other than the Registration Statement contemplated hereby, or any registration statement related to securities issued or to be issued pursuant to any option or other plan for the benefit of the Company’s employees, officers, directors or consultants.

(3) As soon as practicable, and in accordance with applicable rules and regulations, following the Closing, the Company shall, by filing a Current Report on Form 8-K and/or by issuance of a press release, disclose such Closing of the Offering .

(4) In the event the Company, at any time prior to the Company obtaining a market capitalization in excess of $85,000,000 (market capitalization shall be calculated by multiplying the Company’s current stock price per share by the total number of shares issued and outstanding), desires to enter into a transaction to offer and sell its debt and/or equity securities, in any manner, including a transaction that is intended to be exempt from the registration requirements of Section 5 of the Securities Act, the Company agrees to first propose in writing the terms and conditions pursuant to which it would enter such a transaction to Purchaser (the “Proposed Terms”). If Purchaser elects to enter into such discussions, the Parties agree to negotiate exclusively and in good faith for a period of sixty (60) days the terms and conditions of such a transaction (the “Initial Negotiating Term”). If during such sixty (60) day period the Parties do not enter into a binding agreement with respect to such transaction, then the Company shall have one hundred twenty (120) days in which to consummate a transaction with a third

 

14


party; provided, however, that the terms and conditions of such transaction with a third party shall not be more favorable (including financial consideration to be received) than those proposed by Purchaser in the Initial Negotiating Term, and shall be similar in structure and scope to those negotiated with Purchaser during the Initial Negotiating Term. Promptly after any transaction, the Company shall furnish Purchaser evidence of the consummation (including time of completion) of such transaction and of the terms thereof as Purchaser may request. If at the end of such one hundred twenty (120) day period the Company has not consummated the transaction in all respects on terms required hereunder, then the Company shall no longer be permitted to consummate the transaction pursuant to this Section E(4) without again fully complying with the provisions of this Section E(4).

(5) The Company shall pay (or reimburse the Purchaser for) all fees and expenses incident to the performance of or compliance with this Agreement, the amendment to the Clinical Development and License Agreement, the Amended and Restated Registration Rights Agreement, and any other related transaction document, by the Purchaser up to an aggregate of $25,000.

(6) The Company covenants that it shall provide for a stockholder vote on the approval of Purchaser’s owning in excess of the Maximum Common Stock Issuance, as described in paragraph D(8) above, in the Company’s upcoming Proxy Statement on Schedule 14A and related materials for the Company’s 2006 Annual Meeting of Stockholders, scheduled to take place in July 2006, and each successive meeting, of stockholders, including any special meeting of stockholders, until such approval is received.

F. Miscellaneous

(1) All pronouns and any variations thereof used herein shall be deemed to refer to the masculine, feminine, singular or plural, as identity of the person or persons may require.

(2) Any notice or other document required or permitted to be given or delivered to the Purchaser shall be in writing and sent (a) by fax if the sender on the same day sends a confirming copy of such notice by an internationally recognized overnight delivery service (charges prepaid) or (b) by an internationally recognized overnight delivery service (with charges prepaid):

(i) if to the Company, at

If to the Company:

BioDelivery Sciences International, Inc.

2501 Aerial Center Parkway, Suite 205

Morrisville, NC 27560

Attention: Mark A. Sirgo, Pharm.D.

Fax: (919) 653-5161

 

15


With a copy to:

Wyrick Robbins Yates & Ponton LLP

4101 Lake Boone Trail

Suite 300

Raleigh, NC 27607

Attention: Larry E. Robbins

Fax: (919) 781-4865

or such other address as it shall have specified to the Purchaser in writing, with a copy (which shall not constitute notice) to:

Morgan, Lewis & Bockius LLP

502 Carnegie Center

Princeton, NJ 08540

Phone: (609) 919.6600

Fax: (609) 919.6701

Attention: Denis Segota, Esq.

(ii) if to the Purchaser, at its address set forth on the signature page to this Agreement, or such other address as it shall have specified to the Company in writing.

(3) Failure of the Company to exercise any right or remedy under this Agreement or any other agreement between the Company and the Purchaser, or otherwise, or delay by the Company in exercising such right or remedy, will not operate as a waiver thereof. No waiver by the Company will be effective unless and until it is in writing and signed by the Company.

(4) This Agreement shall be enforced, governed and construed in all respects in accordance with the laws of the State of New York, as such laws are applied by the New York courts to agreements entered into and to be performed in New York by and between residents of New York, and shall be binding upon the Purchaser, the Purchaser’s heirs, estate, legal representatives, successors and assigns and shall inure to the benefit of the Company, its successors and assigns.

(5) If any provision of this Agreement is held to be invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed modified to conform with such statute or rule of law. Any provision hereof that may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provisions hereof.

(6) The parties understand and agree that, unless provided otherwise herein, money damages would not be a sufficient remedy for any breach of the Agreement by the Company or the Purchaser and that the party against which such breach is committed shall be entitled to equitable relief, including injunction and specific performance, as a remedy for any such breach. Such remedies shall not, unless provided otherwise herein, be deemed to be the exclusive remedies for a breach by either party of the Agreement but shall be in addition to all other remedies available at law or equity to the party against which such breach is committed.

 

16


(7) This Agreement, together with the agreements and documents executed and delivered in connection with this Agreement, constitutes the entire agreement between the parties hereto with respect to the subject matter hereof.

G. Signature

The signature page of this Agreement is contained as part of the applicable subscription package, entitled “Signature Page”.

* * * * * * *

 

17


SIGNATURE PAGE

The Purchaser hereby subscribes for 2,000,000 shares of Common Stock, and shall also receive a Warrant to purchase 904,000 shares of Common Stock, and agrees to be bound by the terms and conditions of this Agreement.

PURCHASER

Dated: May 16, 2006

CDC IV, LLC

 

By:

 

/s/ Jan Leschly

Name:   Jan Leschly
Title:  

 

Taxpayer Identification or Social
Security Number

 

Name (please print as name will appear

on stock certificate)

 

Number and Street

 

City, State   Zip Code    

 

ACCEPTED BY:
BIODELIVERY SCIENCES INTERNATIONAL, INC.
By:  

/s/ Mark A. Sirgo

Name:   Mark A. Sirgo
Title:   President and CEO
Dated:  

May 16, 2006


Exhibit A

Legal Matters

[                                    ] shall deliver an opinion covering the following matters. The opinion shall be subject to and include customary assumptions, limitations and qualifications.

(1) The Company is a corporation, validly existing and in good standing under the laws of the State of [            ] and has all requisite corporate power and authority under the laws of the State of [            ] to conduct its business as it is described in the Company’s Form 10-QSB for the quarter ended [            ], Form 10-KSB for the fiscal year ended [            ] and the Definitive Proxy Statement dated [            ], and to enter into and perform its obligations under the Agreement.

(2) The authorized capital stock of the Company consists of [            ] shares of stock of all classes. The authorized capital stock is divided into [            ] shares of Common Stock, $[            ] par value per share (the “Common Stock”) and [            ] shares of Preferred Stock, $[            ] par value per share (the “Preferred Stock”). As of [            ], there were [            ] shares of Common Stock issued and outstanding and [            ] shares of Preferred Stock issued and outstanding.

(3) The Shares have been duly authorized or reserved for issuance by all necessary corporate action on the part of the Company; and the Shares, when issued and delivered against payment therefor in accordance with the provisions of the Agreement, will be validly issued, fully paid and non-assessable. The Warrants have been duly authorized by all necessary corporate action on the part of the Company, and the Warrant Shares have been duly reserved for issuance and, when issued and delivered against payment therefor upon the due exercise of the Warrants in accordance with the provisions thereof, will be validly issued, fully paid and non-assessable shares of Common Stock.

(4) The execution and delivery by the Company of the Agreement, and the consummation by the Company of the transactions contemplated thereby, have been duly authorized by all necessary corporate action on the part of the Company. The Agreement constitutes the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as rights to indemnification and contribution thereunder may be limited by applicable law and except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditors’ rights generally or by general equitable principles.

(5) The execution and delivery by the Company of the Agreement, and the consummation by the Company of the transactions contemplated thereby, do not (a) violate the provisions of any federal law of the United States of America or the General Corporation Law of the State of Delaware applicable to the Company; (b) violate the provisions of the Company’s Certificate of Incorporation or By-laws; or (c) violate any existing obligation of the Company under any judgment, decree, order or award of any court, governmental body or arbitrator


specifically naming the Company and of which we are aware, without any inquiry; or (d) with or without notice and/or the passage of time, conflict with or result in the material breach or termination of any material term or provision of, or constitute a material default under, or cause any acceleration of any material obligation under, or cause the creation of any material lien, charge or encumbrance upon the material properties or assets of the Company pursuant to any contract or instrument in the form included as an Exhibit to the Company’s Form 10-KSB and subsequent SEC filings.

(6) Assuming (a) the accuracy of the representations made by the Purchaser in the Agreement; (b) that neither the Company, nor any person acting on behalf of the Company has offered or sold the Securities by any form of general solicitation or general advertising within the meaning of Rule 502(c) of Regulation D promulgated (the “Regulation D”) under the Securities Act; (c) that no offerings or sales of securities of the Company after the date hereof in a transaction can be “integrated” with any sales of the Securities; and (d) that each person or entity that purchased securities of the Company directly from the Company or its agents and without registration between the date six months prior to the Closing of the Offering and the date of the Agreement was, as of the date of such purchase, an “accredited investor” as defined in Rule 501 of Regulation D, the sale of the Securities to the Purchaser at the Closing under the circumstances contemplated by this Agreement are exempt from the registration and prospectus delivery requirements of Section 5 of the Securities Act.

(7) To our knowledge, without any inquiry (including, without limitation, without any docket search or other inquiry), there is no action, proceeding or litigation pending or threatened against the Company before any court, governmental or administrative agency or body required to be described in the Company’s Form 10-QSB for the quarter ended [            ], Form 10-KSB for the fiscal year ended [            ] and the Definitive Proxy Statement dated [            ], which is not otherwise disclosed therein.


Exhibit B

Form of Warrant


Exhibit C

[                    ]

Confidential Purchaser Questionnaire

Before any sale of Shares or Warrants by [            ]. can be made to you, this Questionnaire must be completed and returned to [            ].

 

  1. IF YOU ARE AN INDIVIDUAL PLEASE FILL IN THE IDENTIFICATION QUESTIONS IN (A) IF YOU ARE AN ENTITY PLEASE FILL IN THE IDENTIFICATION QUESTIONS IN (B)

A. INDIVIDUAL IDENTIFICATION QUESTIONS

Name  _______________________________________________________________________________

(Exact name as it should appear on stock certificate)

Residence Address _____________________________________________________________________

Home Telephone Number __________________________________________________________

Fax Number _______________________________________________________________________________

Date of Birth _______________________________________________________________________________

Social Security Number ____________________________________________________________

B. IDENTIFICATION QUESTIONS FOR ENTITIES

Name _______________________________________________________________________________

(Exact name as it will appear on stock certificate)

Address of Principal Place of Business _____________________________________________________

State (or Country) of Formation or Incorporation _____________________________________________________

Contact Person _________________________________________________________________

Telephone Number (            ) ________________________________________________________

Type of Entity (corporation, partnership, trust, etc.) _____________________________________________________

Was entity formed for the purpose of this investment?

Yes      No     

 

2. DESCRIPTION OF INVESTOR

The following information is required to ascertain whether you would be deemed an “accredited investor” as defined in Rule 501 of Regulation D under the Securities Act. Please check whether you are any of the following:

a corporation or partnership with total assets in excess of $5,000,000, not organized for the purpose of this particular investment

private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940, a U.S. venture capital fund which invests primarily through private placements in non-publicly traded securities and makes available (either directly or through co-investors) to the portfolio companies significant guidance concerning management, operations or business objectives

a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958


an investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act

a trust not organized to make this particular investment, with total assets in excess of $5,000,000 whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) of the Securities Act of 1933 and who completed item 4 below of this questionnaire

a bank as defined in Section 3(a)(2) or a savings and loan association or other institution defined in Section 3(a)(5)(A) of the Securities Act of 1933 acting in either an individual or fiduciary capacity

an insurance company as defined in Section 2(13) of the Securities Act of 1933

an employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974 (i) whose investment decision is made by a fiduciary which is either a bank, savings and loan association, insurance company, or registered investment advisor, or (ii) whose total assets exceed $5,000,000, or (iii) if a self-directed plan, whose investment decisions are made solely by a person who is an accredited investor and who completed Part I of this questionnaire;

a charitable, religious, educational or other organization described in Section 501(c)(3) of the Internal Revenue Code, not formed for the purpose of this investment, with total assets in excess of $5,000,000

an entity not located in the U.S. none of whose equity owners are U.S. citizens or U.S. residents

a broker or dealer registered under Section 15 of the Securities Exchange Act of 1934

a plan having assets exceeding $5,000,000 established and maintained by a government agency for its employees

an individual who had individual income from all sources during each of the last two years in excess of $200,000 or the joint income of you and your spouse (if married) from all sources during each of such years in excess of $300,000 and who reasonably excepts that either your own income from all sources during the current year will exceed $200,000 or the joint income of you and your spouse (if married) from all sources during the current year will exceed $300,000

an individual whose net worth as of the date you purchase the securities offered, together with the net worth of your spouse, be in excess of $1,000,000

an entity in which all of the equity owners are accredited investors

 

3. BUSINESS, INVESTMENT AND EDUCATIONAL EXPERIENCE

Occupation ____________________________________________________________________

Number of Years ________________________________________________________________

Present Employer ____________________________________________________________________

Position/Title ____________________________________________________________________

Educational Background ___________________________________________________________

 

- 2 -


Frequency of prior investment (check one in each column):

 

     Stocks & Bonds    Venture Capital Investments
Frequently      
Occasionally      
Never      

 

4. SIGNATURE

The above information is true and correct. The undersigned recognizes that the Company and its counsel are relying on the truth and accuracy of such information in reliance on the exemption contained in Subsection 4(2) of the Securities Act of 1933, as amended, and Regulation D promulgated thereunder. The undersigned agrees to notify the Company promptly of any changes in the foregoing information which may occur prior to the investment.

Executed at                         , on                     , 2005

 

 

(Signature)

 

- 3 -


Exhibit D

Selling Stockholder Questionnaire

To: [                        ]

Reference is made to the Securities Purchase Agreement (the “Agreement”), made between [            ], a [            ] (the “Company”), and the Purchaser.

Pursuant to Section B(12) of the Agreement, the undersigned hereby furnishes to the Company the following information for use by the Company in connection with the preparation of the Registration Statement contemplated by the Registration Rights Agreement.

 

  (1) Name and Contact Information:

 

Full legal name of record holder:

 

 

Address of record holder:

 

 

 

 

Social Security Number or Taxpayer identification number of record holder:

 

 

Identity of beneficial owner (if different than record holder):

 

 

Name of contact person:

 

 

Telephone number of contact person:

 

 

Fax number of contact person:

 

 

E-mail address of contact person:

 

 

 

  (2) Beneficial Ownership of Registrable Securities:

 

(a) Number of Registrable Securities owned by Selling Stockholder:

 

(b) Number of Registrable Securities requested to be registered:

 

 


  (3) Beneficial Ownership of Other Securities of the Company Owned by the Selling Stockholder:

 

Except as set forth below in this Item (3), the undersigned is not the beneficial or registered owner of any securities of the Company other than the Registrable Securities listed above in Item (2)(a).
Type and amount of other securities beneficially owned by the Selling Stockholder:

 

 

 

  (4) Relationships with the Company:

 

Except as set forth below, neither the undersigned nor any of its affiliates, officers, directors or principal equity holders (5% or more) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years.
State any exceptions here:

 

 

 

  (5) Plan of Distribution:

 

Except as set forth below, the undersigned intends to distribute pursuant to the Registration Statement the Registrable Securities listed above in Item (2) in accordance with the “Plan of Distribution” section set forth therein:
State any exceptions here:

 

 

 

  (6) Selling Stockholder Affiliations:

 

(a) Is the Selling Stockholder a registered broker-dealer?

 

(b) Is the Selling Stockholder an affiliate of a registered broker-dealer(s)? (For purposes of this response, an “affiliate” of, or person “affiliated” with, a specified person, is a person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the person specified.)

 

 

- 2 -


(c) If the answer to Item (6)(b) is yes, identify the registered broker-dealer(s) and describe the nature of the affiliation(s):

 

(d) If the answer to Item (6)(b) is yes, did the Selling Stockholder acquire the Registrable Securities in the ordinary course of business (if not, please explain)?

 

(e) If the answer to Item (6)(b) is yes, did the Selling Stockholder, at the time of purchase of the Registrable Securities, have any agreements, plans or understandings, directly or indirectly, with any person to distribute the Registrable Securities (if yes, please explain)?

 

 

  (7) Voting or Investment Control over the Registrable Securities:

 

If the Selling Stockholder is not a natural person, please identify the natural person or persons who have voting or investment control over the Registrable Securities listed in Item (2) above:

 

The undersigned acknowledges that the Company may, by notice to the Purchaser at its last known address, suspend or withdraw the Registration Statement and require that the undersigned immediately cease sales of Registrable Securities pursuant to the Registration Statement under certain circumstances described in the Registration Rights Agreement. At any time that such notice has been given, the undersigned may not sell Registrable Securities pursuant to the Registration Statement.

The undersigned hereby acknowledges receipt of a draft of the Registration Statement dated [            ], [            ] and confirms that the undersigned has reviewed such draft including, without limitation, the sections captioned “Selling Stockholders” and “Plan of Distribution,” and confirms that, to the best of the undersigned’s knowledge, the same is true, complete and accurate in every respect except as indicated in this Questionnaire. The undersigned hereby further acknowledges that pursuant to Section B(12) of the Agreement, the undersigned shall indemnify the Company and each of its directors and officers against, and hold the Company and each of its directors and officers harmless from, any losses, claims, damages, expenses or liabilities (including reasonable attorneys fees) to which the Company or its directors and officers may become subject by reason of any statement or omission in the Registration

 

- 3 -


Statement made in reliance upon, or in conformity with, a written statement by the undersigned, including the information furnished in this Questionnaire by the undersigned.

By signing below, the undersigned consents to the disclosure of the information contained herein in its answers to Items (1) through (7) above and the inclusion of such information in the Registration Statement, any amendments thereto and the related prospectus. The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of the Registration Statement and the related prospectus.

The undersigned has reviewed the answers to the above questions and affirms that the same are true, complete and accurate. THE UNDERSIGNED AGREES TO NOTIFY THE COMPANY IMMEDIATELY OF ANY CHANGES IN THE FOREGOING INFORMATION.

 

Dated:                     , 2006  

 

 

Signature of Record Holder

(Please sign your name in exactly the same

manner as the certificate(s) for the shares being

registered)

 

- 4 -

EX-99.(B) 3 dex99b.htm AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT, DATED AS OF MAY 16, 2006 Amended and Restated Registration Rights Agreement, dated as of May 16, 2006

Exhibit B

AMENDED AND RESTATED

REGISTRATION RIGHTS AGREEMENT

THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (“Agreement”) is entered into as of May 16, 2006, by and between BioDelivery Sciences International, Inc., a Delaware corporation (the “Company”) and CDC IV, LLC, a Delaware limited liability company (the “Purchaser”).

R E C I T A L S:

WHEREAS, the Company entered into a certain Clinical Development and License Agreement dated as of July 14, 2005 by and among the Company, Arius Pharmaceuticals, Inc., a wholly-owned subsidiary of the Company and Purchaser, an assignee of Clinical Development Capital LLC (“CDC”) (the “License Agreement”); and

WHEREAS, the Company and Purchaser have amended the License Agreement pursuant to that certain Amendment No. 2 to Clinical Development and License Agreement dated the date hereof; and

WHEREAS, in connection with such amendment, the Company and Purchaser have entered into a Securities Purchase Agreement, dated the date hereof (the “Securities Purchase Agreement”); and

WHEREAS, this Agreement is made pursuant to the Securities Purchase Agreement and amends and restates that certain Registration Rights Agreement, dated as of July 14, 2005, by and between the Company and Purchaser, an assignee of CDC.

NOW THEREFORE, in consideration of the foregoing recitals and the nutual promises and covenants hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the Company and the Purchaser hereby agree as follows:

(1) Certain Definitions. For purposes of this Agreement, the following terms shall have the meanings ascribed to them below. Additional capitalize terms not otherwise defined herein shall have the meaning set forth in the Securities Purchase Agreement.

(a) “Prospectus” means the prospectus included in the Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the issuance of the Warrant, the Warrant Shares and any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.


(b) “Registrable Securities” shall mean any Shares and Warrant Shares issued or issuable upon exercise of the Warrant, together with any securities issued or issuable upon any stock split, dividend or other distribution, adjustment, recapitalization or similar event with respect to the foregoing.

(c) “Registration Statement” means the registration statement required to be filed under this Agreement, including the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.

(d) “SEC” means the Securities and Exchange Commissions.

(e) “Securities Act” means The Securities Act of 1933, as amended, together with all rules and regulations promulgated thereunder

(f) “Warrant Shares” means the shares of Common Stock issued or issuable upon exercise of the (i) Warrant issued in connection with the Securities Purchase Agreement, and (ii) the Amended and Restated Warrant to purchase 601,120 shares of the Company’s Common Stock, issued to Purchaser on February 15, 2006.

(2) Shelf Registration

(a) The Company shall use commercially reasonable efforts to cause to prepare and file with the SEC a “Shelf” Registration Statement covering the resale of all Registrable Securities for an offering to be made on a continuous basis pursuant to Rule 415 on or prior to the 60th day following date hereof (the “Filing Date”). The Registration Statement shall be on Form S-3 and shall contain (except if otherwise directed by Purchaser) a “Plan of Distribution” substantially in the form attached hereto as Exhibit A. Purchaser will furnish to the Company in writing the information specified in Item 507 or 508 of Regulation S-K, as applicable, of the Securities Act for use in connection with the Registration Statement or prospectus or preliminary prospectus included therein. Purchaser agrees to promptly furnish additional information required to be disclosed in order to make the information previously furnished to the Company by Purchaser not materially misleading. The Registration Statement shall register the Registrable Securities for resale by the holders thereof.

(b) The Company shall use commercially reasonable efforts to cause the Registration Statement to be declared effective by the SEC on or prior to the date which is 60 days subsequent to the Filing Date, and shall use its best efforts to keep the Registration Statement continuously effective under the Securities Act until the earlier of (i) the date when all Registrable Securities covered by such Registration Statement have been sold, or (i) two years from the effective date of the Registration Statement (the “Effectiveness Period”).

 

2


(c) The Company shall notify Purchaser in writing promptly (and in any event within one business day) after receiving notification from the SEC that the Registration Statement has been declared effective.

(d) Upon the occurrence of any Event (as defined below), as partial relief for the damages suffered therefrom by the Purchaser (which remedy shall not be exclusive of any other remedies which are available at law or in equity; and provided further that the Purchaser shall be entitled to pursue an action for specific performance of the Company’s obligations under Paragraph (2)(b) above and any such actions at law, in equity, for specific performance or otherwise shall not require the Purchaser to post a bond), the Company shall pay to Purchaser, as liquidated damages and not as a penalty (it being agreed that it would not be feasible to ascertain the extent of such damages with precision), such amounts and at such times as shall be determined pursuant to this Paragraph (2)(d). For such purposes, each of the following shall constitute an “Event”:

(i) the Filing Date does not occur on or prior to the later of the 60th day following the date hereof (such later date is defined herein as the “Filing Default Date”), in which case the Company shall pay to Purchaser an amount in cash equal to: (A) one and one-half percent (1.5%) of the aggregate purchase price paid by Purchaser, on a pro-rata basis over a 30-day period; and (B) for each successive 30-day period thereafter or any portion thereof until the Filing Date, one-half percent (1.5%) of the aggregate purchase price paid by Purchaser, on a pro-rata basis over a 30-day period, to be paid at the end of each 30-day period; or

(ii) in the event the Registration Statement does not undergo a full review by the SEC and the Registration Statement is not declared effective on or prior to the date that is 90 days after the Filing Date (the “Required Effectiveness Date”), in which case the Company shall pay to Purchaser an amount in cash equal to: (A) for the first 30 days after such 90th day, one and one-half percent (1.5%) of the aggregate purchase price paid by Purchaser (the purchase price paid by Purchaser being equal to $7,000,000), on a pro-rata basis over a 30-day period; and (B) for each successive 30-day period thereafter until the Registration Statement is deemed effective, one and one-half percent (1.5%) of the aggregate purchase price paid by Purchaser, on a pro rata basis over a 30-day period, at the end of each 30-day period.

(iii) in the event the Registration Statement undergoes a full review by the SEC and the Registration Statement is not declared effective on or prior to the date that is 120 days after the Filing Date (the “Required Effectiveness Date”), in which case the Company shall pay to Purchaser an amount in cash equal to: (A) for the first 30 days after such 120th day, one and one-half percent (1.5%) of the aggregate purchase price paid by Purchaser (the purchase price paid by Purchaser being equal to $7,000,000), on a pro-rata basis over a 30-day period; and (B) for each successive 30-day period thereafter until the Registration Statement is deemed effective, one and one-half percent (1.5%) of the aggregate purchase price paid by Purchaser, on a pro rata basis over a 30-day period, at the end of each 30-day period.

 

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The payment obligations of the Company under this Section 2(d) shall be cumulative and shall in no event exceed, in the aggregate, $1,400.000.

(3) Registration Procedures. In connection with the Company’s registration obligations hereunder, the Company shall:

(a) (i) prepare and file with the SEC such amendments, including post-effective amendments, to the Registration Statement as may be necessary to keep the Registration Statement continuously effective as to the Registrable Securities for the Effectiveness Period; (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424; and (iii) respond as promptly as reasonably possible to any comments received from the SEC with respect to the Registration Statement or any amendment thereto and as promptly as reasonably possible provide the Placement Agent true and complete copies of all correspondence from and to the SEC relating to the Registration Statement.

(b) Notify the Purchaser as promptly as reasonably possible, and (if requested by the Purchaser) confirm such notice in writing no later than five (5) trading days thereafter, of any of the following events: (i) the SEC notifies the Company whether there will be a “review” of the Registration Statement; (ii) the SEC comments in writing on the Registration Statement (in which case the Company shall deliver to the Placement Agent a copy of such comments and of all written responses thereto); (iii) the SEC or any other Federal or state governmental authority in writing requests any amendment or supplement to the Registration Statement or Prospectus or requests additional information related thereto; (iv) if the SEC issues any stop order suspending the effectiveness of the Registration Statement or initiates any action, claim, suit, investigation or proceeding (a “Proceeding”) for that purpose; (v) the Company receives notice in writing of any suspension of the qualification or exemption from qualification of any Registrable Securities for sale in any jurisdiction, or the initiation or threat of any Proceeding for such purpose; or (vi) the financial statements included in the Registration Statement become ineligible for inclusion therein or any statement made in the Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference is untrue in any material respect or any revision to the Registration Statement, Prospectus or other document is required so that it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

(c) Use commercially reasonable efforts to avoid the issuance of or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of the Registration Statement or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment.

(d) Promptly deliver to Purchaser, without charge, such reasonable number of copies of the Prospectus or Prospectuses (including each form of prospectus)

 

4


and each amendment or supplement thereto as Purchaser may reasonably request. The Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by Purchaser in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto.

(e) (i) In the time and manner required by NASDAQ, prepare and file with NASDAQ an additional shares listing application covering all of the Registrable Securities and a notification form regarding the change in the number of the Company’s outstanding Shares; (ii) use commercially reasonable efforts, regardless of listing or similar costs, to take all steps necessary to cause such Registrable Securities to be approved for listing on NASDAQ as soon as possible thereafter; (iii) provide to Purchaser notice of such listing; and (iv) use commercially reasonable efforts, regardless of listing or similar costs, to maintain the listing of such Registrable Securities on NASDAQ.

(f) Prior to any public offering of Registrable Securities, use its commercially reasonable efforts to register or qualify or cooperate with the Purchaser in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or “blue sky” laws of such jurisdictions within the United States as Purchaser requests in writing, to keep each such registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by a Registration Statement; provided, however, that the Company shall not be required for any such purpose to (i) qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not be otherwise required to qualify but for the requirements of this Paragraph (3)(f), or (ii) subject itself to taxation.

(g) Upon the occurrence of any event described in Paragraph (3)(b)(vi) above, as promptly as reasonably possible, prepare a supplement or amendment, including a post-effective amendment, to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither the Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the Company may suspend sales pursuant to the Registration Statement for a period of up to sixty (60) days (unless the holders of at least two-thirds of the Registrable Securities consent in writing to a longer delay of up to an additional thirty (30) days) no more than once in any twelve-month period if the Company furnishes to the holders of the Registrable Securities a certificate signed by the Company’s Chief Executive Officer stating that in the good faith judgment of the Company’s Board of Directors, (i) the offering could reasonably be expected to interfere in any material respect with any acquisition, corporate reorganization or other material transaction under consideration by the Company or (ii) there is some other material development relating to the operations or condition (financial or other) of the Company

 

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that has not been disclosed to the general public and as to which it is in the Company’s best interests not to disclose such development; provided further, however, that the Company may not so suspend sales more than once in any calendar year without the written consent of the holders of at least two-thirds of the Registrable Securities.

(h) Comply with all applicable rules and regulations of the SEC and NASDAQ in all material respects.

(4) Registration Expenses. The Company shall pay (or reimburse the Purchaser for) all fees and expenses incident to the performance of or compliance with this Agreement by the Company, including without limitation (a) all registration and filing fees and expenses, including without limitation those related to filings with the SEC, NASDAQ and in connection with applicable state securities or “Blue Sky” laws, (b) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities and of printing copies of Prospectuses reasonably requested by the Purchaser), (c) messenger, telephone and delivery expenses, (d) fees and disbursements of counsel for the Company and fees and disbursements up to an aggregate of $5,000 of counsel for Purchaser, and (e) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement. Notwithstanding the foregoing, Purchaser shall pay any and all costs, fees, discounts or commissions attributable to the sale of its respective Registrable Securities.

(5) Indemnification.

(a) Indemnification by the Company. The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless Purchaser, its officers and directors, partners, members, agents, brokers and employees of each of them, each Person who controls Purchaser (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, partners, members, agents and employees of each such controlling Person, and each underwriter of Registrable Securities, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, settlement costs and expenses, including without limitation costs of preparation and reasonable attorneys’ fees (collectively, “Losses”), as incurred, arising out of or relating to any untrue or alleged untrue statement of a material fact contained in the Registration Statement, any Prospectus or form of prospectus or in any amendment or supplement thereto, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading, except to the extent, but only to the extent, that (i) such untrue statements or omissions are based upon information regarding Purchaser furnished in writing to the Company by such Purchaser expressly for use therein, or to the extent that such information related to Purchaser or such Purchaser’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by Purchaser expressly for use in the Registration Statement, such Prospectus or such form of Prospectus or in any amendment or supplement thereto (which shall, however, be deemed to include disclosure substantially in accordance with the “Plan of Distribution” attached

 

6


hereto), or (ii) in the case of an occurrence of an event of the type specified in Paragraph (3)(b) above, the use by Purchaser of an outdated or defective Prospectus after the Company has notified Purchaser in writing that the Prospectus is outdated or defective and prior to the receipt by Purchaser of the Advice contemplated in Paragraph (6) below. The Company shall notify the Purchaser promptly of the institution, threat or assertion of any Proceeding of which the Company is aware in connection with the transactions contemplated by this Agreement.

(b) Indemnification by Purchaser. Purchaser shall indemnify and hold harmless the Company, its directors, officers, agents and employees, and each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses (as determined by a court of competent jurisdiction in a final judgment not subject to appeal or review) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement, any Prospectus, or any form of prospectus or in any amendment or supplement thereto, or arising out of or based upon any omission of a material fact required to be stated therein or necessary to make the statements therein not misleading to the extent, but only to the extent, that such untrue statement or omission is contained in any information furnished in writing by Purchaser to the Company specifically for inclusion in such Registration Statement or Prospectus or to the extent that (i) such untrue statements or omissions are based upon information regarding Purchaser furnished in writing to the Company by Purchaser expressly for use therein, or to the extent that such information related to Purchaser or Purchaser’s proposed method of distribution of Registrable Securities and was reviewed and expressly approved in writing by Purchaser expressly for use in the Registration Statement, such Prospectus or such form of Prospectus or in any amendment or supplement thereto (which shall, however, be deemed to include disclosure substantially in accordance with the “Plan of Distribution” attached hereto), or (ii) in the case of an occurrence of an event of the type specified in Paragraph (3)(b) above, the use by Purchaser of an outdated or defective Prospectus after the Company has notified Purchaser in writing that the Prospectus is outdated or defective and prior to the receipt by Purchaser of the Advice contemplated in Paragraph (6) below. In no event shall the liability of Purchaser hereunder be greater in amount than the dollar amount of the net proceeds received by Purchaser upon the sale of the Registrable Securities giving rise to such indemnification obligation.

(c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof, provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that such failure shall have prejudiced the Indemnifying Party. An Indemnified Party shall have the right to employ

 

7


separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed in writing to pay such fees and expenses; or (ii) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (iii) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and such counsel shall be at the expense of the Indemnifying Party; provided, however, that in the event that the Indemnifying Party shall be required to pay the fees and expenses of separate counsel, the Indemnifying Party shall only be required to pay the fees and expenses of one separate counsel for such Indemnified Party or Parties. The Indemnifying Party shall not be liable for any settlement of any such Proceeding affected without its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding. All fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten trading days of written notice thereof to the Indemnifying Party (regardless of whether it is ultimately determined that an Indemnified Party is not entitled to indemnification hereunder; provided, that the Indemnifying Party may require such Indemnified Party to undertake to reimburse all such fees and expenses to the extent it is finally judicially determined that such Indemnified Party is not entitled to indemnification hereunder).

(d) Contribution. If a claim for indemnification under Paragraph (5)(a) or (b) is unavailable to an Indemnified Party (by reason of public policy or otherwise), then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or related to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in Paragraph (5)(c), any

 

8


reasonable attorneys’ or other reasonable fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Paragraph 5(d) was available to such party in accordance with its terms.

The parties hereto agree that it would not be just and equitable if contribution pursuant to this Paragraph (5)(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provision of this Paragraph (5)(d), no Purchaser shall be required to contribute, in the aggregate, any amount in excess of the amount by which the proceeds actually received by such Purchaser from the sale of the Registrable Securities subject to the Proceeding exceeds the amount of any damages that such Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.

(6) Dispositions. Purchaser agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it in connection with sales of Registrable Securities pursuant to the Registration Statement. Purchaser further agrees that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in Paragraphs (3)(b), Purchaser will discontinue disposition of such Registrable Securities under the Registration Statement until Purchaser’s receipt of the copies of the supplemented Prospectus and/or amended Registration Statement contemplated by Paragraph (3)(g), or until it is advised in writing (the “Advice”) by the Company that the use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus or Registration Statement. The Company may provide appropriate stop orders to enforce the provisions of this paragraph.

(7) No Piggy-Back on Registrations. Neither the Company nor any of its security holders may include securities of the Company in the Registration Statement other than the Registrable Securities, and the Company shall not after the date hereof enter into any agreement providing any such right with respect to the Registration Statement to any of its security holders.

(8) Piggy-Back Registrations. If at any time during the Effectiveness Period, other than any suspension period referred to in Paragraph (3)(g), there is not an effective Registration Statement covering all of the Registrable Securities and the Company shall determine to prepare and file with the SEC a registration statement relating to an offering for its own account or the account of others under the Securities Act of any of its equity

 

9


securities, other than (i) on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans, or on any other form that does not permit secondary sales, or (ii) under any registration filed on behalf of Laurus Master Fund, Ltd. or its successors or assigns, then the Company shall send to Purchaser written notice of such determination and if, within fifteen (15) days after receipt of such notice, Purchaser shall so request in writing, the Company shall include in such registration statement all or any part of such Registrable Securities not already covered by an effective Registration Statement such Purchaser requests to be registered. If the managing underwriter advises the Company that marketing considerations require a limitation on the number of shares offered pursuant to any registration statement, then any limitation on the sale of shares shall be imposed pro rata among all stockholders who are entitled to include shares in such registration statement according to the number of shares requested to be included in such registration statement, provided that shares to be included that do not have contractual registration rights shall be first excluded.

(9) Rule 144. For a period of two years following the date hereof, the Company agrees with each holder of Registrable Securities to:

(a) use its best efforts to comply with the requirements of Rule 144(c) under the Securities Act with respect to current public information about the Company;

(b) use its best efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time it is subject to such reporting requirements); and

(c) furnish to any holder of Registrable Securities upon request (i) a written statement by the Company as to its compliance with the requirements of said Rule 144(c) and the reporting requirements of the Securities Act and the Exchange Act (at any time it is subject to such reporting requirements), (ii) a copy of the most recent annual or quarterly report of the Company, and (iii) such other reports and documents of the Company as such holder may reasonably request to avail itself of any similar rule or regulation of the SEC allowing it to sell any such securities without registration.

(10) Miscellaneous.

(a) Governing Law. This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York, without giving effect to principles of conflicts of law or choice of law that would cause the laws of any other jurisdiction to apply.

(b) Amendment and Waiver. Any provision of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only upon the written consent of both the Company and Purchaser.

 

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(c) Entire Agreement. This Agreement constitutes the entire agreement between the parties relative to the specific subject matter hereof. Any previous agreement among the parties relative to the specific subject matter hereof is superseded by this Agreement.

(d) Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified; (b) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day; (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (d) the next business day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the Company at the address or facsimile number set forth on Schedule A hereof and to Purchaser at the address or facsimile number set forth on Schedule A attached hereto or at such other address as the Company or Purchaser may designate by ten (10) days’ advance written notice to the other parties hereto.

(e) Severability. In the event one or more of the provisions of this Agreement should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

(f) Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one (1) and the same instrument.

(g) Successors and Assigns. The provisions hereof shall inure to the benefit of, and be binding upon, the successors and assigns of the parties hereto.

(h) Specific Performance. The parties hereto hereby declare that it is impossible to measure in money the damages that will accrue to a party hereto, or to their heirs, personal representatives, successors or assigns, by reason of a failure to perform any of the obligations under this Agreement and agree that the terms of this Agreement shall be specifically enforceable. If any party hereto, or his heirs, personal representatives, or successors or assigns, institutes any action or proceeding to specifically enforce the provisions hereof, any person against whom such action or proceeding is brought hereby waives the claim or defense therein that such party or such personal representative has an adequate remedy at law, and such person shall not offer in any such action or proceeding the claim or defense that such remedy at law exists.

(i) Titles and Subtitles. The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first set forth above.

 

COMPANY:

BIODELIVERY SCIENCES INTERNATIONAL, INC.

By:

 

/s/  Mark A. Sirgo

Name:

  Mark A. Sirgo

Title:

  President and CEO
PURCHASER:
CDC IV, LLC

By:

 

/s/  Jan Leschly

Name:

  Jan Leschly

Title:

 

 

SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT


SCHEDULE A

NOTICES

If to the Company:

BioDelivery Sciences International, Inc.

2501 Aerial Center Parkway, Suite 205

Morrisville, NC 27560

Facsimile: 919-653-5161

Attention: Mark A. Sirgo, Pharm.D.

with a copy to:

Wyrick Robbins Yates & Ponton LLP

4101 Lake Boone Trail

Suite 300

Raleigh, NC 27607

Attention: Larry E. Robbins

If to the Purchaser:

CDC IV LLC

[47 Hulfish Street, Suite 310

Princeton, NJ 08542

Facsimile: 609-683-5787

Attention: Chief Financial Officer, and David R. Ramsay]

with a copy to:

Morgan, Lewis & Bockius LLP

502 Carnegie Center

Princeton, NJ 08540

Facsimile: 609.919.6701

Attention: Denis Segota, Esq.


Exhibit A

Plan of Distribution

The Selling Stockholders and any of their pledges, assignees, donees selling shares received from such Selling Stockholders as a gift, and successors-in-interest may, from time to time, sell any or all of their shares of Common Stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. The Selling Stockholders may use any one or more of the following methods when selling shares:

 

•      ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

 

•      block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

 

•      purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

 

•      an exchange distribution in accordance with the rules of the applicable exchange;

 

•      privately negotiated transactions;

 

•      broker-dealers may agree with the Selling Stockholders to sell a specified number of such shares at a stipulated price per share;

 

•      a combination of any such methods of sale; and

 

•      any other method permitted pursuant to applicable law.

The Selling Stockholders may also sell shares under Rule 144 under the Securities Act of 1933, as amended, if available, rather than under this prospectus.

Broker-dealers engaged by the Selling Stockholders may arrange for other broker-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The Selling Stockholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved.

The Selling Stockholders who are registered broker-dealers are deemed to be “underwriters” within the meaning of the Securities Act. In addition, Selling Stockholders who are affiliates of registered broker-dealers may be deemed to be “underwriters” within the meaning of the Securities Act if such Selling Stockholder (i) did not acquire the shares of Common Stock in the ordinary course of business or (ii) had any agreement or understanding, directly or indirectly, with any person to distribute the shares of Common Stock. In such event,


any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act, and such Selling Stockholders may be subject to certain additional regulations and statutory liabilities under the Securities Act and Exchange Act. To our knowledge and based upon information we received from the Selling Stockholders, (i) each Selling Stockholder that is a registered broker-dealer or affiliated with a registered broker-dealer acquired the shares of Common Stock in the ordinary course of business, (ii) such Selling Stockholder did not have any agreement or understanding, directly or indirectly, with any person to distribute the shares of common stock, and (iii) no such Selling Stockholder received any securities as underwriting compensation. We are also not aware of any underwriting plan or agreement, underwriters’ or dealers’ compensation, or passive market making or stabilizing transactions involving the purchase or distribution of these securities

The Company is required to pay all fees and expenses incident to the registration of the shares, including certain fees and disbursements of counsel to the Selling Stockholders. The Company has agreed to indemnify the Selling Stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.

To the extent required, the Company will amend or supplement this prospectus to disclose material arrangements regarding the plan of distribution.

To comply with the securities laws of certain jurisdictions, registered or licensed brokers or dealers may need to offer or sell the shares offered by this prospectus. The applicable rules and regulations under the Securities Exchange Act of 1934, as amended, may limit any person engaged in a distribution of the shares of common stock covered by this prospectus in its ability to engage in market activities with respect to such shares. A selling stockholder, for example, will be subject to applicable provisions of the Exchange Act and the rules and regulations under it, which provisions may limit the timing of purchases and sales of any shares of common stock by that selling stockholder.

 

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EX-99.(C) 4 dex99c.htm WARRANT, DATED MAY 16, 2006 Warrant, dated May 16, 2006

Exhibit C

WARRANT

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), APPLICABLE STATE SECURITIES LAWS, OR APPLICABLE LAWS OF ANY FOREIGN JURISDICTION. The securities represented hereby may not be transferred unless (i) such securities have been registered for sale pursuant to the Securities Act of 1933, as amended, (ii) such securities may be sold pursuant to Rule 144(k), or (iii) the company has received an opinion of counsel reasonably satisfactory to it that such transfer may lawfully be made without registration under the Securities Act of 1933 or qualification under applicable state securities laws.

THIS WARRANT SHALL BE VOID AFTER THE EARLIER OF (I) 5:00 P.M. EASTERN TIME ON NOVEMBER 16, 2011 (the “EXPIRATION DATE”), (II) THE CLOSING OF THE COMPANY’S SALE OF ALL OR SUBSTANTIALLY ALL OF ITS ASSETS OR THE ACQUISITION OF THE COMPANY BY ANOTHER ENTITY BY MEANS OF MERGER OR OTHER TRANSACTION AS A RESULT OF WHICH STOCKHOLDERS OF THE COMPANY IMMEDIATELY PRIOR TO SUCH ACQUISITION POSSESS A MINORITY OF THE VOTING POWER OF THE ACQUIRING ENTITY IMMEDIATELY FOLLOWING SUCH ACQUISITION (AN “ACQUISITION”) OR (III) ANY LIQUIDATION OR WINDING UP OF THE COMPANY (A “LIQUIDATION”).

BIODELIVERY SCIENCES INTERNATIONAL, INC.

WARRANT TO PURCHASE UP TO 904,000 SHARES OF

COMMON STOCK, PAR VALUE $0.001 PER SHARE

(subject to adjustment as set forth herein)

For VALUE RECEIVED, CDC IV, LLC (“Warrantholder”), is entitled to purchase, subject to the provisions of this Warrant, from BioDelivery Sciences International, Inc., a Delaware corporation (“Company”), at any time and from time to time on or after the six month anniversary of the date of issuance of this Warrant not later than 5:00 P.M., Eastern time, on the Expiration Date (as defined above), at an exercise price per share equal to $3.00 (the exercise price in effect being herein called the “Warrant Price”), up to 904,000 shares (“Warrant Shares”) of the Company’s Common Stock, par value $0.001 per share (“Common Stock”). The number of Warrant Shares purchasable upon exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time as described herein. Capitalized terms not otherwise defined herein shall have the meaning set forth in the Clinical Development and License Agreement, dated as of July 14, 2005, by and among the Company, Arius Pharmaceuticals, Inc., a wholly-owned subsidiary of the Company (“Arius”) and Purchaser, an assignee of Clinical Development Capital LLC as amended from time to time (the “License Agreement”).


Section 1. Registration. The Company shall maintain books for the transfer and registration of the Warrant. Upon the initial issuance of this Warrant, the Company shall issue and register the Warrant in the name of the Warrantholder.

Section 2. Transfers. As provided herein, this Warrant may be transferred only pursuant to a registration statement filed under the Securities Act of 1933, as amended (the “Securities Act”), or an exemption from such registration. Subject to such restrictions, the Company shall transfer this Warrant from time to time upon the books to be maintained by the Company for that purpose, upon surrender thereof for transfer properly endorsed or accompanied by appropriate instructions for transfer and such other documents as may be reasonably required by the Company, including, if required by the Company, an opinion of its counsel to the effect that such transfer is exempt from the registration requirements of the Securities Act, to establish that such transfer is being made in accordance with the terms hereof, and a new Warrant shall be issued to the transferee and the surrendered Warrant shall be canceled by the Company.

Section 3. Exercise.

(a) Exercise for Cash. The Warrantholder may, at its option, elect to exercise this Warrant, in whole or in part and at any time or from time to time, by surrendering this Warrant, with the purchase form appended hereto as Appendix A duly executed by or on behalf of the Warrantholder, at the principal office of the Company, or at such other office or agency as the Company may designate, accompanied by payment in full, in lawful money of the United States, of the Warrant Price payable in respect of the number of Warrant Shares purchased upon such exercise. A facsimile signature of the Warrantholder on the purchase form shall be sufficient for purposes of exercising this Warrant, provided that the Company receives the Warrantholder’s original signature within three (3) business days thereafter.

(b) Cashless Exercise.

(i) The Warrantholder may, at any time prior to the date of effectiveness of a registration statement covering the resale of the Warrant Shares, at its option, elect to exercise this Warrant, in whole or in part, on a cashless basis, by surrendering this Warrant, with the purchase form appended hereto as Appendix A duly executed by or on behalf of the Warrantholder, at the principal office of the Company, or at such other office or agency as the Company may designate, by canceling a portion of this Warrant in payment of the Warrant Price payable in respect of the number of Warrant Shares purchased upon such exercise. In the event of an exercise pursuant to this subsection 3(b), the number of Warrant Shares issued to the Warrantholder shall be determined according to the following formula:

 

X = Y(A-B)     

A    

    
Where: X =      number of Warrant Shares that shall be issued to the Warrantholder;
Y =      the number of Warrant Shares for which this Warrant is being exercised (which shall include both the number of Warrant Shares


     issued to the Warrantholder and the number of Warrant Shares subject to the portion of the Warrant being cancelled in payment of the Warrant Price);
A =      the Fair Market Value (as defined below) of one share of Common Stock; and
B =      the Warrant Price then in effect.

(ii) The Fair Market Value per share of Common Stock shall be determined as follows:

(1) If the Common Stock is listed on a national securities exchange, the Nasdaq National Market or another nationally recognized trading system as of the exercise date, the Fair Market Value per share of Common Stock shall be deemed to be the average of the high and low reported sale prices per share of Common Stock thereon on the trading day immediately preceding the exercise date (provided that if no such price is reported on such day, the Fair Market Value per share of Common Stock shall be determined pursuant to clause (2) below).

(2) If the Common Stock is not listed on a national securities exchange, the Nasdaq National Market or another nationally recognized trading system as of the exercise date, the Fair Market Value per share of Common Stock shall be deemed to be the amount most recently determined by the Board of Directors of the Company (the “Board”) to represent the fair market value per share of the Common Stock (including without limitation a determination for purposes of granting Common Stock options or issuing Common Stock under any plan, agreement or arrangement with employees of the Company); and, upon request of the Warrantholder, the Board (or a representative thereof) shall, as promptly as reasonably practicable but in any event not later than 10 days after such request, notify the Warrantholder of the Fair Market Value per share of Common Stock and furnish the Warrantholder with reasonable documentation of the Board’s determination of such Fair Market Value. Notwithstanding the foregoing, if the Board has not made such a determination within the three-month period prior to the exercise date, then (A) the Board shall make, and shall provide or cause to be provided to the Warrantholder notice of, a determination of the Fair Market Value per share of the Common Stock within 15 days of a request by the Warrantholder that it do so, and (B) the exercise of this Warrant pursuant to this subsection 1(b) shall be delayed until such determination is made and notice thereof is provided to the Warrantholder.

Section 4. Compliance with the Securities Act of 1933. Subject to the provisions of the Securities Purchase Agreement, dated as of May 16, 2006, by and between the Company and Purchaser named therein (the “Securities Purchase Agreement”), the Company may cause the legend set forth on the first page of this Warrant to be set forth on each Warrant or similar legend on any security issued or issuable upon exercise of this Warrant, unless counsel for the Company is of the opinion as to any such security that such legend is unnecessary.

Section 5. Payment of Taxes. The Company will pay any documentary stamp taxes attributable to the initial issuance of Warrant Shares issuable upon the exercise of the Warrant; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificates for Warrant Shares in a name other than that of the Warrantholder in respect of which such shares


are issued, and in such case, the Company shall not be required to issue or deliver any certificate for Warrant Shares or any Warrant until the person requesting the same has paid to the Company the amount of such tax or has established to the Company’s reasonable satisfaction that such tax has been paid.

Section 6. Mutilated or Missing Warrants. In case this Warrant shall be mutilated, lost, stolen, or destroyed, the Company shall issue in exchange and substitution of and upon cancellation of the mutilated Warrant, or in lieu of and substitution for the Warrant lost, stolen or destroyed, a new Warrant of like tenor and for the purchase of a like number of Warrant Shares, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction of the Warrant, and with respect to a lost, stolen or destroyed Warrant, reasonable indemnity or bond with respect thereto, if requested by the Company.

Section 7. Reservation of Common Stock. The Company hereby represents and warrants that there have been reserved, and the Company shall at all applicable times keep reserved until issued (if necessary) as contemplated by this Section 7, out of the authorized and unissued shares of Common Stock, sufficient shares to provide for the exercise of the rights of purchase represented by this Warrant. The Company agrees that all Warrant Shares issued upon due exercise of the Warrant shall be, at the time of delivery of the certificates for such Warrant Shares, duly authorized, validly issued, fully paid and non-assessable shares of Common Stock of the Company.

Section 8. Adjustments. Subject and pursuant to the provisions of this Section 8, the Warrant Price and number of Warrant Shares subject to this Warrant shall be subject to adjustment from time to time as set forth hereinafter.

(a) If the Company shall, at any time or from time to time while this Warrant is outstanding, pay a dividend or make a distribution on its Common Stock in shares of Common Stock, subdivide its outstanding shares of Common Stock into a greater number of shares or combine its outstanding shares of Common Stock into a smaller number of shares or issue by reclassification of its outstanding shares of Common Stock any shares of its capital stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then the number of Warrant Shares purchasable upon exercise of the Warrant and the Warrant Price in effect immediately prior to the date upon which such change shall become effective, shall be adjusted by the Company so that the Warrantholder thereafter exercising the Warrant shall be entitled to receive the number of shares of Common Stock or other capital stock which the Warrantholder would have received if the Warrant had been exercised immediately prior to such event upon payment of a Warrant Price that has been adjusted to reflect a fair allocation of the economics of such event to the Warrantholder. Such adjustments shall be made successively whenever any event listed above shall occur.

(b) If any capital reorganization or reclassification of the capital stock of the Company, then, as a condition of such reorganization or reclassification, lawful and adequate provision shall be made whereby each Warrantholder shall thereafter have the right to purchase and receive upon the basis and upon the terms and conditions herein specified and in lieu of the Warrant Shares immediately theretofore issuable upon exercise of the Warrant, such shares of stock, securities or assets as would have been issuable or payable with respect to or in exchange


for a number of Warrant Shares equal to the number of Warrant Shares immediately theretofore issuable upon exercise of the Warrant, had such reorganization or reclassification not taken place, and in any such case appropriate provision shall be made with respect to the rights and interests of each Warrantholder to the end that the provisions hereof (including, without limitation, provision for adjustment of the Warrant Price) shall thereafter be applicable, as nearly equivalent as may be practicable in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise hereof. The provisions of this paragraph (b) shall similarly apply to successive reorganizations or reclassifications.

(c) In case the Company shall fix a payment date for the making of a distribution to all holders of Common Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) of evidences of indebtedness or assets (other than cash dividends or cash distributions payable out of consolidated earnings or earned surplus or dividends or distributions referred to in Section 8(a)), or subscription rights or warrants, the Warrant Price to be in effect after such payment date shall be determined by multiplying the Warrant Price in effect immediately prior to such payment date by a fraction, the numerator of which shall be the total number of shares of Common Stock then outstanding multiplied by the Market Price (as defined below) per share of Common Stock immediately prior to such payment date, less the fair market value (as determined by the Company’s Board of Directors in good faith) of said assets or evidences of indebtedness so distributed, or of such subscription rights or warrants, and the denominator of which shall be the total number of shares of Common Stock outstanding multiplied by such Market Price per share of Common Stock immediately prior to such payment date. “Market Price” as of a particular date (the “Valuation Date”) shall mean the following: (a) if the Common Stock is then listed on a national stock exchange, the closing sale price of one share of Common Stock on such exchange on the last trading day prior to the Valuation Date; (b) if the Common Stock is then quoted on The Nasdaq Stock Market, Inc. (“Nasdaq”), the National Association of Securities Dealers, Inc. OTC Bulletin Board (the “Bulletin Board”) or such similar exchange or association, the closing sale price of one share of Common Stock on Nasdaq, the Bulletin Board or such other exchange or association on the last trading day prior to the Valuation Date or, if no such closing sale price is available, the average of the high bid and the low asked price quoted thereon on the last trading day prior to the Valuation Date; or (c) if the Common Stock is not then listed on a national stock exchange or quoted on Nasdaq, the Bulletin Board or such other exchange or association, the fair market value of one share of Common Stock as of the Valuation Date, shall be reasonably determined in good faith by the Board of Directors of the Company and the Warrantholder.

(d) An adjustment to the Warrant Price shall become effective immediately after the payment date in the case of each dividend or distribution and immediately after the effective date of each other event which requires an adjustment.

(e) In the event that, as a result of an adjustment made pursuant to this Section 8, the Warrantholder shall become entitled to receive any shares of capital stock of the Company other than shares of Common Stock, the number of such other shares so receivable upon exercise of this Warrant shall be subject thereafter to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Warrant Shares contained in this Warrant.


(f) On or prior to the 90th day following the date of approval of the NDA by the FDA, except as provided in subsection (g) hereof, if and whenever the Company shall issue or sell, or is, in accordance with any of subsections (f)(l) through (f)(7) hereof, deemed to have issued or sold, any Additional Shares of Common Stock for no consideration or for a consideration per share less than the Warrant Price in effect immediately prior to the time of such issue or sale, then and in each such case (a “Trigger Issuance”) the then-existing Warrant Price, shall be reduced, as of the close of business on the effective date of the Trigger Issuance, to a price equal to the lowest price per share of Common Stock received or deemed to be received by the Company upon such Trigger Issuance; provided, however, that in no event shall the Warrant Price after giving effect to such Trigger Issuance be greater than the Warrant Price in effect prior to such Trigger Issuance. For purposes of this subsection (f), “Additional Shares of Common Stock” shall mean all shares of Common Stock issued by the Company or deemed to be issued pursuant to this subsection (f), other than Excluded Issuances (as defined in subsection (g) hereof). For purposes of clarity, in the event that one or more issuances (including the issuance of any warrants or other rights to subscribe for or to purchase, or any options for the purchase of, Common Stock or any stock or security convertible into or exchangeable for Common Stock), or deemed issuances, of Additional Shares of Common Stock occur in connection with a single transaction or series of related transactions at different prices, then the Warrant Price shall be reduced to the lowest price per share of Common Stock issued or deemed issued in such transaction or transactions.

For purposes of this subsection (f), the following subsections (f)(l) to (f)(7) shall also be applicable:

(f)(1) Issuance of Rights or Options. Except for transactions in which Options (as defined below) are issued in connection with the issuance and sale of other securities by the Company, together comprising one integral transaction, as provided for in subsection (f)(5) below, if at any time the Company shall in any manner grant (directly and not by assumption in a merger or otherwise) any warrants or other rights to subscribe for or to purchase, or any options for the purchase of, Common Stock or any stock or security convertible into or exchangeable for Common Stock (such warrants, rights or options being called “Options” and such convertible or exchangeable stock or securities being called “Convertible Securities”) whether or not such Options or the right to convert or exchange any such Convertible Securities are immediately exercisable, and the sum of (i) the price per share for which Common Stock is issuable upon the exercise of such Options or upon the conversion or exchange of such Convertible Securities (the “Exercise Consideration”), plus (ii) the consideration for granting of such Options (the “Grant Consideration”; together with Exercise Consideration, the “Option Consideration”) shall be less than the Warrant Price in effect immediately prior to the time of the granting of such Options, then the shares of Common Stock issuable upon the exercise of such Options or upon conversion or exchange of the total amount of such Convertible Securities issuable upon the exercise of such Options shall be deemed to have been issued for the Option Consideration per share as of the date of granting of such Options or the issuance of such Convertible Securities, and thereafter shall be deemed to be outstanding for purposes of adjusting the Warrant Price. If there is no cash consideration allocated to the Grant Consideration or if the Grant Consideration is below fair market value, then the fair market value of the Option Consideration shall be determined in good faith by the Board of Directors of the Company and the Warrantholder and the difference between the fair market value as determined and the Grant


Consideration shall be reduced from the Option Consideration for purposes of determining adjustment to the Warrant price under this subsection (f)(1). Except as otherwise provided in subsection 8(f)(3), no adjustment of the Warrant Price shall be made upon the actual issue of such Common Stock or of such Convertible Securities upon exercise of such Options or upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities. In the event that the Board of Directors of the Company and the Warrantholder are unable to agree upon the fair market value of the Options and/or Convertible Security, the Company and the Warrantholder shall jointly select an appraiser, who is experienced in such matters. The decision of such appraiser shall be final and conclusive, and the cost of such appraiser shall be borne evenly by the Company and the Warrantholder.

(f)(2) Issuance of Convertible Securities. Except for transactions in which Convertible Securities are issued in connection with the issuance and sale of other securities by the Company, together comprising one integral transaction, as provided for in subsection (f)(5) below, if the Company shall in any manner issue (directly and not by assumption in a merger or otherwise) or sell any Convertible Securities, whether or not the rights to exchange or convert any such Convertible Securities are immediately exercisable, and the sum of (i) the price per share for which Common Stock is issuable upon such conversion or exchange (the “Conversion Consideration”), plus (ii) the consideration for the granting of such Convertible Securities (the “Granting Consideration”; together with the Conversion Consideration, the “Convertible Securities Consideration”) shall be less than the Warrant Price in effect immediately prior to the time of such issue or sale, then the shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities shall be deemed to have been issued for the Convertible Securities Consideration per share as of the date of the issue or sale of such Convertible Securities, and thereafter shall be deemed to be outstanding for purposes of adjusting the Warrant Price, provided that (a) except as otherwise provided in subsection 8(f)(3), no adjustment of the Warrant Price shall be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities and (b) no further adjustment of the Warrant Price shall be made by reason of the issue or sale of Convertible Securities upon exercise of any Options to purchase any such Convertible Securities for which adjustments of the Warrant Price have been made pursuant to the other provisions of subsection 8(f). If there is no cash consideration allocated to the Granting Consideration or if the Granting Consideration is below fair market value, then the fair market value of the Convertible Securities Consideration shall be determined in good faith by the Board of Directors of the Company and the Warrantholder and the difference between the fair market value as determined and the Granting Consideration shall be reduced from the Convertible Securities Consideration for purposes of determining adjustment to the Warrant price under this subsection (f)(2). In the event that the Board of Directors of the Company and the Warrantholder are unable to agree upon the fair market value of the Options and/or Convertible Security, the Company and the Warrantholder shall jointly select an appraiser, who is experienced in such matters. The decision of such appraiser shall be final and conclusive, and the cost of such appraiser shall be borne evenly by the Company and the Warrantholder.

(f)(3) Change in Option Price or Conversion Rate. Upon the happening of any of the following events, namely, if the purchase price provided for in any Option referred to in subsection 8(f)(l) hereof, or 8(f)(2), or the rate at which Convertible Securities referred to in subsections 8(f)(l) or 8(f)(2) are convertible into or exchangeable for Common Stock shall


change at any time (including, but not limited to, changes under or by reason of provisions designed to protect against dilution), the Warrant Price in effect at the time of such event shall forthwith be readjusted to the Warrant Price which would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed purchase price or conversion rate, as the case may be, at the time initially granted, issued or sold. On the termination of any Option for which any adjustment was made pursuant to this subsection 8(f) or any right to convert or exchange Convertible Securities for which any adjustment was made pursuant to this subsection 8(f) (including without limitation upon the redemption or purchase for consideration of such Convertible Securities by the Company), the Warrant Price then in effect hereunder shall forthwith be changed to the Warrant Price which would have been in effect at the time of such termination had such Option or Convertible Securities, to the extent outstanding immediately prior to such termination, never been issued.

(f)(4) Consideration for Stock. In case any shares of Common Stock, Options or Convertible Securities shall be issued or sold for cash, the consideration received therefor shall be deemed to be the net amount received by the Company therefor, after deduction therefrom of any expenses incurred or any underwriting commissions or concessions paid or allowed by the Company in connection therewith. In case any shares of Common Stock, Options or Convertible Securities shall be issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Company shall be deemed to be the fair value of such consideration as determined in good faith by the Board of Directors of the Company and the Warrantholder, after deduction of any expenses incurred or any underwriting commissions or concessions paid or allowed by the Company in connection therewith. In case any Options and/or Convertible Securities shall be issued in connection with the issue and sale of other securities of the Company, together comprising one integral transaction in which no specific consideration is allocated to such Options and/or Convertible Securities by the parties thereto, then the price per share of the Additional Shares of Common Stock shall be deemed to be equal to the following: the quotient of (a) the net amount of the consideration received by the Company for all securities (excluding the exercise price or value of any Option and/or Convertible Security), divided by (b) the total number of shares of Common Stock, plus 50% of the shares of Common Stock issuable upon exercise or conversion of the Options and/or Convertible Securities so issued. The Board of Directors of the Company shall respond promptly, in writing, to an inquiry by the Warrantholder as to the fair market value of the Options and/or Convertible Securities. In the event that the Board of Directors of the Company and the Warrantholder are unable to agree upon the fair market value of any non-cash consideration paid for the Options and/or Convertible Securities, the Company and the Warrantholder shall jointly select an appraiser, who is experienced in such matters. The decision of such appraiser shall be final and conclusive, and the cost of such appraiser shall be borne evenly by the Company and the Warrantholder.

(f)(5) Record Date. In case the Company shall take a record of the holders of its Common Stock for the purpose of entitling them (i) to receive a dividend or other distribution payable in Common Stock, Options or Convertible Securities or (ii) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.


(f)(6) Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company or any of its wholly-owned subsidiaries, and the disposition of any such shares (other than the cancellation or retirement thereof) shall be considered an issue or sale of Common Stock for the purpose of this subsection (f).

(g) Anything herein to the contrary notwithstanding, the Company shall not be required to make any adjustment of the Warrant Price in the case of the issuance of (A) capital stock, Options or Convertible Securities issued to directors, officers, employees or consultants of the Company in connection with their service as directors of the Company, their employment by the Company or their retention as consultants by the Company pursuant to an equity compensation program approved by the Board of Directors of the Company or the compensation committee of the Board of Directors of the Company, (B) shares of Common Stock issued upon the conversion or exercise of Options or Convertible Securities issued prior to the date hereof, (C) shares of Common Stock issued or issuable by reason of a dividend, stock split or other distribution on shares of Common Stock (but only to the extent that such a dividend, split or distribution results in an adjustment in the Warrant Price pursuant to the other provisions of this Warrant), and (D) Shares of Common Stock issued or issuable in connection with licensing arrangements or strategic alliances that are primarily of a non-equity financing nature and are approved by the Company’s Board of Directors; provided that the amount of Common Stock issued shall not exceed in the aggregate 1,500,000 shares (subject to equitable adjustment in the event of any stock dividend, stock split, combination, reorganization, recapitalization or similar event involving a change in the Common stock (excluding the combination of the Common stock effected hereby)) (collectively, “Excluded Issuances”).

Section 9. Fractional Interest. The Company shall not be required to issue fractions of Warrant Shares upon the exercise of this Warrant. If any fractional share of Common Stock would, except for the provisions of the first sentence of this Section 9, be deliverable upon such exercise, the Company, in lieu of delivering such fractional share, shall pay to the exercising Warrantholder an amount in cash equal to the Market Price of such fractional share of Common Stock on the date of exercise.

Section 10. Extension of Expiration Date. If the Company fails to cause any Registration Statement covering Registrable Securities (unless otherwise defined herein, capitalized terms are as defined in the Amended and Restated Registration Rights Agreement dated the date of this Warrant relating to the Warrant Shares (the “Registration Rights Agreement”)) to be declared effective prior to the applicable dates set forth therein, then the Expiration Date of this Warrant shall be extended to a date that is the later of the Expiration Date or six (6) months after the effective date of the Registration Statement.

Section 11. Benefits. Nothing in this Warrant shall be construed to give any person, firm or corporation (other than the Company and the Warrantholder) any legal or equitable right, remedy or claim, it being agreed that this Warrant shall be for the sole and exclusive benefit of the Company and the Warrantholder.

Section 12. Notices to Warrantholder. Upon the happening of (i) any event requiring an adjustment of the Warrant Price or (ii) an acquisition or liquidation, the Company shall


promptly give written notice thereof to the Warrantholder at the address appearing in the records of the Company, provided that any such notice with respect to an acquisition or liquidation shall be given at least fifteen (15) days prior to the closing of such acquisition or liquidation. Any such notice regarding an adjustment of the Warrant Price shall state the adjusted Warrant Price and the adjusted number of Warrant Shares resulting from such event and set forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Failure to give notice to the Warrantholder of any Warrant Price adjustment, or any defect therein, shall not affect the legality or validity of the subject adjustment. In addition, the Company shall promptly give written notice to the Warrantholder as specified above in the event that the Company determines to make a rights offering to its stockholders.

Section 13. Identity of Transfer Agent. The Transfer Agent for the Common Stock is American Stock Transfer & Trust, 40 Wall Street, New York, New York 10005. Upon the appointment of any subsequent transfer agent for the Common Stock or other shares of the Company’s capital stock issuable upon the exercise of the rights of purchase represented by the Warrant, the Company will mail to the Warrantholder a statement setting forth the name and address of such transfer agent.

Section 14. Notices. Unless otherwise provided, any notice required or permitted under this Warrant shall be given in writing and shall be deemed effectively given as hereinafter described (i) if given by personal delivery, then such notice shall be deemed given upon such delivery, (ii) if given by telex or facsimile, then such notice shall be deemed given upon receipt of confirmation of complete transmittal, (iii) if given by mail, then such notice shall be deemed given upon the earlier of (A) receipt of such notice by the recipient or (B) three days after such notice is deposited in first class mail, postage prepaid, and (iv) if given by an internationally recognized overnight air courier, then such notice shall be deemed given one business day after delivery to such carrier. All notices shall be addressed as follows: if to the Warrantholder, at its address as set forth in the Company’s books and records and, if to the Company, at the address as follows, or at such other address as the Warrantholder or the Company may designate by ten days’ advance written notice to the other:

If to the Company:

BioDelivery Sciences International, Inc.

2501 Aerial Center Parkway, Suite 205

Morrisville, NC 27560

Attention: Mark A. Sirgo, Pharm.D.

Fax: (919) 653-5161

With a copy to:

Wyrick Robbins Yates & Ponton LLP

4101 Lake Boone Trail

Suite 300

Raleigh, NC 27607

Attention: Larry E. Robbins

Fax: (919) 781-4865


Section 15. Notice of Sale. The Company acknowledges and agrees that in the event the Company enters into an agreement for the sale of all or substantially all of its assets or the acquisition of the Company by another entity by means of a merger or other transaction, the Company shall provide notice to Warrantholder no later than thirty (30) business days prior to the date of closing of such an agreement.

Section 16. Registration Rights. The initial Warrantholder is entitled to the benefit of certain registration rights with respect to the shares of Common Stock issuable upon the exercise of this Warrant as provided in the Registration Rights Agreement, and any subsequent Warrantholder may be entitled to such rights, provided such subsequent Warrantholder agrees in writing to be bound by the terms of the Registration Rights Agreement.

Section 17. Share Issuance Limitation.

(a) Notwithstanding anything contained herein, the number of shares of Common Stock issued or issuable by the Company.

(i) upon exercise of all or any portion of this Warrant and

(ii) upon exercise of the warrant to purchase Common Stock issued to Warrantholder in July 2005 (the “July 2005 Warrant”),

when added together with the 2 million shares of Common Stock issued to Warrantholder pursuant to the Securities Purchase Agreement (collectively, the “Aggregated Shares”), shall not exceed 19.99% of the outstanding shares of Common Stock as of May 16, 2006 (the “Maximum Common Stock Issuance”), unless the issuance of that number of Aggregated Shares that would result in Warrantholder owning in excess of the Maximum Common Stock Issuance shall first be approved by the Company’s stockholders.

(b) Notwithstanding anything contained herein, the provisions of this Section 17 are irrevocable and may not be waived or modified by Warrantholder or the Company (including, without limitation, any modification providing for an alternative outcome should Company stockholder approval not be obtained).

(c) The Company covenants that it shall provide for a stockholder vote on the approval of Warrantholder’s owning in excess of the Maximum Common Stock Issuance, as described in this Section 17 in the Company’s upcoming Proxy Statement on Schedule 14A and related materials for the Company’s 2006 Annual Meeting of Stockholders, scheduled to take place in July 2006, and each successive meeting, of stockholders, including any special meeting of stockholders, until such approval is received.

Section 18. Successors. All the covenants and provisions hereof by or for the benefit of the Warrantholder shall bind and inure to the benefit of its respective successors and assigns hereunder.

Section 19. Governing Law; Consent to Jurisdiction. This Warrant shall be governed by, and construed in accordance with, the internal laws of the State of New York, without reference to the choice of law provisions thereof.


Section 20. No Rights as Stockholder. Prior to the exercise of this Warrant, the Warrantholder shall not have or exercise any rights as a stockholder of the Company by virtue of its ownership of this Warrant.

Section 21. Amendment; Waiver.. Any term of this Warrant may be amended or waived (including the adjustment provisions included in Section 8 of this Warrant) upon the written consent of the Company and the Warrantholder.

Section 22. Section Headings. The section headings in this Warrant are for the convenience of the Company and the Warrantholder and in no way alter, modify, amend, limit or restrict the provisions hereof.

[Signature Page to follow.]


IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed, as of the 16th day of May, 2006.

 

BIODELIVERY SCIENCES

    INTERNATIONAL, INC.

By:

 

/s/  Mark A. Sirgo

Name:

  Mark A. Sirgo

Title:

  President and CEO

 

SIGNATURE PAGE TO WARRANT


APPENDIX A

[COMPANY NAME].

WARRANT EXERCISE FORM

To [COMPANY NAME]:

The undersigned, pursuant to the provisions set forth in the attached Warrant (No.          ), hereby elects to purchase (check applicable box):

¨                      shares of the Common Stock of [Company Name] covered by such Warrant; or

¨ the maximum number of shares of Common Stock covered by such Warrant pursuant to the cashless exercise procedure set forth in subsection 1(b).

The undersigned herewith makes payment of the full purchase price for such shares at the price per share provided for in such Warrant. Such payment takes the form of (check applicable box or boxes):

¨ $             in lawful money of the United States; and/or

¨ the cancellation of such portion of the attached Warrant as is exercisable for a total of              Warrant Shares (using a Fair Market Value of $             per share for purposes of this calculation) ; and/or

¨ the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 3(b), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 3(b).

 

Signature:

 

 

Address:

 

 

 

 

EX-99.(D) 5 dex99d.htm WARRANT, DATED FEBRUARY 15, 2006 Warrant, dated February 15, 2006

Exhibit D

AMENDED AND RESTATED

WARRANT

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), APPLICABLE STATE SECURITIES LAWS, OR APPLICABLE LAWS OF ANY FOREIGN JURISDICTION. The securities represented hereby may not be transferred unless (i) such securities have been registered for sale pursuant to the Securities Act of 1933, as amended, (ii) such securities may be sold pursuant to Rule 144(k), or (iii) the company has received an opinion of counsel reasonably satisfactory to it that such transfer may lawfully be made without registration under the Securities Act of 1933 or qualification under applicable state securities laws.

THIS WARRANT SHALL BE VOID AFTER THE EARLIER OF (I) 5:00 P.M. EASTERN TIME ON THE SECOND ANNIVERSARY OF THE APPROVAL OF THE FIRST NDA APPROVED BY FDA (the “EXPIRATION DATE”), AS SAID TERMS ARE DEFINED IN THAT CERTAIN CLINICAL DEVELOPMENT AND LICENSE AGREEMENT DATED JULY 14, 2005 (THE “LICENSE AGREEMENT”) BY AND BETWEEN THE WARRANT HOLDER, COMPANY AND ARIUS PHARMACEUTICALS, INC., (II) THE CLOSING OF THE COMPANY’S SALE OF ALL OR SUBSTANTIALLY ALL OF ITS ASSETS OR THE ACQUISITION OF THE COMPANY BY ANOTHER ENTITY BY MEANS OF MERGER OR OTHER TRANSACTION AS A RESULT OF WHICH STOCKHOLDERS OF THE COMPANY IMMEDIATELY PRIOR TO SUCH ACQUISITION POSSESS A MINORITY OF THE VOTING POWER OF THE ACQUIRING ENTITY IMMEDIATELY FOLLOWING SUCH ACQUISITION (AN “ACQUISITION”), OR (III) ANY LIQUIDATION OR WINDING UP OF THE COMPANY (A “LIQUIDATION”).

This Warrant amends and restates the Warrant issued by the Company to CDC IV, LLC dated as of February     , 2006.

BIODELIVERY SCIENCES INTERNATIONAL, INC.

WARRANT TO PURCHASE UP TO 601,120 SHARES OF

COMMON STOCK, PAR VALUE $0.001 PER SHARE

(subject to adjustment as set forth herein)

For VALUE RECEIVED, CDC IV, LLC (“Warrantholder”), is entitled to purchase, subject to the provisions of this Warrant, from BioDelivery Sciences International, Inc., a Delaware corporation (“Company”), at any time and from time to time not later than 5:00 P.M., Eastern time, on the Expiration Date (as defined above), at an exercise price per share equal to $2.91 (the exercise price in effect being herein called the “Warrant Price”), up to 601,120 shares (“Warrant Shares”) of the Company’s Common Stock, par value $0.001 per share (“Common Stock”). The number of Warrant Shares purchasable upon exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time as described herein. This Warrant is being issued to Warrantholder pursuant to a request made under Section 2 of this Warrant to transfer the


Warrant, initially dated July 14, 2005, from its original holder, Clinical Development Capital LLC, to CDC IV, LLC. By acceptance of this Warrant, Clinical Development Capital LLC and CDC IV, LLC acknowledge that the original Warrant dated July 14, 2005 is hereby cancelled. Capitalized terms not otherwise defined herein shall have the meaning set forth in the License Agreement.

Section 1. Registration. The Company shall maintain books for the transfer and registration of the Warrant. Upon the initial issuance of this Warrant, the Company shall issue and register the Warrant in the name of the Warrantholder.

Section 2. Transfers. As provided herein, this Warrant may be transferred only pursuant to a registration statement filed under the Securities Act of 1933, as amended (the “Securities Act”), or an exemption from such registration. Subject to such restrictions, the Company shall transfer this Warrant from time to time upon the books to be maintained by the Company for that purpose, upon surrender thereof for transfer properly endorsed or accompanied by appropriate instructions for transfer and such other documents as may be reasonably required by the Company, including, if required by the Company, an opinion of its counsel to the effect that such transfer is exempt from the registration requirements of the Securities Act, to establish that such transfer is being made in accordance with the terms hereof, and a new Warrant shall be issued to the transferee and the surrendered Warrant shall be canceled by the Company.

Section 3. Exercise of Warrant. Subject to the provisions hereof, the Warrantholder may exercise this Warrant in whole or in part at any time prior to its expiration upon sixty-one (61) days prior written notice. Upon such exercise, the Warrantholder shall surrender the Warrant, together with delivery of a duly executed Warrant exercise form attached hereto as Appendix A (the “Exercise Agreement”). At least ten (10) days prior to the Exercise Effective Date (as defined below), the Warrantholder shall deliver by cash, certified check or wire transfer of funds to an account specified by the Company from time to time for the aggregate Warrant Price for that number of Warrant Shares then being purchased, to the Company during normal business hours on any business day at the Company’s principal executive offices (or such other office or agency of the Company as it may designate by notice to the Warrantholder). The Warrant Shares so purchased shall be deemed to be issued to the Warrantholder or such Warrantholder’s designee, as the record owner of such shares, as of the close of business on the date that is sixty-one (61) days following the date on which this Warrant shall have been surrendered (or evidence of loss, theft or destruction thereof and security or indemnity satisfactory to the Company shall have been received by the Company) (the “Exercise Effective Date”), provided the Warrant Price shall have been paid and the completed Exercise Agreement shall have been delivered in accordance with this Section 3. Warrant Shares so purchased, representing the aggregate number of shares specified in the Exercise Agreement, shall be delivered to the Warrantholder on the Exercise Effective Date either by electronic delivery (if permitted by the Company’s transfer agent) or by physical delivery. If the Company delivers the Warrant Shares by physical delivery, the Company shall mail the certificate(s) representing such shares to the Warrantholder at the address specified by the Warrantholder. Any certificates so delivered shall be in such denominations as may be reasonably requested by the Warrantholder and shall be registered in the name of such Warrantholder or such other name as shall be designated by such Warrantholder. If this Warrant shall have been exercised only in part, then, unless this Warrant

 

2


has expired, the Company shall, at its expense, at the time of delivery of such Warrant Shares, deliver to the Warrantholder a new Warrant representing the number of shares with respect to which this Warrant shall not then have been exercised. As used herein, “business day” means a day, other than a Saturday or Sunday, on which banks in New York City are open for the general transaction of business.

Section 4. Compliance with the Securities Act of 1933. Subject to the provisions of the Purchase Agreement (as defined below), the Company may cause the legend set forth on the first page of this Warrant to be set forth on each Warrant or similar legend on any security issued or issuable upon exercise of this Warrant, unless counsel for the Company is of the opinion as to any such security that such legend is unnecessary.

Section 5. Payment of Taxes. The Company will pay any documentary stamp taxes attributable to the initial issuance of Warrant Shares issuable upon the exercise of the Warrant; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificates for Warrant Shares in a name other than that of the Warrantholder in respect of which such shares are issued, and in such case, the Company shall not be required to issue or deliver any certificate for Warrant Shares or any Warrant until the person requesting the same has paid to the Company the amount of such tax or has established to the Company’s reasonable satisfaction that such tax has been paid.

Section 6. Mutilated or Missing Warrants. In case this Warrant shall be mutilated, lost, stolen, or destroyed, the Company shall issue in exchange and substitution of and upon cancellation of the mutilated Warrant, or in lieu of and substitution for the Warrant lost, stolen or destroyed, a new Warrant of like tenor and for the purchase of a like number of Warrant Shares, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction of the Warrant, and with respect to a lost, stolen or destroyed Warrant, reasonable indemnity or bond with respect thereto, if requested by the Company.

Section 7. Reservation of Common Stock. The Company hereby represents and warrants that there have been reserved, and the Company shall at all applicable times keep reserved until issued (if necessary) as contemplated by this Section 7, out of the authorized and unissued shares of Common Stock, sufficient shares to provide for the exercise of the rights of purchase represented by this Warrant. The Company agrees that all Warrant Shares issued upon due exercise of the Warrant shall be, at the time of delivery of the certificates for such Warrant Shares, duly authorized, validly issued, fully paid and non-assessable shares of Common Stock of the Company.

Section 8. Adjustments. Subject and pursuant to the provisions of this Section 8, the Warrant Price and number of Warrant Shares subject to this Warrant shall be subject to adjustment from time to time as set forth hereinafter.

(a) If the Company shall, at any time or from time to time while this Warrant is outstanding, pay a dividend or make a distribution on its Common Stock in shares of Common Stock, subdivide its outstanding shares of Common Stock into a greater number of shares or

 

3


combine its outstanding shares of Common Stock into a smaller number of shares or issue by reclassification of its outstanding shares of Common Stock any shares of its capital stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), then the number of Warrant Shares purchasable upon exercise of the Warrant and the Warrant Price in effect immediately prior to the date upon which such change shall become effective, shall be adjusted by the Company so that the Warrantholder thereafter exercising the Warrant shall be entitled to receive the number of shares of Common Stock or other capital stock which the Warrantholder would have received if the Warrant had been exercised immediately prior to such event upon payment of a Warrant Price that has been adjusted to reflect a fair allocation of the economics of such event to the Warrantholder. Such adjustments shall be made successively whenever any event listed above shall occur.

(b) If any capital reorganization or reclassification of the capital stock of the Company, then, as a condition of such reorganization or reclassification, lawful and adequate provision shall be made whereby each Warrantholder shall thereafter have the right to purchase and receive upon the basis and upon the terms and conditions herein specified and in lieu of the Warrant Shares immediately theretofore issuable upon exercise of the Warrant, such shares of stock, securities or assets as would have been issuable or payable with respect to or in exchange for a number of Warrant Shares equal to the number of Warrant Shares immediately theretofore issuable upon exercise of the Warrant, had such reorganization or reclassification not taken place, and in any such case appropriate provision shall be made with respect to the rights and interests of each Warrantholder to the end that the provisions hereof (including, without limitation, provision for adjustment of the Warrant Price) shall thereafter be applicable, as nearly equivalent as may be practicable in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise hereof. The provisions of this paragraph (b) shall similarly apply to successive reorganizations or reclassifications.

(c) In case the Company shall fix a payment date for the making of a distribution to all holders of Common Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) of evidences of indebtedness or assets (other than cash dividends or cash distributions payable out of consolidated earnings or earned surplus or dividends or distributions referred to in Section 8(a)), or subscription rights or warrants, the Warrant Price to be in effect after such payment date shall be determined by multiplying the Warrant Price in effect immediately prior to such payment date by a fraction, the numerator of which shall be the total number of shares of Common Stock then outstanding multiplied by the Market Price (as defined below) per share of Common Stock immediately prior to such payment date, less the fair market value (as determined by the Company’s Board of Directors in good faith) of said assets or evidences of indebtedness so distributed, or of such subscription rights or warrants, and the denominator of which shall be the total number of shares of Common Stock outstanding multiplied by such Market Price per share of Common Stock immediately prior to such payment date. “Market Price” as of a particular date (the “Valuation Date”) shall mean the following: (a) if the Common Stock is then listed on a national stock exchange, the closing sale price of one share of Common Stock on such exchange on the last trading day prior to the Valuation Date; (b) if the Common Stock is then quoted on The Nasdaq Stock Market, Inc. (“Nasdaq”), the National Association of Securities Dealers, Inc. OTC Bulletin Board (the “Bulletin Board”) or such similar exchange or

 

4


association, the closing sale price of one share of Common Stock on Nasdaq, the Bulletin Board or such other exchange or association on the last trading day prior to the Valuation Date or, if no such closing sale price is available, the average of the high bid and the low asked price quoted thereon on the last trading day prior to the Valuation Date; or (c) if the Common Stock is not then listed on a national stock exchange or quoted on Nasdaq, the Bulletin Board or such other exchange or association, the fair market value of one share of Common Stock as of the Valuation Date, shall be reasonably determined in good faith by the Board of Directors of the Company and the Warrantholder.

(d) An adjustment to the Warrant Price shall become effective immediately after the payment date in the case of each dividend or distribution and immediately after the effective date of each other event which requires an adjustment.

(e) In the event that, as a result of an adjustment made pursuant to this Section 8, the Warrantholder shall become entitled to receive any shares of capital stock of the Company other than shares of Common Stock, the number of such other shares so receivable upon exercise of this Warrant shall be subject thereafter to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Warrant Shares contained in this Warrant.

(f) Intentionally omitted.

(g) Intentionally omitted.

(h) Intentionally omitted.

Section 9. Fractional Interest. The Company shall not be required to issue fractions of Warrant Shares upon the exercise of this Warrant. If any fractional share of Common Stock would, except for the provisions of the first sentence of this Section 9, be deliverable upon such exercise, the Company, in lieu of delivering such fractional share, shall pay to the exercising Warrantholder an amount in cash equal to the Market Price of such fractional share of Common Stock on the date of exercise.

Section 10. Extension of Expiration Date. If the Company fails to cause any Registration Statement covering Registrable Securities (unless otherwise defined herein, capitalized terms are as defined in the Registration Rights Agreement relating to the Warrant Shares (the “Registration Rights Agreement”)) to be declared effective prior to the applicable dates set forth therein, then the Expiration Date of this Warrant shall be extended to a date that is the later of the Expiration date or six (6) months after the effective date of the Registration Statement.

Section 11. Benefits. Nothing in this Warrant shall be construed to give any person, firm or corporation (other than the Company and the Warrantholder) any legal or equitable right, remedy or claim, it being agreed that this Warrant shall be for the sole and exclusive benefit of the Company and the Warrantholder.

 

5


Section 12. Notices to Warrantholder. Upon the happening of (i) any event requiring an adjustment of the Warrant Price or (ii) an Acquisition or Liquidation, the Company shall promptly give written notice thereof to the Warrantholder at the address appearing in the records of the Company, provided that any such notice with respect to an Acquisition or Liquidation shall be given at least fifteen (15) days prior to the closing of such Acquisition or Liquidation. Any such notice regarding an adjustment of the Warrant Price shall state the adjusted Warrant Price and the adjusted number of Warrant Shares resulting from such event and set forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Failure to give notice to the Warrantholder of any Warrant Price adjustment, or any defect therein, shall not affect the legality or validity of the subject adjustment. In addition, the Company shall promptly give written notice to the Warrantholder as specified above in the event that the Company determines to make a rights offering to its stockholders.

Section 13. Identity of Transfer Agent. The Transfer Agent for the Common Stock is American Stock Transfer & Trust, 40 Wall Street, New York, New York 10005. Upon the appointment of any subsequent transfer agent for the Common Stock or other shares of the Company’s capital stock issuable upon the exercise of the rights of purchase represented by the Warrant, the Company will mail to the Warrantholder a statement setting forth the name and address of such transfer agent.

Section 14. Notices. Unless otherwise provided, any notice required or permitted under this Warrant shall be given in writing and shall be deemed effectively given as hereinafter described (i) if given by personal delivery, then such notice shall be deemed given upon such delivery, (ii) if given by telex or facsimile, then such notice shall be deemed given upon receipt of confirmation of complete transmittal, (iii) if given by mail, then such notice shall be deemed given upon the earlier of (A) receipt of such notice by the recipient or (B) three days after such notice is deposited in first class mail, postage prepaid, and (iv) if given by an internationally recognized overnight air courier, then such notice shall be deemed given one business day after delivery to such carrier. All notices shall be addressed as follows: if to the Warrantholder, at its address as set forth in the Company’s books and records and, if to the Company, at the address as follows, or at such other address as the Warrantholder or the Company may designate by ten days’ advance written notice to the other:

If to the Company:

BioDelivery Sciences International, Inc.

2501 Aerial Center Parkway, Suite 205

Morrisville, NC 27560

Attention: Mark A. Sirgo, Pharm. D.

Fax: (919) 653-5161

With a copy to:

Wyrick Robbins Yates & Ponton LLP

4101 Lake Boone Trail

Suite 300

Raleigh, NC 27607

Attention: Larry E. Robbins

Fax: (919) 781-4865

 

6


Section 15. Registration Rights. The initial Warrantholder is entitled to the benefit of certain registration rights with respect to the shares of Common Stock issuable upon the exercise of this Warrant as provided in the Registration Rights Agreement, and any subsequent Warrantholder may be entitled to such rights, provided such subsequent Warrantholder agrees in writing to be bound by the terms of the Registration Rights Agreement.

Section 16. Successors. All the covenants and provisions hereof by or for the benefit of the Warrantholder shall bind and inure to the benefit of its respective successors and assigns hereunder.

Section 17. Governing Law; Consent to Jurisdiction. This Warrant shall be governed by, and construed in accordance with, the internal laws of the State of New York, without reference to the choice of law provisions thereof.

Section 18. Partial Forfeiture. In the event that Warrantholder provides less than an amount equal to the Development Funding Cap to Company under the License Agreement (which determination shall be made upon termination of the License Agreement), then the number of Warrant Shares exercisable under this Warrant shall be reduced by multiplying the number of Warrant Shares then exercisable under this Warrant by a fraction, the numerator of which shall be the actual amount of funding provided by Warrantholder to Company under the License Agreement, and the denominator shall be the Development Funding Cap. Notwithstanding the foregoing, the number of Warrant Shares exercisable hereunder shall not be reduced to less than 100,000 Warrant Shares (subject to adjustment as otherwise set forth in this Warrant).

Section 19. No Rights as Stockholder. Prior to the exercise of this Warrant, the Warrantholder shall not have or exercise any rights as a stockholder of the Company by virtue of its ownership of this Warrant.

Section 20. Amendment; Waiver. Any term of this Warrant may be amended or waived (including the adjustment provisions included in Section 8 of this Warrant) upon the written consent of the Company and the Warrantholder.

Section 21. Section Headings. The section headings in this Warrant are for the convenience of the Company and the Warrantholder and in no way alter, modify, amend, limit or restrict the provisions hereof.

[Signature Page to follow.]

 

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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of the      day of February, 2006.

 

BIODELIVERY SCIENCES

INTERNATIONAL, INC.

By:   /s/ Mark A. Sirgo
Name:   Mark A. Sirgo, Pharm. D.
Title:   President & CEO

 

SIGNATURE PAGE TO WARRANT


IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of the      day of February, 2006.

 

BIODELIVERY SCIENCES

INTERNATIONAL, INC.

By:     
Name:   Mark A. Sirgo, Pharm.D.
Title:   President & CEO

 

AGREED:

 

CDC IV, LLC

By:   /s/ David A. Ramsay
Name:   David A. Ramsay
Title:  

 

SIGNATURE PAGE TO WARRANT


APPENDIX A

[COMPANY NAME].

WARRANT EXERCISE FORM

To [COMPANY NAME]:

The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant (“Warrant”) for, and to purchase thereunder by the payment of the Warrant Price and surrender of the Warrant,                      shares of Common Stock (“Warrant Shares”) provided for therein, and requests that certificates for the Warrant Shares be issued as follows:

Name                                                                                                       

Address                                                                                                   

                _________________________________________

Federal Tax ID or Social Security No.                                                  

and delivered by (certified mail to the above address, or (electronically (provide DWAC Instructions:                     ),

or

(other (specify):                     ).

and, if the number of Warrant Shares shall not be all the Warrant Shares purchasable upon exercise of the Warrant, that a new Warrant for the balance of the Warrant Shares purchasable upon exercise of this Warrant be registered in the name of the undersigned Warrantholder or the undersigned’s Assignee as below indicated and delivered to the address stated below.

Dated:                     ,         

 

Note: The signature must correspond with the name of the

Warrantholder as written on the first page of the Warrant in

every particular, without alteration or enlargement or any

change whatever unless the Warrant Name (please print) has

been assigned.

     Signature:                                                                                                      
    

 

Name:                                                                                                             

       (please print)
     Address:                                                                                                         
                                                                                                                                  
     Federal Identification or  
     Social Security No.                                                                                     
     Assignee:                                                                                                       
                                                                                                                                
-----END PRIVACY-ENHANCED MESSAGE-----