BIODELIVERY SCIENCES INTERNATIONAL INC (Form: 10-Q, Received: 08/08/2019 16:19:31)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-31361

BioDelivery Sciences International, Inc.

(Exact name of registrant as specified in its charter)


Delaware		35-2089858
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

4131 ParkLake Ave., Suite 225, Raleigh, NC		27612
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number (including area code): 919-582-9050

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

Common stock, par value $0.001

BDSI

The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company”, or “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 8, 2019, there were 89,538,523 shares of company Common Stock issued and 89,523,032 shares of company Common Stock outstanding.

BioDelivery Sciences International, Inc. and Subsidiaries

Quarterly Report on Form 10-Q

TABLE OF CONTENTS


		Page
Part I. Financial Information

Item 1.	Financial Statements (unaudited)

	Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018		1

	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2019 and 2018		2

	Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2019 and 2018		3

	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018		4

	Notes to Condensed Consolidated Financial Statements		5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		19

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		26

Item 4.	Controls and Procedures		26

Cautionary Note on Forward Looking Statements			27

Part II. Other Information

Item 1.	Legal Proceedings		27

Item 1A.	Risk Factors		27

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		29

Item 3.	Defaults upon Senior Securities		29

Item 4.	Mine Safety Disclosures		29

Item 5.	Other Information		30

Item 6.	Exhibits		30

Signatures			S-1

Certifications

We own various trademark registrations and applications, and unregistered trademarks, including BioDelivery Sciences International, Inc., BEMA, BELBUCA, BUNAVAIL, ONSOLIS and our corporate logo. We have an exclusive license to use and display the Symproic registered trademark in order to commercialize Symproic in the United States. All other trade names, trademarks and service marks of other companies appearing in this prospectus are the property of their respective holders. Solely for convenience, the trademarks and trade names in this prospectus may be referred to without the ^® and ^™ symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend to use or display other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

From time to time, we may use our website, our Facebook page at Facebook.com/BioDeliverySI and on Twitter at @BioDeliverySI to distribute material information. Our financial and other material information is routinely posted to and accessible on the Investors section of our website, available at www.bdsi.com . Investors are encouraged to review the Investors section of our website because we may post material information on that site that is not otherwise disseminated by us. Information that is contained in and can be accessed through our website, our Facebook page and our Twitter posts are not incorporated into, and does not form a part of, this Quarterly Report.

BIODELIVERY SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(U.S. DOLLARS, IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

(Unaudited)


	June 30, 2019			December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	57,215		$	43,822
Accounts receivable, net		24,879			13,627
Inventory, net		9,974			5,406
Prepaid expenses and other current assets		3,298			3,188

Total current assets		95,366			66,043
Property and equipment, net		3,853			3,072
Goodwill		2,715			2,715
License and distribution rights, net		63,778			36,000
Other intangible assets, net		375			703

Total assets	$	166,087		$	108,533

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	40,762		$	21,539

Total current liabilities		40,762			21,539
Notes payable, net		58,448			51,652
Other long-term liabilities		727			5,600

Total liabilities		99,937			78,791
Commitments and contingencies (Note 11)
Stockholders’ equity:
Preferred Stock, 5,000,000 shares authorized; Series A Non-Voting Convertible Preferred Stock. $.001 par value, 2,093,155 shares outstanding at both June 30, 2019 and December 31, 2018, respectively; Series B Non-Voting Convertible Preferred Stock, $.001 par value, 1,716 and 3,100 shares outstanding at June 30, 2019 and December 31, 2018, respectively.		2			2
Common Stock, $.001 par value; 125,000,000 shares authorized at June 30, 2019 and December 31, 2018, respectively; 89,535,024 and 75,793,725 shares issued;89,519,533 and 70,778,234 shares outstanding at June 30, 2019 and December 31, 2018, respectively.		88			71
Additional paid-in capital		432,358			381,004
Treasury stock, at cost, 15,491 shares		(47	)		(47	)
Accumulated deficit		(366,251	)		(351,288	)

Total stockholders’ equity		66,150			29,742

Total liabilities and stockholders’ equity	$	166,087		$	108,533

See notes to condensed consolidated financial statements

BIODELIVERY SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(U.S. DOLLARS, IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Revenues:
Product sales	$	28,056		$	10,766		$	47,815		$	20,604
Product royalty revenues		1,461			1,386			1,471			1,826
Contract revenues		160			23			160			1,026

Total Revenues:		29,677			12,175			49,446			23,456

Cost of sales		4,923			4,566			8,975			7,981

Expenses:
Research and development		—			854			—			3,338
Selling, general and administrative		21,955			14,021			38,944			27,526

Total Expenses:		21,955			14,875			38,944			30,864

Income (loss) from operations		2,799			(7,266	)		1,527			(15,389	)
Interest expense		(13,937	)		(2,525	)		(16,498	)		(5,030	)
Other (expense) income, net		8			1			8			(6	)

Loss before income taxes	$	(11,130	)	$	(9,790	)	$	(14,963	)	$	(20,425	)
Income tax benefit (expense)		—			20			—			(54	)

Net loss attributable to common stockholders	$	(11,130	)	$	(9,770	)	$	(14,963	)	$	(20,479	)

Basic and diluted:
Weighted average common stock shares outstanding		83,821,811			59,400,317			77,571,003			58,735,351

Basic and diluted loss per share	$	(0.13	)	$	(0.16	)	$	(0.19	)	$	(0.35	)

See notes to condensed consolidated financial statements

BIODELIVERY SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(U.S. DOLLARS, IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

(Unaudited)


	Preferred Stock Series A				Preferred Stock Series B					Common Stock					Additional Paid-In Capital			Treasury Stock			Accumulated Deficit			Total Stockholders’ Equity
	Shares		Amount		Shares			Amount		Shares		Amount			Additional Paid-In Capital			Treasury Stock			Accumulated Deficit			Total Stockholders’ Equity
Balances, March 31, 2019		2,093,155	$	2		2,400		$	—		75,333,254	$	74		$	382,614		$	(47	)	$	(355,121	)	$	27,522

Stock-based compensation		—		—		—			—		—		—			1,570			—			—			1,570
Stock option exercises		—		—		—			—		210,104		—			598			—			—			598
Restricted stock awards		—		—		—			—		191,666		—			—			—			—			—
Series B conversion to common stock		—		—		(684	)		—		3,800,000		4			(4	)		—			—			—
Equity offering, net of finance costs		—		—		—			—		10,000,000		10			47,580			—			—			47,590
Net loss		—		—		—			—		—		—			—			—			(11,130	)		(11,130	)

Balances, June 30, 2019		2,093,155	$	2		1,716		$	—		89,535,024	$	88		$	432,358		$	(47	)	$	(366,251	)	$	66,150


	Preferred Stock Series A				Preferred Stock Series B					Common Stock					Additional Paid-In Capital			Treasury Stock			Accumulated Deficit			Total Stockholders’ Equity
	Shares		Amount		Shares			Amount		Shares		Amount			Additional Paid-In Capital			Treasury Stock			Accumulated Deficit			Total Stockholders’ Equity
Balances, March 31, 2018		2,093,155	$	2		—		$	—		55,646,522	$	59		$	316,970		$	(47	)	$	(315,630	)	$	1,354

Stock-based compensation		—		—		—			—		—		—			1,083			—			—			1,083
Stock option exercises		—		—		—			—		105,721		—			176			—			—			176
Restricted stock awards		—		—		—			—		227,476		—			—			—			—			—
Common stock issuance upon retirement		—		—		—			—		479,727		—			—			—			—			—
Series B conversion to common stock		—		—		(684	)		—		—		—			47,894			—			—			47,894
Cumulative effect of accounting change		—		—		—			—		—		—			—			—			135			135
Net loss		—		—		—			—		—		—			—			—			(9,770	)		(9,770	)

Balances, June 30, 2018		2,093,155	$	2		(684	)	$	—		59,459,446	$	59		$	366,123		$	(47	)	$	(325,400	)	$	40,737


	Preferred Stock Series A				Preferred Stock Series B					Common Stock					Additional Paid-In Capital			Treasury Stock			Accumulated Deficit			Total Stockholders’ Equity
	Shares		Amount		Shares			Amount		Shares		Amount			Additional Paid-In Capital			Treasury Stock			Accumulated Deficit			Total Stockholders’ Equity
Balances, January 1, 2019		2,093,155	$	2		3,100		$	—		70,793,725	$	71		$	381,004		$	(47	)	$	(351,288	)	$	29,742

Stock-based compensation		—		—		—			—		—		—			2,711			—			—			2,711
Stock option exercises		—		—		—			—		360,379		—			1,070			—			—			1,070
Restricted stock awards		—		—		—			—		692,032		(1	)		1			—			—			—
Series B conversion to common stock		—		—		(1,384	)		—		7,688,888		8			(8	)		—			—			—
Equity offering, net of finance costs		—		—		—			—		10,000,000		10			47,580			—			—			47,590
Net loss		—		—		—			—		—		—			—			—			(14,963	)		(14,963	)

Balances, June 30, 2019		2,093,155	$	2		1,716		$	—		89,535,024	$	88		$	432,358		$	(47	)	$	(366,251	)	$	66,150


	Preferred Stock Series A				Preferred Stock Series B					Common Stock					Additional Paid-In Capital			Treasury Stock			Accumulated Deficit			Total Stockholders’ Equity
	Shares		Amount		Shares			Amount		Shares		Amount			Additional Paid-In Capital			Treasury Stock			Accumulated Deficit			Total Stockholders’ Equity
Balances, January 1, 2018		2,093,155	$	2		—		$	—		55,904,072	$	56		$	313,922		$	(47	)	$	(305,056	)	$	8,877

Stock-based compensation		—		—		—			—		—		—			4,004			—			—			4,004
Stock option exercises		—		—		—			—		169,016		—			306			—			—			306
Restricted stock awards		—		—		—			—		1,266,433		1			(1	)		—			—			—
Common stock issuance upon retirement		—		—		—			—		2,119,925		2			(2	)		—			—			—
Series B issuance, net of issuance costs		—		—		5,000			—		—		—			47,894			—			—			47,894
Cumulative effect of accounting change		—		—		—			—		—		—			—			—			135			135
Net loss		—		—		—			—		—		—			—			—			(20,479	)		(20,479	)

Balances, June 30, 2018		2,093,155	$	2		5,000		$	—		59,459,446	$	59		$	366,123		$	(47	)	$	(325,400	)	$	40,737

See notes to condensed consolidated financial statements

BIODELIVERY SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. DOLLARS, IN THOUSANDS)

(Unaudited)


	Six months ended June 30,
	2019			2018
Operating activities:
Net loss	$	(14,963	)	$	(20,479	)
Adjustments to reconcile net loss to net cash flows from operating activities
Depreciation and amortization		168			456
Impairment loss on equipment		—			78
Accretion of debt discount and loan costs		11,374			1,782
Amortization of intangible assets		3,187			2,578
Provision for inventory obsolescence		149			412
Stock-based compensation expense		2,711			4,004
Changes in assets and liabilities, net of effect of acquisition:
Accounts receivable		(11,252	)		(423	)
Inventories		(4,716	)		(489	)
Prepaid expenses and other assets		(110	)		1,454
Accounts payable and accrued liabilities		9,078			(1,118	)

Net cash flows used in operating activities		(4,374	)		(11,745	)

Investing activities:
Product acquisitions		(20,674	)		(1,951	)
Acquisitions of equipment		(79	)		(122	)

Net cash flows used in investing activities		(20,753	)		(2,073	)

Financing activities:
Proceeds from issuance of common stock		48,000			—
Proceeds from issuance of Series B preferred stock		—			50,000
Equity issuance costs		(410	)		(1,509	)
Proceeds from notes payable		60,000			—
Proceeds from exercise of stock options		1,070			306
Payment on note payable		(67,346	)		—
Loss on refinancing of former debt		(2,794	)		—
Payment of deferred financing fees		—			(450	)

Net cash flows provided by financing activities		38,520			48,347

Net change in cash and cash equivalents		13,393			34,529
Cash and cash equivalents at beginning of period		43,822			21,195

Cash and cash equivalents at end of period	$	57,215		$	55,724

Cash paid for interest	$	3,831		$	3,249

See notes to condensed consolidated financial statements

BIODELIVERY SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(U.S. DOLLARS, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(Unaudited)

1. Organization, basis of presentation and summary of significant policies:

Overview

BioDelivery Sciences International, Inc., together with its subsidiaries (collectively, the “Company”) is a rapidly growing commercial-stage specialty pharmaceutical company dedicated to patients living with chronic conditions. The Company is utilizing its novel and proprietary BioErodible MucoAdhesive (BEMA) drug-delivery technology and other drug delivery technologies to develop and commercialize new applications of proven therapies aimed at addressing important unmet medical needs. The Company commercializes in the United States using its own sales force while working in partnership with third parties to commercialize its products outside the United States.

In April 2019, the Company entered into an exclusive license agreement for the commercialization of Symproic (naldemedine tosylate) in the United States including Puerto Rico for the opioid-induced constipation in adult patients with chronic non-cancer pain (Note 7).

The accompanying unaudited condensed consolidated financial statements include all adjustments (consisting of normal and recurring adjustments) necessary for a fair presentation of these financial statements. The condensed consolidated balance sheet at December 31, 2018 has been derived from the Company’s audited consolidated financial statements included in its annual report on Form 10-K for the year ended December 31, 2018. Certain footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the Securities and Exchange Commission rules and regulations. It is recommended that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2018.

Operating results for the three- and six-month periods ended June 30, 2019 are not necessarily indicative of results for the full year or any other future periods.

As used herein, the Company’s common stock, par value $0.001 per share, is referred to as the “Common Stock” and the Company’s preferred stock, par value $0.001 per share, is referred to as the “Preferred Stock”.

Principles of consolidation

The condensed consolidated financial statements include the accounts of the Company, Arius Pharmaceuticals, Inc. (“Arius”), Arius Two, Inc. (“Arius Two”) and Bioral Nutrient Delivery, LLC (“BND”). For each period presented, BND has been an inactive subsidiary. All significant inter-company balances and transactions have been eliminated.

Use of estimates in financial statements

The preparation of the accompanying consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. The Company reviews all significant estimates affecting the consolidated financial statements on a recurring basis and records the effect of any necessary adjustments prior to their issuance. Significant estimates made by the Company include: revenue recognition associated with sales allowances such as returns of product sold, government program rebates, customer coupon redemptions, wholesaler/pharmacy discounts, product service fees, rebates and chargebacks; sales bonuses; stock-based compensation; determination of fair values of assets and liabilities relating to business combinations; and deferred income taxes.

Cash and cash equivalents

Cash and cash equivalents consist of operating and money market accounts. Cash equivalents are carried at cost which approximates fair value due to their short-term nature. The Company considers all highly-liquid investments with an original maturity of 90 days or less to be cash equivalents.

The Company maintains cash equivalent balances with financial institutions that management believes are of high credit quality. The Company’s cash and cash equivalents accounts at times may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk from cash and cash equivalents.

BIODELIVERY SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(U.S. DOLLARS, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(Unaudited)

Inventory

Inventories are stated at the lower of cost or net realizable value with costs determined for each batch under the first-in, first-out method and specifically allocated to remaining inventory. Inventory consists of raw materials, work in process and finished goods. Raw materials include amounts of active pharmaceutical ingredient for a product to be manufactured, work in process includes the bulk inventory of laminate (the Company’s drug delivery film) prior to being packaged for sale, and finished goods include pharmaceutical products ready for commercial sale.

On a quarterly basis, the Company analyzes its inventory levels and records allowances for inventory that has become obsolete, inventory that has a cost basis in excess of the expected net realizable value and inventory that is in excess of expected demand based upon projected product sales. The Company reserved $0.3 million and $0.2 million for inventory obsolescence as of June 30, 2019 and December 31, 2018, respectively.

Revenue recognition

The main types of revenue contracts are:

•

Product sales- Product sales amounts relate to sales of BELBUCA, Symproic and BUNAVAIL. These sales are recognized as revenue when control is transferred to the wholesaler in an amount that reflects the consideration expected to be received.

•

Product royalty revenues- Product royalty revenue amounts are based on sales revenue of the PAINKYL product under the Company’s license agreement with TTY and the BREAKYL product under the Company’s license agreement with Meda AB, which was acquired by Mylan N.V. (which we refer to herein as Mylan). Product royalty revenues are recognized when control of the product is transferred to the license partner in an amount that reflects the consideration expected to be received. Supplemental sales-based product royalty revenue may also be earned upon the subsequent sale of the product at agreed upon contractual rates.

•

Contract revenue- Contract revenue amounts are related to milestone payments under the Company’s license agreements with its partners.

The Company recognizes revenue on product sales when control of the promised goods is transferred to its customers in an amount that reflects the consideration expected to be received in exchange for transferring those goods. The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. When determining whether the customer has obtained control of the goods, the Company considers any future performance obligations. Generally, there is no post-shipment obligations on product sold.

Performance obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The majority of the Company’s product sales contracts have a single performance obligation as the promise to transfer the individual goods is not separately identifiable from other promises in the contracts and, therefore, not distinct. The Company’s performance obligations are satisfied at a point in time. The multiple performance obligations are not allocated based off of the obligations but based off of standard selling price.

Adjustments to product sales

The Company recognizes product sales net of estimated allowances for rebates, price adjustments, returns, chargebacks, vouchers and prompt payment discounts. A significant majority of the Company’s adjustments to gross product revenues are the result of accruals for its commercial contracts, retail consumer subsidy programs, and Medicaid rebates.

The Company establishes allowances for estimated rebates, chargebacks and product returns based on numerous qualitative and quantitative factors, including:

•

the number of and specific contractual terms of agreements with customers;

•

estimated levels of inventory in the distribution channel;

BIODELIVERY SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(U.S. DOLLARS, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(Unaudited)

•

historical rebates, chargebacks and returns of products;

•

direct communication with customers;

•

anticipated introduction of competitive products or generics;

•

anticipated pricing strategy changes by the Company and/or its competitors;

•

analysis of prescription data gathered by a third-party prescription data provider;

•

the impact of changes in state and federal regulations; and

•

the estimated remaining shelf life of products.

The Company uses prescription data purchased from a third-party data provider to develop estimates of historical inventory channel sell-through. The Company utilizes an internal analysis to compare historical net product shipments to estimated historical prescriptions written. Based on that analysis, management develops an estimate of the quantity of product in the channel which may be subject to various rebate, chargeback and product return exposures. To estimate months of ending inventory in the Company’s distribution channel, the Company divides estimated ending inventory in the distribution channel by the Company’s recent prescription data, not considering any future anticipated demand growth beyond the succeeding quarter. Monthly for each product line, the Company prepares an internal estimate of ending inventory units in the distribution channel by adding estimated inventory in the channel at the beginning of the period, plus net product shipments for the period, less estimated prescriptions written for the period. This is done for each product line by applying a rate of historical activity for rebates, chargebacks and product returns, adjusted for relevant quantitative and qualitative factors discussed above, to the potential exposed product estimated to be in the distribution channel. In addition, the Company receives daily information from the wholesalers regarding their sales and actual on hand inventory levels of the Company’s products. This enables the Company to execute accurate provisioning procedures.

Product returns -Consistent with industry practice, the Company offers contractual return rights that allow its customers to return the products within an 18-month period that begins six months prior to and ends twelve months after expiration of the products.

Rebates- The liability for government program rebates is calculated based on historical and current rebate redemption and utilization rates contractually submitted by each program’s administrator.

Price adjustments and chargebacks- The Company’s estimates of price adjustments and chargebacks are based on its estimated mix of sales to various third-party payers, which are entitled either contractually or statutorily to discounts from the Company’s listed prices of its products. If the sales mix to third-party payers is different from the Company’s estimates, the Company may be required to pay higher or lower total price adjustments and/or chargebacks than it had estimated, and such differences may be significant.

The Company, from time to time, offers certain promotional product-related incentives to its customers. The Company has voucher programs for BELBUCA, Symproic and BUNAVAIL whereby the Company offers a point-of-sale subsidy to retail consumers. The Company estimates its liabilities for these voucher programs based on the current utilization and historical redemption rates as reported to the Company by a third-party claims processing organization. The Company accounts for the costs of these special promotional programs as price adjustments, which are a reduction of gross revenue.

Prompt payment discounts -The Company typically offers its wholesale customers a prompt payment discount of 2% as an incentive to remit payments within a prescribed number of days after the invoice date depending on the customer and the products purchased.

Gross to net accruals -A significant majority of the Company’s gross to net adjustments to gross product revenues are the result of accruals for its voucher program and rebates related to Medicare Part D, Part D Coverage Gap, Medicaid and commercial contracts, with most of those programs having an accrual to payment cycle of anywhere from one to three months. In addition to this relatively short accrual to payment cycle, the Company receives daily information from the wholesalers regarding their sales of the Company’s products and actual on hand inventory levels of its products. This enables the Company to execute accurate provisioning procedures. Consistent with the pharmaceutical industry, the accrual to payment cycle for returns is longer and can take several years depending on the expiration of the related products.

Cost of sales

Cost of sales includes the direct costs attributable to the production of BELBUCA and BUNAVAIL. It includes raw materials, production costs at the Company’s three contract manufacturing sites, quality testing directly related to the products, and depreciation

BIODELIVERY SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(U.S. DOLLARS, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(Unaudited)

on equipment that the Company has purchased to produce BELBUCA and BUNAVAIL. It also includes any batches not meeting specifications and raw material yield losses. Yield losses and batches not meeting specifications are expensed as incurred. Cost of sales is recognized when sold to the wholesaler from our distribution center.

Beginning in April 2019, cost of sales also includes direct costs attributable to the production of Symproic.

For BREAKYL and PAINKYL (the Company’s out-licensed breakthrough cancer pain therapies), cost of sales includes all costs related to creating the product at the Company’s contract manufacturing location in Germany. The Company’s contract manufacturer bills the Company for the final product, which includes materials, direct labor costs, and certain overhead costs as outlined in applicable supply agreements.

Cost of sales also includes royalty expenses that the Company owes to third parties.

Fair Value of Financial Instruments

The Company measures the fair value of instruments in accordance with GAAP which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

GAAP defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. GAAP also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company considers the carrying amount of its cash and cash equivalents to approximate fair value due to short-term nature of this instrument. GAAP describes three levels of inputs that may be used to measure fair value:

Level 1 – quoted prices in active markets for identical assets or liabilities

Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 – inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

The following table summarizes the cash and cash equivalents measured at fair value on a recurring basis as of June 30, 2019:


	Level 1		Level 2		Level 3		Balance at June 30, 2019
Cash and cash equivalents	$	57,215	$	—	$	—		57,215

The cash and cash equivalent balance as of June 30, 2019 includes investments in various money market accounts and cash held in interest bearing accounts.

Research and development

As of January 1, 2019, the Company has focused entirely on commercialized products rather than research and development. As such, there were no expenses incurred in research and development during the six months ended June 30, 2019. Research and development expense for the six months ended June 30, 2018 was $3.3 million.

2. Leases:

The components of lease expense were as follows:


	Three months ended June 30,				Six months ended June 30,
	2019		2018		2019		2018
*Lease Cost*
Operating lease cost
Operating lease	$	82	$	81	$	164	$	163
Variable lease costs		2		1		7		2

Total lease cost	$	84	$	82	$	171	$	165

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(U.S. DOLLARS, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(Unaudited)


	Six Months Ended June 30
	2019			2018
Other Information
Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases	$	173		$	165


	Six Months Ended June 30
	2019			2018
Lease Term and Discount Rate
Weighted-average remaining lease term Operating leases		3.0 years			4.0 years
Weighted-average discount rate Operating leases		11.8	%		11.8	%

Maturity of Lease Liabilities

Future minimum lease payments under non-cancellable leases as of June 30, 2019 were as follows:


Maturity of Lease Liabilities
2019	$	177
2020		360
2021		370
2022		219

Total lease payments	$	1,126
Less: Interest		(179	)

Present value of lease liabilities	$	947

Components of Lease Assets and Liabilities


	June 30, 2019
Assets
Property and equipment, net Operating lease-right of use asset	$	883
Liabilities
Current liabilities Operating lease- current liability	$	260
Other long-term liabilities Operating lease- noncurrent liability	$	687

Total lease liabilities	$	947

3. Inventory:

The following table represents the components of inventory as of:


	June 30, 2019			December 31, 2018
Raw materials & supplies	$	937		$	645
Work-in-process		5,966			2,093
Finished goods		3,407			2,855
Obsolescence reserve		(336	)		(187	)

Total inventories	$	9,974		$	5,406

BIODELIVERY SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(U.S. DOLLARS, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(Unaudited)

4. Accounts payable and accrued liabilities:

The following table represents the components of accounts payable and accrued liabilities as of:


	June 30, 2019		December 31, 2018
Accounts payable	$	4,167	$	3,166
Accrued rebates		19,584		12,261
Accrued compensation and benefits		3,443		3,814
Accrued acquisition costs		10,000		318
Accrued returns		830		715
Accrued royalties		464		159
Accrued clinical trial costs		—		464
Accrued legal		391		70
Accrued regulatory expenses		229		—
Accrued other		1,654		572

Total accounts payable and accrued liabilities	$	40,762	$	21,539

5. Property and equipment:

Property and equipment, summarized by major category, consist of the following as of:


	June 30, 2019			December 31, 2018
Machinery & equipment	$	5,635		$	5,635
Right of use, building lease		833			—
Computer equipment & software		437			406
Office furniture & equipment		161			155
Leasehold improvements		43			43
Idle equipment		679			679

Total		7,788			6,918

Less accumulated depreciation and amortization		(3,935	)		(3,846	)

Total property and equipment, net	$	3,853		$	3,072

Depreciation expense for the three-month periods ended June 30, 2019 and June 30, 2018, was approximately $0.08 million and $0.2 million, respectively. Depreciation expense for the six-month periods ended June 30, 2019 and June 30, 2018, was approximately $0.2 million and $0.5 million, respectively.

6. License agreements and acquired product rights:

Shionogi license and supply agreement

On April 4, 2019 (the “Effective Date”), the Company and Shionogi Inc. (“Shionogi”) entered into an exclusive license agreement (the “License Agreement”) for the commercialization of Symproic in the United States including Puerto Rico (the “Territory”) for opioid-induced constipation in adult patients with chronic non-cancer pain (the “Field”).

Pursuant to the terms of the License Agreement, the Company paid Shionogi a $20 million up-front payment on the Effective Date and will pay Shionogi a $10 million payment on the six-month anniversary of the Effective Date (or earlier if the License Agreement is assigned or transferred), and quarterly, tiered royalty payments on potential sales of Symproic in the Territory that range from 8.5% to 17.5% (plus an additional 1% of net sales on a pass-through basis to a third party licensor of Shionogi) of net sales based on volume of net sales and whether Symproic is being sold as an authorized generic. Assets acquired as part of the License Agreement include: intellectual property, inventory, trademarks and tradenames.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(U.S. DOLLARS, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(Unaudited)

The Company and Shionogi have made customary representations and warranties and have agreed to certain other customary covenants, including confidentiality, limitation of liability and indemnity provisions. Either party may terminate the License Agreement for cause if the other party materially breaches or defaults in the performance of its obligations. Unless earlier terminated, the License Agreement will continue in effect until the expiration of the Company’s royalty obligations, as defined. Upon expiration of the License Agreement, all licenses granted to Company for Symproic in the Field and in the Territory survive and become fully-paid, royalty-free, perpetual and irrevocable.

The Company and Shionogi have also entered into a customary supply agreement under which Shionogi will supply Symproic to the Company at cost plus an agreed upon markup for an initial term of up to two years. In the event the Company elects to source Symproic from a third party supplier, Shionogi would continue to supply the Company with naldemedine tosylate for use in Symproic at cost plus such agreed upon markup for the duration of the License Agreement. The Company and Shionogi also entered into a customary transition services and distribution agreement under which Shionogi will continue to perform certain sales, distribution and related activities and commercialization and administrative services on the Company’s behalf until June 30, 2019 pursuant to the transition services and distribution agreement (the “Transition Date”) (during which time, in lieu of paying royalties and cost-plus supply, distribution and transitional services during this period, Shionogi will retain 35% of the net sales of Symproic in the Territory and remit the remaining 65% of net sales to the Company) and certain other customary transitional services (if so requested by the Company), initially at no cost and thereafter, at a specified hourly rate for a term not to exceed three months from the Transition Date or the term of the Agreement. The Company and Shionogi have also entered into a Pharmacovigilance agreement that required ongoing cooperation on adverse event reporting for the duration of License Agreement.

The Company accounted for the Symproic purchase as an asset acquisition under ASC 805-10-55-5b, which provides guidance for asset acquisitions. Under the guidance, if substantially all the acquisition is made up of one asset or several similar assets, then the acquisition is an asset acquisition. The Company believes that the licensing agreement and other assets acquired from Shionogi are similar and consider them all to be intangible assets.

The total purchase price was allocated to the acquired asset based on their relative estimated fair values, as follows:


Symproic license	$	30,000
Transaction expenses		636

Total value	$	30,636

Additionally, the Company also purchased from Shionogi $0.4 million of Symproic samples, which have been recorded in selling, general and administrative expenses in the accompanying condensed consolidated statement of operations for the six months ended June 30, 2019.

The Company is amortizing the Symproic license over the life of the underlying patent, which the earliest date of generic entry for Symproic is November 2031 based on the expiration date of US patent # 9,108,975.

TTY license and supply agreement

The Company has a license and supply agreement with TTY Biopharm Co., Ltd. (“TTY”) for the exclusive rights to develop and commercialize BEMA Fentanyl in the Republic of China, Taiwan.

During the six months ended June 30, 2019 and 2018, the Company received cumulative payments of $0.3 million and $0.9 million, respectively, from TTY, which related to royalties based on product purchased in Taiwan by TTY of PAINKYL ^™ which is recorded in the accompanying condensed consolidated statement of operations. Also, during the six months ended June 30, 2019, the Company received the final milestone payment of $0.2 million ($0.16 million net of Taiwan tax) which is based on cumulative sales of PAINKYL by TTY exceeding $10 million.

BIODELIVERY SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(U.S. DOLLARS, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(Unaudited)

7. Other intangible assets:

Other intangible assets, net, consisting of product rights and licenses are summarized as follows:


June 30, 2019	Gross Carrying Value		Accumulated Amortization			Intangible Assets, net
Product rights	$	6,050	$	(5,723	)	$	327
BELBUCA license and distribution rights		45,000		(11,250	)		33,750
Symproic license and distribution rights		30,636		(609	)		30,027
Licenses		1,900		(1,851	)		49

Total intangible assets	$	83,586	$	(19,433	)	$	64,153


December 31, 2018	Gross Carrying Value		Accumulated Amortization			Intangible Assets, net
Product rights	$	6,050	$	(5,442	)	$	608
BELBUCA license and distribution rights		45,000		(9,000	)		36,000
Licenses		1,900		(1,805	)		95

Total intangible assets	$	52,950	$	(16,247	)	$	36,703

8. Notes payable:

On May 23, 2019, the Company entered into a Loan Agreement (the “Loan Agreement”) with Biopharma Credit plc (“Pharmakon”), for a senior secured credit facility consisting of a term loan of $60 million (the “Term Loan”), with the ability to draw an additional $20 million within twelve months of the closing date. The Loan Agreement replaced the Company’s existing Term Loan Agreement (the “Original Loan Agreement”) with CRG Servicing LLC, (“CRG”).

The Company utilized $60 million of the initial loan proceeds under the Loan Agreement, plus an additional $1.8 million to repay all of the outstanding loan balance owed by the Company under the Original Loan Agreement. The Company also used existing cash on hand to pay a $5.6 million backend facility fee to CRG. Upon the repayment of all amounts owed by the Company under the CRG Original Loan Agreement, all commitments to CRG were terminated and all security interests granted by the Company and its subsidiary guarantors under the CRG Original Loan Agreement were released.

During the six months ended June 30, 2019, the Company expensed one-time events of $5.2 million in unamortized deferred loan fees, $3.9 million in unamortized warrant discount costs and $2.8 million in loan prepayment fees and realized losses arising out of the CRG Term Loan and recorded as interest expense in the accompanying consolidated statement of operations.

The new facility carries a 72-month term with interest only payments on the term loan for the first 36 months. The Term Loan will mature in May 2025 and bears an interest rate of 7.5% plus the LIBOR rate (LIBOR effective rate as of June 28, 2019 was 2.52%). The Term Loan is subject to mandatory prepayment provisions that require prepayment upon change of control.

The obligations under the Loan Agreement are guaranteed by the Company’s subsidiaries and are secured by a first priority security interest in and a lien on substantially all of the assets of the Company and the subsidiary guarantors, subject to certain exceptions.

The following table represents future maturities of the notes payable obligation as of June 30, 2019:


2019		—
2020		—
2021		—
2022		13,846
2023		18,461
2024		18,462
2025		9,231

Total maturities	$	60,000
Unamortized discount and loan costs		(1,552	)

Total notes payable obligation	$	58,448

BIODELIVERY SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(U.S. DOLLARS, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(Unaudited)

9. Net sales by product:

The Company’s business is classified as a single reportable segment.

However, the following table presents net sales by product:


	Three months ended June 30,				Six months ended June 30,
	2019		2018		2019		2018
BELBUCA	$	24,060	$	9,746	$	42,764	$	17,770
Symproic		3,175		—		3,175		—
BUNAVAIL		821		1,020		1,876		2,834

Net product sales	$	28,056	$	10,766	$	47,815	$	20,604

10. Stockholders’ equity:

Public Offering

On April 15, 2019 the Company completed an underwritten public offering by the Company and a selling stockholder of 12,000,000 shares of common stock at a public offering price of $5.00 per share. The gross proceeds from the Company’s portion of the offering (10,000,000 shares), before deducting the underwriter discounts and commission and other offering expenses, was $50.0 million. The net proceeds were $47.6 million. The gross proceeds to the selling stockholder were approximately $19.0 million, which includes shares sold pursuant to the underwriters’ exercise of their option to purchase an additional 1,800,000 shares of common stock at the public offering price.

Common Stock

On July 25, 2019, in connection with the Company’s 2019 Annual Meeting of Stockholders (“the Annual Meeting”), the Company’s stockholders approved, among other matters, an amendment to the Company’s Certificate of Incorporation to increase the number of authorized shares of Common Stock from 125,000,000 to 175,000,000. Shareholders also approved the Company’s 2019 Stock Option and Incentive Plan (the “2019 Plan”), which reserves 14,000,000 shares of stock for issuance under the 2019 Plan.

Stock-based compensation

During the six months ended June 30, 2019, a total of 2,134,956 options to purchase Common Stock, with an aggregate fair market value of approximately $9.0 million, were granted to employees, officers and directors of the Company. Options have a term of 10 years from the grant date. Options granted to employees vest ratably over a three-year period and options granted to members of the Board of Directors vest ratably through 2022. The fair value of each option is amortized as compensation expense evenly through the vesting period.

The fair value of each option award is estimated on the grant date using the Black-Scholes valuation model that uses assumptions for expected volatility, expected dividends, expected term, and the risk-free interest rate. Expected volatilities are based on implied volatilities from historical volatility of the Common Stock, and other factors estimated over the expected term of the options.

Expected term of options granted is derived using the “simplified method” which computes expected term as the average of the sum of the vesting term plus contract term. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the period of the expected term.

The key assumptions used in determining the fair value of options granted during the six months ended June 30, 2019 follows:


Expected price volatility			61.83%-64.10%
Risk-free interest rate			2.36%-2.66%
Weighted average expected life in years			6 years
Dividend yield			—

BIODELIVERY SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(U.S. DOLLARS, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(Unaudited)

Option activity during the six months ended June 30, 2019 was as follows:


	Number of shares			Weighted average exercise price per share		Aggregate intrinsic value
Outstanding at January 1, 2019		4,406,004		$	3.19	$	4,172

Granted in 2019:
Officers and Directors		1,132,109			3.93
Employees		1,002,847			4.51
Exercised		(360,379	)		4.60
Forfeitures		(204,587	)		4.07

Outstanding at June 30, 2019		5,975,994		$	3.53	$	7,987

During the six months ended June 30, 2019, a cumulative total of 492,198 options were granted in excess of the Company’s 2011 Equity Incentive Plan, as amended (the “EIP”) available number of shares under the plan. These options were subject to shareholder approval at the Annual Meeting, which were subsequently approved.

As of June 30, 2019, options exercisable totaled 1,992,349. There are approximately $7.9 million of unrecognized compensation cost related to non-vested share-based compensation awards, including options and restricted stock units (“RSUs”) granted. These costs will be expensed through 2022.

Restricted stock units

During the six months ended June 30, 2019, a cumulative total of 360,250 RSUs were granted to the Company’s executive officers, members of senior management, a former officer and directors with a fair market value of approximately $1.6 million. The fair value of restricted units is determined using quoted market prices of the Common Stock and the number of shares expected to vest. These RSUs were issued under the EIP.

RSU grants are time-based, all of which generally vest from a one to three-year period. The RSU grant to the former officer vested on his retirement date April 30, 2019.

Restricted stock activity during the six months ended June 30, 2019 was as follows:


	Number of restricted shares			Weighted average fair market value per RSU
Outstanding at January 1, 2019		2,166,102		$	2.59
Granted:
Executive officers		223,250			4.44
Directors		90,000			4.85
Employees		47,000			4.67
Vested		(692,032	)		4.89
Forfeitures		(76,632	)		3.10

Outstanding at June 30, 2019		1,757,688		$	3.31

Preferred Stock

During the six months ended June 30, 2019, 1,384 shares of Series B Preferred Stock (“Series B”) were converted into 7,688,888 shares of Common Stock. As of June 30, 2019, 1,716 shares of Series B are outstanding. As of June 30, 2019, 2,093,155 shares of Series A Preferred Stock (“Series A”) are outstanding. There were no conversions of Series A during the six months ended June 30, 2019.

BIODELIVERY SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(U.S. DOLLARS, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(Unaudited)

Earnings Per Share

During the three months ended June 30, 2019 and 2018, outstanding stock options, RSUs, warrants and preferred shares of 18,131,489 and 23,849,633, respectively, were not included in the computation of diluted earnings per common share, because to do so would have had an antidilutive effect. During the six months ended June 30, 2019 and 2018, outstanding stock options, RSUs, warrants and preferred shares of 17,528,530 and 17,334,492, respectively, were not included in the computation of diluted earnings per common share, because to do so would have had an antidilutive effect. Included in the three and six months ended June 30, 2019 and 2018 are the Series B shares as converted to common stock.

11. Commitments and contingencies:

The Company is involved from time to time in routine legal matters incidental to our business. Based upon available information, the Company believes that the resolution of such matters will not have a material adverse effect on its condensed consolidated financial position or results of operations. Except as discussed below, the Company is not the subject of any pending legal proceedings and, to the knowledge of management, no proceedings are presently contemplated against the Company by any federal, state or local governmental agency.

Indivior (formerly RB Pharmaceuticals Ltd.) and Aquestive Therapeutics (formerly MonoSol Rx)

The following disclosure regarding the Company’s ongoing litigations with Aquestive Therapeutics, Inc. (formerly MonoSol Rx, “Aquestive”) and Indivior PLC (formerly RB Pharmaceuticals Limited, “Indivior”) is intended to provide some background and an update on the matter as required by the rules of the SEC. Additional details regarding the past procedural history of the matter can be found in the Company’s previously filed periodic filings with the SEC.

Litigation related to BUNAVAIL

On October 29, 2013, Reckitt Benckiser, Inc., Indivior, and Aquestive (collectively, the “RB Plaintiffs”) filed an action against the Company relating to its BUNAVAIL product in the United States District Court for the Eastern District of North Carolina (“EDNC”) for alleged patent infringement. BUNAVAIL is a drug approved for the maintenance treatment of opioid dependence. The RB Plaintiffs claim that the formulation for BUNAVAIL, which has never been disclosed publicly, infringes its US Patent No. 8,475,832 (the “‘832 Patent”). On May 21, 2014, the Court granted the Company’s motion to dismiss.

On January 22, 2014, Aquestive initiated an inter partes review (“IPR”) on U.S. Patent No. 7,579,019, the (“‘019 Patent”). The PTAB upheld all claims of the Company’s ‘019 Patent in 2015 and this decision was not appealed by Aquestive.

On September 20, 2014, the Company proactively filed a declaratory judgment action in the United States District Court for the EDNC requesting the Court to make a determination that the Company’s BUNAVAIL product does not infringe the ‘832 Patent, US Patent No. 7,897,080 (the “‘080 Patent”) and US Patent No. 8,652,378 (the “‘378 Patent”). The Company invalidated the “‘080 Patent” in its entirety in an inter partes reexamination proceeding. The Company invalidated all relevant claims of the ‘832 Patent in an IPR proceeding. And, in an IPR proceeding for the ‘378 Patent, in its decision not to institute the IPR proceeding, the PTAB construed the claims of the ‘378 Patent narrowly. Shortly thereafter, by joint motion of the parties, the ‘378 Patent was subsequently removed from the action.

On June 6, 2016, in an unrelated case in which Indivior and Aquestive asserted the ‘832 Patent against other parties, the Delaware District Court entered an order invalidating other claims in the ‘832 Patent. Indivior and Aquestive cross-appealed all adverse findings in that decision to the Court of Appeals for the Federal Circuit in Case No. 17-2587. The Company’s declaratory judgment action remains stayed pending the outcome of that cross-appeal by Indivior and Aquestive.

On September 22, 2014, the RB Plaintiffs filed an action against the Company (and the Company’s commercial partner) relating to the Company’s BUNAVAIL product in the United States District Court for the District of New Jersey for alleged patent infringement. The RB Plaintiffs claim that BUNAVAIL, whose formulation and manufacturing processes have never been disclosed publicly, infringes its patent U.S. Patent No. 8,765,167 (the “‘167 Patent”). The Company believes this is an anticompetitive attempt by the RB Plaintiffs to distract the Company’s efforts from commercializing BUNAVAIL. On December 12, 2014, the Company filed a motion to transfer the case from New Jersey to North Carolina and a motion to dismiss the case against its commercial partner.

BIODELIVERY SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(U.S. DOLLARS, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(Unaudited)

On October 28, 2014, the Company filed multiple IPR petitions on certain claims of the ‘167 Patent. The USPTO instituted three of the four IPR petitions. The PTAB upheld the claims and denied collateral estoppel applied to the PTAB decisions in March 2016. The Company appealed to Court of Appeals for the Federal Circuit. The USPTO intervened with respect to whether collateral estoppel applied to the PTAB. On June 19, 2018, the Company filed a motion to remand the case for further consideration by the PTAB in view of intervening authority. On July 31, 2018, the Federal Circuit vacated the decisions, and remanded the ‘167 Patent IPRs for further consideration on the merits. On February 7, 2019, the PTAB issued three decisions on remand purporting to deny institution of the three previously instituted IPRs of the ‘167 patent. On March 11, 2019, the Company timely appealed the PTAB decisions on remand to U.S. Court of Appeal for the Federal Circuit. On March 20, 2019, Aquestive and Indivior moved to dismiss the appeal, and the Company opposed that motion.

Litigation related to BELBUCA

On January 13, 2017, Aquestive filed a complaint in the United States District Court for the District of New Jersey alleging BELBUCA infringes the ‘167 Patent. In lieu of answering the complaint, the Company filed motions to dismiss the complaint and, in the alternative, to transfer the case to the EDNC. On July 25, 2017, the New Jersey Court administratively terminated the case pending the parties submission of a joint stipulation of transfer because the District of New Jersey was an inappropriate venue. This case was later transferred to the Delaware District Court. On October 31, 2017, the Company filed motions to dismiss the complaint and, in the alternative, to transfer the case to the EDNC. On October 16, 2018, denying the motion to dismiss as moot, the Delaware District Court granted the Company’s motion to transfer the case to the EDNC. On November 20, 2018, the Company moved the EDNC to dismiss the complaint for patent infringement for failure to state a claim for relief. On August 6, 2019, the EDNC granted the Company’s motion to dismiss, and dismissed the complaint without prejudice. The Company strongly refutes as without merit Aquestive’s assertion of patent infringement and will vigorously defend the lawsuit.

Teva Pharmaceuticals USA (formerly Actavis)

On February 8, 2016, the Company received a notice relating to a Paragraph IV certification from Teva Pharmaceuticals USA, or (formerly Actavis, “Teva”) seeking to find invalid three Orange Book listed patents relating specifically to BUNAVAIL. The Paragraph IV certification related to an ANDA filed by Teva with the FDA for a generic formulation of BUNAVAIL. The patents subject to Teva’s certification were the ‘019 Patent, U.S. Patent No. 8,147,866 (the “‘866 Patent”) and 8,703,177 (the “‘177 Patent”).

On March 18, 2016, the Company asserted three different patents against Teva, the ‘019 Patent, the ‘866 Patent, and the ‘177 Patent. Teva did not raise non-infringement positions about the ‘019 and the ‘866 Patents in its Paragraph IV certification. Teva did raise a non-infringement position on the ‘177 Patent but the Company asserted in its complaint that Teva infringed the ‘177 Patent either literally or under the doctrine of equivalents.

On December 20, 2016 the USPTO issued U.S. Patent No. 9,522,188 (“the “‘188 Patent””), and this patent was properly listed in the Orange Book as covering the BUNAVAIL product. On February 23, 2017 Teva sent a Paragraph IV certification adding the 9,522,188 to its ANDA. An amended Complaint was filed, adding the ‘188 Patent to the litigation.

On January 31, 2017, the Company received a notice relating to a Paragraph IV certification from Teva relating to Teva’s ANDA on additional strengths of BUNAVAIL and on March 16, 2017, the Company brought suit against Teva and its parent company on these additional strengths. On June 20, 2017, the Court entered orders staying both BUNAVAIL suits at the request of the parties.

On May 23, 2017, the USPTO issued U.S. Patent 9,655,843 (the “‘843 Patent”) relating to the BEMA technology, and this patent was properly listed in the Orange Book as covering the BUNAVAIL product.

Finally, on October 12, 2017, the Company announced that it had entered into a settlement agreement with Teva that resolved the Company’s BUNAVAIL patent litigation against Teva pending in the U.S. District Court for the District of Delaware. As part of the Settlement Agreement, which is subject to review by the U.S. Federal Trade Commission and the U.S. Department of Justice, the Company has entered into a non-exclusive license agreement with Teva that permits Teva to first begin selling its generic version of BUNAVAIL in the U.S. on July 23, 2028 or earlier under certain circumstances. Other terms of the agreement are confidential.

The Company received notices regarding Paragraph IV certifications from Teva on November 8, 2016, November 10, 2016, and December 22, 2016, seeking to find invalid two Orange Book listed patents relating specifically to BELBUCA. The Paragraph IV certifications relate to three ANDAs filed by Teva with the FDA for a generic formulation of BELBUCA. The patents subject to Teva’s certification were the ‘019 Patent and the ‘866 Patent. The Company filed complaints in Delaware against Teva on December 22, 2016 and February 3, 2017 in which it asserted against Teva the ‘019 Patent and the ‘866 Patent. Teva did not contest infringement of the claims of the ‘019 Patent and did not contest infringement of the claims of the ‘866 Patent.

BIODELIVERY SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(U.S. DOLLARS, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(Unaudited)

The ‘019 Patent had already been the subject of an unrelated IPR before the USPTO under which the Company prevailed, and all claims of the ‘019 Patent survived. Aquestive’s request for rehearing of the final IPR decision regarding the ‘019 Patent was denied by the USPTO on December 19, 2016. Aquestive did not file a timely appeal at the Federal Circuit.

On August 28, 2017, the Court entered orders staying both BELBUCA suits at the request of the parties.

In February 2018, the Company announced that it had entered into a settlement agreement with Teva that resolved the Company’s BELBUCA patent litigation against Teva pending in the U.S. District Court for the District of Delaware. As part of the settlement agreement, which is subject to review by the U.S. Federal Trade Commission and the U.S. Department of Justice, the Company has granted Teva a non-exclusive license (for which the Company will receive no current or future payments) that permits Teva to first begin selling the generic version of the Company’s BELBUCA product in the U.S. on January 23, 2027 or earlier under certain circumstances (including, for example, upon (i) the delisting of the patents-in-suit from the U.S. FDA Orange Book, (ii) the granting of a license by us to a third party to launch another generic form of BELBUCA at a date prior to January 23, 2027, or (iii) the occurrence of certain conditions regarding BELBUCA market share). Other terms of the Agreement are confidential.

Alvogen

On September 7, 2018, the Company filed a complaint for patent infringement in Delaware against Alvogen Pb Research & Development LLC, Alvogen Malta Operations Ltd., Alvogen Pine Brook LLC, Alvogen, Incorporated, and Alvogen Group, Incorporated (collectively, “Alvogen”), asserting that Alvogen infringes the Company’s Orange Book listed patents for BELBUCA ^® , including U.S. Patent Nos. 8,147,866 and 9,655,843, both expiring in July of 2027, and U.S. Patent No. 9,901,539, expiring in December of 2032. This complaint follows receipt by the Company on July 30, 2018 of a Paragraph IV Patent Certification from Alvogen stating that Alvogen had filed an ANDA with the FDA for a generic version of BELBUCA ^® Buccal Film (75 mcg, 150 mcg, 300 mcg, 450 mcg, 600 mcg, 750 mcg and 900 mcg). Because the Company initiated a patent infringement suit to defend the patents identified in the Paragraph IV notice within 45 days after receipt of the Paragraph IV Certification, the FDA is prevented from approving the ANDA until the earlier of 30 months or a decision in the case that each of the patents is not infringed or invalid. Alvogen’s notice letter also does not provide any information on the timing or approval status of its ANDA.

In its Paragraph IV Certification, Alvogen does not contest infringement of at least several independent claims of each of the ’866, ’843, and ’539 patents. Rather, Alvogen advances only invalidly arguments for these independent claims. The Company believes that it will be able to prevail on its claims of infringement of these patents, particularly as Alvogen does not contest infringement of certain claims of each patent. Additionally, as the Company has done in the past, it intends to vigorously defend its intellectual property against assertions of invalidity. Each of the three patents carry a presumption of validity, which can only be overcome by clear and convincing evidence.

2018 Arkansas Opioid Litigation

On March 15, 2018, the State of Arkansas, and certain counties and cities in that State, filed an action in the Circuit Court of Arkansas, Crittenden County against multiple manufacturers, distributors, retailers, and prescribers of opioid analgesics, including the Company. The Company was served with the complaint on April 27, 2018. The complaint specifically alleged that it licensed its branded fentanyl buccal soluble film ONSOLIS to Collegium, and Collegium is also named as a defendant in the lawsuit. ONSOLIS is not presently sold in the United States and the license agreement with Collegium was terminated prior to Collegium launching ONSOLIS in the United States. Therefore, on June 28, 2018, the Company moved to dismiss the case against it and most recently, on July 6, 2018, the plaintiffs filed a notice to voluntarily dismiss us from the Arkansas case, without prejudice.

Chemo Research, S.L

On March 1, 2019, the Company filed a complaint for patent infringement in Delaware against Chemo Research, S.L., Insud Pharma S.L., IntelGenx Corp., and IntelGenx Technologies Corp. (collectively, “Defendants”), asserting that the Defendants infringe its Orange Book listed patents for BELBUCA, including U.S. Patent Nos. 8,147,866 and 9,655,843, both expiring in July of 2027, and U.S. Patent No. 9,901,539 expiring December of 2032. This complaint follows a receipt by the Company on January 31, 2019, of a Notice Letter from Chemo Research S.L. stating that it has filed with the FDA an ANDA containing a Paragraph IV Patent Certification, for a generic version of BELBUA Buccal Film in strengths 75 mcg, 150 mcg, 300 mcg, 450 mcg, and 900 mcg. Because the Company initiated a patent infringement suit to defend the patents identified in the Notice Letter within 45 days after receipt, the FDA is prevented from approving the ANDA until the earlier of 30 months or a decision in the case that each of the patents is not

BIODELIVERY SCIENCES INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(U.S. DOLLARS, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(Unaudited)

infringed or invalid. Chemo Research S.L.’s Notice Letter also does not provide any information on the timing or approval status of its ANDA. On March 15, 2019, the Company filed a complaint against the Defendants in New Jersey asserting the same claims for patent infringement made in the Delaware lawsuit. On April 19, 2019, Defendants filed an answer to the Delaware complaint wherein they denied infringement of the ‘866, ‘843 and ‘539 patents and asserted counterclaims seeking declaratory relief concerning the alleged invalidity and non-infringement of such patents. On April 25, 2019, the Company voluntarily dismissed the New Jersey lawsuit given Defendants’ consent to jurisdiction in Delaware.

The Company believes that it will be able to prevail in this lawsuit. As it has done in the past, the Company intends to vigorously defend its intellectual property against assertions of invalidity.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with the Condensed Consolidated Financial Statements and Notes thereto included elsewhere in this Quarterly Report. This discussion contains certain forward-looking statements that involve risks and uncertainties. Our actual results and the timing of certain events could differ materially from those discussed in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth herein and elsewhere in this Quarterly Report and in our other filings with the SEC. See “Cautionary Note Regarding Forward Looking Statements” below.

Overview

Strategy

Our strategy is evolving with the establishment of our commercial footprint in the management of chronic conditions. We seek to build a well-balanced, diversified, high-growth specialty pharmaceutical company. Through our industry-leading commercialization infrastructure, we are executing the commercialization of our existing products. As part of our corporate growth strategy, we have licensed, and will continue to explore opportunities to acquire or license additional products that meet the needs of patients living with debilitating chronic conditions and treated primarily by therapeutic specialists. As we gain access to these drugs and technologies, we intend to employ our commercialization experience to bring them to the marketplace. With a strong commitment to patient access and a focused business-development approach for transformative acquisitions or licensing opportunities, we intend to leverage our experience and apply it to developing new partnerships that enable us to commercialize novel products that can change the lives of people suffering from debilitating chronic conditions.

Second Quarter and Recent Highlights

•

On April 4, 2019, we entered into an exclusive licensing agreement with Shionogi, Inc. to commercialize Symproic in the United States and Puerto Rico effective immediately, for the treatment of opioid-induced constipation (“OIC”) in adults with chronic non-cancer pain.

•

On April 15, 2019, we completed an underwritten public offering by us and a selling stockholder of 12,000,000 shares of common stock at a public offering price of $5.00 per share. The gross proceeds from our portion of the offering (10,000,000 shares), before deducting the underwriter discounts and commission and other offering expenses, was $50.0 million, or net $47.6 million. The gross proceeds to the selling stockholder was approximately $10.0 million.

•

On May 23, 2019, we refinanced our existing debt agreement with a new facility from BioPharma Credit plc (“Pharmakon”). The new facility consists of a $60.0 million term loan and will generate an estimated $1.5 million in annual interest cost savings compared to the previous debt facility.

•

On July 1, 2019, we were added to the broad-market Russell 3000 ^® Index as well as the Russell 2000 ^® Index at the conclusion of the 2019 Russell indexes annual reconstitution.

•

On June 24, 2019, we shared how our scientific investments for BELBUCA throughout 2019, including clinical trials, publications, and medical education initiatives align with the recommendations regarding buprenorphine from the recently released Pain Management Best Practices Inter-Agency Task Force’s (“Task Force”) final report which proposes best practices for managing chronic and acute pain.

•

On July 9, 2019, we announced that several regional health care plans improved patient access to BELBUCA during the second quarter of this year. Several prominent regional U.S. insurance plans representing an additional six million covered lives enhanced BELBUCA’s coverage to preferred status or initiated coverage for BELBUCA. These six million covered lives brings the total number of commercial lives with access to BELBUCA to more than 165 million, representing more than 90% of the U.S. commercial insurance market.

Our Products and Related Trends

Our product portfolio currently consists of four products that are approved by the FDA. Three of our products utilize our patented BEMA thin film drug delivery technology.

BELBUCA

BELBUCA (buprenorphine buccal film) is a buccal film that contains buprenorphine, a Schedule III opioid, and was approved by the FDA in October 2015 for use in patients with pain severe enough to require daily, around-the-clock, long-term opioid treatment for which alternative options are inadequate. BELBUCA is differentiated from other opioids and has the potential to address some of the most critical issues facing healthcare providers treating chronic pain with prescription opioids – abuse, misuse, addiction and the

risk of overdose. Compared to currently marketed products and products under development, we believe that BELBUCA is differentiated based on the following features:

•

strong and durable efficacy in both opioid naïve and opioid experienced patients;

•

Schedule III designation by DEA, which indicates less abuse and addiction potential compared to Schedule II opioids, which include oxycodone, hydrocodone and morphine;

•

in published studies, investigators observed that respiratory depression from buprenorphine administration reached a plateau, and we believe this ceiling effect may result in a lower risk of overdose related respiratory depression;

•

favorable tolerability with a low incidence of constipation and low discontinuation rate;

•

flexible dosing options with seven available strengths; and

•

buccal administration to optimize buprenorphine delivery.

We believe that there are long-term growth opportunities for BELBUCA and we focus our commercial efforts primarily on BELBUCA. Our sales force is focused on current BELBUCA prescribers and clinicians we believe have the greatest opportunity to be adopters of BELBUCA. As of January 2019, BELBUCA had formulary coverage for more than 88% of commercial lives.

The risks to our company associated with BELBUCA include: (i) inability to manufacture adequate supplies for commercial use; (ii) unexpected product safety issues; (iii) failure of our sales force to effectively sell the product and, (iv) inadequate reimbursement. A technical or commercial failure of BELBUCA would have a material adverse effect on our future revenue potential and would negatively affect investor confidence in our company and our public stock price.

SYMPROIC

Symproic is a peripherally acting mu-opioid receptor antagonist, or PAMORA, and was approved by the FDA on March 23, 2017 for the treatment of opioid-induced constipation in adult patients with chronic non-cancer pain, including patients with chronic pain related to prior cancer or its treatment who do not require frequent (e.g., weekly) opioid dosage escalation. OIC occurs primarily via activation of entericmu-receptors in the small intestine and proximal colon, which results in harder stool and less frequent and less effective defecation. Because OIC results from the specific effects of opioids, it differs mechanistically from other forms of constipation, and deserves dedicated medical management. Compared to currently marketed products and products under development for OIC, we believe that Symproic is differentiated based on the following features:

•

strong and durable efficacy observed in randomized, double-blind, placebo controlled clinical trials of 12 week and 52 week duration in OIC patients;

•

OIC relief that was more frequent, more complete, with less straining than patients taking placebo

•

recommended by the American Gastroenterological Association for patients with laxative refractory OIC;

•

adverse event profile comparable to placebo, with low rates of abdominal pain observed across the phase III program; and

•

the only prescription OIC medication with the convenience of once daily dosing, with only a tablet strength, and that can be taken with or without food and with or without laxatives.

Because of the durable efficacy, tolerability and convenience benefits, we believe that Symproic is a best-in-class PAMORA that reliably provides durable relief of OIC, which frees both the patient and the healthcare provider to focus on treating the patient’s chronic pain.

We believe that there are long-term growth opportunities for Symproic. In 2018, according to data from Symphony Health, the market for PAMORAs included over 550,000 prescriptions dispensed. This represents a 1% growth in prescription volume from 2017. The growth rate of the PAMORAs has slowed since 2017, driven by a decline in opioid prescription rates.

The risks to our company associated with Symproic include: (i) unexpected product safety issues; (ii) inability to continue to supply product in adequate quantities to meet the commercial demand; (iii) inability to continue to reduce Symproic manufacturing costs; (iv) failure of our sales force to effectively sell the product and, (v) inadequate reimbursement.

BUNAVAIL

In June 2014, BUNAVAIL (buprenorphine and naloxone buccal film) was approved by the FDA for the maintenance treatment of opioid dependence as part of a complete treatment plan to include counseling and psychosocial support. BUNAVAIL contains the

partial opioid agonist buprenorphine, which binds to the same receptors as opiate drugs but has a higher affinity, and naloxone, an opioid antagonist and an abuse deterrent.

BUNAVAIL provides an alternative treatment utilizing the advanced BEMA drug delivery technology. BUNAVAIL has approximately twice the bioavailability of sublingual buprenorphine-containing products for opioid dependence, allowing for effective treatment with half the dose when compared to Suboxone film. Additionally, BUNAVAIL offers convenient and discrete buccal administration and avoids the need for patients to avoid talking and swallowing during administration. BUNAVAIL has demonstrated an excellent tolerability profile, with a 68% reduction in the incidence of constipation at the end of 12 weeks in a Phase 3 trial in patients converted from Suboxone sublingual tablets or film to BUNAVAIL. The impact of a growing generic Suboxone market has resulted in declining market conditions, and as such, BUNAVAIL is no longer a core strategic asset for our Company.

Our BUNAVAIL efforts are focused on current BUNAVAIL prescribers and on increasing prescriptions related to current, upcoming and future managed care contracts where BUNAVAIL is placed in a favorable formulary position.

The risks to our company associated with BUNAVAIL include: (i) unexpected product safety issues; (ii) inability to continue to supply product in adequate quantities to meet the commercial demand; (iii) inability to continue to reduce BUNAVAIL manufacturing costs; (iv) failure of our sales force to effectively sell the product and, (v) inadequate reimbursement.

ONSOLIS

In July 2009, ONSOLIS (fentanyl buccal soluble film) was approved for the management of pain that “breaks through” the effects of other medications being used to control persistent pain, or breakthrough pain, in cancer patients 18 years of age and older who are already receiving and who are tolerant to opioid therapy for their underlying persistent cancer pain. We refer to breakthrough pain in opioid tolerant patients with cancer as BTCP. ONSOLIS provides significant reduction in pain for patients suffering from BTCP in a convenient formulation with a range of doses to allow patients to titrate to an adequate level of pain control. We are not currently assessing options for U.S. commercialization of ONSOLIS. Given current declining market conditions, we have no plans to reintroduce the product in the US at this time. The product is no longer strategic for the Company.

We will continue to seek additional license agreements. We anticipate that funding for the next several years will come primarily from earnings from sales of BELBUCA, Symproic and BUNAVAIL, milestone payments and royalties from Mylan and TTY.

Results of Operations

Comparison of the three months ended June 30, 2019 and 2018

Product Sales. We recognized $28.1 million and $10.8 million in product sales during the three months ended June 30, 2019 and 2018, respectively. The increase in 2019 is principally due to increased BELBUCA product sales from the utilization of managed care wins and the acquisition of Symproic.

Product Royalty Revenues. We recognized $1.5 million and $1.4 million in product royalty revenue during the three months ended June 30, 2019 and 2018, respectively. Of the aforementioned amounts, $1.0 million and $0.9 million, respectively, can be attributed to royalties on net sales of BREAKYL under our license agreement with Meda. We recognized $0.5 million and $0.5 million in PAINKYL royalty revenue during the three months ended June 30, 2019 and 2018, respectively, under our license agreement with TTY.

Contract Revenues. We recognized $0.16 million in PAINKYL contract revenue during the three months ended June 30, 2019 under our license agreement with TTY. We recognized $0.02 million in contract revenue during the three months ended June 30, 2018 related to our former license agreement with Purdue for BELBUCA in Canada.

Cost of Sales. We incurred $4.9 million and $4.6 million in cost of sales during the three months ended June 30, 2019 and 2018, respectively. Cost of sales includes product cost, royalties paid, depreciation, yield adjustments and quarterly minimum royalty payments to CDC IV, LLC (“CDC”).

Selling, General and Administrative Expenses. During the three months ended June 30, 2019 and 2018, selling, general and administrative expenses totaled $22.0 million and $14.0 million, respectively. Selling, general and administrative costs include commercialization costs for BELBUCA, BUNAVAIL and Symproic, legal, accounting and management wages, consulting and professional fees, travel costs, stock based compensation and amortization. The increase in selling, general and administrative expenses during the three months ended June 30, 2019 is due to the increase in compensation expense related to our expansion efforts, increased marketing efforts and expenses related to the acquisition of Symproic.

Research and Development. We recognized $0.9 million of research and development expense during the three months ended June 30, 2018 related to allocated wages and compensation to approved products and product candidates. There was no such research and development expense during the three months ended June 30, 2019 due to the Company focusing entirely on commercialized products beginning in 2019.

Interest expense, net . During the three months ended June 30, 2019, we had net interest expense of $13.9 million. During the three months ended June 30, 2019, we had interest expense of $14.2 million, consisting of $11.9 million of one-time costs associated with the refinancing, $1.9 million of scheduled interest payments relating to both loans, $0.3 million of related amortization of discount and loan costs for both the old and new debt arrangements, and $0.1 million of warrant interest expense associated with the former CRG loan.

The one-time expenses related to the payoff of the CRG loan consisted of $5.2 million in unamortized deferred loan fees, $3.9 million in unamortized warrant discount costs and $2.8 million in loan prepayment fees and realized losses, for a cumulative total of $11.9 million in one-time costs.

During the three months ended June 30, 2019, we also had interest income of $0.3 million.

During the three months ended June 30, 2018, we had net interest expense of $2.5 million, consisting of $1.4 million of scheduled interest payments, $0.8 million of related amortization of discount and loan costs and $0.3 million of warrant interest expense, all related to the former CRG loan.

Comparison of the six months ended June 30, 2018 and 2017

Product Sales . We recognized $47.8 million and $20.6 million in product sales during the six months ended June 30, 2019 and 2018, respectively. The increase in 2019 is principally due to increased BELBUCA product sales from the utilization of managed care wins and the acquisition of Symproic.

Product Royalty Revenues . We recognized $1.5 million and $1.8 million in product royalty revenue during the six months ended June 30, 2019 and 2018, respectively. Of the aforementioned amounts, $1.0 million and $0.9 million, respectively, can be attributed to royalty revenue from BREAKYL under our license agreement with Meda. We recognized $0.5 million and $0.9 million during the six months ended June 30, 2019 and 2018, respectively, in PAINKYL royalty revenue under our license agreement with TTY.

Contract Revenues . We recognized $0.16 million in PAINKYL contract revenue during the six months ended June 30, 2019 under our license agreement with TTY. We recognized $1.0 million in contract revenue during the six months ended June 30, 2018 related to our former license agreement with Purdue, which was for the Canadian commercial launch and related milestones.

Cost of Sales . We incurred $9.0 million and $8.0 million in cost of sales during the six months ended June 30, 2019 and 2018, respectively. Cost of sales includes product cost, royalties paid, depreciation, yield adjustments and quarterly minimum royalty payments to CDC.

Selling, General and Administrative Expenses . During the six months ended June 30, 2019 and 2018, selling, general and administrative expenses totaled $38.9 million and $27.5 million, respectively. Selling, general and administrative costs include commercialization costs for BELBUCA, BUNAVAIL and Symproic, management wages and stock-based compensation, legal, accounting and other professional fees, travel costs, and the amortization of our intangible assets including the license and distribution rights from the reacquisition of BELBUCA and the acquisition of Symproic. During the normal course of business, we accrue additional expenses for certain legal matters from time to time, including legal matters related to the protection and enforcement of our intellectual property. The amounts accrued for such legal matters are recorded within accrued expenses on the balance sheet. The increase in selling, general and administrative expenses during 2019 is due to the increase in compensation expense related to our expansion efforts, increased marketing efforts and expenses related to the acquisition of Symproic.

Research and Development. We recognized $3.3 million of research and development expense during the six months ended June 30, 2018 related to allocated wages and compensation to approved products and product candidates. There was no such research and development expense during the six months ended June 30, 2019 due to the Company focusing entirely on commercialized products beginning in 2019.

Interest expense, net . During the six months ended June 30, 2019, we had interest expense of $16.8 million, consisting of $11.9 million of one-time costs associated with the refinancing, $3.9 million of scheduled interest payments relating to both loans, $0.7

million of related amortization of discount and loan costs for both the old and new debt arrangements, and $0.4 million of warrant interest expense associated with the former CRG loan.

During the six months ended June 30, 2019, we also had interest income of $0.3 million.

During the six months ended June 30, 2018, we had net interest expense of $5.0 million, consisting of $1.3 million of scheduled interest payments, $1.8 million of related amortization of discount and loan costs and $0.5 million of warrant interest expense, all related to the former CRG loan.

Revenues

The following table summarizes net product sales for the three- and six-month periods ended June 30 in thousands:


	Three months ended June 30,						Six months ended June 30,
	2019			2018			2019			2018
BELBUCA	$	24,060		$	9,746		$	42,764		$	17,770
% of net product sales		86	%		91	%		89	%		86	%
Symproic		3,175			—			3,175			—
% of net product sales		11	%		—			7	%		—
BUNAVAIL		821			1,020			1,876			2,834
% of net product sales		3	%		9	%		4	%		14	%

Net product sales	$	28,056		$	10,766		$	47,815		$	20,604

Non-GAAP Financial Information:

We report our condensed consolidated financial results in accordance with GAAP; however, we believe that earnings before interest, taxes, depreciation and amortization (“EBITDA”) and other non-GAAP results should be considered in isolation of or as an alternative for, earnings measures prepared in accordance with GAAP. Management uses these non-GAAP measures internally to measure the ongoing operating performance of our Company along with other metrics, and for planning and forecasting purposes. In addition, when evaluating non-GAAP results, we exclude certain items that are considered to be non-cash and if applicable, non-recurring, in nature.

EBITDA and Non-GAAP Income/(Loss):

We have presented EBITDA because it is a key measure used by our management and board of directors to understand and evaluate our operating performance and to develop operational goals for managing our business. We believe this financial measure helps identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude. In particular, we believe that the exclusion of the expenses eliminated in calculating EBITDA can provide a useful measure for period-to-period comparisons of our core operating performance. Accordingly, we believe that EBITDA provides useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects, and allowing for greater transparency with respect to key financial metrics used by our management in its financial and operational decision-making.

EBITDA is not prepared in accordance with GAAP, and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of adjusted EBITDA rather than net income/(loss), which is the nearest GAAP equivalent. Some of these limitations are:

•

EBITDA excludes depreciation and amortization and, although these are non-cash expenses, the assets being depreciated or amortized may have to be replaced in the future, the cash requirements for which are not reflected in EBITDA;

•

EBITDA does not reflect provision for (benefit from) income taxes or the cash requirements to pay taxes; and

•

EBITDA excludes net interest, including both interest expense and interest income.

Non-GAAP net income/(loss) is an alternative view of our performance that we are providing because management believes this information enhances investors’ understanding of our results as it permits investors to better understand the ongoing operations of the business, the impact of any non-recurring one time events, the cash results of the organization and is an additional measure used by management to assess performance.

Non-GAAP net income/(loss) is not prepared in accordance with GAAP, and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of non-GAAP net income/(loss) rather than net income/(loss), which is the nearest GAAP equivalent. Some of these limitations are:

•

Non-GAAP income/(loss) excludes certain one-time items because of the nature of the items and the impact that those have on the analysis of underlying business performance and trends. Specifically, in the presentation of non-GAAP income/(loss) for the three and six months periods ended June 30, 2019, we have excluded the financial impact of our debt refinancing which closed in May 2019, as it is non-recurring. This excluded item is a significant component in understanding and assessing ongoing financial performance. The one-time expenses related to the dissolution of the CRG loan consisted of $5.2 million in unamortized deferred loan fees, $3.9 million in unamortized warrant discount costs and $2.8 million in loan prepayment fees and realized losses, for a cumulative total of $11.9 million in one-time costs;

•

The expenses and other items that we exclude in our calculation of non-GAAP net income/(loss) may differ from the expenses and other items, if any, that other companies may exclude from non-GAAP net income/(loss) when they report their operating results since non-GAAP income/(loss) is not a measure determined in accordance with GAAP, and it has no standardized meaning prescribed by GAAP;

•

We exclude stock-based compensation expense from non-GAAP net income/(loss) although (a) it has been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy and (b) if we did not pay out a portion of our compensation in the form of stock-based compensation, the cash salary expense included in operating expenses would be higher, which would affect our cash position;

•

We exclude amortization of intangible assets from non-GAAP net income/(loss) due to the non-cash nature of this expense and although it has been and will continue to be for the foreseeable future a recurring expense for our business, these expenses do not affect our cash position; and

•

Amortization of warrant discount costs associated with the CRG loan which was dissolved in May 2019 are excluded given these expenses did not affect our cash position;

Reconciliations of non-GAAP metrics to most directly comparable U.S. GAAP financial measures:

The following tables reconcile net income/(loss)earnings and computations (in thousands) under GAAP to a Non-GAAP basis.


	Three Months Ended June 30,						Six Months Ended June 30,
Reconciliation of GAAP net income/(loss) to EBITDA *(non-GAAP)*	2019			2018			2019			2018
GAAP n et income/(l oss )	$	(11,130	)	$	(9,770	)	$	(14,963	)	$	(20,479	)
Add back:
Provision for income taxes		—			(20	)		—			53
Net interest expense		13,929			2,525			16,490			5,037
Depreciation and amortization		1,981			1,679			3,356			3,199

EBITDA	$	4,780		$	( 5,586	)	$	4,883		$	(12,190	)

Reconciliation of GAAP net income/(loss) to Non-GAAP net income/(loss)	$	(11,130	)	$	(9,770	)	$	(14,963	)	$	(20,479	)
Non-GAAP adjustments:
Stock-based compensation expense		1,569			1,084			2,712			4,005
Amortization of intangible assets		1,898			1,289			3,187			2,578
Amortization of warrant discount		179			269			448			538
Non-recurring financial impact of debt refinance		11,866			—			11,866			—

Non-GAAP net income/(loss)	$	4,382		$	( 7,128	)	$	3,250		$	(13,358	)

Liquidity and Capital Resources

Since inception, we have financed our operations principally from the sale of equity securities, proceeds from borrowings, convertible notes, and notes payable, funded research arrangements, revenue generated as a result of our worldwide license and development agreements and the commercialization of our BELBUCA, Symproic and BUNAVAIL products. We intend to finance our commercialization and working capital needs from existing cash, earnings from the commercialization of BELBUCA, Symproic and BUNAVAIL, royalty revenue, new sources of debt and equity financing, existing and new licensing and commercial partnership agreements and, potentially, through the exercise of outstanding common stock options and warrants to purchase common stock.

At June 30, 2019, we had cash of approximately $57.2 million. We used $4.4 million of cash in operations during the six months ended June 30, 2019. We believe that we have sufficient cash to manage the business as currently planned.

Additional capital may be required to support the continued commercialization of our BELBUCA, Symproic and BUNAVAIL products, as well as other products which may be acquired or licensed by us, and for general working capital requirements. Based on product development timelines and agreements with our partners, the ability to scale up or reduce personnel and associated costs are factors considered throughout the product life cycle. Available resources may be consumed more rapidly than currently anticipated, potentially resulting in the need for additional funding. Additional funding, capital or loans (including, without limitation, milestone or other payments from commercialization agreements) may be unavailable on favorable terms, if at all.

Accordingly, we anticipate that we may be required to raise additional capital, which may be available to us through a variety of sources, including:

•

public equity markets;

•

private equity financings;

•

commercialization agreements and collaborative arrangements;

•

sale of product royalty;

•

grants and new license revenues;

•

bank loans;

•

equipment financing;

•

public or private debt; and

•

exercise of existing warrants and options.

Readers are cautioned that additional funding, capital or loans (including, without limitation, milestone or other payments from commercialization agreements) may be unavailable on favorable terms, if at all. If adequate funds are not available, we may be required to significantly reduce or refocus our operations or to obtain funds through arrangements that may require us to relinquish rights to certain technologies and drug formulations or potential markets, either of which could have a material adverse effect on us, our financial condition and our results of operations in 2019 and beyond. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of such securities would result in ownership dilution to existing stockholders.

Contractual Obligations and Commercial Commitments

Our contractual obligations as of June 30, 2019 are as follows in thousands:


	Payments Due by Period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Lease obligations	$	1,126	$	355	$	740	$	31	$	—
Secured loan facility		60,000		—		4,615		55,385		—
Interest on secured loan facility		28,100		6,747		12,192		9,161		—
Minimum royalty expenses*		12,000		1,500		3,000		3,000		4,500
Purchase obligations**		1,015		493		522		—		—

Total contractual cash obligations	$	102,241	$	9,095	$	21,069	$	67,577	$	4,500

*	Minimum royalty expenses represent a contractual floor that we are obligated to pay CDC and NB Athyrium LLC regardless of actual sales. The minimum payment is $0.4 million per quarter or $1.5 million per year until patent expiry on July 23, 2027.

**	Purchase obligations represent an agreement for the supply of active pharmaceutical ingredient for use in production.

Off-Balance Sheet Arrangements

As of June 30, 2019, we had no off-balance sheet arrangements.

Effects of Inflation

We do not believe that inflation has had a material effect on our financial position or results of operations. However, there can be no assurance that our business will not be affected by inflation in the future.

Critical Accounting Policies

For information regarding our critical accounting policies and estimates, please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” contained in our annual report on Form 10-K for the year ended December 31, 2018 (the “2018 Annual Report”).

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Foreign currency exchange risk

We currently have, and may in the future have increased, commercial, manufacturing and clinical agreements which are denominated in Euros or other foreign currencies. As a result, our financial results could be affected by factors such as a change in the foreign currency exchange rate between the U.S. dollar or Euro or other applicable currencies, or by weak economic conditions in Europe or elsewhere in the world. Such amounts are currently immaterial to our financial position or results of operations. We are not currently engaged in any foreign currency hedging activities.

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report, our management, with the participation of our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial officer) (the “Certifying Officers”), conducted evaluations of our disclosure controls and procedures. As defined under Sections 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the term “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or

submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures include without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including the Certifying Officers, to allow timely decisions regarding required disclosures.

Readers are cautioned that our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our control have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any control design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

Based on this evaluation, the Certifying Officers have concluded that our disclosure controls and procedures were effective as of June 30, 2019.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during our second quarter of 2019 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS

Certain information set forth in this Quarterly Report on Form 10-Q, including in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (and the “Liquidity and Capital Resources” section thereof) and elsewhere may address or relate to future events and expectations and as such constitutes “forward-looking statements” within the meaning of the Private Securities Litigation Act of 1995. Such forward-looking statements involve significant risks and uncertainties. Such statements may include, without limitation, statements with respect to our plans, objectives, projections, expectations and intentions and other statements identified by words such as “projects,” “may,” “could,” “would,” “should,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans” or similar expressions. These statements are based upon the current beliefs and expectations of our management and are subject to significant risks and uncertainties, including those detailed in our filings with the SEC. Actual results, including, without limitation: (i) actual sales results (including the results of our continuing commercial efforts with BELBUCA, Symproic and BUNAVAIL), (ii) the application and availability of corporate funds and our need for future funds, (iii) the timing for completion, and results of, scheduled or additional clinical trials and the FDA’s review and/or approval and commercial activities for our products and product candidates and regulatory filings related to the same or (iv) the results of our ongoing intellectual property litigations and patent office proceedings, may differ significantly from those set forth or anticipated in the forward-looking statements. Such forward-looking statements also involve other factors which may cause our actual results, performance or achievements to materially differ from any future results, performance, or achievements expressed or implied by such forward-looking statements and to vary significantly from reporting period to reporting period. Such factors include, among others, those listed under Item 1A of our 2018 Annual Report and other factors detailed from time to time in our other filings with the SEC. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual future results will not be different from the expectations expressed in this Quarterly Report. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings.

See Note 11, Commitments and Contingencies, to our condensed consolidated financial statements included in Part I, Item I of this Quarterly Report on Form 10-Q, which is incorporated into this item by reference.

Item 1A.

Risk Factors.

We are dependent on third party suppliers for key components of our delivery technologies, products and product candidates.

Key components of our drug delivery technologies, products and product candidates, including for BELBUCA, Symproic and BUNAVAIL, may be provided by sole or limited numbers of suppliers, and supply shortages or loss of these suppliers could result in interruptions in supply or increased costs. Certain components used in our development activities, such as the active pharmaceutical ingredients, or API, of our products, are currently purchased from a single or a limited number of outside sources. The reliance on a sole or limited number of suppliers could result in:

•

delays associated with development and non-clinical and clinical trials due to an inability to timely obtain a single or limited source component;

•

inability to timely obtain a sufficient quantities of API and an adequate supply of required components; and

•

reduced control over pricing, quality and timely delivery.

Our relationships with our manufacturers and suppliers are particularly important to us and any loss of or material diminution of their capabilities due to factors such as regulatory issues, accidents, acts of God or any other factor would have a material adverse effect on our company. Any loss of or interruption in the supply of components from our suppliers or other third-party suppliers would require us to seek alternative sources of supply or require us to manufacture these components internally, which we are currently not able to do.

If the supply of any components is lost or interrupted, API, product or components from alternative suppliers may not be available in sufficient quality or in volumes within required time frames, if at all, to meet our or our partners’ needs. This could delay our ability to complete clinical trials, obtain approval for commercialization or commence marketing or cause us to lose sales, force us into breach of other agreements, incur additional costs, delay new product introductions or harm our reputation. Furthermore, product or components from a new supplier may not be identical to those provided by the original supplier. Such differences could have material effects on our overall business plan and timing, could fall outside of regulatory requirements, affect product formulations or the safety and effectiveness of our products that are being developed.

If our competitors are successful in obtaining approval for Abbreviated New Drug Applications for products that have the same active ingredients as BELBUCA, Symproic or BUNAVAIL, sales of BELBUCA, Symproic or BUNAVAIL may be adversely affected.

Our competitors may submit for approval certain Abbreviated New Drug Applications, or ANDAs, which provide for the marketing of a drug product that has the same active ingredients in the same strengths and dosage form as a drug product already listed with the FDA, and which has been shown to be bioequivalent to such FDA-listed drug. Drugs approved in this way are commonly referred to as generic versions of a listed drug and can often be substituted by pharmacists under prescriptions written for an original listed drug. Any applicant filing an ANDA is required to make patent certifications to the FDA, such as certification to the FDA that the new product subject to the ANDA will not infringe an already approved product’s listed patents or that such patents are invalid (otherwise known as a Paragraph IV Certification).

In February 2016, we announced that a generic competitor, Teva Pharmaceutical Industries Ltd., or Teva, had filed a Paragraph IV Certification challenging certain of our BUNAVAIL-related patents and we received notices regarding Paragraph IV certifications from Teva in November and December 2016, seeking to find invalid two Orange Book listed patents relating specifically to BELBUCA. The filing of this certification required us to initiate costly litigation against Teva. In addition, a number of our competitor companies have filed Paragraph IV Certifications challenging the patent for Suboxone ^® film, the market leader in the field in which we are seeking to generate sales of BUNAVAIL. To the extent that any company is successful in challenging the validity of certain patents covering BUNAVAIL or Suboxone ^® film under a Paragraph IV Certification, it could result in FDA approval of a drug that is lower in price to BUNAVAIL or Suboxone ^® film. Such a new drug could make it more difficult for BUNAVAIL to gain any significant market share in an increasingly generic marketplace, which would have a material adverse effect on our results of operations, cash flow, reputation and stock price.

In October 2017, we announced that we had entered into a settlement agreement with Teva that resolved our BUNAVAIL patent litigation against Teva pending in the U.S. District Court for the District of Delaware. As part of the Settlement Agreement, which is subject to review by the U.S. Federal Trade Commission and the U.S. Department of Justice, we entered into a non-exclusive license agreement with Teva that permits Teva to first begin selling its generic version of BUNAVAIL in the U.S. on July 23, 2028 or earlier under certain circumstances. Other terms of the agreement are confidential.

In February 2018, we announced that we had entered into a Settlement Agreement with Teva that resolves our previously reported BELBUCA, patent litigation against Teva pending in the United States District Court for the District of Delaware. As part of the settlement agreement, which is subject to review by the U.S. Federal Trade Commission and the U.S. Department of Justice, we entered into a non-exclusive license agreement with Teva that permits Teva to first begin selling its generic version of BELBUCA in the U.S. on January 23, 2027 or earlier under certain circumstances. Other terms of the agreement are confidential.

As such, we have been and may continue to be subject to ANDA-related litigation, which is costly and distracting and has the potential to impair the long-term value of our products.

We are presently a party to lawsuits by third parties who claim that our products, methods of manufacture or methods of use infringe on their intellectual property rights, and we may be exposed to these types of claims in the future.

We are presently, and may continue to be, exposed to litigation by third parties based on claims that our technologies, processes, formulations, methods, or products infringe the intellectual property rights of others or that we have misappropriated the trade secrets of others. This risk is exacerbated by the fact that the validity and breadth of claims covered in pharmaceutical patents is, in most instances, uncertain and highly complex. Any litigation or claims against us, whether or not valid, would result in substantial costs, could place a significant strain on our financial and human resources and could harm our reputation. Such a situation may force us to do one or more of the following:

•

incur significant costs in legal expenses for defending against an intellectual property infringement suit;

•

delay the launch of, or cease selling, making, importing, incorporating or using one or more or all of our technologies and/or formulations or products that incorporate the challenged intellectual property, which would adversely affect our revenue;

•

obtain a license from the holder of the infringed intellectual property right, which license may be costly or may not be available on reasonable terms, if at all; or

•

redesign our formulations or products, which would be costly and time-consuming.

With respect to our BEMA delivery technology, the thin film drug delivery technology space is highly competitive. There is a risk that a court of law in the United States or elsewhere could determine that one or more of our BEMA based products conflicts with or covered by external patents. This risk presently exists in our litigation with Reckitt Benckiser, Inc., RB Pharmaceuticals Limited, and Aquestive Therapeutics, Inc. (formerly known as MonoSol Rx LLC, or Aquestive) relating to our BUNAVAIL product which was filed in September 2014 and in our litigation with Aquestive relating to our BELBUCA product which was filed in January 2017. If the courts in these cases were to rule against us and our partner in these cases, we could be forced to license technology from Aquestive or be prevented from marketing BUNAVAIL or BELBUCA, or otherwise incur liability for damages, which could have a material adverse effect on our ability for us or our partners to market and sell BUNAVAIL or BELBUCA.

We have been granted non-exclusive license rights to European Patent No. 949 925, which is controlled by LTS to market BELBUCA and ONSOLIS within the countries of the European Union. We are required to pay a low single digit royalty on sales of products that are covered by this patent in the European Union. We have not conducted freedom to operate searches and analyses for our other proposed products. Moreover, the possibility exists that a patent could issue that would cover one or more of our products, requiring us to defend a patent infringement suit or necessitating a patent validity challenge that would be costly, time consuming and possibly unsuccessful.

Our lawsuits with Aquestive and RB Pharmaceuticals have caused us to incur significant legal costs to defend ourselves, and we would be subject to similar costs if we are a party to similar lawsuits in the future Furthermore, if a court were to determine that we infringe any other patents and that such patents are valid, we might be required to seek one or more licenses to commercialize our BEMA products. We may be unable to obtain such licenses from the patent holders, which could materially and adversely impact our business.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3.

Defaults upon Senior Securities.

None.

Item 4.

Mine Safety Disclosures.

Not applicable.

Item 5.

Other Information.

None.

Item 6.

Exhibits.


Number		Description

3.1		Amended and Restated Bylaws of the Company *

10.1		Exclusive License Agreement dated April 4, 2019 between the Company and Shionogi Inc. (1)

10.2		Loan Agreement dated May 23, 2019 between the Company and Biopharma Credit PLC *†

10.3		2019 Stock Option and Incentive Plan (2)

10.4		Form of Incentive Stock Option Agreement under the 2019 Stock Option and Incentive Plan.*

10.5		Form of Nonqualified Stock Option Agreement for Company Employees under the 2019 Stock Option and Incentive Plan.*

10.6		Form of Nonqualified Stock Option Agreement for Non-Employee Directors under the 2019 Stock Option and Incentive Plan.*

10.7		Form of Restricted Stock Unit Award Agreement for Company Employees under the 2019 Stock Option and Incentive Plan.*

10.8		Form of Restricted Stock Unit Award Agreement for Non-Employee Directors under the 2019 Stock Option and Incentive Plan.*

31.1		Certification of Principal Executive Officer Pursuant To Sarbanes-Oxley Section 302. *

31.2		Certification of Principal Financial Officer Pursuant To Sarbanes-Oxley Section 302. *

32.1		Certification Pursuant To 18 U.S.C. Section 1350. #

32.2		Certification Pursuant To 18 U.S.C. Section 1350. #

101.ins		XBRL Instance Document.

101.sch		XBRL Taxonomy Extension Schema Document.

101.cal		XBRL Taxonomy Calculation Linkbase Document.

101.def		XBRL Taxonomy Definition Linkbase Document.

101.lab		XBRL Taxonomy Label Linkbase Document.

101.pre		XBRL Taxonomy Presentation Linkbase Document.

(1)	Incorporated by reference to the Company’s Form 8-K filed on April 10, 2019.

(2)	Incorporated by reference to Appendix A of the Company’s Form DEF 14A filed on June 17, 2019

*	Filed herewith, a signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

†	Portions of this exhibit (indicated by asterisks) have been omitted in accordance with the rules of the Securities and Exchange Commission.

This certification will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent specifically incorporated by reference into such filing.

SIGNATURES

Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	BIODELIVERY SCIENCES INTERNATIONAL, INC.

Date: August 8, 2019	By:	/s/ Herm Cukier
		Herm Cukier
		Chief Executive Officer and Director
		(Principal Executive Officer)

Date: August 8, 2019	By:	/s/ Mary Theresa Coelho
		Mary Theresa Coelho
		Treasurer and Chief Financial Officer
		(Principal Financial and Accounting Officer)

S-1

Exhibit 3.1

STATE OF DELAWARE

SECRETARY OF STATE

DIVISION OF CORPORATIONS

FILED 09:00 AM 04/18/2002

020247943 - 3515699

CERTIFICATE OF INCORPORATION

BIODELIVERY SCIENCES INTERNATIONAL, INC.

FIRST: The name of the corporation is:

BIODELIVERY SCIENCES INTERNATIONAL, INC.

SECOND: The address of its registered office in the State of Delaware is 9 East Loockerman Street, Delaware, Delaware 19901, County of Kent. The name of its registered agent at such address is National Registered Agents, Inc.

THIRD: The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (the “GCL”).

FOURTH: The Corporation shall have perpetual existence.

FIFTH: The total number of shares of capital stock which the corporation shall have authority to issue is fifty million (50,000,000) shares, consisting of forty-five million (45,000,000) shares of common stock, each of the par value of one-thousandths of one cent ($.001) (the “Common Stock”) and five million (5,000,000) shares of preferred stock, each of the par value of one-thousandth of one cent ($.001) each (the “Preferred Stock”).

The Preferred Stock shall be issued by the Board of Directors in one or more classes or one or more series within any classes and such classes or series shall have such voting powers (or lack thereof) and such designations, preferences, limitations or restrictions as the Board of Directors may from time to time determine.

Holders of shares of Common Stock shall be entitled to cast one vote for each share held at all stockholders’ meetings for all purposes, including the election of directors. The Common Stock shall not have cumulative voting rights.

No holder of shares of stock of any class shall be entitled as a matter of right to subscribe for or purchase or receive any part of any new or additional issue of shares of stock of any class or of securities convertible into shares of stock of any class, whether now or hereafter authorized or whether issued for money, for consideration other than money, or by way of dividend.

SIXTH: The Board of Directors shall have the power to adopt, amend or repeal the bylaws of the Corporation.

SEVENTH: No director shall be personally liable to the Corporation or its shareholders for monetary damages for any breach of fiduciary duty by such director as a

director. Notwithstanding the foregoing sentence, a director shall be liable to the extent provided by applicable law, (i) for breach of the director’s duty of loyalty to the Corporation or its shareholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the GCL, or (iv) for any transaction from which the director derived an improper personal benefit. If the GCL hereafter is amended to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the Corporation, in addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted by the GCL, as amended. No amendment to or repeal of this Article Seventh shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment.

EIGHTH: The Corporation shall, to the maximum extent permitted under the General Corporation Law of the State of Delaware and except as set forth below, indemnify, hold harmless and, upon request, advance expenses to each person (and the heirs, executors or administrators of such person) who was or is a party or is 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 the fact that he or she is or was, or has agreed to become, a director or officer of the Corporation, or is or was serving, or has agreed to serve, at the request of the Corporation, as a director, officer or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise, including any employee benefit plan (any such person being referred to hereafter as an “Indemnitee”), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her or on his or her behalf in connection with such action, suit or proceeding and any appeal therefrom, if he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. Notwithstanding anything to the contrary in this Article, the Corporation shall not indemnify an Indemnitee seeking indemnification in connection with any action, suit, proceeding, claim or counterclaim, or part thereof, initiated by the Indemnitee unless the initiation thereof was approved by the Board of Directors of the Corporation.

1. Advance of Expenses. Notwithstanding any other provisions, this Certificate of Incorporation, the By-Laws of the Corporation, or any agreement, vote of stockholder or disinterested directors, or arrangement to the contrary, the Corporation shall advance payment of expenses incurred by an Indemnitee in advance of the final disposition of any matter only upon receipt of an undertaking by or on behalf of the Indemnitee to repay all amounts so advanced in the event that it shall ultimately be determined that the Indemnitee is not entitled to be indemnified by the Corporation as authorized in this Article. Such undertaking may be accepted without reference to the financial ability of the Indemnitee to make such repayment.

2. Subsequent Amendment. No amendment, termination or repeal of this Article or of the relevant provisions of the General Corporation Law of the State of Delaware or any other applicable laws shall affect or diminish in any way the rights of any Indemnitee to indemnification under the provisions hereof with respect to any action, suit, proceeding or investigation arising out of or relating to any actions, transactions or facts occurring prior to the final adoption of such amendment, termination or repeal.

3. Other Rights. The Corporation may, to the extent authorized from time to time by its Board of Directors, grant indemnification rights to other employees or agents of the Corporation or other persons serving the Corporation and such rights may be equivalent to, or greater or less than, those set forth in this Article.

4. Reliance. Persons who after the date of the adoption of this provision become or remain directors or officers of the Corporation or who, while a director or officer of the Corporation, become or remain a director, officer, employee or agent of a subsidiary, shall be conclusively presumed to have relied on the rights to indemnity, advance of expenses and other rights contained in this Article in entering into or continuing such service. The rights to indemnification and to the advance of expenses conferred in this Article shall apply to claims made against an Indemnitee arising out of acts or omissions which occurred or occur both prior and subsequent to the adoption hereof.

5. Merger or Consolidation. If the Corporation is merged into or consolidated with another corporation and the Corporation is not the surviving corporation, the surviving corporation shall assume the obligations of the Corporation under this Article with respect to any action, suit, proceeding or investigation arising out of or relating to any actions, transactions or facts occurring prior to the date of such merger or consolidation.

6. Insurance. The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was, or has agreed to become, a director, officer, employee or agent of the Corporation, or is or was serving, or has agreed to serve, at the request of the Corporation as a director, officer, employee, agent or trustee of another corporation, partnership, joint venture, trust or other enterprise, including any employee benefit plan, against all expenses (including attorney’s fees) judgments, fines or amounts paid in settlement incurred by such person in any such capacity or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such expenses under the General Corporation Law of the State of Delaware.

7. Savings Clause. If this Article or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each Indemnitee as to any expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement in connection with any action, suit, proceeding or investigation, whether civil, criminal or administrative, including an action by or in the right of the Corporation, to the fullest

extent permitted by any applicable portion of this Article that shall not have been invalidated and to the fullest extent permitted by applicable law.

NINTH: The Board of Directors shall have authority from time to time to set apart out of any assets of the Corporation otherwise available for dividends a reserve or reserves as working capital or for any other purpose or purposes, and to abolish or add to any such reserve or reserves from time to time as said board may deem to be in the interest of the Corporation; and said Board shall likewise have power to determine in its discretion, except as herein otherwise provided, what part of the assets of the Corporation available for dividends in excess of such reserve or reserves shall be declared in dividends and paid to the stockholders of the Corporation.

1. Issuance of Stock. The shares of all classes of stock of the Corporation may be issued by the Corporation from time to time for such consideration as from time to time may be fixed by the Board of Directors of the Corporation, provided that shares of stock having a par value shall not be issued for a consideration less than such par value, as determined by the Board. At any time, or from time to time, the Corporation may grant rights or options to purchase from the Corporation any shares of its stock of any class or classes to run for such period of time, for such consideration, upon such terms and conditions, and in such form as the Board of Directors may determine. The Board of Directors shall have authority, as provided by law, to determine that only a part of the consideration which shall be received by the Corporation for the shares of its stock which it shall issue from time to time, shall be capital; provided, however, that, if all the shares issued shall be shares having a par value, the amount of the part of such consideration so determined to be capital shall be equal to the aggregate par value of such shares. The excess, if any, at any time, of the total net assets of the Corporation over the amount so determined to be capital, as aforesaid, shall be surplus. All classes of stock of the Corporation shall be and remain at all times nonassessable. The Board of Directors is hereby expressly authorized, in its discretion, in connection with the issuance of any obligations or stock of the Corporation (but without intending hereby to limit its general power so to do in other cases), to grant rights or options to purchase stock of the Corporation of any class upon such terms and during such period as the Board of Directors shall determine, and to cause such rights to be evidenced by such warrants or other instruments as it may deem advisable.

2. Inspection of Books and Records. The Board of Directors shall have power from time to time to determine to what extent and at what times and places and under what conditions and regulations the accounts and books of the Corporation, or any of them, shall be open to the inspection of the stockholders; and no stockholder shall have any right to inspect any account or book or document of the Corporation, except as conferred by the laws of the State of Delaware, unless and until authorized so to do by resolution of the Board of Directors or of the stockholders of the Corporation.

3. Tender Offer. The Board of Directors of this Corporation, when evaluating any offer of another party to make a tender or exchange offer for any equity security of the Corporation,

shall, in connection with the exercise of its judgment in determining what is in the best interests of the Corporation as a whole, be authorized to give due consideration to any such factors as the Board of Directors determines to be relevant, including without limitation: (i) the interests of the stockholders of the Corporation; (ii) whether the proposed transaction might violate federal or state laws; (iii) not only the consideration being offered in the proposed transaction, in relation of the then current market price for the outstanding capital stock of the Corporation, but also to the market price for the capital stock of the Corporation over a period of years, the estimated price that might be achieved in a negotiated sale of the Corporation as a whole or in part or through orderly liquidation, the premiums over market price for the securities of other corporations in similar transactions, current political, economic and other factors bearing on securities prices and the Corporation’s financial condition and future prospects; and (iv) the social, legal and economic effects upon employees, suppliers, customers and others having similar relationships with the Corporation, and the communities in which the Corporation conducts its business. In connection with any such evaluation, the Board of Directors is authorized to conduct such investigations and to engage in such legal proceedings as the Board of Directors may determine.

TENTH: To the extent allowed by the Delaware General Corporation Law, the Corporation expressly elects not to be governed by Section 203 of the Delaware General Corporation Law.

ELEVENTH: The name and mailing address of the incorporator is: Tony Ngo, Esq., c/o Ellenoff Grossman Schole & Cyruli, LLP, 370 Lexington Avenue, New York, New York 10017.

IN WITNESS WHEREOF, the undersigned hereby executes this certificate of incorporation this 18 ^th day of April, 2002.

/s/ Tony Ngo

Tony Ngo

Sole Incorporator

STATE OF DELAWARE

SECRETARY OF STATE

DIVISION OF CORPORATIONS

FILED 09:00 AM 06/03/2002

020353595 - 3515699

CERTIFICATE OF OWNERSHIP AND MERGER

BIODELIVERY SCIENCES INTERNATIONAL, INC.

(an Indiana corporation)

into

BIODELIVERY SCIENCES INTERNATIONAL, INC.

(a Delaware corporation)

Pursuant to Section 253 of the Delaware General Corporation Law

It is hereby certified that:

1. BIODELIVERY SCIENCES INTERNATIONAL, INC. (hereinafter called the “Corporation”) is a corporation of the State of Indiana, the laws of which permit a merger of a corporation of that jurisdiction with a corporation of another jurisdiction.

2. The Corporation, as the owner of all of the outstanding shares of capital stock consisting of common stock, $.001 par value, and preferred stock, $.001 par value, of BIODELIVERY SCIENCES INTERNATIONAL, INC. (“BDSI-DE”), hereby merges itself into BDSI-DE, a corporation of the State of Delaware.

3. The following is a similar copy of the resolutions adopted on the 29 ^th day of April, 2002, by the Board of Directors of the Corporation to merge the Corporation into BDSI-DE:

RESOLVED that this Corporation be reincorporated in the State of Delaware by merging itself into BDSI-DE pursuant to the laws of the State of Indiana and the State of Delaware as hereinafter provided, so that the separate existence of this Corporation shall cease as soon as the merger shall become effective, and thereupon this Corporation and BDSI-DE will become a single corporation, which shall continue to exist under, and be governed by, the laws of the State of Delaware.

RESOLVED that the terms and conditions of the proposed merger are as follows:

(a) From and after the effective time of the merger, all of the estate, property, rights, privileges, powers, and franchises of this Corporation shall become vested in and be held by BDSI-DE as fully and entirely and without change or diminution as the same were before held and enjoyed by this Corporation, and BDSI-DE

Delaware Certificate of Ownership and Merger - Foreign

Parent into Delaware Subsidiary 1/96 - 1

shall assume all of the obligations of this corporation.

(b) All the issued and outstanding shares of BDSI-DE which are owned by this Corporation immediately prior to the effective time of the merger shall be made, and such shares shall be cancelled upon the effectiveness of the Merger.

(c) Each share of common stock, $.001 par value, of this Corporation which shall be issued and outstanding immediately prior to the effective time of the merger shall be converted into one issued and outstanding share of common stock, $.001 par value, of BDSI-DE, and, from and after the effective time of the merger, the holders of all of said issued and outstanding shares of common stock of this corporation shall automatically be and become holders of shares of BDSI-DE upon the basis above specified, whether or not certificates representing said shares are then issued and delivered. Each share of common stock, $.001 par value, of this Corporation which shall be issued and held by it as a treasury share immediately prior to the effective time of the merger shall be converted into one share of common stock, $.001 par value, of BDSI-DE and shall be held in the treasury of BDSI-DE.

(d) The Corporation’s authorized shares of Preferred Stock are cancelled upon the effective date of the Merger and no shared of Preffered Stock will be issued by BDSI-DE

(e) After the effective time of the merger, each holder of record of any outstanding certificate or certificates theretofore representing common stock of this corporation may surrender the same to BDSI-DE at its office in New Jersey and such holder shall be entitled upon such surrender to receive in exchange therefor a certificate or certificates representing an equal number of shares of common stock of BDSI-DE. Until so surrendered, each outstanding certificate which prior to the effective time of the merger represented one or more shares of common stock of this corporation shall be deemed for all corporate purposes to evidence ownership of an equal number of shares of common stock of BDSI-DE.

(f) From and after the effective time of the merger, the Certificate of Incorporation and the By-Laws of BDSI-DE shall be the Certificate of Incorporation and the By-Laws of BDSI-DE as in effect immediately prior to such effective time.

Delaware Certificate of Ownership and Merger - Foreign

Parent into Delaware Subsidiary 1/96 - 2

(g) The members of the Board of Directors and officers of BDSI-DE shall be the members of the Board of Directors and the corresponding officers of BDSI-DE immediately before the effective time of the merger.

(h) From and after the effective time of the merger, the assets and liabilities of this Corporation and of BDSI-DE shall be entered on the books of BDSI-DE at the amounts at which they shall be carried at such time on the respective books of this Corporation and of BDSI-DE, subject to such inter-corporate adjustments or eliminations, if any, as may be required to give effect to the merger; and, subject to such action as may be taken by the Board of Directors of BDSI-DE, in accordance with generally accepted accounting principles, the capital and surplus of BDSI-DE shall be equal to the capital and surplus of this Corporation and of BDSI-DE.

RESOLVED that, in the event that the proposed merger shall not be terminated, the proper officers of this Corporation be and they hereby are authorized and directed to make and execute a Certificate of Ownership and Merger setting forth a copy of these resolutions to merge itself into BDSI-DE and the date of adoption thereof, and to cause the same to be filed and recorded as provided by law, and to do all acts and things whatsoever, within the State of Indiana and Delaware in any other appropriate jurisdiction, necessary or proper to effect this merger.

4. The proposed merger herein certified has been adopted, approved, certified, executed, and acknowledged by BioDelivery Sciences International, Inc. in accordance with the laws under which it is organized (Indiana).

Delaware Certificate of Ownership and Merger - Foreign

Parent into Delaware Subsidiary 1/96 - 3

Executed on this 3rd day of June, 2002.


BIODELIVERY SCIENCES INTERNATIONAL, INC. (an Indiana corporation)

By:		/s/ Francis E. O’Donnell, Jr.
		Francis E. O’Donnell, Jr., President

Delaware Certificate of Ownership and Merger - Foreign

Parent into Delaware Subsidiary 1/96 - 4

CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS

SERIES A NON-VOTING CONVERTIBLE PREFERRED STOCK

BIODELIVERY SCIENCES INTERNATIONAL, INC.

Acting pursuant to Sections 151(a) and (g) of the Delaware General Corporation Law, the undersigned, Francis E. O’Donnell, Jr., the duly elected and acting Chairman, President and Chief Executive Officer of BioDelivery Sciences International, Inc., a Delaware corporation, hereby certifies that the Board of Directors of the Company duly approved the following Certificate of Designation of Series A Non-Voting Convertible Preferred Stock of the Company on July 29, 2004, and that the Certificate of Incorporation of the Company expressly authorizes the Board to so designate and issue one or more series of preferred stock, par value $.001 per share, of the Company. The designations, powers, preferences and relative, participating, optional or other special rights, and the qualifications, limitations and restrictions thereof in respect of the shares said Series A Non-Voting Convertible Preferred Stock of the Company are as described in the following resolution, duly adopted by the Board of Directors of the Company:

“WHEREAS, the Certificate of Incorporation of BioDelivery Sciences International, Inc., a Delaware corporation (the “Company”) authorizes a class (or classes) of up to five million (5,000,000) shares of preferred stock, par value $.001 per share (the “Preferred Stock”), and provides that such Preferred Stock may be issued from time to time in one or more series and vests authority in the Board of Directors of the Company (the “Board”) to fix or alter the rights, preferences, privileges, restrictions and other matters granted to or imposed upon any wholly unissued series of the Preferred Stock;

WHEREAS, the Company has not heretofore issued any Preferred Stock; and

WHEREAS, it is the desire of the Board to fix and determine the rights, preferences, privileges, restrictions and other matters relating to one million six hundred forty-seven thousand and fifty nine (1,647,059) shares of Series A Non-Voting Convertible Preferred Stock of the Company (the “Series A Stock”).

NOW, THEREFORE, BE IT RESOLVED, that pursuant to authority expressly granted to and vested in the Board by the Certificate of Incorporation of the Company, there is hereby created, out of the five million (5,000,000) shares of Preferred Stock authorized in Article FOURTH of the Certificate of Incorporation a series of Preferred Stock, consisting of one million six hundred forty-seven thousand and fifty nine (1,647,059) shares and having the designations, powers, number, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof set forth below:

A. Authorized Number . One million six hundred forty-seven thousand and fifty nine (1,647,059) of the authorized shares of Preferred Stock are hereby designated “Series A Non-Voting Convertible Preferred Stock.”

State of Delaware

Secretary of State

Division of Corporations

Delivered 05:00 PM 08/20/2004

FILED 05:00 PM 08/20/2004

SRV 040612391 - 3515699 FILE

B. Designation . The rights, preferences, privileges, restrictions and other matters relating to Series A Stock are as follows:

1. Dividend Rights . Holders of Series A Stock shall be entitled to receive, pari passu with holders of common stock, par value $.001 per share, of the Company (the “Common Stock”), all cash or in-kind dividends or distributions (including, without limitation, in the case of a distribution by the Company spin-off of limited liability company interests in the Company’s subsidiary, Bioral Nutrient Delivery, LLC) on an as converted basis from time to time at any time declared, set aside, or paid by the Company in an amount that would have been received by the holders of Series A Stock (assuming, for purposes of the calculation, that the holders of Series A Stock had lawfully converted such Series A Stock into shares of Common Stock immediately prior to the record date for determining the holders of Common Stock entitled to receive such distribution at the then-applicable Series A Stock Conversion Rate), in each case only when, as and if declared by the Board, and, in the case of cash dividends, only out of funds that are legally available therefor. Such dividends shall be non-cumulative.

2. Voting Rights . The holders of shares of Series A Stock shall not have any voting or approval rights whatsoever except as expressly set forth herein. Notwithstanding the foregoing, the Company shall not amend or modify this Certificate of Designations without the prior written consent of the holders of a majority of the then outstanding shares of Series A Stock.

3. Liquidation Rights .

(a) Upon any Liquidation Event (as defined below), subject to the rights and preferences of any shares of the Company’s preferred stock having liquidation rights senior to those of the Series A Stock, the assets and funds of the Company legally available for distribution to its stockholders shall be distributed ratably (the “Liquidation Event Distribution”) among the holders of the Common Stock and Series A Stock as if such shares of Series A Stock had been converted into Common Stock at the then-applicable Series A Stock Conversion Rate immediately prior to such distribution, without any further action by the holders of such shares; provided, however, that all declared and unpaid dividends, if any, shall be paid in accordance with the provisions of Section 5(g) below; provided further, however, that the Company’s obligations with respect to the Liquidation Event Distribution shall be contingent upon the delivery of the certificates evidencing such shares of Series A Stock to the Company or its transfer agent as provided below, or the notification by the holder to the Company or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with such certificates;

(b) For purposes hereof, the term “Liquidation Event” shall mean (i) any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, or (ii) a transaction or series of related transactions resulting in any of the following:

(A) a sale, lease, transfer, exchange or other disposition of all or substantially all the assets of the Company;

(B) a merger (with or into any other entity), consolidation, sale or reorganization.

(C) the transfer by one or more stockholders of the Company of securities of the Company representing 50% or more of the combined voting power of the then outstanding securities of the Company.

(c) Upon the occurrence of any Liquidation Event that would involve the distribution of assets other than cash with respect to the outstanding shares of Series A Stock, the amount of such distribution shall be the fair market value thereof at the time of such distribution as determined in good faith by the Board of Directors of the Company, and any securities to be distributed in such event shall be valued as follows:

(i) Securities not subject to investment letter or other similar restrictions on free marketability covered by subsection (ii) hereof:

(A)

if traded on a securities exchange or through the Nasdaq National Market or Nasdaq SmallCap Market, the value shall be deemed to be the average of the closing sales prices of the securities on such exchange over the 30-day period ending three (3) business days prior to the closing;

(B)

if actively traded over-the-counter, the value shall be deemed to be the average of the closing sale prices (whichever is applicable) over the 30-day period ending three (3) business days prior to the closing; and

(C)

if there is no active public market, the value shall be the fair market value thereof, as reasonably determined by the Board of Directors of the Company in good faith.

(ii) The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder’s status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as provided in clauses (A), (B) or (C) of subsection (i) of this subsection (c), to reflect the adjusted fair market value thereof, as reasonably determined by the Board of Directors of the Company in good faith.

4. Redemption . There shall be no obligation on the part of the Company to redeem any shares of Series A Stock nor on the part of any holder thereof to submit any such shares for redemption.

5. Conversion Rights . The holders of Series A Stock shall have the following rights with respect to the conversion of Series A Stock into shares of Common Stock:

(a) Optional Conversion . Subject to and in compliance with the provisions of this Section 5, all (but not less than all; provided, however that, in the event a holder of Series A Stock is prevented from converting all of its shares of Series A Stock into Common Stock as a result of the limitation referred to in Section 5(p) below, such holder (i) may immediately convert the maximum number of shares of Series A Stock permitted to be converted thereunder (all but not less than all) and (ii) shall be entitled to convert the balance of such shares of Series A Stock into Common Stock upon the Company’s obtaining the requisite stockholder approval) of the shares of Series A Stock held by the holders thereof may be converted, at the individual option of each such holder, into fully-paid and non-assessable shares of Common Stock at any time following (but not prior to) the earliest to occur of:

(i) on thirty (30) days written notice by such holder to the Company following the occurrence of the Conversion Event;

(ii) the first approval by the U.S Food and Drug Administration for the marketing and sale by the Company or any of its subsidiaries of any of the following products: Emezine, BEMA-Fentanyl, BEMA-Sumitriptan or any product which primarily incorporates technology similar to the foregoing for the buccal delivery of pharmaceuticals ( “FDA Approval ” ); or

(iii) August 24, 2009,

The number of shares of Common Stock to which a holder of Series A Stock shall be entitled upon conversion shall be the product obtained by multiplying the Series A Stock Conversion Rate (as defined below) then in effect by the number of shares of Series A Stock being converted.

As used herein, the term “Conversion Event” shall mean the failure of the Company to provide at least $3,000,000 (which amount shall not be subject to surrender or repayment) to the surviving entity (the “Surviving Entity”) in that certain merger of Arius Pharmaceuticals, Inc. (“Arius”) with and into Arius Acquisition Corp., a wholly-owned subsidiary of the Company (“Merger Sub”) as required to: (i) pay Atrix Laboratories, Inc. (“Atrix”) $1,000,000 by August 24, 2004 pursuant to the terms of that certain license agreement between Arius and Atrix and (ii) fund, in a total amount of no less than $2,000,000, the operations of the Surviving Entity in accordance with the Business Plan (as defined in that certain Agreement and Plan of Merger and Reorganization, dated August 10, 2004, among the Company, Arius, Merger Sub, Mark A. Sirgo (“Sirgo”), and Andrew L. Finn (“Finn”), subject to any changes to such Business Plan mutually agreed upon by the Company and Sirgo.

(b) Termination Conversion .

(i) Upon termination by the Company of Sirgo’s employment with the Company without Good Cause (as that term is defined in, and otherwise in accordance with, that certain Employment Agreement between Sirgo and the Company, dated August 24, 2004 (the “Sirgo Agreement”)) or the termination of such employment by Sirgo for Good Reason (as defined in the Sirgo Agreement), in either case prior to an FDA Approval, all (but not

less than all, subject to any limitations on the extent of such conversion under Section 5(p) below) of the shares of Series A Stock held by Sirgo may be converted, at the option of Sirgo, into fully-paid and non-assessable shares of Common Stock at any time thereafter.

(ii) Upon termination by the Company of Finn’s employment with the Company without Good Cause (as that term is defined in, and otherwise in accordance with, that certain Employment Agreement, dated August 24, 2004 between Finn and the Company (the “Finn Agreement”)) or termination of such employment by Finn for Good Reason (as defined in the Finn Agreement), prior to an FDA Approval in either case, all (but not less than all, subject to any limitations on the extent of such conversion under Section 5(p) below) of the shares of Series A Stock held by Finn may be converted, at the option of Finn, into fully-paid and non-assessable shares of Common Stock at any time thereafter.

(c) Conversion Rate . The conversion rate in effect at any time for conversion of the Series A Stock (the “Series A Stock Conversion Rate” ) shall be the quotient obtained by dividing the Series A Stock Original Issue Price by the Series A Stock Conversion Price (as defined below). The “Series A Original Issue Price” shall be Four Dollars and Twenty-Five Cents ($4.25) per share.

(d) Conversion Price . The conversion price for Series A Stock (the “Series A Stock Conversion Price” ) shall initially be Four Dollars and Twenty-Five Cents ($4.25) per share, which is equal to one hundred percent 100% of the Series A Original Issue Price. Such initial Series A Stock Conversion Price shall be adjusted from time to time in accordance with this Section 5. All references to Series A Stock Conversion Price herein shall mean the Series A Stock Conversion Price as so adjusted.

(e) Fractional Shares . No fractional shares of Common Stock shall be issued upon conversion of Series A Stock. All shares of Common Stock (including fractions thereof) issuable upon conversion of more than one share of Series A Stock by a holder thereof shall be aggregated for purposes of determining whether the conversion would result in the issuance of any fractional share. If, after the aforementioned aggregation, the conversion would result in the issuance of any fractional share, the Company shall, in lieu of issuing any fractional share, pay cash equal to the product of such fraction multiplied by the Common Stock’s fair market value (as determined by the Board) on the date of conversion.

outstanding shares of Series A Stock, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose.

(g) Notices . Any notice required by the provisions of this Section 5 shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed facsimile if sent during normal business hours of the recipient; if not, then on the next business day, (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (iv) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All notices shall be addressed to each holder of record at the address of such holder appearing on the books of the Company.

(h) Mechanics of Conversion . Each holder of Series A Stock who converts the same into shares of Common Stock pursuant to this Section 5 shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Company or any transfer agent for Series A Stock, and shall give written notice to the Company at such office that such holder elects to convert the same. Such notice shall state the number of shares of Series A Stock being converted, which shall be no less than all of the shares of Series A Stock held by the holder. Thereupon, or, with respect to any voluntary conversion of Series A Stock following a Conversion Event, but prior to the occurrence of any other condition permitting voluntary conversion of a holder’s Series A Stock under Section 5(a) or Section 5(b), no sooner than thirty (30) days following notice from such holder regarding such conversion, the Company shall promptly issue and deliver at such office to such holder a certificate or certificates for the number of shares of Common Stock to which such holder is entitled and shall promptly pay in cash or, to the extent sufficient funds are not then legally available therefor, in Common Stock (at the Common Stock’s fair market value determined by the Board as of the date of such conversion), any declared and unpaid dividends on the shares of Series A Stock being converted. Such conversion shall be deemed to have been made at the close of business on the date of such surrender of the certificates representing the shares of Series A Stock to be converted, or, with respect to any voluntary conversion of Series A Stock following a Conversion Event, but prior to the occurrence of any other condition permitting voluntary conversion of a holder’s Series A Stock under Section 5(a) or Section 5(b), on the date thirty (30) days following notice from such holder regarding such conversion, and the person entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder of such shares of Common Stock on such date.

(i) Adjustment for Stock Splits and Combinations . If the Company shall at any time or from time to time after the date that the first share of Series A Stock is issued (the “Series A Original Issue Date” ) effect a subdivision of the outstanding Common Stock without a corresponding subdivision of Series A Stock, the Series A Stock Conversion Price in effect immediately before that subdivision shall be proportionately decreased. Conversely, if the Company shall at any time or from time to time after the Series A Original Issue Date combine the outstanding shares of Common Stock into a smaller number of shares without a corresponding combination of Series A Stock, the Series A Stock Conversion Price in effect immediately before the combination shall be proportionately increased. Any adjustment under

this Section 5(i) shall become effective at the close of business on the date the subdivision or combination becomes effective.

(j) Adjustment for Common Stock Dividends and Distributions . If the Company at any time or from time to time after the Series A Original Issue Date makes, or fixes a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, in each such event the Series A Stock Conversion Price that is then in effect shall be decreased as of the time of such issuance or, in the event such record date is fixed, as of the close of business on such record date, by multiplying the Series A Stock Conversion Price then in effect by a fraction (1) the numerator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and (2) the denominator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however , that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series A Stock Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Series A Stock Conversion Price shall be adjusted pursuant to this Section 5(i) to reflect the actual payment of such dividend or distribution.

(k) Adjustments for Other Dividends and Distributions . If the Company at any time or from time to time after the Series A Original Issue Date makes, or fixes a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Company other than shares of Common Stock, in each such event provision shall be made so that the holders of Series A Stock shall receive upon conversion thereof, in addition to the number of shares of Common Stock receivable thereupon, the amount of other securities of the Company which they would have received had their Series A Stock been converted into Common Stock on the date of such event and had they thereafter, during the period from the date of such event to and including the conversion date, retained such securities receivable by them as aforesaid during such period, subject to all other adjustments called for during such period under this Section 5 with respect to the rights of the holders of Series A Stock or with respect to such other securities by their terms.

(l) Adjustment for Reclassification, Exchange and Substitution . If at any time or from time to time after the Series A Original Issue Date, the shares of Common Stock issuable upon the conversion of Series A Stock is changed into the same or a different number of shares of any class or classes of stock, whether by recapitalization, reclassification or otherwise (other than a subdivision or combination of shares or stock dividend or a reorganization, merger, consolidation or sale of assets provided for elsewhere in this Section 5), in any such event each holder of Series A Stock shall have the right thereafter to convert such stock into the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification or other change by holders of the maximum number of shares of Common Stock into which such shares of Series A Stock could have been converted immediately prior to such recapitalization, reclassification or change, all subject to further adjustment as provided herein or with respect to such other securities or property by the terms thereof.

(m) Reorganizations, Mergers, Consolidations or Sales of Assets . If at any time or from time to time after the Series A Original Issue Date, there is a capital reorganization of Common Stock (other than a recapitalization, subdivision, combination, reclassification, exchange or substitution of shares provided for elsewhere in this Section 5 or (ii) a Liquidation Event, as defined in Section 3 above), as a part of such capital reorganization, provision shall be made so that the holders of Series A Stock shall thereafter be entitled to receive upon conversion of Series A Stock the number of shares of stock or other securities or property of the Company to which a holder of the number of shares of Common Stock deliverable upon conversion would have been entitled on such capital reorganization, subject to adjustment in respect of such stock or securities by the terms thereof. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 5 with respect to the rights of the holders of Series A Stock after the capital reorganization to the end that the provisions of this Section 5 (including adjustment of the Series A Stock Conversion Price then in effect and the number of shares issuable upon conversion of the Series A Stock) shall be applicable after that event and be as nearly equivalent as practicable.

(n) Certificate of Adjustment . In each case of an adjustment or readjustment of the Series A Stock Conversion Price for the number of shares of Common Stock or other securities issuable upon conversion of Series A Stock, if Series A Stock is then convertible pursuant to this Section 5, the Company, at its expense, shall compute such adjustment or readjustment in accordance with the provisions hereof and prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to each registered holder of Series A Stock at the holder’s address as shown in the Company’s books. The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (1) the consideration received or deemed to be received by the Company for any Additional Shares of Common Stock issued or sold or deemed to have been issued or sold, (2) the Series A Stock Conversion Price at the time in effect, (3) the number of Additional Shares of Common Stock and (4) the type and amount, if any, of other property which at the time would be received upon conversion of the Series A Stock.

(o) Notices of Record Date . Upon: (i) any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or (ii) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company, any merger or consolidation of the Company with or into any other entity, or any transfer of all or substantially all of the assets of the Company or any voluntary or involuntary dissolution, liquidation or winding up of the Company, the Company shall mail to each holder of Series A Stock at least ten (10) days prior to the record date specified therein a notice specifying (1) the date on which any such record is to be taken for the purpose of such dividend or distribution and a description of such dividend or distribution, (2) the date on which any such acquisition, reorganization, reclassification, transfer, consolidation, merger, asset transfer, dissolution, liquidation or winding up is expected to become effective, and (3) the date, if any, that is to be fixed as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property

deliverable upon such acquisition, reorganization, reclassification, transfer, consolidation, merger, asset transfer, dissolution, liquidation or winding up.

(p) 19.99% Limitation . Notwithstanding anything in this Certificate of Designations to the contrary, if, at the time that any shares of Series A Stock are converted pursuant to the terms hereof, the Common Stock is listed for quotation on The Nasdaq SmallCap Market or The Nasdaq National Market (collectively, “Nasdaq”), then, without the prior approval of the Company’s stockholders in accordance with the rules of Nasdaq, in no event shall the Company issue shares of Common Stock upon conversion of the Series A Stock to the extent that the total aggregate number of shares of Common Stock issued or deemed to be issued at any time to any holder or all holders of Series A Stock would exceed 19.99% of the issued and outstanding shares of Common Stock immediately prior to the effective time of the merger of Arius Pharmaceuticals, Inc., a Delaware corporation, with and into Arius Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of the Company.

6. No Reissuance of Series A Stock . No share or shares of Series A Stock acquired by the Company by reason of redemption, purchase, conversion or otherwise shall be reissued. In addition, this Certificate of Designations shall be appropriately amended to effect the corresponding reduction in the Company’s authorized stock.

7. No Preemptive Rights . No stockholders of the Company, including, without limitation, the holders of Series A Stock, shall have preemptive rights.

[remainder of page intentionally left blank]

IN WITNESS WHEREOF, the Company has caused this Certificate of Designation of Series A Non-Voting Convertible Preferred Stock to be duly executed by its President and Chief Executive Officer and attested to by its Secretary on this 20 ^th day of August, 2004.


BIODELIVERY SCIENCES INTERNATIONAL, INC.



By:		/s/ Francis E. O’Donnell, Jr.
		Name: Francis E. O’Donnell, Jr.
		Title: President and Chief Executive Officer

ATTEST:

/s/ James A. McNulty

James A. McNulty, Secretary

CERTIFICATE OF CORRECTION OF

CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF

SERIES A NON-VOTING CONVERTIBLE PREFERRED STOCK

BIODELIVERY SCIENCES INTERNATIONAL, INC.

It is hereby certified that:

1. The name of the corporation is BioDelivery Sciences International, Inc. (the “Corporation”).

2. The Certificate of Designations, Preferences and Rights of Series A Non-Voting Convertible Preferred Stock of the Corporation (the “Certificate of Designations”), which was filed with the Secretary of State of Delaware on August 20, 2004 is hereby corrected.

3. The inaccuracy to be corrected in the Certificate of Designations is as follows:

The first proviso in Section 3(a) of the Certificate of Designations was included in the Certificate of Designations by error.

4. The portion of the instrument in corrected form is as follows:

Section 3(a) of the Certificate of Designations is hereby corrected in its entirety to read as follows:

(a) Upon any Liquidation Event (as defined below), subject to the rights and preferences of any shares of the Company’s preferred stock having liquidation rights senior to those of the Series A Stock, the assets and funds of the Company legally available for distribution to its stockholders shall be distributed ratably (the “Liquidation Event Distribution”) among the holders of the Common Stock and Series A Stock as if such shares of Series A Stock had been converted into Common Stock at the then-applicable Series A Stock Conversion Rate immediately prior to such distribution, without any further action by the holders of such shares; provided, however, that all declared and unpaid dividends, if any, shall be paid to holders of Series A Stock in cash or, to the extent sufficient funds are not then legally available therefor, in Common Stock (at the Common Stock’s fair market value determined by the Board as of the date of such payment); provided further, however, that the Company’s obligations with respect to the Liquidation Event Distribution shall be contingent upon the delivery of the certificates evidencing such shares of Series A Stock to the Company or its transfer agent as provided below, or the notification by the holder to the Company or its transfer agent that such certificates have been lost, stolen or destroyed and execution of an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with such certificates;

Dated: August 25, 2004

/s/ James A. McNulty

James A. McNulty

Secretary, Treasurer and Chief Financial Officer

State of Delaware

Secretary of State

Division of Corporations

Delivered 03:10 PM 08/25/2004

FILED 03:10 PM 08/25/2004

SRV 040621854 - 3515699 FILE

State of Delaware

Secretary of State

Division of Corporations

Delivered 09:27 AM 09/02/2004

FILED 09:27 AM 09/02/2004

SRV 040640143 - 3515699 FILE

CERTIFICATE OF CORRECTION OF

CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF

SERIES A NON-VOTING CONVERTIBLE PREFERRED STOCK

BIODELIVERY SCIENCES INTERNATIONAL, INC.

It is hereby certified that:

1. The name of the corporation is BioDelivery Sciences International, Inc. (the “Corporation”).

2. The Certificate of Designations, Preferences and Rights of Series A Non-Voting Convertible Preferred Stock of the Corporation (as corrected, the “Certificate of Designations”), which was filed with the Secretary of State of Delaware on August 20, 2004 is hereby further corrected.

3. The inaccuracy to be corrected in the Certificate of Designations is as follows:

Certain provisions contained in Section 5(p) of the Certificate of Designations were included in the Certificate of Designations by error.

4. The portion of the instrument in corrected form is as follows:

Section 5(p) of the Certificate of Designations is hereby corrected in its entirety to read as follows:

(p) 19.99% Limitation . Notwithstanding anything in this Certificate of Designations to the contrary, without the prior approval of the Company’s stockholders, in no event shall the Company issue shares of Common Stock at any time upon conversion of the Series A Stock to the extent that the total aggregate number of shares of Common Stock issued or deemed to be issued at any time to any holder or all holders of Series A Stock would exceed 19.99% of the issued and outstanding shares of Common Stock immediately prior to the effective time of the merger of Arius Pharmaceuticals, Inc., a Delaware corporation, with and into Arius Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of the Company.

Dated: September 2, 2004

/s/ James A. McNulty

James A. McNulty

Secretary, Treasurer and Chief Financial Officer

State of Delaware

Secretary of State

Division of Corporations

Delivered 05:18 PM 09/03/2004

FILED 05:18 PM 09/03/2004

SRV 040645497 - 3515699 FILE

CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS

SERIES B CONVERTIBLE PREFERRED STOCK

BIODELIVERY SCIENCES INTERNATIONAL, INC.

Acting pursuant to Sections 151(a) and (g) of the Delaware General Corporation Law, the undersigned, Francis E. O’Donnell, Jr., the duly elected and acting Chairman, President and Chief Executive Officer of BioDelivery Sciences International, Inc., a Delaware corporation, hereby certifies that the Board of Directors of the Company duly approved the following Certificate of Designation of Series B Convertible Preferred Stock of the Company on August 23, 2004, and that the Certificate of Incorporation of the Company expressly authorizes the Board to so designate and issue one or more series of preferred stock, par value $.001 per share, of the Company. The designations, powers, preferences and relative, participating, optional or other special rights, and the qualifications, limitations and restrictions thereof in respect of the shares said Series B Convertible Preferred Stock of the Company are as described in the following resolution, duly adopted by the Board of Directors of the Company:

“ WHEREAS , the Certificate of Incorporation of BioDelivery Sciences International, Inc., a Delaware corporation (the “ Company ”) authorizes a class (or classes) of up to five million (5,000,000) shares of preferred stock, par value $.001 per share (the “ Preferred Stock ”), and provides that such Preferred Stock may be issued from time to time in one or more series and vests authority in the Board of Directors of the Company (the “ Board ”) to fix or alter the rights, preferences, privileges, restrictions and other matters granted to or imposed upon any wholly unissued series of the Preferred Stock; and

WHEREAS , it is the desire of the Board to fix and determine the rights, preferences, privileges, restrictions and other matters relating to nine hundred and forty-one thousand one hundred and seventy-seven (941,177) shares of Series B Convertible Preferred Stock of the Company (the “ Series B Stock ”).

NOW, THEREFORE, BE IT RESOLVED , that pursuant to authority expressly granted to and vested in the Board by the Certificate of Incorporation of the Company, there is hereby created, out of the five million (5,000,000) shares of Preferred Stock authorized in Article FOURTH of the Certificate of Incorporation a series of Preferred Stock, consisting of nine hundred and forty-one thousand one hundred and seventy-seven (941,177) shares and having the designations, powers, number, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof set forth below:

A. Authorized Number . Nine hundred and forty-one thousand one hundred and seventy-seven (941,177) shares of the authorized shares of Preferred Stock are hereby designated “Series B Convertible Preferred Stock.”

B. Ranking . The Series B Stock shall rank, as to payment of dividends and distribution of assets upon liquidation, dissolution or winding up of the Company: (a) senior to

the shares of common stock, par value $.001 per share, of the Company (the “Common Stock”), (b) senior to the shares of Series A Non-Voting Convertible Preferred Stock, par value .001 per share (“Series A Stock”), (c) senior to any other class or series of capital stock issued by the Company which by its terms ranks junior to the Series B Stock (collectively, with the Common Stock and the Series A Stock, the “Junior Stock”), (d) pari passu with any class or series of capital stock issued by the Company which by its terms ranks pari passu with the Series B Stock (the “Parity Stock”) and (e) junior to any class or series of capital stock issued by the Company which by its terms ranks senior to the Series B Stock (the “Senior Stock”).

C. Designation . The rights, preferences, privileges, restrictions and other matters relating to Series B Stock are as follows:

1. Dividend Rights .

(a) Computation and Preference of Cumulative Cash Dividends . Subject to the rights of the holders of any Parity Stock or Senior Stock which may be issued from time to time by the Company, the holders of the outstanding shares of Series B Stock shall be entitled to receive, out of any funds legally available therefor, prior and in preference to any declaration or payment of any cash dividend on any shares of Junior Stock, cash dividends or distributions on a cumulative (but not compounding) basis at the annual rate of four and one-half percent (4.5%), compounded annually, of the Series B Face Amount (as defined below), calculated on a 360-day per year basis, based on the actual number of days elapsed. Such dividends shall be payable only when, as and if declared by the Board of Directors and shall be cumulative (but not compounding) and shall accrue from the date of the initial issuance of the applicable shares of Series B Preferred by the Company. No dividends or other distributions shall be made on or with respect to any shares of Junior Stock unless, prior thereto, all declared and unpaid dividends on the Series B Stock shall be declared, set aside and paid on all the then outstanding shares of Series B Stock, payable as if such shares of Series B Stock were fully converted into shares of Common Stock. As used in this Certificate of Designations, the term “Series B Face Amount” shall mean an amount equal to $4.25 per share of Series B Stock (subject to equitable adjustment for any stock dividend, stock split, combination, reorganization, recapitalization, reclassification or other similar event involving a change in the Company’s capital structure (collectively, “Splits”)).

(b) Certain Calculation Conventions . For purposes of calculating dividends for the Series B Stock, on each anniversary of the issuance date for such share of Series B Stock, the accrued and unpaid dividends for the prior one year shall be deemed added to the Series B Face Amount, for purposes of calculating the amount of dividends on the Series B Stock thereafter. Dividends on the outstanding shares of Series B Stock shall accrue from day to day on each share from the date of original issuance of such share, whether or not earned or declared, and shall accrue until paid. All numbers relating to calculation of cumulative dividends shall be subject to equitable adjustment in the event of any Splits.

(c) In-Kind Distributions . The holders of the outstanding shares of Series B Stock shall be entitled to receive in-kind distributions of property made by the Company (including, without limitation, in the case of a distribution by the Company spin-off of limited

liability company interests in the Company’s subsidiary, Bioral Nutrient Delivery, LLC) on an as converted basis.

(d) Payment in Common Stock . Each dividend on the outstanding shares of the Series B Stock shall be paid, at the sole election of the Company, in either cash or in shares of Common Stock. If the Company elects to pay dividends in shares of Common Stock, dividends shall be paid in full shares only, with an additional share to be paid for any fractional shares. Upon conversion of any shares of the Series B Stock, the dividends provided for under this Section (C)(1) shall cease to accrue, provided, however , that any dividends declared on the Common Stock to be received upon conversion of the shares of Series B Stock (the “Conversion Shares”) shall accrue on any such Conversion Shares, including shares of Common Stock received in payments of the dividends provided for under this Section (C)(1).

2. Voting Rights . The holders of shares of Series B Stock shall not have any voting or approval rights whatsoever. Notwithstanding the foregoing, the Company shall not amend or modify this Certificate of Designations without the prior written consent of the holders of a majority of the then outstanding shares of Series B Stock.

3. Liquidation Rights .

(a) Subject to the rights of the holders of any Parity Stock or Senior Stock which may be issued from time to time by the Company, upon any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, before any distribution or payment shall be made to the holders of any Junior Stock, the holders of Series B Stock shall be entitled to be paid out of the assets of the Company an amount per share of Series B Stock equal to the Series B Face Amount (as adjusted for any Splits), plus all declared and unpaid dividends on such shares of Series B Stock, if any (collectively, the “Series B Liquidation Preference).

(b) After the payment of the full Series B Liquidation Preference, the remaining assets of the Company legally available for distribution, if any, shall be distributed ratably to the holders of any Junior Stock, including the holders of Common Stock. The holders of Series B Stock shall not participate in any such distribution of remaining assets.

(c) Subject to the rights of the holders of any Parity Stock or Senior Stock which may be issued from time to time by the Company, if, upon any liquidation, distribution, or winding up, the assets of the Company shall be insufficient to make payment in full of the Series B Liquidation Preference to all holders of Series B Stock, then such assets shall be distributed among the holders of Series B Stock ratably in proportion to the full amounts to which they would otherwise be respectively entitled.

4. Redemption .

(a) No Redemption by Series B Stock Holders . There shall be no obligation on the part of the Company to redeem any shares of Series B Stock nor any right of any holder of Series B Stock to submit any such shares for redemption or otherwise cause the Company to purchase such shares.

(b) Optional Redemption by the Company .

(i) Generally . If not earlier redeemed, part or all of the Series B Stock shall be subject to optional redemption by the Company at any time prior to conversion at a redemption price equal to the Series B Face Amount per share plus any accrued but unpaid dividends thereon (the “Redemption Price per Share”).

(ii) Number of Shares Subject to Redemption . Any redemption of fewer than all outstanding shares of Series B Stock effected pursuant to this Section (C)4(b) shall be made on a pro-rata basis among the holders of the Series B Stock in proportion to the shares of Series B Stock then held by them.

(iii) Redemption Date; Notice of Redemption . Any date on which a redemption is effectuated shall be known herein as the “Series B Redemption Date.” At least 10 but no more than 30 days prior to each Series B Redemption Date written notice shall be delivered to each holder of record (at the close of business on the business day next preceding the day on which notice is given) of the Series B Stock to be redeemed, at the address, fax number or e-mail address last shown on the records of the Company for such holder, notifying such holder of the redemption to be effected, specifying the number of shares to be redeemed from such holder, the Series B Redemption Date, the Redemption Price per Share, the place at which payment may be obtained and calling upon such holder to surrender to the Company, in the manner and at the place designated, its certificate or certificates representing the shares to be redeemed (the “Series B Redemption Notice”).

(iv) Redemption Procedure .

(A) Except as provided in Section (C)4(c) below, on or after the Series B Redemption Date, each holder of Series B Preferred Stock to be redeemed shall surrender to the Company the certificate or certificates representing such shares, in the manner and at the place designated in the Series B Redemption Notice, and thereupon the Series B Redemption Price per Share for the aggregate shares redeemed shall be paid to the order of the person or entity (“Person”) whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be cancelled. In the event that less than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares.

(B) From and after the Series B Redemption Date, unless there shall have been a default in payment in connection with such redemption, all rights of the holders of shares of Series B Stock designated for redemption in the Series B Redemption Notice as holders of Series B Stock (except the right to receive the redemption price without interest upon surrender of their certificate or certificates) shall cease with respect to such shares, and such shares shall not thereafter be transferred on the books of the Company or be deemed to be outstanding for any purpose whatsoever.

(c) Certain Redemption Restrictions . Subject to the rights of the holders of any Parity Stock or Senior Stock which may be issued from time to time by the

Company, if funds of the Company legally available for redemption of shares of Series B Stock on any Series B Redemption Date are insufficient to redeem the total number of shares of Series B Stock to be redeemed on such date, those funds which are legally available will be used to redeem the maximum possible number of such shares ratably among the holders of such shares to be redeemed based upon their holdings of Series B Stock. The shares of Series B Stock not redeemed shall remain outstanding and entitled to all the rights and preferences provided herein. Subject to the rights of other series of Preferred Stock which may from time to time come into existence, at any time thereafter when additional funds of the Company are legally available for the redemption of shares of Series B Stock, such funds will immediately be used to redeem the balance of the shares which the Company has become obliged to redeem on any Series B Redemption Date but which it has not redeemed.

5. Conversion Rights . The holders of Series B Stock shall have the following rights with respect to the conversion of Series B Stock into shares of Common Stock:

(a) Optional Conversion . Subject to and in compliance with the provisions of this Section (C)(5), all or any portion of the shares of Series B Stock held by the holders thereof may be converted, at the option of the holders thereof, into fully-paid and nonassessable shares of Common Stock at any time following (but not prior to) the earliest to occur of:

(i) the occurrence of a Change of Control; or

(ii) April 1, 2006.

The number of shares of Common Stock to which a holder of Series B Stock shall be entitled upon conversion shall be the product obtained by multiplying the Series B Stock Conversion Rate (as defined below) then in effect by the number of shares of Series B Stock being converted. As used herein, the term “Change in Control” shall mean the occurrence of one or more of the following events: (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person (together with such Person’s affiliates and associates within the meanings set forth in Rule 12b-2 under the Securities Exchange Act of 1934, as amended), in a single transaction or through a series of related transactions, of securities of the Company ordinarily having the right to elect a majority of directors or other individuals performing similar functions, (b) any sale or disposition, in a single transaction or through a series of related transactions, of all or substantially all of the assets of the Company, other than leases, licenses and/or distribution arrangements entered into by the Company consistent with industry practice with respect to non-sale transactions, (c) any merger or consolidation of the Company with or into another Person, or (d) the adoption of a plan relating to the liquidation or dissolution of the Company.

(b) Conversion Rate . The conversion rate in effect at any time for conversion of the Series B Stock (the “Series B Stock Conversion Rate”) shall be the quotient obtained by dividing the Series B Face Amount by the Series B Stock Conversion Price (as defined below).

(c) Conversion Price . The conversion price for Series B Stock (the “Series B Stock Conversion Price”) shall initially be Four Dollars and Twenty-Five Cents ($4.25) per share. Such initial Series B Stock Conversion Price shall be adjusted from time to time in accordance with this Section (C)(5). All references to Series B Stock Conversion Price herein shall mean the Series B Stock Conversion Price as so adjusted.

(d) Fractional Shares . No fractional shares of Common Stock shall be issued upon conversion of Series B Stock. All shares of Common Stock (including fractions thereof) issuable upon conversion of more than one share of Series B Stock by a holder thereof shall be aggregated for purposes of determining whether the conversion would result in the issuance of any fractional share. If, after the aforementioned aggregation, the conversion would result in the issuance of any fractional share, the Company shall, in lieu of issuing any fractional share, pay cash equal to the product of such fraction multiplied by the Common Stock’s fair market value (as determined by the Board) on the date of conversion.

(e) Reservation of Stock Issuable Upon Conversion . The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of Series B Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series B Stock. If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Series B Stock, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose.

(f) Notices . Any notice required by the provisions of this Section (C)5 shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed facsimile if sent during normal business hours of the recipient; if not, then on the next business day, (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (iv) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All notices shall be addressed to each holder of record at the address of such holder appearing on the books of the Company.

(g) Mechanics of Conversion . Each holder of Series B Stock who converts the same into shares of Common Stock pursuant to this Section (C)(5) shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Company or any transfer agent for Series B Stock, and shall give written notice to the Company at such office that such holder elects to convert the same. Such notice shall state the number of shares of Series B Stock being converted, which may be all or any portion of the shares of Series B Stock held by the holder. Thereupon, the Company shall promptly issue and deliver at such office to such holder a certificate or certificates for the number of shares of Common Stock to which such holder is entitled and shall promptly pay in cash or, to the extent sufficient funds are not then legally available therefor, in Common Stock (at the Common Stock’s fair market value determined by the Board as of the date of such conversion), any declared and unpaid dividends on the shares of Series B Stock being converted. Such conversion shall be deemed to have been made at the

close of business on the date of such surrender of the certificates representing the shares of Series B Stock to be converted, and the Person entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder of such shares of Common Stock on such date.

(h) Adjustment for Stock Splits and Combinations . If the Company shall at any time or from time to time after the date that the first share of Series B Stock is issued (the “Series B Original Issue Date”) effect a subdivision of the outstanding Common Stock without a corresponding subdivision of Series B Stock, the Series B Stock Conversion Price in effect immediately before that subdivision shall be proportionately decreased. Conversely, if the Company shall at any time or from time to time after the Series B Original Issue Date combine the outstanding shares of Common Stock into a smaller number of shares without a corresponding combination of Series B Stock, the Series B Stock Conversion Price in effect immediately before the combination shall be proportionately increased. Any adjustment under this Section (C)(5)(h) shall become effective at the close of business on the date the subdivision or combination becomes effective.

(i) Adjustment for Common Stock Dividends and Distributions . If the Company at any time or from time to time after the Series B Original Issue Date makes, or fixes a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, in each such event the Series B Stock Conversion Price that is then in effect shall be decreased as of the time of such issuance or, in the event such record date is fixed, as of the close of business on such record date, by multiplying the Series B Stock Conversion Price then in effect by a fraction (1) the numerator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and (2) the denominator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series B Stock Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Series B Stock Conversion Price shall be adjusted pursuant to this Section (C)(5)(i) to reflect the actual payment of such dividend or distribution.

(j) Adjustments for Other Dividends and Distributions . If the Company at any time or from time to time after the Series B Original Issue Date makes, or fixes a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Company other than shares of Common Stock, in each such event provision shall be made so that the holders of Series B Stock shall receive upon conversion thereof, in addition to the number of shares of Common Stock receivable thereupon, the amount of other securities of the Company which they would have received had their Series B Stock been converted into Common Stock on the date of such event and had they thereafter, during the period from the date of such event to and including the conversion date, retained such securities receivable by them as aforesaid during such period, subject to all other adjustments

called for during such period under this Section (C)5 with respect to the rights of the holders of Series B Stock or with respect to such other securities by their terms.

(k) Adjustment for Reclassification, Exchange and Substitution . If at any time or from time to time after the Series B Original Issue Date, the shares of Common Stock issuable upon the conversion of Series B Stock is changed into the same or a different number of shares of any class or classes of stock, whether by recapitalization, reclassification or otherwise (other than a subdivision or combination of shares or stock dividend or a reorganization, merger, consolidation or sale of assets provided for elsewhere in this Section (C)(5)), in any such event each holder of Series B Stock shall have the right thereafter to convert such stock into the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification or other change by holders of the maximum number of shares of Common Stock into which such shares of Series B Stock could have been converted immediately prior to such recapitalization, reclassification or change, all subject to further adjustment as provided herein or with respect to such other securities or property by the terms thereof.

(l) Reorganizations, Mergers, Consolidations or Sales of Assets . If at any time or from time to time after the Series B Original Issue Date, there is a capital reorganization of Common Stock (other than a recapitalization, subdivision, combination, reclassification, exchange or substitution of shares provided for elsewhere in this Section (C)(5)), as a part of such capital reorganization, provision shall be made so that the holders of Series B Stock shall thereafter be entitled to receive upon conversion of Series B Stock the number of shares of stock or other securities or property of the Company to which a holder of the number of shares of Common Stock deliverable upon conversion would have been entitled on such capital reorganization, subject to adjustment in respect of such stock or securities by the terms thereof. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section (C)(5) with respect to the rights of the holders of Series B Stock after the capital reorganization to the end that the provisions of this Section 5 (including adjustment of the Series B Stock Conversion Price then in effect and the number of shares issuable upon conversion of the Series B Stock) shall be applicable after that event and be as nearly equivalent as practicable.

(m) Certificate of Adjustment . In each case of an adjustment or readjustment of the Series B Stock Conversion Price for the number of shares of Common Stock or other securities issuable upon conversion of Series B Stock, if Series B Stock is then convertible pursuant to this Section (C)(5), the Company, at its expense, shall compute such adjustment or readjustment in accordance with the provisions hereof and prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to each registered holder of Series B Stock at the holder’s address as shown in the Company’s books. The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (1) the consideration received or deemed to be received by the Company for any Additional Shares of Common Stock issued or sold or deemed to have been issued or sold, (2) the Series B Stock Conversion Price at the time in effect, (3) the number of Additional Shares of Common Stock and (4) the type and amount, if any, of other property which at the time would be received upon conversion of the Series B Stock.

(n) Notices of Record Date . Upon: (i) any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or (ii) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company, any merger or consolidation of the Company with or into any other entity, or any transfer of all or substantially all of the assets of the Company or any voluntary or involuntary dissolution, liquidation or winding up of the Company, the Company shall mail to each holder of Series B Stock at least ten (10) days prior to the record date specified therein a notice specifying (1) the date on which any such record is to be taken for the purpose of such dividend or distribution and a description of such dividend or distribution, (2) the date on which any such acquisition, reorganization, reclassification, transfer, consolidation, merger, asset transfer, dissolution, liquidation or winding up is expected to become effective, and (3) the date, if any, that is to be fixed as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property deliverable upon such acquisition, reorganization, reclassification, transfer, consolidation, merger, asset transfer, dissolution, liquidation or winding up.

(o) 19.99% Limitation . Notwithstanding anything in this Certificate of Designations to the contrary, without the prior approval of the Company’s stockholders, in no event shall the Company issue shares of Common Stock at any time upon conversion of the of: (i) the first $1.25 million face value of Series B Stock (representing 294,117 shares of Series B Stock), plus (ii) any additional shares of Series B Stock, the proceeds from the sale of which are used by the Company in connection with the acquisition Arius Pharmaceuticals, Inc., a Delaware corporation (“Arius”) plus (iii) all shares of Series A Stock (collectively, the “Aggregated Stock”) to the extent that the total aggregate number of shares of Common Stock issued or deemed to be issued at any time to any holder or all holders of the Aggregated Stock would exceed 19.99% of the issued and outstanding shares of Common Stock immediately prior to the effective time of the merger of Arius with and into Arius Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of the Company.

6. No Reissuance of Series B Stock . No share or shares of Series B Stock acquired by the Company by reason of redemption, purchase, conversion or otherwise shall be reissued. In addition, this Certificate of Designations shall be appropriately amended to effect the corresponding reduction in the Company’s authorized stock.

7. No Preemptive Rights . No stockholders of the Company, including, without limitation, the holders of Series B Stock, shall have preemptive rights.

[remainder of page intentionally left blank]

IN WITNESS WHEREOF, the Company has caused this Certificate of Designation of Series B Convertible Preferred Stock to be duly executed by its President and Chief Executive Officer and attested to by its Secretary on this 3rd day of September, 2004.


BIODELIVERY SCIENCES INTERNATIONAL, INC.

By:		/s/ Francis E. O’Donnell, Jr.
		Name: Francis E. O’Donnell, Jr.
		Title: President and Chief Executive Officer

ATTEST:

/s/ James A. McNulty

James A. McNulty, Secretary

State of Delaware

Secretary of State

Division of Corporations

Delivered 04:38 PM 02/22/2007

FILED 04:43 PM 02/22/2007

SRV 070210244 - 3515699 FILE

CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS

SERIES C NON VOTING CONVERTIBLE PREFERRED STOCK

BIODELIVERY SCIENCES INTERNATIONAL, INC.

Acting pursuant to Sections 151 (a) and (g) of the Delaware General Corporation Law, the undersigned, Mark A. Sirgo, the duly elected and acting President and Chief Executive Officer of BioDelivery Sciences International, Inc., a Delaware corporation, hereby certifies that the Board of Directors of the Company duly approved the following Certificate of Designation of Series C Non-Voting Convertible Preferred Stock of the Company on February 11, 2007, and that the Certificate of Incorporation of the Company expressly authorizes the Board to so designate and issue one or more series of preferred stock, par value $.001 per share, of the Company. The designations, powers, preferences and relative, participating, optional or other special rights, and the qualifications, limitations and restrictions thereof in respect of the shares said Series C Non-Voting Convertible Preferred Stock of the Company are as described in the following resolution, duly adopted by the Board of Directors of the Company:

“WHEREAS, the Certificate of Incorporation of BioDelivery Sciences International, Inc., a Delaware corporation (the “Company” ) authorizes a class (or classes) of up to five million (5,000,000) shares of preferred stock, par value $.001 per share (the “Preferred Stock” ), and provides that such Preferred Stock may be issued from time to time in one or more series and vests authority in the Board of Directors of the Company (the “Board” ) to fix or alter the rights, preferences, privileges, restrictions and other matters granted to or imposed upon any wholly unissued series of the Preferred Stock;

WHEREAS , it is the desire of the Board to fix and determine the rights, preferences, privileges, restrictions and other matters relating to one million six hundred forty-seven thousand and fifty nine (1,647,059) shares of Series C Non-Voting Convertible Preferred Stock of the Company (the “Series C Stock” )

NOW, THEREFORE, BE IT RESOLVED , that pursuant to authority expressly granted to and vested in the Board by the Certificate of Incorporation of the Company, there is hereby created, out of the five million (5,000,000) shares of Preferred Stock authorized in Article FOURTH of the Certificate of Incorporation a series of Preferred Stock, consisting of one million six hundred forty-seven thousand and fifty nine (1,647,059) shares and having the designations, powers, number, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof set forth below:

A. Authorized Number . One million six hundred forty-seven thousand and fifty nine (1,647,059) of the authorized shares of Preferred Stock are hereby designated “Series C Non-Voting Convertible Preferred Stock ”

B. Designation. The rights, preferences, privileges, restrictions and other matters relating to Series C Stock are as follows:

1. Dividend Rights. Holders of Series C Stock shall be entitled to receive, pari passu with holders of common stock, par value $.001 per share, of the Company (the “Common Stock” ), all cash or in-kind dividends or distributions (including, without limitation, in the case of a distribution by the Company spin-off of limited liability company interests in the Company’s subsidiary, Bioral Nutrient Delivery, LLC) on an as converted basis from time to time at any time declared, set aside, or paid by the Company in an amount that would have been received by the holders of Series C Stock (assuming, for purposes of the calculation, that the holders of Series C Stock had lawfully converted such Series C Stock into shares of Common Stock immediately prior to the record date for determining the holders of Common Stock entitled to receive such distribution at the then-applicable Series C Stock Conversion Rate), in each case only when, as and if declared by the Board, and, in the case of cash dividends, only out of funds that are legally available therefor. Such dividends shall be non-cumulative.

2. Voting Rights . The holders of shares of Series C Stock shall not have any voting or approval rights whatsoever except as expressly set forth herein. Notwithstanding the foregoing, the Company shall not amend or modify this Certificate of Designations without the prior written consent of the holders of a majority of the then outstanding shares of Series C Stock.

3. Liquidation Rights .

(a) Upon any Liquidation Event (as defined below), subject to the rights and preferences of any shares of the Company’s preferred stock having liquidation rights senior to those of the Series C Stock, the assets and funds of the Company legally available for distribution to its stockholders shall be distributed ratably (the “Liquidation Event Distribution”) among the holders of the Common Stock and Series C Stock as if such shares of Series C Stock had been converted into Common Stock at the then-applicable Series C Stock Conversion Rate immediately prior to such distribution, without any further action by the holders of such shares; provided, however, that all declared and unpaid dividends, if any, shall be paid to holders of Series C Stock in cash or, to the extent sufficient funds are not then legally available therefor, in Common Stock (at the Common Stock’s fair market value determined by the Board as of the date of such payment); provided further, however, that the Company’s obligations with respect to the Liquidation Event Distribution shall be contingent upon the delivery of the certificates evidencing such shares of Series C Stock to the Company or its transfer agent as provided below, or the notification by the holder to the Company or its transfer agent that such certificates have been lost, stolen or destroyed and execution of an agreement satisfactory to the Company to indemnify the Company from any loss incurred by it in connection with such certificates;

(A) a sale, lease, transfer, exchange or other disposition of all or substantially all the assets of the Company;

(B) a merger (with or into any other entity), consolidation, sale or reorganization.

(C) the transfer by one or more stockholders of the Company of securities of the Company representing 50% or more of the combined voting power of the then outstanding securities of the Company.

(c) Upon the occurrence of any Liquidation Event that would involve the distribution of assets other than cash with respect to the outstanding shares of Series C Stock, the amount of such distribution shall be the fair market value thereof at the time of such distribution as determined in good faith by the Board of Directors of the Company, and any securities to be distributed in such event shall be valued as follows:

(i) Securities not subject to investment letter or other similar restrictions on free marketability covered by subsection (ii) hereof:

(A)

if traded on a securities exchange or through the Nasdaq Global Market or Nasdaq Capital Market, the value shall be deemed to be the average of the closing sales prices of the securities on such exchange over the 30-day period ending three (3) business days prior to the closing;

(B)

(C)

if there is no active public market, the value shall be the fair market value thereof, as reasonably determined by the Board of Directors of the Company in good faith.

(ii) The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder’s status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as provided in clauses (A) _, (B) or (C) of subsection (i) of this. subsection (c), to reflect the adjusted fair market value thereof, as reasonably determined by the Board of Directors of the Company in good faith.

4. Redemption . There shall be no obligation on the part of the Company to redeem any shares of Series C Stock nor on the part of any holder thereof to submit any such shares for redemption.

5. Conversion Rights. The holders of Series C Stock shall have the following rights with respect to the conversion of Series C Stock into shares of Common Stock:

(a) Optional Conversion. Subject to and in compliance with the provisions of this Section 5, all (but not less than all) of the shares of Series C Stock held by the holders thereof may be converted, at the individual option of each such holder, into fully-paid and non-assessable shares of Common Stock at any time following (but not prior to) the earliest to occur of:

(i) the public announcement by the Company of positive outcome of the Company’s Phase III efficacy trial (FEN-201) for its BEMA Fentanyl product (a “FEN-201 Event” ) As used in this Section 5(a)(i) the term “positive outcome” means a statistically significant difference (p less than or equal to 0.05) in the primary efficacy endpoint comparing active to placebo; or

(ii) August 24, 2009.

The number of shares of Common Stock to which a holder of Series C Stock shall be entitled upon conversion shall be the product obtained by multiplying the Series C Stock Conversion Rate (as defined below) then in effect by the number of shares of Series C Stock being converted.

(b) Termination Conversion .

(i) Upon termination by the Company of the employment of Mark A, Sirgo ( “Sirgo” ) with the Company without Good Cause (as that term is defined in, and otherwise in accordance with, that certain Employment Agreement between Sirgo and the Company, dated August 24, 2004, as amended (the “Sirgo Agreement’’ )) or the termination of such employment by Sirgo for Good Reason (as defined in the Sirgo Agreement), in either case prior to a FEN-201 Event, all (but not less than all) of the shares of Series C Stock held by Sirgo may be converted, at the option of Sirgo, into fully-paid and non-assessable shares of Common Stock at any time thereafter.

(ii) Upon termination by the Company of the employment of Andrew L. Finn ( “Finn” ) with the Company without Good Cause (as that term is defined in, and otherwise in accordance with, that certain Employment Agreement, dated August 24, 2004 between Finn and the Company, as amended (the “Finn Agreement” )) or termination of such employment by Finn for Good Reason (as defined in the Finn Agreement), prior to a FEN-201 Event in either case, all (but not less than all) of the shares of Series C Stock held by Finn may be converted, at the option of Finn, into fully-paid and non-assessable shares of Common Stock at any time thereafter.

(c) Conversion Rate . The conversion rate in effect at any time for conversion of the Series C Stock (the “Series C Stock Conversion Rate” ) shall be the quotient

obtained by dividing the Series C Stock Original Issue Price by the Series C Stock Conversion Price (as defined below). The “Series C Original Issue Price” shall be Four Dollars and Twenty-Five Cents ($4.25) per share.

(d) Conversion Price . The conversion price for Series C Stock (the “Series C Stock Conversion Price” ) shall initially be Four Dollars and Twenty-Five Cents ($4.25) per share, which is equal to one hundred percent 100% of the Series C Original Issue Price. Such initial Series C Stock Conversion Price shall be adjusted from time to time in accordance with this Section 5. All references to Series C Stock Conversion Price herein shall mean the Series C Stock Conversion Price as so adjusted.

(e) Fractional Shares . No fractional shares of Common Stock shall be issued upon conversion of Series C Stock. All shares of Common Stock (including fractions thereof) issuable upon conversion of more than one share of Series C Stock by a holder thereof shall be aggregated for purposes of determining whether the conversion would result in the issuance of any fractional share. If, after the aforementioned aggregation, the conversion would result in the issuance of any fractional share, the Company shall, in lieu of issuing any fractional share, pay cash equal to the product of such fraction multiplied by the Common Stock’s fair market value (as determined by the Board) on the date of conversion.

(f) Reservation of Stock Issuable Upon Conversion . The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of Series C Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series C Stock. If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Series C Stock, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose.

(g) Notices. Any notice required by the provisions of this Section 5 shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed facsimile if sent during normal business hours of the recipient; if not, then on the next business day, (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (iv) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All notices shall be addressed to each holder of record at the address of such holder appearing on the books of the Company.

(h) Mechanics of Conversion . Each holder of Series C Stock who converts the same into shares of Common Stock pursuant to this Section 5 shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Company or any transfer agent for Series C Stock, and shall give written notice to the Company at such office that such holder elects to convert the same. Such notice shall state the number of shares of Series C Stock being converted, which shall be no less than all of the shares of Series C Stock held by the holder, Thereupon, or, with respect to any voluntary conversion of Series C Stock following a

Conversion Event, but prior to the occurrence of any other condition permitting voluntary conversion of a holder’s Series C Stock under Section 5(a) or Section 5(b), no sooner than thirty (30) days following notice from such holder regarding such conversion, the Company shall promptly issue and deliver at such office to such holder a certificate or certificates for the number of shares of Common Stock to which such holder is entitled and shall promptly pay in cash or, to the extent sufficient funds are not then legally available therefor, in Common Stock (at the Common Stock’s fair market value determined by the Board as of the date of such conversion), any declared and unpaid dividends on the shares of Series C Stock being converted, Such conversion shall be deemed to have been made at the close of business on the date of such surrender of the certificates representing the shares of Series C Stock to be converted, or, with respect to any voluntary conversion of Series C Stock following a Conversion Event, but prior to the occurrence of any other condition permitting voluntary conversion of a holder’s Series C Stock under Section 5(a) or Section 5(b), on the date thirty (30) days following notice from such holder regarding such conversion, and the person entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder of such shares of Common Stock on such date.

(i) Adjustment for Stock Splits and Combination s. If the Company shall at any time or from time to time after the date that the first share of Series C Stock is issued (the “Series C Original Issue Date” ) effect a subdivision of the outstanding Common Stock without a corresponding subdivision of Series C Stock, the Series C Stock Conversion Price in effect immediately before that subdivision shall be proportionately decreased. Conversely, if the Company shall at any time or from time to time after the Series C Original Issue Date combine the outstanding shares of Common Stock into a smaller number of shares without a corresponding combination of Series C Stock, the Series C Stock Conversion Price in effect immediately before the combination shall be proportionately increased. Any adjustment under this Section 5(i) shall become effective at the close of business on the date the subdivision or combination becomes effective.

(j) Adjustment for Common Stock Dividends and Distributions. If the Company at any time or from time to time after the Series C Original Issue Date makes, or fixes a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, in each such event the Series C Stock Conversion Price that is then in effect shall be decreased as of the time of such issuance or, in the event such record date is fixed, as of the close of business on such record date, by multiplying the Series C Stock Conversion Price then in effect by a fraction (1) the numerator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and (2) the denominator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Series C Stock Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Series C Stock Conversion Price shall be adjusted pursuant to this Section 5(i) to reflect the actual payment of such dividend or distribution.

(k) Adjustments for Other Dividends and Distributions . If the Company at any time or from time to time after the Series C Original Issue Date makes, or fixes a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Company other than shares of Common Stock, in each such event provision shall be made so that the holders of Series C Stock shall receive upon conversion thereof, in addition to the number of shares of Common Stock receivable thereupon, the amount of other securities of the Company which they would have received had their Series C Stock been converted into Common Stock on the date of such event and had they thereafter, during the period from the date of such event to and including the conversion date, retained such securities receivable by them as aforesaid during such period, subject to all other adjustments called for during such period under this Section 5 with respect to the rights of the holders of Series C Stock or with respect to such other securities by their terms.

(l) Adjustment for Reclassification, Exchange and Substitution . If at any time or from time to time after the Series C Original Issue Date, the shares of Common Stock issuable upon the conversion of Series C Stock is changed into the same or a different number of shares of any class or classes of stock, whether by recapitalization, reclassification or otherwise (other than a subdivision or combination of shares or stock dividend or a reorganization, merger, consolidation or sale of assets provided for elsewhere in this Section 5), in any such event each holder of Series C Stock shall have the right thereafter to convert such stock into the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification or other change by holders of the maximum number of shares of Common Stock into which such shares of Series C Stock could have been converted immediately prior to such recapitalization, reclassification or change, all subject to further adjustment as provided herein or with respect to such other securities or property by the terms thereof.

(m) Reorganizations, Mergers, Consolidations or Sales of Assets . If at any time or from time to time after the Series C Original Issue Date, there is a capital reorganization of Common Stock (other than a recapitalization, subdivision, combination, reclassification, exchange or substitution of shares provided for elsewhere in this Section 5 or (ii) a Liquidation Event, as defined in Section 3 above), as a part of such capital reorganization, provision shall be made so that the holders of Series C Stock shall thereafter be entitled to receive upon conversion of Series C Stock the number of shares of stock or other securities or property of the Company to which a holder of the number of shares of Common Stock deliverable upon conversion would have been entitled on such capital reorganization, subject to adjustment in respect of such stock or securities by the terms thereof. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 5 with respect to the rights of the holders of Series C Stock after the capital reorganization to the end that the provisions of this Section 5 (including adjustment of the Series C Stock Conversion Price then in effect and the number of shares issuable upon conversion of the Series C Stock) shall be applicable after that event and be as nearly equivalent as practicable.

(n) Certificate of Adjustment. In each case of an adjustment or readjustment of the Series C Stock Conversion Price for the number of shares of Common Stock or other securities issuable upon conversion of Series C Stock, if Series C Stock is then convertible pursuant to this Section 5, the Company, at its expense, shall compute such

adjustment or readjustment in accordance with the provisions hereof and prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to each registered holder of Series C Stock at the holder’s address as shown in the Company’s books. The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (1) the consideration received or deemed to be received by the Company for any Additional Shares of Common Stock issued or sold or deemed to have been issued or sold, (2) the Series C Stock Conversion Price at the time in effect, (3) the number of Additional Shares of Common Stock and (4) the type and amount, if any, of other property which at the time would be received upon conversion of the Series C Stock.

(o) Notices of Record Date . Upon: (i) any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or (ii) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company, any merger or consolidation of the Company with or into any other entity, or any transfer of all or substantially all of the assets of the Company or any voluntary or involuntary dissolution, liquidation or winding up of the Company, the Company shall mail to each holder of Series C Stock at least ten (10) days prior to the record date specified therein a notice specifying (1) the date on which any such record is to be taken for the purpose of such dividend or distribution and a description of such dividend or distribution, (2) the date on which any such acquisition, reorganization, reclassification, transfer, consolidation, merger, asset transfer, dissolution, liquidation or winding up is expected to become effective, and (3) the date, if any, that is to be fixed as to when the holders of record of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property deliverable upon such acquisition, reorganization, reclassification, transfer, consolidation, merger, asset transfer, dissolution, liquidation or winding up.

6. No Reissuance of Series C Stock . No share or shares of Series C Stock acquired by the Company by reason of redemption, purchase, conversion or otherwise shall be reissued. In addition, this Certificate of Designations shall be appropriately amended to effect the corresponding reduction in the Company’s authorized stock.

7. No Preemptive Rights . No stockholders of the Company, including, without limitation, the holders of Series C Stock, shall have preemptive rights.

[remainder of page intentionally left blank]

IN WITNESS WHEREOF, the Company has caused this Certificate of Designation of Series C Non-Voting Convertible Preferred Stock to be duly executed by its President and Chief Executive Officer and attested to by its Secretary on this 22nd day of February, 2007.


BIODELIVERY SCIENCES INTERNATIONAL, INC.



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

ATTEST:

/s/ James A. McNulty

James A. McNulty, Secretary

State of Delaware

Secretary of State

Division or Corporations

Delivered 12:00 PM 07/25/2008

FILED 12:00 PM 07/25/2008

SRV 080819097 – 3515699 FILE

CERTIFICATE OF AMENDMENT TO THE

CERTIFICATE OF INCORPORATION OF

BIODELIVERY SCIENCES INTERNATIONAL, INC.

Under Section 242 of the Delaware General Corporation Law

IT IS HEREBY CERTIFIED THAT:

1. The name of the corporation is BioDelivery Sciences International, Inc. (the “Corporation”). The original Certificate of Incorporation of the Corporation (the “Certificate of Incorporation”) was filed with the Secretary of the State of Delaware on April 18, 2002.

2. The amendment of the Certificate of Incorporation effected by this Certificate of Amendment is to create a classified board of directors comprised of three classes with staggered terms.

3. The Certificate of Incorporation is herby amended by added thereto a new Article “TWELFTH”, and said Article shall read as follows:

“TWELFTH: The Board of Directors shall be divided into three classes, each such class as nearly equal in number as the then-authorized number of Directors constituting the Board of Directors permits, with the term of office of one class expiring each year. At the annual meeting of stockholders following approval of amendment to the Certificate of Incorporation, the stockholders shall elect the one class of Directors for a term expiring at the annual meeting of stockholders to be held in 2009, another class of Directors for a term expiring at the annual meeting of stockholders to be held in 2010, and another class of Directors for a term expiring at the annual meeting of stockholders to be held in 2011. Thereafter, each Director shall serve for a term ending at the third annual meeting of stockholders of the Corporation following the annual meeting at which such Director was elected. Members of each class shall hold office until their successors are elected and qualified. At each succeeding annual meeting of the stockholders of the Corporation, the successors of the class of Directors whose term expires at that meeting shall be elected by a plurality vote of all votes cast at such meeting to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election.”

4. The amendment of the Certificate of Incorporation herein certified has been duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed by its duly authorized officer signatory below this 24 ^th day of July, 2008.


BIODELIVERY SCIENCES INTERNATIONAL, INC.



By:		/s/ James A. McNulty


Name: James A. McNulty
Title: Chief Financial Officer

State of Delaware

Secretary of State

Division of Corporations

Delivered 03:15 PM 02/12/2009

FILED 02:44 PM 02/12/2009

SRV 090135229 – 3515699 FILE

CERTIFICATE OF ELIMINATION

OF THE

SERIES A NON-VOTING CONVERTIBLE PREFERRED STOCK,

SERIES B CONVERTIBLE PREFERRED STOCK

AND

SERIES C NON-VOTING CONVERTIBLE PREFERRED STOCK

BIODELIVERY SCIENCES INTERNATIONAL, INC.

Pursuant to Section 151(g) of the General Corporation Law of the State of Delaware

BioDelivery Sciences International, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Company”) , in accordance with the provisions of Section 151(g) of the General Corporation Law of the State of Delaware (“DGCL”) , hereby certifies as follows:

FIRST: That, pursuant to Section 151 of the DGCL and authority granted in Company’s Certificate of Incorporation (as amended, the “Certificate of Incorporation”) , the Board of Directors of the Company (the “Board”) previously designated 1,647,059 shares of authorized shares of preferred stock of the Company as Series A Non-Voting Convertible Preferred Stock, par value $.001 per share, of the Company (the “Series A Preferred Stock”), 941,177 shares of authorized shares of preferred stock of the Company as Series B Convertible Preferred Stock, par value $.001 per share, of the Company (the “Series B Preferred Stock”), and 1,647,059 shares of authorized shares of preferred stock of the Company as Series C Non-Voting Convertible Preferred Stock, par value $.001 per share, of the Company (the “Series C Preferred Stock”).

SECOND: That no shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock are outstanding and no shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock will be issued by the Company.

THIRD: That the following resolutions were adopted on February 11, 2009 by Unanimous Written Consent to Action of the Board pursuant to the authority granted by Section 151(g) of the DGCL, approving the filing of a Certificate of Elimination of the Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock (the “Certificate of Elimination”):

“WHEREAS, by resolution of the Board duly adopted, and by a Certificate of Designations, Rights and Preferences filed with the Office of the Secretary of State of the State of Delaware on August 20, 2004, as corrected on August 25, 2004 and September 2, 2004 (the “Series A Certificate of Designations”), 1,647,059 shares of authorized shares of preferred stock of the Company were designated as Series A Non-Voting Convertible Preferred Stock, par value $.001 per share, of the Company (the “Series A Preferred Stock”), which certificate established the voting powers, designations, preferences and relative, participating and other rights, and the qualifications, limitations or restrictions of the Series A Preferred Stock;

WHEREAS, by resolution of the Board duly adopted, and by a Certificate of Designations, Rights and Preferences filed with the Office of the Secretary of State of the State of Delaware on September 3, 2004 (the “Series B Certificate of Designations”), 941,177 shares of authorized shares of preferred stock were designated as Series B Convertible Preferred Stock, par value $.001 per share, of the Company (the “Series B Preferred Stock”), which certificate established the voting powers, designations, preferences and relative, participating and other rights, and the qualifications, limitations or restrictions of the Series B Preferred Stock;

WHEREAS, by resolution of the Board duly adopted, and by a Certificate of Designations, Rights and Preferences filed on February 22, 2007 (the “Series C Certificate of Designations”), all 1,647,059 shares of the Series A Preferred Stock (consisting of all of the designated Series A Preferred Stock shares) were exchanged for 1,647,059 shares of newly designated Series C Non-Voting Convertible Preferred Stock, par value $.001 per share, of the Company (the “Series C Preferred Stock”);

WHEREAS, on January 10, 2007, 341,176 shares of Series B Preferred Stock (consisting of all then outstanding shares of Series B Preferred Stock) were converted into 341,176 shares of common stock, par value $.001 per share, of the Company (the “Common Stock”);

WHEREAS, the agreements to which the Company was a party which necessitated the designation of the Series B Preferred Stock have expired;

WHEREAS, as of December 31, 2007, all 1,647,059 shares of Series C Preferred Stock (consisting of all of the designated Series C Preferred Stock shares) had been converted into 1,647,059 shares of Common Stock pursuant to the terms of the Series C Certificate of Designations; and

WHEREAS, in light of the foregoing, the Board deems it desirable that, pursuant to Section 151(g) of the DGCL, a Certificate of Elimination of the Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock, in the form set forth as Exhibit A hereto (the “Certificate of Elimination”) be executed and filed with the Secretary of State of the State of Delaware and that all 1,647,059 shares of Series A Preferred Stock, 941,177 shares of Series B Preferred Stock and 1,647,059 shares of Series C Preferred Stock heretofore designated resume the status of authorized and unissued shares of preferred stock, par value $.001 per share, of the Company, and that all matters set forth in the Series A Certificate of Designations, the Series B Certificate of Designations, and the Series C Certificate of Designations be eliminated from the Company’s Certificate of Incorporation (as amended, the “Certificate of Incorporation”) .

NOW THEREFORE, BE IT

RESOLVED, as of the date hereof, no shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock are outstanding and

no shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock will be issued by the Company; and be it further

RESOLVED, that each of the executive officers of the Company is hereby authorized and directed, jointly and severally, for and on behalf of the Company, to execute and deliver the Certificate of Elimination and any and all other certificates, agreements and other documents which they may deem necessary or advisable in order to effectuate the elimination of the Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock, as provided by Section 151(g) of the DGCL in accordance with Section 103 of the DGCL; and be it further

RESOLVED, when such Certificate of Elimination become effective, all references to the Series A Preferred Stock, Series B preferred Stock and Series C Preferred Stock in the Certificate of Incorporation shall be eliminated and the shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock shall resume the status of authorized and unissued shares of preferred stock, par value $.001 per share, of the Company, without designation as to series;”

FOURTH: That, in accordance with the Section 151(g) of the DGCL, upon the effective date of the filing of this Certificate of Elimination, the Certificate of Incorporation is hereby amended to eliminate all matters set forth in the Series A Certificate of Designations, the Series B Certificate of Designations, and the Series C Certificate of Designations from the Certificate of Incorporation, and all shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock shall resume the status of authorized and unissued shares of preferred stock, par value $.001 per share, of the Company, without designation as to series.

IN WITNESS WHEREOF, the Company has caused this Certificate of Elimination to be executed by its duly authorized officers on this 12th day of February, 2009.


BIODELIVERY SCIENCES INTERNATIONAL, INC.

By:		/s/ James A. McNulty
		Name: James A. McNulty
		Title: Secretary, Treasurer and Chief Financial Officer

State of Delaware

Secretary of State

Division of Corporations

Delivered 04:07 PM 07/22/2011

FILED 03:25 PM 07/22/2011

SRV 110849967 – 3515699 FILE

CERTIFICATE OF AMENDMENT OF

THE CERTIFICATE OF INCORPORATION OF

BIODELIVERY SCIENCES INTERNATIONAL, INC.

Under Section 242 of the Delaware General Corporation Law

BioDelivery Sciences International, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), DOES HEREBY CERTIFY AS FOLLOWS:

1. That the name of the Corporation is BioDelivery Sciences International, Inc. The original Certificate of Incorporation of the Corporation (as amended, the “Certificate of Incorporation”) was filed with the Secretary of the State of Delaware on April 18, 2002.

2. That the amendment of the Certificate of Incorporation effected by this Certificate of Amendment is to increase the authorized shares of common stock, par value $.001, of the Corporation.

3. That the Certificate of Incorporation is hereby amended by deleting the first paragraph of Article FIFTH thereof and replacing such paragraph with the following:

“FIFTH. The total number of shares of capital stock which the Corporation shall have authority to issue is 80,000,000 shares, consisting of 75,000,000 (Seventy-Five Million) shares of common stock, each of par value one-thousandths of one cent ($.001) (the “Common Stock”), and 5,000,000 (Five Million) shares of preferred stock, each of par value one-thousandths of one cent ($.001) (the “Preferred Stock”).””

The remaining text of Article FIFTH of the Certificate of Incorporation will remain unchanged.

4. That said amendment to the Certificate of Incorporation was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.

5. That all other provisions of the Certificate of Incorporation remain unchanged and in full force and effect.

IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed by its duly authorized officer signatory below this 22nd day of July, 2011.


BIODELIVERY SCIENCES INTERNATIONAL, INC.

By:		/s/ James A. McNulty
		Name: James A. McNulty
		Title: Chief Financial Officer, Treasurer and Secretary

State of Delaware

Secretary of State

Division of Corporations

Delivered 01:13 PM 11/30/2012

FILED 01:11 PM 11/30/2012

SRV 121279748 – 3515699 FILE

CERTIFICATE OF DESIGNATION

SERIES A NON-VOTING CONVERTIBLE PREFERRED STOCK

BIODELIVERY SCIENCES INTERNATIONAL, INC.

Pursuant to Section 151 of the

Delaware General Corporation Law

BioDelivery Sciences International, Inc., a Delaware corporation (the “ Corporation” ), in accordance with the provisions of Section 103 of the Delaware General Corporation Law (the “ DGCL ”) does hereby certify that, in accordance with Sections 141(c) and 151 of the DGCL, the following resolution was duly adopted by the Board of Directors of the Corporation at a meeting duly convened on November 20, 2012:

RESOLVED , that pursuant to the authority granted to and vested in the Board of Directors of the Corporation in accordance with the provisions of the Certificate of Incorporation of the Corporation, as amended (the “ Certificate of Incorporation ” ), there is hereby established a series of the Corporation’s authorized preferred stock, par value $.001 per share (the “ Preferred Stock ” ), which series shall be designated as the Series A Non-Voting Convertible Preferred Stock, par value $.001 per share, of the Corporation, with the designation, number of shares, powers, preferences, rights, qualifications, limitations and restrictions thereof (in addition to any provisions set forth in the Certificate of Incorporation which are applicable to the Preferred Stock of all classes and series) as follows:

SERIES A NON-VOTING CONVERTIBLE PREFERRED STOCK

SECTION 1. DEFINITIONS . For the purposes hereof, the following terms shall have the following meanings:

“ Affiliate ” means any person or entity that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a person or entity, as such terms are used in and construed under Rule 144 under the Securities Act. With respect to a Holder, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as such Holder will be deemed to be an Affiliate of such Holder.

“ Alternate Consideration ” shall have the meaning set forth in Section 7(c).

“ Beneficial Ownership Limitation ” shall have the meaning set forth in Section 6(c).

“ Business Day ” means any day except Saturday, Sunday, any day which shall be a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

“ Buy-In ” shall have the meaning set forth in Section 6(d)(iii).

“ Closing Sale Price ” means, for any security as of any date, the last closing trade price for such security prior to 4:00 p.m., New York City time, on the principal securities exchange or trading market where such security is listed or traded, as reported by Bloomberg, L.P. (or an equivalent, reliable reporting service mutually acceptable to and hereafter designated by Holders of a majority of the then-outstanding Series A Preferred Stock and the Corporation), or if the foregoing do not apply, the last trade price of such security in the over-the-counter market on the electronic bulletin board for such security as

reported by Bloomberg, L.P., or, if no last trade price is reported for such security by Bloomberg, L.P., the average of the bid prices of any market makers for such security as reported on the OTC Pink Market by OTC Markets Group, Inc. If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as determined in good faith by the Board of Directors of the Corporation.

“ Commission ” means the Securities and Exchange Commission.

“ Common Stock ” means the Corporation’s common stock, par value $.001 per share, and stock of any other class of securities into which such securities may hereafter be reclassified or changed into.

“ Conversion Date ” shall have the meaning set forth in Section 6(a).

“ Conversion Price ” shall mean $4.21, as adjusted pursuant to paragraph 7 hereof.

“ Conversion Ratio ” shall have the meaning set forth in Section 6(b).

“ Conversion Shares ” means, collectively, the shares of Common Stock issuable upon conversion of the shares of Series A Preferred Stock in accordance with the terms hereof.

“ Daily Failure Amount ” means the product of (x) 0.005 multiplied by (y) the Closing Sale Price of the Common Stock on the applicable Share Delivery Date.

“ DGCL ” shall mean the Delaware General Corporation Law.

“ Distribution” shall have the meaning set forth in Section 7(b).

“ DTC ” shall have the meaning set forth in Section 6(a).

“ DWAC Delivery ” shall have the meaning set forth in Section 6(a).

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“ Fundamental Transaction ” shall have the meaning set forth in Section 7(c).

“ Holder ” means any holder of Series A Preferred Stock.

“ Junior Securities ” shall have the meaning set forth in Section 5(a).

“ Liquidation Event ” shall have the meaning set forth in Section 5(b).

“ Notice of Conversion ” shall have the meaning set forth in Section 6(a).

“ Parity Securities ” shall have the meaning set forth in Section 5(a).

“ Person ” means any individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“ Senior Securities ” shall have the meaning set forth in Section 5(a).

“ Series A Preferred Stock Register” shall have the meaning set forth in Section 2(b).

“ Share Delivery Date ” shall have the meaning set forth in Section 6(d)(i).

“ Stated Value ” shall mean $4.21.

“ Trading Day” means a day on which the Common Sock is traded for any period on the principal securities exchange or if the Common Stock is not traded on a principal securities exchange, on a day that the Common Stock is traded on another securities market on which the Common Stock is then being traded.

SECTION 2. DESIGNATION, AMOUNT AND PAR VALUE; ASSIGNMENT.

(a) The series of preferred stock designated by this Certificate shall be designated as the Corporation’s “Series A Non-Voting Convertible Preferred Stock” (the “ Series A Preferred Stock ”) and the number of shares so designated shall be 2,709,300. Each share of Series A Preferred Stock shall have a par value of $.001 per share.

(b) The Corporation shall register shares of the Series A Preferred Stock, upon records to be maintained by the Corporation for that purpose (the “ Series A Preferred Stock Register ”), in the name of the Holders thereof from time to time. The Corporation may deem and treat the registered Holder of shares of Series A Preferred Stock as the absolute owner thereof for the purpose of any conversion thereof and for all other purposes. The Corporation shall register the transfer of any shares of Series A Preferred Stock in the Series A Preferred Stock Register, upon surrender of the certificates evidencing such shares to be transferred, duly endorsed by the Holder thereof, to the Corporation at its principal place of business or such other office of the Corporation as may be designated by the Corporation. Upon any such registration or transfer, a new certificate evidencing the shares of Series A Preferred Stock so transferred shall be issued to the transferee and a new certificate evidencing the remaining portion of the shares not so transferred, if any, shall be issued to the transferring Holder, in each case, within three (3) Business Days. The provisions of this Certificate are intended to be for the benefit of all Holders from time to time and shall be enforceable by any such Holder.

SECTION 3. DIVIDENDS . Holders shall be entitled to receive, and the Corporation shall pay, dividends on shares of the Series A Preferred Stock equal (on an as-if-converted-to-Common-Stock basis without giving effect for such purposes to the Beneficial Ownership Limitation set forth in Section 6(c) hereof) to and in the same form as dividends (other than dividends in the form of Common Stock) actually paid on shares of the Common Stock when, as and if such dividends (other than dividends in the form of Common Stock) are paid on shares of the Common Stock.

SECTION 4. VOTING RIGHTS . Except as otherwise provided herein or as otherwise required by the DGCL, the Series A Preferred Stock shall have no voting rights. However, as long as any shares of Series A Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote of the Holders of a majority of the then outstanding shares of the Series A Preferred Stock: (a) alter or change adversely the powers, preferences or rights given to the Series A Preferred Stock as set forth herein or alter or amend this Certificate of Designation, (b) increase the number of authorized shares of Series A Preferred Stock, or (c) enter into any agreement with respect to any of the foregoing; provided, however, that the foregoing shall not preclude the Corporation from designating or issuing any Junior Securities, Parity Securities or Senior Securities.

SECTION 5. RANK; LIQUIDATION .

(a) The Series A Preferred Stock shall rank: (i) senior to all of the Common Stock; (ii) senior to any class or series of capital stock of the Corporation hereafter created specifically ranking by its terms junior to any Series A Preferred Stock (“ Junior Securities ”); (iii) on parity with any class or series of capital stock of the Corporation hereafter created specifically ranking by its terms on parity with the Series A Preferred Stock (“ Parity Securities ”); and (iv) junior to any class or series of capital stock of the Corporation hereafter created specifically ranking by its terms senior to any Series A Preferred Stock (“ Senior Securities ”), in each case, as to dividends, distributions of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntarily or involuntarily. The foregoing shall not preclude the Corporation from designating or issuing any Junior Securities, Parity Securities or Senior Securities.

(b) Subject to the prior and superior rights of the holders of any Senior Securities of the Corporation, upon liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary (each, a “ Liquidation Event ”), each holder of shares of Series A Preferred Stock shall be entitled to receive, in preference to any distributions of any of the assets or surplus funds of the Corporation to the holders of the Common Stock and Junior Securities and pari passu with any distribution to the holders of Parity Securities, an amount equal to $.001 per share of Series A Preferred Stock, plus an additional amount equal to any dividends declared but unpaid on such shares, before any payments shall be made or any assets distributed to holders of any class of Common Stock or Junior Securities. If, upon any such Liquidation Event, the assets of the Corporation shall be insufficient to pay the holders of shares of the Series A Preferred Stock the amount required under the preceding sentence, then all remaining assets of the Corporation shall be distributed ratably to holders of the shares of the Series A Preferred Stock and Parity Securities.

(c) After payment to the holders of shares of the Series A Preferred Stock of the amount required under Section 5(b) and subject to the prior and superior rights of the holders of any Senior Securities of the Corporation, the remaining assets or surplus funds of the Corporation, if any, available for distribution to stockholders shall be distributed ratably among the holders of the Series A Preferred Stock, any other class or series of capital stock that participates with the Common Stock in the distribution of assets upon any Liquidation Event and the Common Stock, with the holders of the Series A Preferred Stock deemed to hold that number of shares of Common Stock into which such shares of Series A Preferred Stock are then convertible (without giving effect for such purposes to the Beneficial Ownership Limitation set forth in Section 6(c) hereof).

SECTION 6. CONVERSION .

(a) Conversions at Option of Holder . Each share of Series A Preferred Stock shall be convertible, at any time and from time to time from and after the date of the issuance thereof, at the option of the Holder thereof, into a number of shares of Common Stock equal to the Conversion Ratio in effect at the time of such conversion. Holders shall effect conversions by providing the Corporation with the form of conversion notice (via overnight courier, facsimile or email) attached hereto as Annex A (a “ Notice of Conversion ”), duly completed and executed. For purposes of clarification, unless required pursuant to industry standard stock transfer procedures, the Corporation or its transfer agent shall not require a Holder to obtain a medallion guaranty, notary attestation or any similar deliverable in order to effectuate the conversion of all or a portion of such Holder’s shares of Series A Preferred Stock. Other than a conversion following a Fundamental Transaction or following a notice provided for under Section 7(e)(ii) hereof, the Notice of Conversion must specify at least a number of shares of Series A Preferred Stock to be converted equal to the lesser of (x) 10,000 shares (such number subject to appropriate adjustment following the occurrence of an event specified in Section 7(a) hereof) and (y) the number of shares of Series A Preferred Stock then held by the Holder. Provided the Corporation’s

Common Stock transfer agent is participating in the Depository Trust Company (“ DTC ”) Fast Automated Securities Transfer program, the Notice of Conversion may specify, at the Holder’s election, whether the applicable Conversion Shares shall be credited to the account of the Holder’s prime broker with DTC through its Deposit Withdrawal Agent Commission system (a “ DWAC Delivery ”). The date on which a conversion of Series A Preferred Stock shall be deemed effective (the “ Conversion Date” ) shall be defined as the Trading Day that the Notice of Conversion, completed and executed, is sent (via overnight courier, facsimile or email) to, and received during regular business hours by, the Corporation; provided that the original certificate(s) representing such shares of Series A Preferred Stock being converted, duly endorsed, and the accompanying Notice of Conversion, are received by the Corporation within two (2) Trading Days thereafter. In all other cases, the Conversion Date shall be defined as the Trading Day on which the original stock certificates representing the shares of Series A Preferred Stock being converted, duly endorsed, and the accompanying Notice of Conversion, are received by the Corporation. The calculations set forth in the Notice of Conversion shall control in the absence of manifest or mathematical error.

(b) Conversion Ratio . The “ Conversion Ratio ” for each share of Series A Preferred Stock shall be equal to the Stated Value divided by the Conversion Price.

(c) Beneficial Ownership Limitation . Notwithstanding anything herein to the contrary, the Corporation shall not effect any conversion of the Series A Preferred Stock, and a Holder shall not have the right to convert any portion of its Series A Preferred Stock, to the extent that, after giving effect to an attempted conversion set forth on an applicable Notice of Conversion, such Holder (together with such Holder’s Affiliates, and any other Person whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act and the applicable rules and regulations of the Commission, including any “group” of which the Holder is a member) would beneficially own a number of shares of Common Stock in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by such Holder and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of the Series A Preferred Stock subject to the Notice of Conversion with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which are issuable upon (A) conversion of the remaining, unconverted shares of Series A Preferred Stock beneficially owned by such Holder or any of its Affiliates, and (B) exercise or conversion of the unexercised or unconverted portion of any other securities of the Corporation beneficially owned by such Holder or any of its Affiliates (including, without limitation, any convertible notes, convertible stock or warrants) that are subject to a limitation on conversion or exercise analogous to the limitation contained herein. Except as set forth in the preceding sentence, for purposes of this Section 6(c), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the applicable rules and regulations of the Commission. In addition, for purposes hereof, “group” has the meaning set forth in Section 13(d) of the Exchange Act and the applicable rules and regulations of the Commission. For purposes of this Section 6(c), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Corporation’s most recent Form 10-K, Form 10-Q, Current Report on Form 8-K or other public filing with the Commission, as the case may be, (B) a more recent public announcement by the Corporation or (C) a more recent notice by the Corporation or the Corporation’s transfer agent to the Holder setting forth the number of shares of Common Stock then outstanding. For any reason at any time, upon the written or oral request of a Holder (which may be by email), the Corporation shall, within two (2) Business Days of such request, confirm orally and in writing to such Holder (which may be via email) the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to any actual conversion or exercise of securities of the Corporation, including shares of Series A Preferred Stock, by such Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was last

publicly reported or confirmed to the Holder. The “ Beneficial Ownership Limitation” shall be 9.98% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock pursuant to such Notice of Conversion (to the extent permitted pursuant to this Section 6(c)). The Corporation shall be entitled to rely on representations made to it by the Holder in any Notice of Conversion regarding its Beneficial Ownership Limitation. By written notice to the Corporation, a Holder may from time to time increase or decrease the Beneficial Ownership Limitation to any other percentage specified in such notice; provided that any such increase or decrease will not be effective until the sixty-fifth (65th) day after such notice is delivered to the Corporation. The provisions of this Section 6(c) shall be construed, corrected and implemented in a manner so as to effectuate the intended beneficial ownership limitation herein contained and the shares of Common Stock underlying the Series A Preferred Stock in excess of the Beneficial Ownership Limitation shall not be deemed to be beneficially owned by the Holder for any purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the Exchange Act.

(d) Mechanics of Conversion .

(i) Delivery of Certificate or Electronic Issuance Upon Conversion . Not later than three (3) Trading Days after the applicable Conversion Date, or if the Holder requests the issuance of physical certificate(s), two (2) Trading Days after receipt by the Corporation of the original certificate(s) representing such shares of Series A Preferred Stock being converted, duly endorsed, and the accompanying Notice of Conversion (the “ Share Delivery Date ”), the Corporation shall: (a) deliver, or cause to be delivered, to the converting Holder a physical certificate or certificates representing the number of Conversion Shares being acquired upon the conversion of shares of Series A Preferred Stock (which certificate or certificates shall not have any legends on it) or (b) in the case of a DWAC Delivery, electronically transfer such Conversion Shares by crediting the account of the Holder’s prime broker with DTC through its DWAC system. If in the case of any Notice of Conversion such certificate or certificates are not delivered to or as directed by or, in the case of a DWAC Delivery, such shares are not electronically delivered to or as directed by, the applicable Holder by the Share Delivery Date, the applicable Holder shall be entitled to elect to rescind such Conversion Notice by written notice to the Corporation at any time on or before its receipt of such certificate or certificates for Conversion Shares or electronic receipt of such shares, as applicable, in which event the Corporation shall promptly return to such Holder any original Series A Preferred Stock certificate delivered to the Corporation and such Holder shall promptly return to the Corporation any Common Stock certificates or otherwise direct the return of any shares of Common Stock delivered to the Holder through the DWAC system, representing the shares of Series A Preferred Stock unsuccessfully tendered for conversion to the Corporation.

(ii) Obligation Absolute . Subject to any limitations on the beneficial ownership of Series A Preferred Stock to which a Holder may be subject and subject to such Holder’s right to rescind a Conversion Notice pursuant to Section 6(d)(i) above, the Corporation’s obligation to issue and deliver the Conversion Shares upon conversion of Series A Preferred Stock in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by a Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by such Holder or any other Person of any obligation to the Corporation or any violation or alleged violation of law by such Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Corporation to such Holder in connection with the issuance of such Conversion Shares. Subject to any limitations on the beneficial of ownership of Series A Preferred Stock to which a Holder may be subject and subject to such Holder’s right to rescind a Conversion Notice pursuant to Section 6(d)(i) above, in the event a Holder shall elect to convert any or all of its Series A Preferred Stock, the Corporation may not refuse conversion based on any claim that such Holder or any one associated or affiliated with such Holder has been engaged in any

violation of law, agreement or for any other reason, unless an injunction from a court, on notice to such Holder, restraining and/or enjoining conversion of all or part of the Series A Preferred Stock of such Holder shall have been sought and obtained by the Corporation, and the Corporation posts a surety bond for the benefit of such Holder in the amount of 150% of the value of the Conversion Shares into which would be converted the Series A Preferred Stock which is subject to such injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and the proceeds of which shall be payable to such Holder to the extent it obtains judgment. In the absence of such injunction, the Corporation shall, subject to any limitations on the beneficial ownership of Series A Preferred Stock to which a Holder may be subject and subject to such Holder’s right to rescind a Conversion Notice pursuant to Section 6(d)(i) above, issue Conversion Shares upon a properly noticed conversion. If the Corporation fails to deliver to a Holder such certificate or certificates, or electronically deliver (or cause its transfer agent to electronically deliver) such shares in the case of a DWAC Delivery, pursuant to Section 6(d)(i) on or prior to the third (3rd) Trading Day after the Share Delivery Date applicable to such conversion (other than a failure caused by incorrect or incomplete information provided by such Holder to the Corporation), then, unless the Holder has rescinded the applicable Conversion Notice pursuant to Section 6(d)(i) above, the Corporation shall pay (as liquidated damages and not as a penalty) to such Holder an amount payable in cash equal to the product of (x) the number of Conversion Shares required to have been issued by the Corporation on such Share Delivery Date, (y) an amount equal to the Daily Failure Amount and (z) the number of Trading Days actually lapsed after such third (3rd) Trading Day after the Share Delivery Date during which such certificates have not been delivered, or, in the case of a DWAC Delivery, such shares have not been electronically delivered; provided, however, the Holder shall only receive up to such amount of shares of Common Stock such that Holder and any other persons or entities whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act (including shares held by any “group” of which the Holder is a member, but excluding shares beneficially owned by virtue of the ownership of securities or rights to acquire securities that have limitations on the right to convert, exercise or purchase similar to the limitation set forth in Section 6(c) hereof) shall not collectively beneficially own greater than the percentage of the total number of shares of Common Stock of the Corporation then issued and outstanding applicable to any limitation on beneficial ownership to which such Holder may be subject. Nothing herein shall limit a Holder’s right to pursue actual damages for the Corporation’s failure to deliver Conversion Shares within the period specified herein and such Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief; provided that Holder shall not receive duplicate damages for the Corporation’s failure to deliver Conversion Shares within the period specified herein. The exercise of any such rights shall not prohibit a Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

(iii) Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Conversion . If the Corporation fails to deliver to a Holder the applicable certificate or certificates or to effect a DWAC Delivery, as applicable, by the Share Delivery Date pursuant to Section 6(d)(i) (other than a failure caused by incorrect or incomplete information provided by such Holder to the Corporation), and if after such Share Delivery Date such Holder is required by its brokerage firm to purchase (in an open market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by such Holder of the Conversion Shares which such Holder was entitled to receive upon the conversion relating to such Share Delivery Date (a “ Buy-In ”). then the Corporation shall (A) pay in cash to such Holder (in addition to any other remedies available to or elected by such Holder) the amount by which (x) such Holder’s total purchase price (including any brokerage commissions) for the shares of Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that such Holder was entitled to receive from the conversion at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and (B) at the option of such

Holder, either reissue (if surrendered) the shares of Series A Preferred Stock equal to the number of shares of Series A Preferred Stock submitted for conversion or deliver to such Holder the number of shares of Common Stock that would have been issued if the Corporation had timely complied with its delivery requirements under Section 6(d)(i). For example, if a Holder purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of shares of Series A Preferred Stock with respect to which the actual sale price (including any brokerage commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence, the Corporation shall be required to pay such Holder $1,000. The Holder shall provide the Corporation written notice, within three (3) Trading Days after the occurrence of a Buy-In, indicating the amounts payable to such Holder in respect of such Buy-In together with applicable confirmations and other evidence reasonably requested by the Corporation. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Corporation’s failure to timely deliver certificates representing shares of Common Stock upon conversion of the shares of Series A Preferred Stock as required pursuant to the terms hereof; provided, however, that the Holder shall not be entitled to both (i) require the reissuance of the shares of Series A Preferred Stock submitted for conversion for which such conversion was not timely honored and (ii) receive the number of shares of Common Stock that would have been issued if the Corporation had timely complied with its delivery requirements under Section 6(d)(i).

(iv) Reservation of Shares Issuable Upon Conversion . The Corporation covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of the Series A Preferred Stock, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holders of the Series A Preferred Stock, not less than such aggregate number of shares of the Common Stock as shall be issuable (taking into account the adjustments of Section 7) upon the conversion of all outstanding shares of Series A Preferred Stock. The Corporation covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.

(v) Fractional Shares . No fractional shares or scrip representing fractional shares of Common Stock shall be issued upon the conversion of the Series A Preferred Stock. As to any fraction of a share which a Holder would otherwise be entitled to receive upon such conversion, the Corporation shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price or round up to the next whole share.

(vi) Transfer Taxes . The issuance of certificates for shares of the Common Stock upon conversion of the Series A Preferred Stock shall be made without charge to any Holder for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificates, provided that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the registered Holder(s) of such shares of Series A Preferred Stock and the Corporation shall not be required to issue or deliver such certificates unless or until the Person or Persons requesting the issuance thereof shall have paid to the Corporation the amount of such tax or shall have established to the satisfaction of the Corporation that such tax has been paid.

(e) Status as Stockholder . Upon each Conversion Date: (i) the shares of Series A Preferred Stock being converted shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a holder of such converted shares of Series A Preferred Stock shall cease and terminate, excepting only the right to receive certificates for or electronic delivery of such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Corporation to comply with the terms of this Certificate of Designation. In all cases, the

holder shall retain all of its rights and remedies for the Corporation’s failure to convert Series A Preferred Stock.

SECTION 7. CERTAIN ADJUSTMENTS .

(a) Stock Dividends and Stock Splits . If the Corporation, at any time while the Series A Preferred Stock is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Corporation upon conversion of shares of Series A Preferred Stock) with respect to the then outstanding shares of Common Stock; (ii) subdivides outstanding shares of Common Stock into a larger number of shares; or (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Corporation) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event (excluding any treasury shares of the Corporation). Any adjustment made pursuant to this Section 7(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision or combination.

(b) Rights Upon Distribution of Assets . If the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “ Distribution ”), a Holder shall be entitled to receive the dividend or distribution of assets that would have been payable to such Holder pursuant to the Distribution had such Holder converted his or her shares of Series A Preferred Stock (or, if he or she had partially converted such shares prior to the Distribution, any unconverted portion thereof) immediately prior to such record date without giving effect for such purposes to the Beneficial Ownership Limitation set forth in Section 6(c) hereof.

(c) Fundamental Transaction . If, at any time while the Series A Preferred Stock is outstanding: (i) the Corporation effects any merger or consolidation of the Corporation with or into another Person (other than a merger in which the Corporation is the surviving or continuing entity and its Common Stock is not exchanged for or converted into other securities, cash or property), (ii) the Corporation effects any sale of all or substantially all of its assets in one transaction or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Corporation or another Person) is completed pursuant to which all of the Common Stock is exchanged for or converted into other securities, cash or property, or (iv) the Corporation effects any reclassification of the Common Stock or any compulsory share exchange pursuant (other than as a result of a dividend, subdivision or combination covered by Section 7(a) above) to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a “ Fundamental Transaction ”), then, upon any subsequent conversion of this Series A Preferred Stock, the Holders shall have the right to receive, in lieu of the right to receive Conversion Shares, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of one share of Common Stock (the “ Alternate Consideration” ). For purposes of any such subsequent conversion, the determination of the Conversion Ratio shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Corporation shall adjust the

Conversion Ratio in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holders shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Series A Preferred Stock following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Corporation or surviving entity in such Fundamental Transaction shall file a new Certificate of Designation with the same terms and conditions and issue to the Holders new preferred stock consistent with the foregoing provisions and evidencing the Holders’ right to convert such preferred stock into Alternate Consideration. The terms of any agreement to which the Corporation is a party and pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this Section 7(b) and ensuring that the Series A Preferred Stock (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. The Corporation shall cause to be delivered (via overnight courier, facsimile or email) to each Holder, at its last address as it shall appear upon the books and records of the Corporation, written notice of any Fundamental Transaction at least ten (10) calendar days prior to the date on which such Fundamental Transaction is expected to become effective or close.

(d) Calculations . All calculations under this Section 7 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 7, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Corporation) issued and outstanding.

(e) Notice to the Holders .

(i) Adjustment to Conversion Price . Whenever the Conversion Price is adjusted pursuant to any provision of this Section 7, the Corporation shall promptly deliver to each Holder a notice setting forth the Conversion Ratio after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

(ii) Other Notices . If: (A) the Corporation shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Corporation shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Corporation shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Corporation shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Corporation is a party, any sale or transfer of all or substantially all of the assets of the Corporation, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property or (E) the Corporation shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, then, in each case, the Corporation shall cause to be delivered (via overnight courier, facsimile or email) to each Holder at its last address as it shall appear upon the books and records of the Corporation, at least ten (10) calendar days (or in the event of a voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, at least seventy-five (75) calendar days) prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange, provided that the failure to deliver such notice or any defect

therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice.

SECTION 8. MISCELLANEOUS .

(a) Notices . Any and all notices or other communications or deliveries to be provided by the Holders hereunder including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by email, facsimile, or sent by a nationally recognized overnight courier service, addressed to the Corporation, at 801 Corporate Center Drive, Suite #210, Raleigh, NC 27607, facsimile number 919-582-9051, or such other facsimile number or address or email address as the Corporation may specify for such purposes by notice to the Holders delivered in accordance with this Section. Any and all notices or other communications or deliveries to be provided by the Corporation hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service or email addressed to each Holder at the facsimile number or address of such Holder appearing on the books of the Corporation, or if no such facsimile number or address appears on the books of the Corporation, at the principal place of business of such Holder. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile or email at the facsimile number or email address specified in or pursuant to this Section prior to 5:30 p.m. (New York City time) on any date, (ii) the date immediately following the date of transmission, if such notice or communication is delivered via facsimile or mail at the facsimile number or email address specified in or pursuant to this Section between 5:30 p.m. and 11:59 p.m. (New York City time) on any date, (iii) the second (2 ^nd ) Business Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.

(b) Lost or Mutilated Series A Preferred Stock Certificate . If a Holder’s Series A Preferred Stock certificate shall be mutilated, lost, stolen or destroyed, the Corporation shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the shares of Series A Preferred Stock so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such certificate, and of the ownership thereof, reasonably satisfactory to the Corporation and, in each case, customary and reasonable indemnity, if requested. Applicants for a new certificate under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Corporation may prescribe.

(c) Waiver . Any waiver by the Corporation or a Holder of a breach of any provision of this Certificate of Designation shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Certificate of Designation or a waiver by any other Holders. The failure of the Corporation or a Holder to insist upon strict adherence to any term of this Certificate of Designation on one or more occasions shall not be considered a waiver or deprive that party (or any other Holder) of the right thereafter to insist upon strict adherence to that term or any other term of this Certificate of Designation. Any waiver by the Corporation or a Holder must be in writing.

(d) Severability . If any provision of this Certificate of Designation is invalid, illegal or unenforceable, the balance of this Certificate of Designation shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law.

(e) Next Business or Trading Day . Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day or a Trading Day, such payment shall be made on the next succeeding Business Day or Trading Day, as the case may be.

(f) Headings . The headings contained herein are for convenience only, do not constitute a part of this Certificate of Designation and shall not be deemed to limit or affect any of the provisions hereof.

(g) Status of Converted Series A Preferred Stock . If any shares of Series A Preferred Stock shall be converted or reacquired by the Corporation, such shares shall resume the status of authorized but unissued shares of preferred stock and shall no longer be designated as Series A Preferred Stock.

IN WITNESS WHEREOF , the Corporation has caused this Certificate of Designation to be signed by its duly authorized officer this 30 ^th day of November, 2012.


BIODELIVERY SCIENCES INTERNATIONAL, INC.

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

ANNEX A

NOTICE OF CONVERSION

(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO

CONVERT SHARES OF SERIES A PREFERRED STOCK)

The undersigned Holder hereby irrevocably elects to convert the number of shares of Series A Convertible Preferred Stock indicated below, represented by stock certificate No(s). (the “ Preferred Stock Certificates ”), into shares of common stock, par value $.001 per share (the “ Common Stock ”), of BioDelivery Sciences International, Inc., a Delaware corporation (the “ Corporation ”), as of the date written below. If securities are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Capitalized terms utilized but not defined herein shall have the meaning ascribed to such terms in that certain Certificate of Designation of Preferences, Rights and Limitations (the “ Certificate of Designation ”) of Series A Non-Voting Convertible Preferred Stock (the “ Series A Preferred Stock ”) filed by the Corporation on , 2012.

As of the date hereof, the number of shares of Common Stock beneficially owned by the undersigned Holder (together with such Holder’s Affiliates, and any other Person whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act and the applicable regulations of the Commission, including any “group” of which the Holder is a member), including the number of shares of Common Stock issuable upon conversion of the Series A Preferred Stock subject to this Notice of Conversion, but excluding the number of shares of Common Stock which are issuable upon (A) conversion of the remaining, unconverted Series A Preferred Stock beneficially owned by such Holder or any of its Affiliates, and (B) exercise or conversion of the unexercised or unconverted portion of any other securities of the Corporation (including any warrants) beneficially owned by such Holder or any of its Affiliates that are subject to a limitation on conversion or exercise similar to the limitation contained in Section 6(c) of the Certificate of Designation, is . For purposes hereof, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the applicable regulations of the Commission. In addition, for purposes hereof, “group” has the meaning set forth in Section 13(d) of the Exchange Act and the applicable regulations of the Commission.

Conversion calculations:

Date to Effect Conversion:

Number of shares of Series A Preferred Stock owned prior to Conversion:

Number of shares of Series A Preferred Stock to be Converted:

Number of shares of Common Stock to be Issued:

Address for delivery of physical certificates:

Or for DWAC Delivery:

DWAC Instructions:

Broker no:

Account no:


[HOLDER]

By:
		Name:
		Title Date:

State of Delaware

Secretary of State

Division of Corporations

Delivered 09:59 AM 05/21/2018

FILED 09:59 AM 05/21/2018

SR 20184031792 - File Number 3515699

CERTIFICATE OF DESIGNATION

SERIES B NON-VOTING CONVERTIBLE PREFERRED STOCK

BIODELIVERY SCIENCES INTERNATIONAL, INC.

Pursuant to Section 151 of the

Delaware General Corporation Law

BioDelivery Sciences International, Inc., a Delaware corporation (the “ Corporation ” ), in accordance with the provisions of Section 103 of the Delaware General Corporation Law (the “ DGCL ”) does hereby certify that, in accordance with Sections 141(c) and 151 of the DGCL, the following resolution was duly adopted by the Board of Directors of the Corporation at a meeting duly convened on May 16, 2018:

RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of the Corporation in accordance with the provisions of the Certificate of Incorporation of the Corporation, as amended (the “ Certificate of Incorporation ”), there is hereby established a series of the Corporation’s authorized preferred stock, par value $0.001 per share (the “ Preferred Stock ” ), which series shall be designated as the Series B Convertible Preferred Stock, par value $0.001 per share, of the Corporation, with the designation, number of shares, powers, preferences, rights, qualifications, limitations and restrictions thereof (in addition to any provisions set forth in the Certificate of Incorporation which are applicable to the Preferred Stock of all classes and series) as follows:

SERIES B NON-VOTING CONVERTIBLE PREFERRED STOCK

SECTION 1. DEFINITIONS . For the purposes hereof, the following terms shall have the following meanings:

“ Affiliate ” means any person or entity that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a person or entity, as such terms are used in and construed under Rule 144 under the Securities Act. With respect to a Holder, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as such Holder will be deemed to be an Affiliate of such Holder.

“ Alternate Consideration ” shall have the meaning set forth in Section 8(c).

“ Beneficial Ownership Limitation ” shall have the meaning set forth in Section 7(c).

“ Business Day ” means any day except Saturday, Sunday, any day which shall be a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

“ Buy-In ” shall have the meaning set forth in Section 7(e)(iii).

“ Bylaws ” shall have the meaning set forth in Section 4(b)(ii).

“ Closing Sale Price ” means, for any security as of any date, the last closing trade price for such security prior to 4:00 p.m., New York City time, on the principal securities exchange or trading market where such security is listed or traded, as reported by Bloomberg, L.P. (or an equivalent, reliable reporting service mutually acceptable to and hereafter designated by Holders of a majority of the then-outstanding Series B Preferred Stock and the Corporation), or if the foregoing do not apply, the last trade price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, L.P., or, if no last trade price is reported for such security by Bloomberg, L.P., the average of the bid prices of any market makers for such security as reported on the OTC Pink Market by OTC Markets Group, Inc. If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as determined in good faith by the Board of Directors of the Corporation.

“ Commission ” means the Securities and Exchange Commission.

“ Conversion Date ” shall have the meaning set forth in Section 7(a).

“ Conversion Price ” shall mean $1.80, as adjusted pursuant to paragraph 8 hereof.

“ Conversion Ratio ” shall have the meaning set forth in Section 7(b).

“ Conversion Shares ” means, collectively, the shares of Common Stock issuable upon conversion of the shares of Series B Preferred Stock in accordance with the terms hereof.

“ Daily Failure Amount ” means the product of (x) 0.005 multiplied by (y) the Closing Sale Price of the Common Stock on the applicable Share Delivery Date.

“ DGCL ” shall mean the Delaware General Corporation Law.

“ Distribution ” shall have the meaning set forth in Section 8(b).

“ DTC ” shall have the meaning set forth in Section 7(a).

“ DWAC Delivery ” shall have the meaning set forth in Section 7(a).

“ Equity Conditions ” means, during the period in question, (a) the Corporation shall have duly honored all conversions scheduled to occur or occurring pursuant to one or more Notices of Conversion of the applicable Holder on or prior to the dates so required, if any, (b) (i) there is an effective registration statement pursuant to which the Corporation may issue Conversion Shares or (ii) all of the Conversion Shares may be issued to the Holder pursuant to Section 3(a)(9) of the Securities Act and immediately resold, (c) the Corporation is current with its required filings under the Exchange Act, (d) the Common Stock is trading on principal securities exchange, (e) there is a sufficient number of authorized but unissued shares of Common Stock for the issuance of all of the shares then issuable pursuant to the Preferred Stock then outstanding, and (f) the issuance of the shares in question to the applicable Holder would not violate the Beneficial Ownership Limitation of such Holder set forth in Section 7(c) herein.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“ Forced Conversion Limitation ” shall have the meaning set forth in Section 7(f)

“ Fundamental Transaction ” shall have the meaning set forth in Section 8(c).

“ Holder ” means any holder of Series B Preferred Stock.

“ Issuance Date ” means May 21, 2018.

“ Junior Securities ” shall have the meaning set forth in Section 5(a).

“ Liquidation Event ” shall have the meaning set forth in Section 5(b).

“ Nasdaq ” means the Nasdaq Stock Market LLC.

“ Notice of Conversion ” shall have the meaning set forth in Section 7(a).

“ Parity Securities ” shall have the meaning set forth in Section 5(a).

“ Purchase Agreement ” means the Securities Purchase Agreement, dated as of May 17, 2018, between the Corporation and the original Holders.

“ Required Holders ” means the holders of at least eighty percent (80%) of the outstanding shares of Series B Preferred Stock (voting together on an as-converted to Common Stock basis).

“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“ Senior Securities ” shall have the meaning set forth in Section 5(a).

“ Series A Preferred Stock ” means the Corporation’s Series A Non-Voting Convertible Preferred Stock, par value $0.001 per share.

“ Share Delivery Date ” shall have the meaning set forth in Section 7(e)(i).

“ Stated Value” shall mean $10,000.

“ Trading Day ” means a day on which the Common Stock is traded for any period on the principal securities exchange or if the Common Stock is not traded on a principal securities exchange, on a day that the Common Stock is traded on another securities market on which the Common Stock is then being traded.

“ Voting Limitation ” shall have the meaning set forth in Section 4(a).

SECTION 2. DESIGNATION, AMOUNT AND PAR VALUE; ASSIGNMENT.

(a) The series of preferred stock designated by this Certificate shall be designated as the Corporation’s “Series B Convertible Preferred Stock” (the “ Series B Preferred Stock ”) and the number of shares so designated shall be 5,000. Each share of Series B Preferred Stock shall have a par value of $0.001 per share.

(b) The Corporation shall register shares of the Series B Preferred Stock, upon records to be maintained by the Corporation for that purpose (the “ Series B Preferred Stock Register ”), in the name of the Holders thereof from time to time. The Corporation may deem and treat the registered Holder of shares of Series B Preferred Stock as the absolute owner thereof for the purpose of any conversion thereof and for all other purposes. The Corporation shall register the transfer of any shares of Series B Preferred Stock in the Series B Preferred Stock Register, upon surrender of the certificates evidencing such shares to be transferred, duly endorsed by the Holder thereof, to the Corporation at its principal place of business or such other office of the Corporation as may be designated by the Corporation. Upon any such registration or transfer, a new certificate evidencing the shares of Series B Preferred Stock so transferred shall be issued to the transferee and a new certificate evidencing the remaining portion of the shares not so transferred, if any, shall be issued to the transferring Holder, in each case, within two (2) Business Days. The provisions of this Certificate are intended to be for the benefit of all Holders from time to time and shall be enforceable by any such Holder.

SECTION 3. DIVIDENDS . The Corporation shall not, without the written consent or affirmative vote of the Required Holders, given in writing or by vote at a meeting declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Corporation (other than dividends on shares of Common Stock payable in shares of Common Stock) unless the holders of the Series B Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series B Preferred Stock in an amount at least equal to (i) in the case of a dividend on Common Stock or any class or series that is convertible into Common Stock, that dividend per share of Series B Preferred Stock as would equal the product of (A) the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock (without giving effect for such purposes to the Beneficial Ownership Limitation set forth in Section 7(c) hereof) and (B) the number of shares of Common Stock issuable upon conversion of a share of Series B Preferred Stock (without giving effect for such purposes to the Beneficial Ownership Limitation set forth in Section 7(c) hereof), in each case calculated on the record date for determination of holders entitled to receive such dividend or (ii) in the case of a dividend on any class or series that is not convertible into Common Stock, at a rate per share of Series B Preferred Stock determined by (A) dividing the amount of the dividend payable on each share of such class or series of capital stock by the original issuance price of such class or series of capital stock (subject

to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to such class or series) and (B) multiplying such fraction by an amount equal to the Stated Value; provided that, if the Corporation declares, pays or sets aside, on the same date, a dividend on shares of more than one class or series of capital stock of the Corporation, the dividend payable to the holders of Series B Preferred Stock pursuant to this Section 3 shall be calculated based upon the dividend on the class or series of capital stock that would result in the highest Series B Preferred Stock dividend. Subject to the forgoing, Holders shall be entitled to receive, and the Corporation shall pay, dividends on shares of the Series B Preferred Stock equal (on an as-if-converted-to-Common-Stock basis without giving effect for such purposes to the Beneficial Ownership Limitation set forth in Section 7(c) hereof) to and in the same form as dividends (other than dividends in the form of Common Stock) actually paid on shares of the Common Stock when, as and if such dividends (other than dividends in the form of Common Stock) are paid on shares of the Common Stock. Except as set forth above, the Holders shall not be entitled to any dividend on the Series B Preferred Stock.

SECTION 4. VOTING RIGHTS .

(a) Except as otherwise provided herein or as otherwise required by the DGCL, the Series B Preferred Stock shall have no voting rights.

(b) Protective Provisions . At any time when shares of Series B Preferred Stock are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or the Certificate of Incorporation) the written consent or affirmative vote of the Required Holders, given in writing or by vote at a meeting, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect:

(i) amend, alter, or repeal any provision of the Certificate of Incorporation, this Certificate, or the Corporation’s bylaws (the “ Bylaws ” ) in a manner adverse to the Series B Preferred Stock, or file any certificate of designation of any series of Preferred Stock, if such action would adversely alter or change the preferences, rights, privileges or powers of, or restrictions provided for the benefit of the Series B Preferred Stock;

(ii) create, or authorize the creation of, or issue or obligate itself to issue shares of, any additional class or series of capital stock, or any other securities convertible into any additional class or series of capital stock, or increase the authorized number of shares of Series B Preferred Stock or increase the authorized number of shares of any additional class or series of capital stock unless the same ranks junior to the Series B Preferred Stock with respect to the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends and rights of redemption; or

(iii) purchase or redeem (or permit any subsidiary to purchase or redeem) or pay or declare any dividend or make any distribution on, any shares of capital stock of the Corporation other than (i) redemptions of or dividends or distributions on the Series B Preferred Stock as expressly authorized herein, (ii) dividends or other distributions payable on the Common Stock solely in the form of additional shares of Common Stock and (iii) repurchases of stock from former employees, officers, directors, consultants or other persons who performed services for the Corporation or any subsidiary in connection with the cessation of such employment or service at the lower of the original purchase price or the then-current fair market value thereof.

SECTION 5. RANK; LIQUIDATION .

(a) The Series B Preferred Stock shall rank: (i) senior to all of the Common Stock; (ii) senior to any class or series of capital stock of the Corporation hereafter created specifically ranking by its terms junior to any Series B Preferred Stock (“ Junior Securities ”); (iii) on parity with any class or series of capital stock of the Corporation hereafter created specifically ranking by its terms on parity with the Series B Preferred Stock (“ Parity Securities ”); and (iv) junior to any class or series of capital stock of the Corporation hereafter created specifically ranking by its terms senior to any Series B Preferred Stock (“ Senior Securities ”), in each case, as to dividends, distributions of assets upon liquidation, dissolution or winding up of the Corporation, whether voluntarily or involuntarily.

Event ”), each holder of shares of Series B Preferred Stock shall be entitled to receive, in preference to any distributions of any of the assets or surplus funds of the Corporation to the holders of the Common Stock and Junior Securities and pari passu with any distribution to the holders of Series A Preferred Stock and Parity Securities, an amount equal to $0.001 per share of Series B Preferred Stock, plus an additional amount equal to any dividends declared but unpaid on such shares, before any payments shall be made or any assets distributed to holders of any class of Common Stock or Junior Securities. If, upon any such Liquidation Event, the assets of the Corporation shall be insufficient to pay the holders of shares of the Series B Preferred Stock the amount required under the preceding sentence, then all remaining assets of the Corporation shall be distributed ratably to holders of the shares of the Series B Preferred Stock, Series A Preferred Stock and Parity Securities.

(c) After payment to the holders of shares of the Series B Preferred Stock of the amount required under Section 5(b) and subject to the prior and superior rights of the holders of any Senior Securities of the Corporation, the remaining assets or surplus funds of the Corporation, if any, available for distribution to stockholders shall be distributed ratably among the holders of the Series B Preferred Stock, the holders of Series A Preferred Stock, any other class or series of capital stock that participates with the Common Stock in the distribution of assets upon any Liquidation Event and the Common Stock, with the holders of the Series B Preferred Stock deemed to hold that number of shares of Common Stock into which such shares of Series B Preferred Stock are then convertible (without giving effect for such purposes to the Beneficial Ownership Limitation set forth in Section 7(c) hereof).

SECTION 6. Requisite Stockholder Approval .

(a) Subject to applicable law, the rules and regulations of Nasdaq and the Certificate of Incorporation and Bylaws, the Corporation covenants that it shall establish a record date for, call, give notice of, convene and hold a meeting of the holders of Common Stock of the Corporation (the “ Corporation Stockholders’ Meeting ” ) , as promptly as practicable following the Issuance Date, but in no event later than August 4, 2018, for the purpose of, among other things, voting upon (i) an amendment to the Certificate of Incorporation to increase the Corporation’s authorized capital stock, in an amount necessary to provide for the full conversion of outstanding shares of the Series B Preferred Stock into shares of Common Stock (the “ Amendment ” ) and (ii) the approval as may be required by the applicable rules and regulations of Nasdaq (or any successor entity) from the stockholders of the Corporation with respect to the transactions contemplated by the Transaction Documents (as defined in the Purchase Agreement) (the “ Stockholder Approval ” ). Notwithstanding the foregoing, (i) if there are insufficient shares of Common Stock necessary to establish a quorum at the Corporation Stockholders’ Meeting, the Corporation may postpone or adjourn the date of the Corporation Stockholders’ Meeting to the extent (and only to the extent) the Corporation reasonably determines that such postponement or adjournment is necessary in order to conduct business at the Corporation Stockholders’ Meeting, (ii) the Corporation may postpone or adjourn the Corporation Stockholders’ Meeting to the extent (and only to the extent) the Corporation reasonably determines that such postponement or adjournment is required by applicable law, and (iii) the Corporation may postpone or adjourn the Corporation Stockholders’ Meeting to the extent (and only to the extent) the Corporation reasonably determines that such postponement or adjournment is necessary to solicit sufficient proxies to secure the favorable vote of the holders of a majority of the outstanding shares of Common Stock present in person or by proxy at the Corporation Stockholders’ Meeting and entitled to vote with respect to each of the Amendment and Stockholder Approval (collectively, such approval, the “ Requisite Stockholder Approval ” ). The Corporation shall solicit from stockholders of the Corporation proxies in favor of the approval of the Amendment and Stockholder Approval in accordance with applicable law and the rules and regulations of Nasdaq, and, except as required to comply with fiduciary duties under applicable law, the Corporation’s Board of Directors shall (x) recommend that the Corporation’s stockholders vote to approve the Amendment and Stockholder Approval (the “ Recommendation ” ) , (y) use its reasonable best efforts to solicit such stockholders to vote in favor of the Amendment and Stockholder Approval and (z) use its reasonable best efforts to take all other actions necessary or advisable to secure the favorable votes of such stockholders required to approve and effect the Amendment and Stockholder Approval. The Corporation shall establish a record date for, call, give notice of, convene and hold the Corporation Stockholders’ Meeting in accordance with this Section 6, whether or not the Corporation’s Board of Directors at any time subsequent to the Issuance Date shall have changed its position with respect to its Recommendation or determined that the Amendment and Stockholder Approval is no longer advisable and/or recommended that stockholders of the Corporation reject the Amendment and Stockholder Approval.

(b) Except as required to comply with fiduciary duties under applicable law, the Corporation’s Board of Directors shall not (i) withdraw or modify the Recommendation in a manner adverse to any Holder, or adopt or propose a resolution to withdraw or modify the Recommendation that is or becomes disclosed publicly and which can reasonably be interpreted to indicate that the Corporation’s Board of Directors or any committee thereof does not support the Amendment or does not believe that the Conversion is in the best interests of the Corporation’s stockholders or (ii) fail to reaffirm, without qualification, the Recommendation, or fail to state publicly, without qualification, that the Conversion is in the best interests of the Corporation’s stockholders after any Holder requests in writing that such action be taken.

SECTION 7. CONVERSION .

(a) Conversions at Option of Holder . At any time after the date that the Requisite Stockholder Approval is obtained, each share of Series B Preferred Stock (or portion of a share of Series B Preferred, which portion shall not be less than 0.5 of a share of Series B Preferred Stock) shall be convertible, from time to time from and after the date thereof, at the option of the Holder thereof, into a number of shares of Common Stock equal to the Conversion Ratio in effect at the time of such conversion. Holders shall effect conversions by providing the Corporation with the form of conversion notice (via overnight courier, facsimile or email) attached hereto as Annex A (a “ Notice of Conversion ” ) , duly completed and executed. For purposes of clarification, unless required pursuant to industry standard stock transfer procedures, the Corporation or its transfer agent shall not require a Holder to obtain a medallion guaranty, notary attestation or any similar deliverable in order to effectuate the conversion of all or a portion of such Holder’s shares of Series B Preferred Stock. Provided the Corporation’s Common Stock transfer agent is participating in the Depository Trust Company (“ DTC ”), Fast Automated Securities Transfer program, the Notice of Conversion may specify, at the Holder’s election, whether the applicable Conversion Shares shall be credited to the account of the Holder’s prime broker with DTC through its Deposit Withdrawal Agent Commission system (a “ D WAC Delivery ” ) . The date on which a conversion of Series B Preferred Stock shall be deemed effective (the “ Conversion Date ” ) shall be defined as the Trading Day that the Notice of Conversion, completed and executed, is sent (via overnight courier, facsimile or email) to, and received during regular business hours by, the Corporation. To effect conversions of shares of Series B Preferred Stock, a Holder shall not be required to surrender the certificate(s) representing the shares of Series B Preferred Stock to the Corporation unless all of the shares of Series B Preferred Stock represented thereby are so converted, in which case such Holder shall deliver the certificate representing such shares of Series B Preferred Stock promptly following the Conversion Date at issue. The calculations set forth in the Notice of Conversion shall control in the absence of manifest or mathematical error.

(b) Conversion Ratio . The “ Conversion Ratio ” for each share of Series B Preferred Stock (or portion of a share of Series B Preferred Stock, which portion shall not be less than 0.5 of a share of Series B Preferred Stock) shall be equal to the Stated Value divided by the Conversion Price.

(c) Beneficial Ownership Limitation . Notwithstanding anything herein to the contrary, the Corporation shall not effect any conversion of the Series B Preferred Stock, and a Holder shall not have the right to convert any portion of its Series B Preferred Stock, to the extent that, after giving effect to an attempted conversion set forth on an applicable Notice of Conversion, such Holder (together with such Holder’s Affiliates, and any other Person whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act and the applicable rules and regulations of the Commission, including any “group” of which the Holder is a member) would beneficially own a number of shares of Common Stock in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by such Holder and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of the Series B Preferred Stock subject to the Notice of Conversion with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which are issuable upon (A) conversion of the remaining, unconverted shares of Series B Preferred Stock beneficially owned by such Holder or any of its Affiliates, and (B) exercise or conversion of the unexercised or unconverted portion of any other securities of the Corporation beneficially owned by such Holder or any of its Affiliates (including, without limitation, any convertible notes, convertible stock or warrants) that are subject to a limitation on conversion or exercise analogous to the limitation contained herein. Except as set forth in the preceding sentence, for purposes of this Section 7(c), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the applicable rules and regulations of the Commission. In addition, for purposes hereof, “group” has the meaning set forth in Section 13(d) of the Exchange Act and the applicable rules

and regulations of the Commission. For purposes of this Section 7(c), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Corporation’s most recent Form 10-K, Form 10-Q, Current Report on Form 8-K or other public filing with the Commission, as the case may be, (B) a more recent public announcement by the Corporation or (C) a more recent notice by the Corporation or the Corporation’s transfer agent to the Holder setting forth the number of shares of Common Stock then outstanding. For any reason at any time, upon the written or oral request of a Holder (which may be by email), the Corporation shall, within one (1) Business Day of such request, confirm orally and in writing to such Holder (which may be via email) the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to any actual conversion or exercise of securities of the Corporation, including shares of Series B Preferred Stock, by such Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was last publicly reported or confirmed to the Holder. The “ Beneficial Ownership Limitation ” shall be 9.98% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock pursuant to such Notice of Conversion (to the extent permitted pursuant to this Section 7(c)). The Corporation shall be entitled to rely on representations made to it by the Holder in any Notice of Conversion regarding its Beneficial Ownership Limitation. By written notice to the Corporation, a Holder may from time to time increase or decrease the Beneficial Ownership Limitation to any other percentage specified in such notice; provided that any such increase or decrease will not be effective until the sixty-first (61 ^st ) day after such notice is delivered to the Corporation; provided , however , that, until Stockholder Approval has been obtained, a Holder shall only be permitted to increase the Beneficial Ownership Limitation up to 19.99%. The provisions of this Section 7(c) shall be construed, corrected and implemented in a manner so as to effectuate the intended beneficial ownership limitation herein contained and the shares of Common Stock underlying the Series B Preferred Stock in excess of the Beneficial Ownership Limitation shall not be deemed to be beneficially owned by the Holder for any purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the Exchange Act.

(d) [reserved]

(e) Mechanics of Conversion .

(i) Delivery of Certificate or Electronic Issuance Upon Conversion . Not later than two (2) Trading Days after the applicable Conversion Date (the “Share Delivery Date” ), the Corporation shall: (a) deliver, or cause to be delivered, to the converting Holder a physical certificate or certificates representing the number of Conversion Shares being acquired upon the conversion of shares of Series B Preferred Stock (which certificate or certificates shall not have any legends on it) or (b) in the case of a DWAC Delivery, electronically transfer such Conversion Shares by crediting the account of the Holder’s prime broker with DTC through its DWAC system. If in the case of any Notice of Conversion such certificate or certificates are not delivered to or as directed by or, in the case of a DWAC Delivery, such shares are not electronically delivered to or as directed by, the applicable Holder by the Share Delivery Date, the applicable Holder shall be entitled to elect to rescind such Notice of Conversion by written notice to the Corporation at any time on or before its receipt of such certificate or certificates for Conversion Shares or electronic receipt of such Conversion Shares, as applicable, in which event the Corporation shall promptly return to such Holder any original Series B Preferred Stock certificate delivered to the Corporation and such Holder shall promptly return to the Corporation any Common Stock certificates or otherwise direct the return of any shares of Common Stock delivered to the Holder through the DWAC system, representing the shares of Series B Preferred Stock unsuccessfully tendered for conversion to the Corporation. Notwithstanding anything herein to the contrary, the Corporation’s obligation to deliver shares of capital stock to a Holder within two (2) Business Days shall be automatically amended if, and to the extent that, the obligation to deliver shares within two (2) Business Days pursuant to Rule 15c6-1(a) (or any successor rule) promulgated under the Securities Exchange Act of 1933, as amended, is amended or modified.

(ii) Obligation Absolute . Subject to any limitations on the beneficial ownership of Series B Preferred Stock to which a Holder may be subject and subject to such Holder’s right to rescind a Notice of Conversion pursuant to Section 7(e)(i) above, the Corporation’s obligation to issue and deliver the Conversion Shares upon conversion of Series B Preferred Stock in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by a Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by such Holder or any other Person of any obligation to the Corporation or any violation or alleged violation of law by such Holder or any other

Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Corporation to such Holder in connection with the issuance of such Conversion Shares. Subject to any limitations on the beneficial of ownership of Series B Preferred Stock to which a Holder may be subject and subject to such Holder’s right to rescind a Notice of Conversion pursuant to Section 7(e)(i) above, in the event a Holder shall elect to convert any or all of its Series B Preferred Stock, the Corporation may not refuse conversion based on any claim that such Holder or any one associated or affiliated with such Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to such Holder, restraining and/or enjoining conversion of all or part of the Series B Preferred Stock of such Holder shall have been sought and obtained by the Corporation, and the Corporation posts a surety bond for the benefit of such Holder in the amount of 150% of the value of the Conversion Shares into which would be converted the Series B Preferred Stock which is subject to such injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and the proceeds of which shall be payable to such Holder to the extent it obtains judgment. In the absence of such injunction, the Corporation shall, subject to any limitations on the beneficial ownership of Series B Preferred Stock to which a Holder may be subject and subject to such Holder’s right to rescind a Notice of Conversion pursuant to Section 7(e)(i) above, issue Conversion Shares upon a properly noticed conversion. If the Corporation fails to deliver to a Holder such certificate or certificates, or electronically deliver (or cause its transfer agent to electronically deliver) such shares in the case of a DWAC Delivery, pursuant to Section 7(e)(i) on or prior to the second (2 ^nd ) Trading Day after the Share Delivery Date applicable to such conversion (other than a failure caused by incorrect or incomplete information provided by such Holder to the Corporation), then, unless the Holder has rescinded the applicable Notice of Conversion pursuant to Section 7(e)(i) above, the Corporation shall pay (as liquidated damages and not as a penalty) to such Holder an amount payable in cash equal to the product of (x) the number of Conversion Shares required to have been issued by the Corporation on such Share Delivery Date, (y) an amount equal to the Daily Failure Amount and (z) the number of Trading Days actually lapsed after such second (2 ^nd ) Trading Day after the Share Delivery Date during which such shares certificates have not been delivered, or, in the case of a DWAC Delivery, such shares not been electronically delivered; provided, however, the Holder shall only receive up to such amount of shares of Common Stock such that Holder and any other persons or entities whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act (including shares held by any “group” of which the Holder is a member, but excluding shares beneficially owned by virtue of the ownership of securities or rights to acquire securities that have limitations on the right to convert, exercise or purchase similar to the limitation set forth in Section 7(c) hereof) shall not collectively beneficially own greater than the percentage of the total number of shares of Common Stock of the Corporation then issued and outstanding applicable to any limitation on beneficial ownership to which such Holder may be subject. Nothing herein shall limit a Holder’s right to pursue actual damages for the Corporation’s failure to deliver Conversion Shares within the period specified herein and such Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief; provided that Holder shall not receive duplicate damages for the Corporation’s failure to deliver Conversion Shares within the period specified herein. The exercise of any such rights shall not prohibit a Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.

(iii) Compensation for Buy-In for Failure to Timely Deliver Certificates Upon Conversion . If the Corporation fails to deliver to a Holder the applicable certificate or certificates or to effect a DWAC Delivery, as applicable, by the Share Delivery Date pursuant to Section 7(e)(i) (other than a failure caused by incorrect or incomplete information provided by such Holder to the Corporation), and if after such Share Delivery Date such Holder is required by its brokerage firm to purchase (in an open market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by such Holder of the Conversion Shares which such Holder was entitled to receive upon the conversion relating to such Share Delivery Date (a “ Buy-In ” ) , the Corporation shall (A) pay in cash to such Holder (in addition to any other remedies available to or elected by such Holder) the amount by which (x) such Holder’s total purchase price (including any brokerage commissions) for the shares of Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that such Holder was entitled to receive from the conversion at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and (B) at the option of such Holder, either reissue (if surrendered) the shares of Series B Preferred Stock equal to the number of shares of Series B Preferred Stock submitted for conversion or deliver to such Holder the number of shares of Common Stock that would have been issued if the Corporation had timely complied with its delivery requirements under Section 7(e)(i). For example, if a Holder purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion

of shares of Series B Preferred Stock with respect to which the actual sale price (including any brokerage commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence, the Corporation shall be required to pay such Holder $1,000. The Holder shall provide the Corporation written notice, within three (3) Trading Days after the occurrence of a Buy-In (a “ Buy-In Notice ”), indicating the amounts payable to such Holder in respect of such Buy-In together with applicable confirmations and other evidence reasonably requested by the Corporation. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Corporation’s failure to timely deliver certificates representing shares of Common Stock upon conversion of the shares of Series B Preferred Stock as required pursuant to the terms hereof; provided, however, that the Holder shall not be entitled to both (i) require the reissuance of the shares of Series B Preferred Stock submitted for conversion for which such conversion was not timely honored and (ii) receive the number of shares of Common Stock that would have been issued if the Corporation had timely complied with its delivery requirements under Section 7(e)(i).

(iv) Reservation of Shares Issuable Upon Conversion . The Corporation covenants that, following obtaining the Requisite Stockholder Approval, it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of the Series B Preferred Stock, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holders of the Series B Preferred Stock, not less than such aggregate number of shares of the Common Stock as shall be issuable (taking into account the adjustments of Section 8) upon the conversion of all outstanding shares of Series B Preferred Stock. The Corporation covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.

(v) Fractional Shares . No fractional shares or scrip representing fractional shares of Common Stock shall be issued upon the conversion of the Series B Preferred Stock. As to any fraction of a share which a Holder would otherwise be entitled to receive upon such conversion, the Corporation shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price or round up to the next whole share.

(vi) Transfer Taxes . The issuance of certificates for shares of the Common Stock upon conversion of the Series B Preferred Stock shall be made without charge to any Holder for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificates, provided that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the registered Holder(s) of such shares of Series B Preferred Stock and the Corporation shall not be required to issue or deliver such certificates unless or until the Person or Persons requesting the issuance thereof shall have paid to the Corporation the amount of such tax or shall have established to the satisfaction of the Corporation that such tax has been paid.

(e) Status as Stockholder . Upon each Conversion Date: (i) the shares of Series B Preferred Stock being converted shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a holder of such converted shares of Series B Preferred Stock shall cease and terminate, excepting only the right to receive certificates for or electronic delivery of such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Corporation to comply with the terms of this Certificate. In all cases, the Holder shall retain all of its rights and remedies for the Corporation’s failure to convert Series B Preferred Stock.

(f) Forced Conversion upon Requisite Stockholder Approval . Notwithstanding anything herein to the contrary, upon Requisite Stockholder Approval, the Corporation may, within ten (10) Trading Days after the date of Requisite Stockholder Approval, deliver a written notice to all Holders (a “ Forced Conversion Notice ” and the date such notice is delivered to all Holders, the “ Forced Conversion Notice Date ”) to cause each Holder to convert all or part of such Holder’s Preferred Stock (as specified in such Forced Conversion Notice) pursuant to Section 7 (a “ Forced Conversion ”) up to each Holder’s Forced Conversion Limitation (as defined below), it being agreed that the “Conversion Date” for purposes of Section 7 shall be deemed to occur on the Forced Conversion Notice Date (such date, the “ Forced Conversion Date ”). The Corporation may not deliver a Forced Conversion Notice, and any Forced Conversion Notice delivered by the Corporation shall not be effective, unless all of the Equity Conditions have been met on the Forced Conversion Date through and including the date of actual delivery of the Conversion Shares. Any Forced Conversion Notices shall be applied ratably to all of the Holders based on the then outstanding

shares of Preferred Stock. For purposes of clarification, a Forced Conversion shall be subject to all of the provisions of Section 7, including, without limitation, the provisions on delivery of Conversion Shares and the limitations on conversion in Section 7(c). In addition, following the initial Forced Conversion hereunder, the Corporation may deliver one or more additional Forced Conversion Notices to the Holders to effect Forced Conversions up to the Forced Conversion Limitation pursuant to the terms hereunder, provided that the Company shall not deliver a Forced Conversion Notice to the Holders more than one time in a ninety (90) day period. In connection with the foregoing sentence, upon written request of the Corporation given no more often than one time in a forty five (45) day period, each Holder shall, within three business days following request, deliver notice in writing to the Corporation of such Holder’s current holdings of Common Stock and beneficial ownership of Common Stock for purposes of the Forced Conversion Limitation in order that the Corporation may effect additional Forced Conversions pursuant to the terms hereunder. For purposes herein, the “ Forced Conversion Limitation ” means, with respect to each Holder, a beneficial ownership limitation equal to 9% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock pursuant to such Forced Conversion Notice, which shall be calculated as set forth in Section 7(c) herein, assuming for purposes of such calculation that the Beneficial Ownership Limitation (as such term is used in Section 7(c) herein) shall be 9%.

SECTION 8. CERTAIN ADJUSTMENTS .

(a) Stock Dividends and Stock Splits . If the Corporation, at any time while the Series B Preferred Stock is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Corporation upon conversion of shares of Series B Preferred Stock) with respect to the then outstanding shares of Common Stock; (ii) subdivides outstanding shares of Common Stock into a larger number of shares; or (iii) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Corporation) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event (excluding any treasury shares of the Corporation). Any adjustment made pursuant to this Section 8(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision or combination.

(b) Rights Upon Distribution of Assets . If the Corporation shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “ Distribution ” ) , a Holder shall be entitled to receive the dividend or distribution of assets that would have been payable to such Holder pursuant to the Distribution had such Holder converted his or her shares of Series B Preferred Stock (or, if he or she had partially converted such shares prior to the Distribution, any unconverted portion thereof) immediately prior to such record date without giving effect for such purposes to the Beneficial Ownership Limitation set forth in Section 7(c) hereof.

(c) Fundamental Transaction . If, at any time while the Series B Preferred Stock is outstanding: (i) the Corporation effects any merger or consolidation of the Corporation with or into another Person (other than a merger in which the Corporation is the surviving or continuing entity and its Common Stock is not exchanged for or converted into other securities, cash or property), (ii) the Corporation effects any sale of all or substantially all of its assets in one transaction or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Corporation or another Person) is completed pursuant to which all of the Common Stock is exchanged for or converted into other securities, cash or property, or (iv) the Corporation effects any reclassification of the Common Stock or any compulsory share exchange pursuant (other than as a result of a dividend, subdivision or combination covered by Section 8(a) above) to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a “ Fundamental Transaction ” ) , then, upon any subsequent conversion of this Series B Preferred Stock, the Holders shall have the right to receive, in lieu of the right to receive Conversion Shares, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of one share of Common Stock (the “ Alternate

Consideration ” ) . For purposes of any such subsequent conversion, the determination of the Conversion Ratio shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Corporation shall adjust the Conversion Ratio in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holders shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Series B Preferred Stock following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Corporation or surviving entity in such Fundamental Transaction shall file a new Certificate of Designation with the same terms and conditions and issue to the Holders new preferred stock consistent with the foregoing provisions and evidencing the Holders’ right to convert such preferred stock into Alternate Consideration. The terms of any agreement to which the Corporation is a party and pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this Section 8(b) and ensuring that the Series B Preferred Stock (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. The Corporation shall cause to be delivered (via overnight courier, facsimile or email) to each Holder, at its last address as it shall appear upon the books and records of the Corporation, written notice of any Fundamental Transaction at least ten (10) calendar days prior to the date on which such Fundamental Transaction is expected to become effective or close.

(d) Calculations . All calculations under this Section 8 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 8, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding any treasury shares of the Corporation) issued and outstanding.

(e) Notice to the Holders .

(i) Adjustment to Conversion Price . Whenever the Conversion Price is adjusted pursuant to any provision of this Section 8, the Corporation shall promptly deliver to each Holder a notice setting forth the Conversion Ratio after such adjustment and setting forth a brief statement of the facts requiring such adjustment.

SECTION 9. MISCELLANEOUS .

(a) Notices . Any and all notices or other communications or deliveries to be provided by the Holders hereunder including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by email, facsimile, or sent by a nationally recognized overnight courier service, addressed to the Corporation, at 4131 ParkLake Avenue, Suite 225, Raleigh, NC 27612, facsimile number 919-582-9051, e-mail: mbrown@bdsi.com, or such other facsimile number or address or email address as the Corporation may specify for such purposes by notice to the Holders delivered in accordance with this Section. Any and all notices or other communications or deliveries to be provided by the Corporation hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service or email addressed to each Holder at the facsimile number or address of such Holder appearing on the books of the Corporation, or if no such facsimile number or address appears on the books of the Corporation, at the principal place of business of such Holder. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile or email at the facsimile number or email address specified in or pursuant to this Section prior to 5:30 p.m. (New York City time) on any date, (ii) the date immediately following the date of transmission, if such notice or communication is delivered via facsimile or mail at the facsimile number or email address specified in or pursuant to this Section between 5:30 p.m. and 11:59 p.m. (New York City time) on any date, (iii) the second (2 ^nd ) Business Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.

(b) Lost or Mutilated Series B Preferred Stock Certificate . If a Holder’s Series B Preferred Stock certificate shall be mutilated, lost, stolen or destroyed, the Corporation shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the shares of Series B Preferred Stock so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such certificate, and of the ownership thereof, reasonably satisfactory to the Corporation and, in each case, customary and reasonable indemnity, if requested. Applicants for a new certificate under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Corporation may prescribe.

(e) Severability . If any provision of this Certificate of Designation is invalid, illegal or unenforceable, the balance of this Certificate of Designation shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law.

(f) Next Business or Trading Day . Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day or a Trading Day, such payment shall be made on the next succeeding Business Day or Trading Day, as the case may be.

(g) Headings . The headings contained herein are for convenience only, do not constitute a part of this Certificate of Designation and shall not be deemed to limit or affect any of the provisions hereof.

(h) Status of Converted Series B Preferred Stock . If any shares of Series B Preferred Stock shall be converted or reacquired by the Corporation, such shares shall resume the status of authorized but unissued shares of preferred stock and shall no longer be designated as Series B Preferred Stock.

IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designation to be signed by its duly authorized officer this 21st day of May, 2018.


BIODELIVERY SCIENCES INTERNATIONAL, INC.

By:	/s/ Ernest R. De Paolantonio
	Name:	Ernest R. De Paolantonio
	Title:	Chief Financial Officer, Secretary and Treasurer

ANNEX A

NOTICE OF CONVERSION

(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO

CONVERT SHARES OF SERIES B PREFERRED STOCK)

The undersigned Holder hereby irrevocably elects to convert the number of shares of Series B Non-Voting Convertible Preferred Stock indicated below, represented by stock certificate No(s). (the “ Preferred Stock Certificates ”), into shares of common stock, par value $.001 per share (the “ Common Stock ”), of BioDelivery Sciences International, Inc., a Delaware corporation (the “ Corporation ”), as of the date written below. If securities are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Capitalized terms utilized but not defined herein shall have the meaning ascribed to such terms in that certain Certificate of Designation of Preferences, Rights and Limitations (the “ Certificate of Designation ”) of Series B Non-Voting Convertible Preferred Stock (the “ Series B Preferred Stock ”) filed by the Corporation on May 21, 2018.

As of the date hereof, the number of shares of Common Stock beneficially owned by the undersigned Holder (together with such Holder’s Affiliates, and any other Person whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act and the applicable regulations of the Commission, including any “group” of which the Holder is a member), including the number of shares of Common Stock issuable upon conversion of the Series B Preferred Stock subject to this Notice of Conversion, but excluding the number of shares of Common Stock which are issuable upon (A) conversion of the remaining, unconverted Series B Preferred Stock beneficially owned by such Holder or any of its Affiliates, and (B) exercise or conversion of the unexercised or unconverted portion of any other securities of the Corporation (including any warrants) beneficially owned by such Holder or any of its Affiliates that are subject to a limitation on conversion or exercise similar to the limitation contained in Section 7(c) of the Certificate of Designation, is . For purposes hereof, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the applicable regulations of the Commission. In addition, for purposes hereof, “group” has the meaning set forth in Section 13(d) of the Exchange Act and the applicable regulations of the Commission.

Conversion calculations:

Date to Effect Conversion:

Number of shares of Series B Preferred Stock owned prior to Conversion:

Number of shares of Series B Preferred Stock to be Converted:

Stated Value of Shares of Series B Preferred Stock to be Converted: $

Number of shares of Common Stock to be Issued:

Address for delivery of physical certificates:

Or for DWAC Delivery:

DWAC Instructions:

Broker no:

Account no:


[HOLDER]

By:
		Name:
		Title
		Date:

State of Delaware

Secretary of State

Division of Corporations

Delivered 04:24 PM 08/06/2018

FILED 04:24 PM 08/06/2018

SR 20186033147 - File Number 3515699

CERTIFICATE OF AMENDMENT OF

THE CERTIFICATE OF INCORPORATION OF

BIODELIVERY SCIENCES INTERNATIONAL, INC.

Under Section 242 of the Delaware General Corporation Law

BioDelivery Sciences International, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), DOES HEREBY CERTIFY AS FOLLOWS:

That the name of the Corporation is BioDelivery Sciences International, Inc. The original Certificate of Incorporation of the Corporation (as amended, the “Certificate of Incorporation”) was filed with the Secretary of the State of Delaware on April 18, 2002.

That the Corporation previously amended its Certificate of Incorporation by filing a Certificate of Amendment on July 25, 2008 and a Certificate of Amendment on July 22, 2011.

That the amendment of the Certificate of Incorporation effected by this Certificate of Amendment is to (i) declassify the board of directors which is currently comprised of three classes with staggered terms, (ii) clarify the voting standard applicable to the election of director nominees and (iii) increase the authorized shares of common stock, par value $0.001, of the Corporation.

That the Certificate of Incorporation is hereby amended by deleting Article TWELFTH in its entirety and replacing it with the following new Article TWELFTH:

“TWELFTH. This Article is inserted for the management of the business and for the conduct of the affairs of the Corporation.

ELECTION OF DIRECTORS. Each nominee for director shall be elected by the requisite affirmative vote of stockholders as set forth in the bylaws of the Corporation

CLASSES OF DIRECTORS. Until the election of directors at the annual meeting scheduled to be held in 2020, the Board of Directors shall be and is divided into classes, with directors in each class having the terms of office specified in Section 3 of this Article TWELFTH. Commencing with the election of directors at the annual meeting scheduled to be held in 2020, the classification of the Board of Directors shall cease, and directors shall thereupon be elected for a term expiring at the next annual meeting of stockholders.

TERMS OF OFFICE. Each director shall serve for a term ending at the election of directors at the third annual meeting following the annual meeting at which such director was elected; provided, that each initial director in Class I shall serve for a term ending at the election of directors at the annual meeting in 2009; each initial director in Class II shall serve for a term ending at the election of directors at the annual meeting in 2010; and each initial director in Class III shall serve for a term ending at the election of directors at the annual meeting in 2011. Notwithstanding the foregoing, commencing with the election of directors at the annual meeting held in 2018, the successor of each director whose term expires at such meeting shall be elected for a term expiring at the annual meeting scheduled to be held in 2019; for the election of directors at the annual meeting scheduled to be held in 2019, the successor of each director whose term expires at such meeting shall be elected for a term expiring at the annual

meeting scheduled to be held in 2020; and for the election of directors at the annual meeting scheduled to be held in 2020 and for the election of directors at each annual meeting thereafter, each director shall be elected for a term expiring at the next succeeding annual meeting. The term of each director shall be subject to the election and qualification of his or her successor and to his or her earlier death, resignation or removal.

ALLOCATION OF DIRECTORS AMONG CLASSES IN THE EVENT OF INCREASES OR DECREASES IN THE NUMBER OF DIRECTORS. Until the election of directors at the annual meeting scheduled to be held in 2020, in the event of any increase or decrease in the authorized number of directors, (i) each director then serving as such shall nevertheless continue as a director of the class of which he or she is a member and (ii) the newly created or eliminated directorships resulting from such increase or decrease shall be apportioned by the Board of Directors among the classes of directors.

REMOVAL. Until the election of directors at the annual meeting scheduled to be held in 2021, directors of the Corporation may be removed only for cause by the affirmative vote of the holders of at least two-thirds of the shares of the capital stock of the Corporation issued and outstanding and entitled to vote generally in the election of directors. Thereafter, any director of the Corporation may be removed, with or without cause, by the affirmative vote of the holders of a majority of the shares of the capital stock of the Corporation issued and outstanding and entitled to vote generally in the election of such director.

VACANCIES. Any vacancy in the Board of Directors, however occurring, or any newly created directorship resulting from an increase in the authorized number of directors, shall be filled only by a vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director. A director elected to fill a vacancy shall be elected for the unexpired term of his or her predecessor in office, and, until the election of directors at the annual meeting scheduled to be held in 2021, a director chosen to fill a newly created directorship resulting from an increase in the number of directors shall hold office until the next election of the class for which such director shall have been chosen, subject to the election and qualification of his or her successor and to his or her earlier death, resignation or removal.

That the Certificate of Incorporation is hereby amended by deleting the first paragraph of Article FIFTH thereof and replacing such paragraph with the following:

“FIFTH. The total number of shares of capital stock which the Corporation shall have authority to issue is 130,000,000 shares, consisting of 125,000,000 (One-Hundred Twenty-Five Million) shares of common stock, each of par value one-thousandths of one cent ($0.001) (the “Common Stock”), and 5,000,000 (Five Million) shares of preferred stock, each of par value one-thousandths of one cent ($0.001) (the “Preferred Stock”).”

The remaining text of Article FIFTH of the Certificate of Incorporation will remain unchanged.

That said amendments to the Certificate of Incorporation were duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.

That all other provisions of the Certificate of Incorporation remain unchanged and in full force and effect.

IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed by its duly authorized officer signatory below this 6 ^th day of August, 2018.


BIODELIVERY SCIENCES INTERNATIONAL, INC.

By:		/s/ Ernest R. De Paolantonio, CPA
		Name: Ernest R. De Paolantonio, CPA
		Title: Chief Financial Officer, Treasurer and Secretary

Charter Amendment

CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF BIODELIVERY

SCIENCES INTERNATIONAL, INC.

BioDelivery Sciences International, Inc. (the “ Corporation” ), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “ DGCL ”), does hereby certify:

1. Pursuant to Section 242 of the DGCL, this Certificate of Amendment to the Certificate of Incorporation (this “ Amendment ”) amends the provisions of the Certificate of Incorporation of the Corporation (the “ Certificate ”).

2. This Amendment has been approved and duly adopted by the Corporation’s Board of Directors and stockholders in accordance with the provisions of Section 242 of the DGCL.

3. The Certificate is hereby amended as follows:

The first paragraph of Article FIFTH is hereby amended and restated in its entirety to read as set forth below:

“FIFTH: The total number of shares of capital stock which the Corporation shall have authority to issue is 180,000,000 shares, consisting of 175,000,000 (One-Hundred Seventy-Five Million) shares of common stock, each of par value $0.001 (the “ Common Stock ”), and 5,000,000 (Five Million) shares of preferred stock, each of par value $0.001 (the “ Preferred Stock ”).”

* * * *

State of Delaware

Secretary of State

Division of Corporations

Delivered 02:33 PM 07/25/2019

FILED 02:33 PM 07/25/2019

SR 20196157971 - File Number 3515699

IN WITNESS WHEREOF , the undersigned authorized officer of the Corporation has executed this Certificate of Amendment to the Certificate of Incorporation as of July 25, 2019.

BIODELIVERY SCIENCES INTERNATIONAL, INC.

/s/ Herm Cukier

Herm Cukier

Chief Executive Officer

Exhibit 10.2

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***],

HAS BEEN OMITTED BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE

COMPETITIVE HARM TO THE COMPANY IF PUBLICLY DISCLOSED.

EXECUTION VERSION

LOAN AGREEMENT

Dated as of May 23, 2019

among

BIODELIVERY SCIENCES INTERNATIONAL, INC.

(as Borrower ),

ARIUS PHARMACEUTICALS, INC. ,

and

ARIUS TWO, INC. ,

(as additional Credit Parties),

and

BIOPHARMA CREDIT PLC

(as Lender )

LOAN AGREEMENT

THIS LOAN AGREEMENT (this “ Agreement ”), dated as of May 23, 2019 (the “ Effective Date ”) by and among BIODELIVERY SCIENCES INTERNATIONAL, INC., a Delaware corporation (as “ Borrower ”), ARIUS PHARMACEUTICALS, INC., a Delaware corporation (as an additional Credit Party), ARIUS TWO, INC., a Delaware corporation (as an additional Credit Party) and BIOPHARMA CREDIT PLC, a public limited company incorporated under the laws of England and Wales (as “ Lender ”), provides the terms on which Lender shall make, and Borrower shall repay, the Credit Extensions (as hereinafter defined). The parties hereto agree as follows:

1. ACCOUNTING AND OTHER TERMS

Except as otherwise expressly provided herein, all accounting terms not otherwise defined in this Agreement shall have the meanings assigned to them in conformity with Applicable Accounting Standards. Calculations and determinations must be made following Applicable Accounting Standards. If at any time any change in Applicable Accounting Standards would affect the computation of any financial requirement set forth in any Loan Document, and either Borrower or Lender shall so request, Lender and Borrower shall negotiate in good faith to amend such requirement to preserve the original intent thereof in light of such change in Applicable Accounting Standards; provided , that , until so amended, such requirement shall continue to be computed in accordance with Applicable Accounting Standards prior to such change therein. Without limiting the foregoing, leases shall continue to be classified on a basis consistent with that reflected in the audited consolidated financial statements of Borrower for the fiscal year ended December 31, 2018 for all purposes of this Agreement, notwithstanding any change in Applicable Accounting Standards relating thereto or the application thereof, unless the parties hereto shall enter into a mutually acceptable amendment addressing such changes, as provided for above. Capitalized terms not otherwise defined in this Agreement shall have the meanings set forth in Section 12 . All other terms contained in this Agreement, unless otherwise indicated, shall have the meaning provided by the Code to the extent such terms are defined therein. All references to “Dollars” or “$” are United States Dollars, unless otherwise noted.

For purposes of determining compliance with Section 6 with respect to the amount of any Indebtedness in a currency other than Dollars, no Default or Event of Default shall be deemed to have occurred solely as a result of changes in rates of currency exchange occurring after the time such Indebtedness is incurred, made or acquired (so long as such Indebtedness, at the time incurred, made or acquired, was permitted hereunder).

2. LOANS AND TERMS OF PAYMENT

2.1. Promise to Pay .

Borrower hereby unconditionally promises to pay Lender the outstanding principal amount of the Term Loans advanced to Borrower by Lender and accrued and unpaid interest thereon and any other amounts due hereunder as and when due in accordance with this Agreement.

2.2. Term Loans.

(a) Availability . Subject to the terms and conditions of this Agreement (including Sections 3.1 , 3.2 , 3.3 and 3.5 ):

(i) Lender agrees to make a term loan to Borrower on the Tranche A Closing Date in an original principal amount equal to the Tranche A Loan Amount (the “ Tranche A Loan ”); and

(ii) At Borrower’s option, Lender agrees to make a term loan to Borrower on the Tranche B Closing Date in an original principal amount equal to the Tranche B Loan Amount (the “ Tranche B Loan ”).

After repayment or prepayment (in whole or in part), no Term Loan (or any portion thereof) may be re-borrowed.

(b) Repayment . Borrower shall make thirteen (13) equal quarterly payments of principal of the Term Loans commencing on the first Payment Date on or following the 36 ^th -month anniversary of the Tranche A Closing Date. All unpaid principal with respect to the Term Loans (and, for the avoidance of doubt, all accrued and

unpaid interest, all due and unpaid Lender Expenses and any other amounts payable under the Loan Documents) is due and payable in full on the Term Loan Maturity Date. The Term Loans may be prepaid only in accordance with Section 2.2(c) , except as provided in Section 8.1 .

(i) Borrower shall have the option at any time after the second anniversary of the Tranche A Closing Date, to prepay up to *** of the aggregate principal amount of the Tranche A Loan advanced by Lender under this Agreement, in whole or in part (in multiples of not less than ***); provided that (A) Borrower provide written notice to Lender of its election (which shall be irrevocable unless Lender otherwise consents in writing) to prepay the applicable portion of the Tranche A Loan, which such notice shall include the principal amount of the Tranche A Loan to be prepaid, at least *** prior to such prepayment, and (B) such prepayment shall be accompanied by any and all accrued and unpaid interest on such principal amount to be prepaid to the date of prepayment; and

(ii) Borrower shall have the option, at any time after the Closing Date, to prepay, in whole but not in part, the Term Loans advanced by Lender under this Agreement (or, for the avoidance of doubt, all of the remaining amounts outstanding following the valid exercise by Borrower of its option under Section 2.2(c)(i) above); provided that (A) Borrower provide written notice to Lender of its election (which shall be irrevocable unless Lender otherwise consents in writing) to prepay all of the Term Loans (or such remaining outstanding portion thereof) at least *** prior to such prepayment, and (B) such prepayment shall be accompanied by any and all accrued and unpaid interest on the aggregate principal amount to be prepaid to the date of prepayment and any amounts payable solely with respect to the prepayment of such principal amount under this Section 2.2(c)(ii) (and not, for the avoidance of doubt, any prior prepayment of principal under Section 2.2(c)(i) ) pursuant to Section 2.2(e) or Section 2.2(f) (as applicable), and all other amounts payable or accrued and not yet paid under this Agreement and the other Loan Documents.

(iii) Upon a Change in Control, Borrower shall promptly, and in any event no later than *** after the consummation of such Change in Control, notify Lender in writing of the occurrence of a Change in Control, which notice shall include reasonable detail as to the nature, timing and other circumstances of such Change in Control (such notice, a “ Change in Control Notice ”). Borrower shall prepay in full all of the Term Loans advanced by Lender under this Agreement (or, for the avoidance of doubt, all of the remaining amounts outstanding following the valid exercise by Borrower of its option under Section 2.2(c)(i) above), no later than *** after delivery to Lender of the Change in Control Notice, in an amount equal to the sum of (A) all unpaid principal and any and all accrued and unpaid interest with respect to the Term Loans (or such remaining outstanding portion thereof), and (B) any applicable amounts payable with respect to the prepayment under this Section 2.2(c)(iii) pursuant to Section 2.2(e) or Section 2.2(f) and all other amounts payable or accrued and not yet paid under this Agreement and the other Loan Documents.

(d) Prepayment Application . Any prepayment of the Term Loans pursuant to Section 2.2(c) (together with the accompanying Makewhole Amount or Prepayment Premium that is payable pursuant to Section 2.2(e) or Section 2.2(f) , as applicable) shall be paid to Lender for application to the Obligations in the following order: (i) first, to due and unpaid Lender Expenses, (ii) second, to accrued and unpaid interest at the Default Rate, if any, (iii) third, without duplication of amounts paid pursuant to clause (ii) above, to accrued and unpaid interest at the non-Default Rate, (iv) fourth, to the Prepayment Premium, if applicable, (v) fifth, to the Makewhole Amount, if applicable, (vi) sixth, to the outstanding principal amount of the Term Loan being prepaid, and (vii) seventh, in the case of a prepayment of the Term Loans in whole, to any remaining amounts then due and payable under this Agreement and the other Loan Documents.

(e) Makewhole Amount .

(i) Any prepayment of the Tranche A Loan by Borrower (i) pursuant to Section 2.2(c)(ii) or Section 2.2(c)(iii) , or (ii) as a result of the acceleration of the maturity of the Term Loans pursuant to Section 8.1(a) , in each case occurring prior to the *** anniversary of the Tranche A Closing

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Date shall, in any such case, be accompanied by payment of an amount equal to the Tranche A Makewhole Amount.

(ii) Any prepayment of the Tranche B Loan by Borrower (i) pursuant to Section 2.2(c)(ii) or Section 2.2(c)(iii) , or (ii) as a result of the acceleration of the maturity of the Term Loans pursuant to Section 8.1(a) , in each case occurring prior to the *** anniversary of the Tranche B Closing Date shall, in any such case, be accompanied by payment of an amount equal to the Tranche B Makewhole Amount.

(f) Prepayment Premium .

(i) Any prepayment of the Tranche A Loan by Borrower (i) pursuant to Section 2.2(c)(ii) or Section 2.2(c)(iii) , or (ii) as a result of the acceleration of the maturity of the Term Loans pursuant to Section 8.1(a) , shall, in any such case, be accompanied by payment of an amount equal to the Tranche A Prepayment Premium.

(ii) Any prepayment of the Tranche B Loan by Borrower (i) pursuant to Section 2.2(c)(ii) or Section 2.2(c)(iii) , or (ii) as a result of the acceleration of the maturity of the Term Loans pursuant to Section 8.1(a) , shall, in any such case, be accompanied by payment of an amount equal to the Tranche B Prepayment Premium.

2.3. Payment of Interest on the Credit Extensions .

(a) Interest Rate .

(i) Subject to Section 2.3(b) , the principal amount outstanding under each Term Loan shall accrue interest at a per annum rate equal to the LIBOR Rate plus seven and one-half percent (7.50%) per annum (the “ Term Loan Rate ”), which interest shall be payable quarterly in arrears in accordance with this Section 2.3 .

(ii) Interest shall accrue on each Term Loan commencing on, and including, the day on which such Term Loan is made, and shall accrue on such Term Loan, or any portion thereof, for the day on which such Term Loan or such portion is paid.

(b) Default Rate . In the event Borrower fails to pay any of the Obligations when due, immediately (and without notice to Borrower or demand by Lender for payment thereof), such past due Obligations shall bear interest at a rate per annum which is three percentage points (3.00%) above the rate that is otherwise applicable thereto (the “ Default Rate ”), and such interest shall be payable entirely in cash on demand of Lender. Payment or acceptance of the increased interest rate provided in this Section 2.3(b) is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Lender.

(d) Payments . Except as otherwise expressly provided herein, all loan payments and any other payments hereunder by (or on behalf of) Borrower shall be made on the date specified herein to such bank account of Lender as Lender shall have designated in a written notice to Borrower delivered on or before the Tranche A Closing Date (which such notice may be updated by Lender from time to time after the Tranche A Closing Date). Interest is payable quarterly on the Interest Date of each calendar quarter. Payments of principal or interest received after 2:00 p.m. on such date are considered received at the opening of business on the next Business Day. When any payment is due on a day that is not a Business Day, such payment is due the immediately next Business Day and additional fees or interest, as applicable, shall continue to accrue until paid. All payments to be made by Borrower hereunder or under any other Loan Document, including payments of principal and interest made hereunder and pursuant to any other Loan Document, and all fees, expenses, indemnities and reimbursements, shall be made without set-off, recoupment or counterclaim, in lawful money of the United States and in immediately available funds.

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(e) If at any time Lender determines (which determination shall be conclusive absent manifest error) that (i) adequate and reasonable means do not exist for determining the rate described in clause (a) of the definition of “LIBOR Rate” and such circumstances are unlikely to be temporary or (ii) the circumstances set forth in the immediately preceding clause (i) have not arisen but the supervisor for the administrator of the three-month LIBOR Rate or a Governmental Authority having jurisdiction over Lender has made a public statement identifying a specific date after which the three-month LIBOR Rate shall no longer be used for determining interest rates for loans, then Lender and Borrower shall endeavor to establish an alternate rate of interest to the three-month LIBOR Rate that gives due consideration to the then prevailing market convention for determining a rate of interest for loans in the United States at such time, and shall enter into an amendment to this Agreement to reflect such alternate rate of interest and such other related changes to this Agreement as may be applicable.

2.4. Expenses . Borrower shall pay to Lender all Lender Expenses incurred through and after the Effective Date, promptly after receipt of a written demand therefor by Lender, setting forth in reasonable detail such Lender Expenses.

2.5. Requirements of Law; Increased Costs . In the event that any applicable Change in Law:

(a) Does or shall subject Lender to any Tax of any kind whatsoever with respect to this Agreement or the Term Loan made hereunder (except, in each case, Indemnified Taxes, Taxes described in clause (b) through (d) of the definition of Excluded Taxes, and Connection Income Taxes);

(b) Does or shall impose, modify or hold applicable any reserve, capital requirement, special deposit, compulsory loan, insurance charge or similar requirements against assets held by, or deposits or other liabilities in or for the account of, advances or loans by, or other credit extended by, or any other acquisition of funds by, Lender; or

(c) Does or shall impose on Lender any other condition (other than Taxes); and the result of any of the foregoing is to increase the cost to Lender (as determined by Lender in good faith using calculation methods customary in the industry) of making, renewing or maintaining the Term Loans or to reduce any amount receivable in respect thereof or to reduce the rate of return on the capital of Lender or any Person controlling Lender,

then, in any such case, Borrower shall promptly pay to Lender, within *** of its receipt of the certificate described below, any additional amounts necessary to compensate Lender for such additional cost or reduced amounts receivable or rate of return as reasonably determined by Lender with respect to this Agreement or the Term Loan made hereunder. If Lender becomes entitled to claim any additional amounts pursuant to this Section 2.5 , it shall promptly notify Borrower in writing of the event by reason of which it has become so entitled, and a certificate as to any additional amounts payable pursuant to the foregoing sentence containing the calculation thereof in reasonable detail submitted by Lender to Borrower shall be conclusive in the absence of manifest error. The provisions hereof shall survive the termination of this Agreement and the payment of the outstanding Term Loans and all other Obligations. Failure or delay on the part of Lender to demand compensation for any increased costs or reduction in amounts received or receivable or reduction in return on capital under this Section 2.5 shall not constitute a waiver of Lender’s right to demand such compensation; provided that Borrower shall not be under any obligation to compensate Lender under this Section 2.5 with respect to increased costs or reductions with respect to any period prior to the date that is *** prior to the date of the delivery of the notice required pursuant to the foregoing provisions of this paragraph; provided , further , that if the Change in Law giving rise to such increased costs or reductions is retroactive, then the *** period referred to above shall be extended to include the period of retroactive effect thereof.

2.6. Taxes; Withholding, Etc.

(a) All sums payable by any Credit Party hereunder and under the other Loan Documents shall (except to the extent required by Requirements of Law) be paid free and clear of, and without any deduction or withholding on account of, any Tax imposed, levied, collected, withheld or assessed by any Governmental Authority. In addition, Borrower agrees to pay, and shall indemnify and hold Lender harmless from, Other Taxes, and as soon as practicable after the date of paying such sum, Borrower shall furnish to Lender the original or a certified copy of a receipt evidencing payment thereof.

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(b) If any Credit Party or any other Person is required by Requirements of Law to make any deduction or withholding on account of any Tax (as determined in the good faith discretion of an applicable Credit Party or other applicable withholding agent) from any sum paid or payable by any Credit Party to Lender under any of the Loan Documents: (i) Borrower shall notify Lender in writing of any such requirement or any change in any such requirement promptly after Borrower becomes aware of it; (ii) Borrower shall make any such withholding or deduction; (iii) Borrower shall pay any such Tax before the date on which penalties attach thereto, such payment to be made (if the liability to pay is imposed on any Credit Party) for its own account or (if that liability is imposed on Lender, as the case may be) on behalf of and in the name of Lender in accordance with Requirements of Law; (iv) if the Tax is an Indemnified Tax, the sum payable by such Credit Party in respect of which the relevant deduction, withholding or payment of Indemnified Tax is required shall be increased to the extent necessary to ensure that, after the making of that deduction, withholding or payment (including any deductions for Indemnified Taxes applicable to additional sums payable under this Section 2.6(b )), Lender receives on the due date a net sum equal to what it would have received had no such deduction, withholding or payment of Indemnified Tax been required or made; and (v) as soon as practicable after paying any sum from which it is required by Requirements of Law to make any deduction or withholding, Borrower shall deliver to Lender evidence reasonably satisfactory to Lender of such deduction, withholding or payment and of the remittance thereof to the relevant taxing or other Governmental Authority.

(c) Borrower shall indemnify Lender for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 2.6(c) ) paid by Lender and any liability (including any reasonable expenses) arising therefrom or with respect thereto whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. Any indemnification payment pursuant to this Section 2.6(c) shall be made to Lender within thirty (30) days from written demand therefor.

(d) If Lender is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to Borrower, at the time or times reasonably requested by Borrower, such properly completed and executed documentation reasonably requested by Borrower as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, Lender, if reasonably requested by Borrower, shall deliver such other documentation prescribed by applicable law or reasonably requested by Borrower as will enable Borrower to determine whether or not Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 2.6(d)(i) , (ii) or (iv) below) shall not be required if in Lender’s reasonable judgment such completion, execution or submission would subject Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of Lender. For avoidance of doubt, for the purposes of this Section 2.6(d) , the term “Lender” shall include each applicable assignee. Without limiting the generality of the foregoing:

(i) If Lender is organized under the laws of the United States of America or any state thereof, Lender shall deliver to Borrower two (2) executed copies of Internal Revenue Service Form W-9 certifying that Lender is exempt from U.S. federal backup withholding tax.

(ii) If Lender is a Foreign Lender, Lender shall deliver, and shall cause each applicable assignee thereof to deliver, to Borrower, on or prior to, the Closing Date and, the date on which a Lender Transfer involving Lender occurs, as applicable, and at such other times as may be necessary in the determination of Borrower (in the reasonable exercise of its discretion):

(1) In the case that the Lender is a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, a properly completed and duly executed copy of Internal Revenue Service (“ IRS ”) Form W-8BEN or IRS Form W-8BEN-E establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, a properly completed and duly executed copy of IRS Form W-8BEN or IRS Form W-8BEN-E establishing an exemption from, or reduction of, U.S. federal

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withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;

(2) a completed and duly executed copy of IRS Form W-8ECI;

(3) two (2) properly completed and duly executed original copies of Internal Revenue Service Form W-8BEN, W-8BEN-E, W-8ECI or W-8IMY (along with Form W-9, W-8BEN-E or W-8BEN for each beneficial owner that will receive, directly or indirectly, a payment of principal, interest, fees or other amounts payable under any of the Loan Documents), or any successor forms; and

(4) if Lender is claiming an exemption from United States withholding Tax pursuant to the “portfolio interest exemption”, it shall provide Borrower with the applicable executed IRS Form W-8BEN-E or IRS Form W-8BEN and an executed U.S. Tax Compliance Certificate substantially in the form of Exhibit D-1 in which Lender represents that it is not a “bank” that entered into any Loan Documents in the ordinary course of its trade or business (within the meaning of Section 881(c)(3)(A) of the IRC), a “10 percent shareholder” of Borrower (within the meaning of Section 881(c)(3)(B) of the IRC), or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the IRC (a “U.S. Tax Compliance Certificate”), or

(5) to the extent a Foreign Lender is not the beneficial owner, an executed copy of IRS Form W-8IMY, accompanied by a withholding statement, IRS Form W-8ECI, IRS Form W-8BEN-E, an executed U.S. Tax Compliance Certificate substantially in the form of Exhibit D-2 or Exhibit D-3 , IRS Form W-9 or other certification documents from each beneficial owner, as applicable, provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide an executed U.S. Tax Compliance Certificate substantially in the form of Exhibit D-4 on behalf of such direct and indirect partner.

(iii) If Lender is a Foreign Lender it shall, to the extent it is legally entitled to do so, deliver to Borrower (in such number of copies as shall be requested by the recipient) on or prior to the date on which such its becomes a party to this Agreement (and from time to time thereafter upon the reasonable request of Borrower), executed copies of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit Borrower to determine the withholding or deduction required to be made.

(iv) If a payment made to Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), Lender shall deliver to Borrower at the time or times prescribed by law and at such time or times reasonably requested by Borrower such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by Borrower as may be necessary for Borrower to comply with their obligations under FATCA and to determine that Lender has complied with its obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (iv) , “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

(v) If Lender is required to deliver any forms, statements, certificates or other evidence with respect to United States federal Tax or backup withholding matters pursuant to this Section 2.6(d) , Lender hereby agrees, from time to time after the initial delivery by Lender of such forms, certificates or other evidence, whenever a lapse in time, change in circumstances or law, or additional

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guidance by a Governmental Authority renders such forms, certificates or other evidence obsolete or inaccurate in any material respect, to promptly deliver to Borrower two (2) new original copies.

(vi) Borrower shall not be required to pay any additional amount to Lender under Section 2.6(b)(iii) if Lender shall have failed (1) to timely deliver to Borrower the forms, certificates or other evidence referred to in this Section 2.6(d) (each of which shall be complete, accurate and duly executed), or (2) to notify Borrower of its inability to deliver any such forms, certificates or other evidence, as the case may be; provided that, if Lender shall have satisfied the requirements of this Section 2.6(d) on the Tranche A Closing Date (or on the date Lender initially acquires an interest in a Term Loan), nothing in this last sentence of this Section 2.6(d) shall relieve Borrower of its obligations to pay any additional amounts pursuant to this Section 2.6 in the event that, solely as a result of any change in any Requirements of Law or any change in the interpretation, administration or application thereof by any applicable Governmental Authority, Lender is no longer legally entitled to deliver forms, certificates or other evidence at a subsequent date establishing the fact that Lender is not subject to withholding as described herein and in the forms, certificates or other evidence initially provided by Lender.

(e) If any party hereto determines that it has received a refund of any Taxes or a credit or offset for any Taxes as to which it has been indemnified pursuant to this Section 2.6 (including by the payment of additional amounts pursuant to this Section 2.6 ), it shall pay to the indemnifying party an amount equal to such refund, credit or offset (but only to the extent of indemnity payments made, or additional amounts paid, under this Section 2.6 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this clause (e) in the event that such indemnified party is required to repay, credit or offset such refund to such Governmental Authority and the requirement to repay such refund to such Governmental Authority is not due to the indemnified party’s failure to timely provide complete and accurate Internal Revenue Service forms and other documentation required pursuant to Section 2.6(d) or Section 2.8 . Notwithstanding anything to the contrary in this clause (e) , in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this clause (e) if the payment of such amount would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the indemnification payments or additional amounts giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such tax had never been paid. This clause (e) shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.

2.7. Additional Consideration . As additional consideration for the obligation to make the Term Loans and the making of one or both of the Term Loans, (a) on the Tranche A Closing Date, Borrower shall pay to Lender an amount equal to the product of (i) the Tranche A Loan Amount, multiplied by (ii) *** and (b) on the Tranche B Closing Date, Borrower shall pay to Lender an amount equal to the product of (i) the Tranche B Loan Amount, multiplied by *** (each such product, the “ Additional Consideration ”). The Additional Consideration shall be fully earned when paid and shall not be refundable for any reason whatsoever.

2.8. Evidence of Debt; Register; Lender ’ s Books and Records; Term Loan Note s .

(a) Lender’s Evidence of Debt; Register . Notwithstanding anything herein to the contrary, Borrower hereby designates Lender to serve as Borrower’s agent solely for purposes of maintaining at all times at Lender’s principal office a “book entry system” as described in IRC Treasury Regulation Section 5f.103-1(c)(1)(ii) that identifies each beneficial owner that is entitled to a payment of principal and stated interest on each Term Loan (the “ Register ”) so that each Term Loan is at all times in “registered form” as described in IRC Treasury Regulations Section 5f.103-1(c). Lender is hereby authorized by Borrower to record in the manual or data processing records of Lender, the date and amount of each advance and the amount of the outstanding Obligations and the date and amount of each repayment of principal and each payment of interest or otherwise on account of the Obligations. Absent manifest error, such Lender records shall be conclusive as to the outstanding principal amount of the total outstanding Obligations, and the payment of interest, principal and other sums due hereunder; provided , however , that the failure of Lender to make any such record entry with respect to any payment shall not limit or otherwise affect the obligations of Borrower under the Loan Documents. Each Term Loan: (i) shall, pursuant to this clause (a) , be also registered as to both principal and any stated interest with Borrower or its agent, and (ii) may be

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transferred by Lender only by (1) surrender of the old instrument and either (x) the reissuance by Borrower of the old instrument to the new Lender or (y) the issuance by Borrower of a new instrument to the new Lender, or (2) confirmation with Borrower that the right to the principal and stated interest on such Term Loan is maintained through the book entry system kept by Lender.

(b) Term Loan Notes . Borrower shall execute and deliver to Lender to evidence Lender’s Term Loan (i) on the Tranche A Closing Date, the Tranche A Note, and (ii) on the Tranche B Closing Date, the Tranche B Note.

3. CONDITIONS OF TERM LOAN

3.1. Conditions Precedent to Tranche A Loan . Lender’s obligation to advance the Tranche A Loan is subject to the satisfaction (or waiver in accordance with Section 11.5 hereof) of the following conditions:

(a) Lender’s receipt of copies of the Loan Documents (including the Tranche A Note, executed by Borrower, and the Collateral Documents but excluding any Control Agreements and any other Loan Document described in Schedule 5.14 of the Disclosure Letter to be delivered after the Tranche A Closing Date) executed and delivered by each applicable Credit Party, the Disclosure Letter, if and to the extent any update thereto is necessary between the Effective Date and the Tranche A Closing Date ( provided , that in no event may the Disclosure Letter be updated in a manner that would reflect or evidence a Default or Event of Default (with or without such update)) and each other schedule to such Loan Documents (the Disclosure Letter and such other schedules to be in form and substance reasonably satisfactory to Lender);

(b) Lender’s receipt of (i) true, correct and complete copies of the Operating Documents of each of the Credit Parties, and (ii) a Secretary’s Certificate, dated the Closing Date, certifying that the foregoing copies are true, correct and complete (such Secretary’s Certificate to be in form and substance reasonably satisfactory to Lender);

(c) Lender’s receipt of the Perfection Certificate for Borrower and its Subsidiaries, in form and substance reasonably satisfactory to Lender, if and to the extent any update thereto is necessary between the Effective Date and the Tranche A Closing Date ( provided , that in no event may the Perfection Certificate be updated in a manner that would reflect or evidence a Default or Event of Default (with or without such update));

(d) Lender’s receipt of a good standing certificate for each Credit Party (where applicable), certified by the Secretary of State (or the equivalent thereof) of the jurisdiction of incorporation or formation of such Credit Party as of a date no earlier than thirty (30) days prior to the Tranche A Closing Date;

(e) Lender’s receipt of a Secretary’s Certificate with completed Borrowing Resolutions with respect to the Loan Documents and the Tranche A Loan for each Credit Party, in form and substance reasonably satisfactory to Lender;

(f) each Credit Party shall have obtained all Governmental Approvals and all consents of other Persons, if any, in each case that are necessary in connection with the transactions contemplated by the Loan Documents and each of the foregoing shall be in full force and effect and in form and substance reasonably satisfactory to Lender;

(g) Lender’s receipt of an opinion of Goodwin Procter LLP, counsel to all of the Credit Parties, in form and substance reasonably satisfactory to Lender;

(h) Lender’s receipt of (i) evidence that the products liability and general liability insurance policies maintained regarding any Collateral are in full force and effect and (ii) appropriate evidence showing loss payable or additional insured clauses or endorsements in favor of Lender (such evidence to be in form and substance reasonably satisfactory to Lender);

(i) Lender’s receipt of all documentation and other information required by bank regulatory authorities under applicable “know-your-customer” and anti-money laundering rules and regulations, including the U.S.A. Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “ Patriot Act ”);

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(j) a payoff letter in respect of the Indebtedness outstanding under the Existing CRG Credit Agreement from CRG Servicing LLC and evidencing the repayment in full of such Indebtedness pursuant thereto prior to or concurrent with the funding of the Tranche A Loan on the Tranche A Closing Date;

(k) (i) payment of Lender Expenses and other fees then due as specified in Section 2.4 hereof; and (ii) payment of any and all expenses incurred in connection with the repayment of all amounts outstanding under the Existing CRG Credit Agreement;

(l) Lender’s receipt of a certificate, dated the Tranche A Closing Date and signed by a Responsible Officer of Borrower, confirming there is no Adverse Proceeding pending or, to the Knowledge of Borrower, threatened, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Change, except as set forth on Schedule 4.7 of the Disclosure Letter (such certificate to be in form and substance reasonably satisfactory to Lender); and

(m) Lender’s receipt of a certificate, dated the Tranche A Closing Date and signed by a Responsible Officer of Borrower, confirming satisfaction of the conditions precedent set forth in this Section 3.1 and in Section 3.3 and Section 3.5 (such certificate to be in form and substance reasonably satisfactory to Lender).

3.2. Conditions Precedent to Tranche B Loan . Lender’s obligation to advance the Tranche B Loan is subject to the satisfaction (or waiver in accordance with Section 11.5 hereof) of the following conditions:

(a) Lender’s receipt of the Tranche B Note, executed by Borrower, and an updated Disclosure Letter, if and to the extent any update thereto is necessary between the Tranche A Closing Date and the Tranche B Closing Date ( provided , that in no event may the Disclosure Letter be updated in a manner that would reflect or evidence a Default or Event of Default (with or without such update)) (to be in form and substance reasonably satisfactory to Lender);

(b) Lender’s receipt of an updated Perfection Certificate for Borrower and its Subsidiaries, if and to the extent any update thereto is necessary between the Tranche A Closing Date and the Tranche B Closing Date ( provided , that in no event may the Perfection Certificate be updated in a manner that would reflect or evidence a Default or Event of Default (with or without such update)), in form and substance reasonably satisfactory to Lender;

(c) Lender’s receipt of a Secretary’s Certificate with completed Borrowing Resolutions with respect to the Loan Documents and the Tranche B Loan for each Credit Party, in form and substance reasonably satisfactory to Lender;

(d) payment of Lender Expenses and other fees then due as specified in Section 2.4 hereof; and

(e) Lender’s receipt of a certificate, dated the Tranche B Closing Date and signed by a Responsible Officer of Borrower, confirming there is no Adverse Proceeding pending or, to the Knowledge of Borrower, threatened, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Change, except as set forth on Schedule 4.7 of the Disclosure Letter delivered in accordance with Section 3.1(k) (such certificate to be in form and substance reasonably satisfactory to Lender) or advised prior to the Tranche B Closing Date pursuant to Section 5.2(b) ;

(f) there should not have been any prepayment of the Tranche A Loan pursuant to Section 2.2(c)(iii) or as a result of the acceleration of the maturity of the Tranche A Loan pursuant to Section 8.1(a) ; and

(g) Lender’s receipt of a certificate, dated the Tranche B Closing Date and signed by a Responsible Officer of Borrower, confirming satisfaction of the conditions precedent set forth in this Section 3.2 and in Section 3.3 (such certificate to be in form and substance reasonably satisfactory to Lender).

3.3. Additional Conditions Precedent to Term Loans . The obligation of Lender to advance the Term Loans is subject to the following additional conditions precedent:

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(a) the representations and warranties made by the Credit Parties in Section 4 of this Agreement and in the other Loan Documents are true and correct in all material respects, unless any such representation or warranty is stated to relate to a specific earlier date, in which case such representation or warranty shall be true and correct in all material respects as of such earlier date (it being understood that any representation or warranty that is qualified as to “materiality,” “Material Adverse Change,” or similar language shall be true and correct in all respects, in each case, on the date on which each Term Loan is made (both with and without giving effect to such Term Loan) or as of such earlier date, as applicable); and

(b) there shall not have occurred (i) any Material Adverse Change or (ii) any Default or Event of Default.

3.4. Covenant to Deliver . The Credit Parties agree to deliver to Lender each item required to be delivered to Lender under this Agreement as a condition precedent to any Credit Extension; provided , however , that any such items set forth on Schedule 5.14 of the Disclosure Letter shall be delivered to Lender within the time period prescribed therefor on such schedule. The Credit Parties expressly agree that a Credit Extension made prior to the receipt by Lender of any such item shall not constitute a waiver by Lender of the Credit Parties’ obligation to deliver such item, and the making of any Credit Extension in the absence of any such item required to have been delivered by the date of such Credit Extension shall be in Lender’s sole discretion.

3.5. Procedures for Borrowing . Subject to the prior satisfaction of all other applicable conditions to the making of each Term Loan set forth in this Agreement, to obtain any Term Loan, Borrower shall deliver to Lender by electronic mail or facsimile a completed Payment/Advance Form in the form of Exhibit A hereto for such Term Loan executed by a Responsible Officer of Borrower (which notice shall be irrevocable on and after the date on which such notice is given and Borrower shall be bound to make a borrowing in accordance therewith); provided , however , that if Borrower intends to obtain the Tranche B Loan, Borrower shall deliver to Lender by electronic mail or facsimile such completed Payment/Advance Form on such date that is at least *** (or such shorter period as may be agreed to by Lender) *** prior to the Tranche B Closing Date set forth in such notice, in which case Lender agrees to make the Tranche B Loan available to Borrower on the Tranche B Closing Date by wire transfer of same day funds in Dollars, to such account(s) in the United States as may be designated in writing to Lender by Borrower.

4. REPRESENTATIONS AND WARRANTIES

In order to induce Lender to enter into this Agreement and make the Credit Extensions to be made on the Closing Date, each Credit Party, jointly and severally, represents and warrants to Lender that the following statements are true and correct as of the Effective Date and on the date on which each Term Loan is made (both with and without giving effect to such Term Loan):

4.1. Due Organization, Power and Authority . Each of Borrower and each of its Subsidiaries (a) is duly incorporated, organized or formed, and validly existing and, where applicable, in good standing under the laws of its jurisdiction of incorporation, organization or formation identified on Schedule 4.15 of the Disclosure Letter, (b) has all requisite power and authority to (i) own, lease, license and operate its assets and properties and to carry on its business as currently conducted and (ii) execute and deliver the Loan Documents to which it is a party and to perform its obligations thereunder and otherwise carry out the transactions contemplated thereby, (c) is duly qualified and, where applicable, in good standing under the laws of each jurisdiction where its ownership, lease, license or operation of assets or properties or the conduct of its business requires such qualification, and (d) has all requisite Governmental Approvals to operate its business as currently conducted; except in each case referred to clauses (a) (other than with respect to Borrower and any other Credit Party), (b)(i) , (c) or (d) above, to the extent that failure to do so could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Change.

4.2. Equity Interests . All of the outstanding Equity Interests in each Subsidiary of the Borrower, the Equity Interests of which are required to be pledged pursuant to the Collateral Documents, have been duly authorized and validly issued, are fully paid and, in the case of Equity Interests representing corporate interests, are non-assessable and, on the Closing Date, all such Equity Interests owned directly by Borrower or any other Credit Party are owned free and clear of all Liens except for Permitted Liens. Schedule 4.2 of the Disclosure Letter identifies each Person, the Equity Interests of which are required to be pledged on the Closing Date pursuant to the Collateral Documents.

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4.3. Authorization; No Conflict . Except as set forth on Schedule 4.3 of the Disclosure Letter, the execution, delivery and performance by each Credit Party of the Loan Documents to which it is a party, and the consummation of the transactions contemplated thereby, (a) have been duly authorized by all necessary corporate or other organizational action and (b) do not and will not (i) contravene the terms of any of such Credit Party’s Operating Documents, (ii) conflict with or result in any breach or contravention of, or require any payment to be made under (A) any provision of any security issued by such Credit Party or of any agreement, instrument or other undertaking to which such Credit Party is a party or affecting such Credit Party or the assets or properties of such Credit Party or any of its Subsidiaries or (B) any order, writ, judgment, injunction, decree, determination or award of any Governmental Authority by which such Credit Party or any of its properties or assets are subject, (iii) result in the creation of any Lien (other than under the Loan Documents) or (iv) violate any Requirements of Law, except, in the cases of clauses (b)(ii) and (b)(iv) above, to the extent that such conflict, breach, contravention, payment or violation could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Change.

4.4. Government Consents; Third Party Consents . Except as set forth on Schedule 4.4 of the Disclosure Letter, no Governmental Approval or other approval, consent, exemption or authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person (including any counterparty to any Current Company IP Agreement or other Material Contract) is necessary or required in connection with (a) the execution, delivery or performance by, or enforcement against, any Credit Party of this Agreement or any other Loan Document, or for the consummation of the transactions contemplated hereby or thereby, (b) the grant by any Credit Party of the Liens granted by it pursuant to the Collateral Documents, (c) the perfection or maintenance of the Liens created under the Collateral Documents (including the priority thereof) or (d) the exercise by Lender of its rights under the Loan Documents or the remedies in respect of the Collateral pursuant to the Collateral Documents, except for (i) filings necessary to perfect the Liens on the Collateral granted by the Credit Parties to Lender in favor and for the benefit of Lender and the other Secured Parties, (ii) the approvals, consents, exemptions, authorizations, actions, notices and filings which have been duly obtained, taken, given or made and are in full force and effect, (iii) filings under state or federal securities laws and (iv) those approvals, consents, exemptions, authorizations or other actions, notices or filings, the failure of which to obtain or make could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Change.

4.5. Binding Obligation . Each Loan Document has been duly executed and delivered by each Credit Party that is a party thereto and constitutes a legal, valid and binding obligation of such Credit Party, enforceable against such Credit Party in accordance with its respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally or by general principles of equity.

4.6. Collateral . In connection with this Agreement, each Credit Party has delivered to Lender a completed certificate signed by such Credit Party (with respect to all Credit Parties, collectively, the “ Perfection Certificate ”). Each Credit Party, jointly and severally, represents and warrants to Lender that:

(a) (i) its exact legal name is that indicated on the Perfection Certificate and on the signature page hereof; (ii) it is an organization of the type and is organized in the jurisdiction set forth in the Perfection Certificate; (iii) the Perfection Certificate accurately sets forth its organizational identification number or accurately states that it has none; (iv) the Perfection Certificate accurately sets forth as of the Closing Date its place of business, or, if more than one, its chief executive office as well as its mailing address (if different than its chief executive office); (v) it (and each of its predecessors) has not, in the five (5) years prior to the Closing Date, changed its jurisdiction of formation, organizational structure or type, or any organizational number assigned by its jurisdiction; and (vi) all other information set forth on the Perfection Certificate pertaining to it and each of its Subsidiaries is accurate and complete in all material respects as of the Closing Date. If any Credit Party is not now a Registered Organization but later becomes one, it shall promptly notify Lender of such occurrence and provide Lender with such Credit Party’s organizational identification number.

(b) (i) it has good title to, has rights in, and subject to Permitted Subsidiary Distribution Restrictions, the power to transfer each item of the Collateral upon which it purports to grant a Lien under any Collateral Document, free and clear of any and all Liens except Permitted Liens, except for such minor irregularities or defects in title as could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Change and (ii) it has no deposit accounts maintained at a bank or other depository or financial institution

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located in the United States other than the deposit accounts described in the Perfection Certificate delivered to Lender in connection herewith.

(c) A true, correct and complete list of each pending, registered or issued Patent, Copyright and Trademark that, individually or together with any other such Patents, Copyrights or Trademarks, is material to the business of Borrower and its Subsidiaries, taken as a whole, relating to the research, development, manufacture, production, use, commercialization, marketing, importing, storage, transport, offer for sale, distribution or sale of the Product in the Territory, and is owned or co-owned by or exclusively or non-exclusively licensed to any Credit Party or any of its Subsidiaries (collectively, the “ Current Company IP ”), including its name/title, current owner, registration, patent or application number, and registration or application date, is set forth on Schedule 4.6(c) of the Disclosure Letter. Except as set forth on Schedule 4.6(c) of the Disclosure Letter, (i) to the Knowledge of Borrower, each item of owned Current Company IP is valid and subsisting and no such item of Current Company IP has lapsed, expired, been cancelled or invalidated or become abandoned, and (ii) to the Knowledge of Borrower, each such item of Current Company IP which is licensed from another Person is valid and subsisting and no such item of Current Company IP has lapsed, expired, been cancelled or invalidated, or become abandoned. To the Knowledge of Borrower, there are no published patents, patent applications, articles or prior art references that would reasonably be expected to materially adversely affect the Product. Except as set forth on Schedule 4.6(c) of the Disclosure Letter, (i) each Person who has or has had any rights in or to owned Current Company IP or any trade secrets owned by any Credit Party or any of its Subsidiaries, including each inventor named on the Patents within such owned Current Company IP filed by any Credit Party or any of its Subsidiaries, and has executed an agreement assigning his, her or its entire right, title and interest in and to such owned Current Company IP and such trade secrets, and the inventions, improvements, ideas, discoveries, writings, works of authorship, information and other intellectual property embodied, described or claimed therein, to the stated owner thereof and, (ii) to the Knowledge of Borrower, no such Person has any contractual or other obligation that would preclude or conflict with such assignment or the exploitation of the Product in the Territory or entitle such Person to ongoing payments.

(d) (i) Each Credit Party or any of its Subsidiaries possesses valid title to the Current Company IP for which it is listed as the owner or co-owner, as applicable, on Schedule 4.6(c) of the Disclosure Letter; and (ii) there are no Liens on any Current Company IP, other than Permitted Liens.

(e) There are no maintenance, annuity or renewal fees that are currently overdue beyond their allotted grace period for any of the Current Company IP which is owned by or exclusively licensed to any Credit Party or any of its Subsidiaries, except, in each case, that could not reasonably be expected to have a materially adverse impact on such Credit Party’s or Subsidiary’s rights to such Current Company IP, nor have any applications or registrations therefor lapsed or become abandoned, been cancelled or expired. There are no maintenance, annuity or renewal fees that are currently overdue beyond their allotted grace period for any of the Current Company IP which is non-exclusively licensed to any Credit Party or any of its Subsidiaries, except, in each case, that could not reasonably be expected to have a materially adverse impact on such Credit Party’s or Subsidiary’s rights to such Current Company IP, nor to the Knowledge of Borrower, have any applications or registrations therefor lapsed or become abandoned, been cancelled or expired.

(f) There are no unpaid fees or royalties under any Current Company IP Agreement that have become due, or are expected to become overdue. Each Current Company IP Agreement is in full force and effect and, to the Knowledge of Borrower, is legal, valid, binding, and enforceable in accordance with its respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally or by equitable principles relating to enforceability. Neither Borrower nor any of its Subsidiaries, as applicable, is in breach of or default under any Current Company IP Agreement to which it is a party or may otherwise be bound, and to the Knowledge of Borrower, no circumstances or grounds exist that would give rise to a claim of breach or right of rescission, termination, non-renewal, revision, or amendment of any of the Current Company IP Agreements, including the execution, delivery and performance of this Agreement and the other Loan Documents.

(g) No payments by any Credit Party or any of its Subsidiaries are due to any other Person in respect of the Current Company IP, other than pursuant to the Current Company IP Agreements and those fees payable to patent offices in connection with the prosecution and maintenance of the Current Company IP and associated attorney fees.

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(h) No Credit Party or any of its Subsidiaries has undertaken or omitted to undertake any acts, and, to the Knowledge of Borrower, no circumstance or grounds exist that would invalidate or reduce, in whole or in part, the enforceability or scope of (i) the Current Company IP in any manner that could reasonably be expected to materially adversely affect the Product, or (ii) in the case of Current Company IP owned or co-owned or exclusively or non-exclusively licensed by any Credit Party or any of its Subsidiaries, except as set forth on Schedule 4.6(h) of the Disclosure Letter, such Credit Party’s or Subsidiary’s entitlement to own or license and exploit such Current Company IP.

(i) Except as set forth on Schedule 4.7 of the Disclosure Letter or advised pursuant to Section 5.2(b) , there is no pending, decided or settled opposition, interference proceeding, reissue proceeding, reexamination proceeding, inter-partes review proceeding, post-grant review proceeding, cancellation proceeding, injunction, lawsuit, paragraph IV patent certification or lawsuit under the Hatch-Waxman Act, hearing, investigation, complaint, arbitration, mediation, demand, International Trade Commission investigation, decree, or any other dispute, disagreement, or claim, in each case alleged in writing to Borrower or any of its Subsidiaries (collectively referred to hereinafter as “ Specified Disputes ”), nor to the Knowledge of Borrower, has any such Specified Dispute been threatened in writing, in each case challenging the legality, validity, enforceability or ownership of any Current Company IP. Except as set forth on Schedule 4.6(i) of the Disclosure Letter, to the Knowledge of Borrower, there is no patent or patent application of any third party that could reasonably be expected to infringe a Patent within the Current Company IP.

(j) Except as noted on Schedule 4.6(j) of the Disclosure Letter, no Credit Party is a party to, nor is it bound by, any Restricted License.

(k) In each case where an issued Patent within the Current Company IP is owned or co-owned by any Credit Party or its Subsidiaries by assignment, the assignment has been duly recorded with the U.S. Patent and Trademark Office and all similar offices and agencies anywhere in the world in which foreign counterparts are registered or issued.

(l) There are no pending or, to the Knowledge of Borrower, threatened (in writing) claims against Borrower or any of its Subsidiaries alleging (i) that any research, development, manufacture, production, use, commercialization, marketing, importing, storage, transport, offer for sale, distribution or sale of the Product in the Territory infringes or violates (or in the past infringed or violated) the rights of any third parties in or to any Intellectual Property (“ Third Party IP ”) or constitutes a misappropriation of (or in the past constituted a misappropriation of) any Third Party IP, or (ii) that any Current Company IP is invalid or unenforceable.

(m) The manufacture, production, use, commercialization, marketing, importing, storage, transport, offer for sale, distribution or sale of the Product in the Territory does not, to the Knowledge of Borrower, infringe or violate (or in the past infringed or violated) any issued or registered Third Party IP (including any issued Patent within the Third Party IP) or, to the Knowledge of Borrower, constitutes a misappropriation of (or in the past constituted a misappropriation of) any Third Party IP.

(n) To the Knowledge of Borrower, there are no settlements, covenants not to sue, consents, judgments, orders or similar obligations which: (i) restrict the rights of any Credit Party or any of its Subsidiaries to use any Intellectual Property relating to the research, development, manufacture, production, use, commercialization, marketing, importing, storage, transport, offer for sale, distribution or sale of the Product in the Territory (in order to accommodate any Third Party IP or otherwise), or (ii) permit any third parties to use any Company IP.

(o) To the Knowledge of Borrower, (i) there is no, nor has there been any, infringement or violation by any Person of any of the Company IP or the rights therein, and (ii) there is no, nor has there been any, misappropriation by any Person of any of the Company IP or the subject matter thereof.

(p) Each Credit Party and each of its Subsidiaries has taken all commercially reasonable measures customary in the pharmaceutical industry to protect the confidentiality and value of all trade secrets owned by such Credit Party or any of its Subsidiaries or used or held for use by such Credit Party or any of its Subsidiaries, in each case relating to the research, development, manufacture, production, use, commercialization, marketing, importing, storage, transport, offer for sale, distribution or sale of the Product in the Territory.

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(q) To the Knowledge of Borrower, the Product made, used or sold under the Patents within the Current Company IP has been marked with the proper patent notice.

(r) To the Knowledge of Borrower, at the time of any shipment of BELBUCA ^® or Symprotic ^® occurring prior to the Effective Date, the units thereof so shipped complied with their relevant specifications and were developed and manufactured in accordance with current FDA Good Manufacturing Practices, FDA Good Clinical Practices, and FDA Good Laboratory Practices.

4.7. Adverse Proceedings, Compliance with Laws . Except as set forth on Schedule 4.7 of the Disclosure Letter or advised pursuant to Section 5.2(b) , there are no Adverse Proceedings pending or, to the Knowledge of Borrower, threatened in writing, at law, in equity, in arbitration or before any Governmental Authority, by or against Borrower or any of its Subsidiaries or against any of their respective assets or properties or revenues (including involving allegations of sexual harassment or misconduct by any officer of Borrower or any of its Subsidiaries) that, either individually or in the aggregate, could reasonably be expected to result in a Material Adverse Change. Neither Borrower nor any of its Subsidiaries (a) is in violation of any Requirements of Law (including Environmental Laws) that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Change, or (b) is subject to or in default with respect to any final judgments, orders, writs, injunctions, decrees, rules or regulations of any court or any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Change.

4.8. Exchange Act Documents; Financial Statements; Financial Condition ; No Material Adverse Change; Books and Records .

(a) The documents filed by Borrower with the SEC pursuant to the Exchange Act since January 1, 2019 (the “ Exchange Act Documents ”), when they were filed with the SEC, conformed in all material respects to the requirements of the Exchange Act, and as of the time they were filed with the SEC, none of such documents contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein (excluding any projections and forward-looking statements, estimates, budgets and general economic or industry data of a general nature), in the light of the circumstances under which they were made, not misleading; provided , that, with respect to projected financial information, Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time (it being understood that such projections are not a guarantee of financial performance and are subject to uncertainties and contingencies, many of which are beyond the control of Borrower or any Subsidiary, and neither Borrower nor any Subsidiary can give any assurance that such projections will be attained, that actual results may differ in a material manner from such projections and any failure to meet such projections shall not be deemed to be a breach of any representation or covenant herein);

(b) The financial statements (including the related notes thereto) of Borrower and its Subsidiaries included in the Exchange Act Documents present fairly in all material respects the consolidated financial condition of Borrower and such Subsidiaries and their consolidated results of operations as of the dates indicated and the results of their operations and the changes in their cash flows for the periods specified. Such financial statements have been prepared in conformity with Applicable Accounting Standards applied on a consistent basis throughout the periods covered thereby, except as otherwise disclosed therein and, in the case of unaudited, interim financial statements, subject to normal year-end audit adjustments and the exclusion of certain footnotes, and any supporting schedules included in the Exchange Act Documents present fairly in all material respects the information required to be stated therein;

(c) Since December 31, 2018, there has not occurred or failed to occur any change or event that has had or could reasonably be expected to have, either alone or in conjunction with any other change(s), event(s) or failure(s), a Material Adverse Change, except as has been disclosed in the Exchange Act Documents; and

(d) The Books of Borrower and each of its Subsidiaries in existence immediately prior to the Effective Date contain full, true and correct entries of all dealings and transactions in relation to its business and activities in conformity with Applicable Accounting Standards and all Requirements of Law.

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4.9. Solvency . Borrower and its Subsidiaries, on a consolidated basis, are Solvent. Without limiting the generality of the foregoing, there has been no proposal made or resolution adopted by any competent corporate body for the dissolution or liquidation of Borrower, nor do any circumstances exist which may result in the dissolution or liquidation of Borrower.

4.10. Payment of Taxes . All foreign, federal and state income and other material Tax returns and reports (or extensions thereof) of each Credit Party and each of its Subsidiaries required to be filed by any of them have been timely filed and are correct in all material respects, and all material Taxes which are due and payable by any Credit Party or any of its Subsidiaries and all material assessments, fees and other governmental charges upon any Credit Party or any of its Subsidiaries and upon their respective properties, assets, income, businesses and franchises which are due and payable have been paid when due and payable except where the validity or amount thereof is being contested in good faith by appropriate proceedings; provided that (a) the applicable Credit Party has set aside on its books adequate reserves therefor in conformity with Applicable Accounting Standards and (b) the failure to pay such Taxes, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Change.

4.11. Environmental Matters . Neither Borrower nor any of its Subsidiaries nor any of their respective Facilities or operations is subject to any outstanding written order, consent decree or settlement agreement with any Person relating to any Environmental Law, any Environmental Claim, or any Hazardous Materials Activity that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Change. There are and, to the Knowledge of Borrower, have been, no conditions, occurrences, or Hazardous Materials Activities which would reasonably be expected to form the basis of an Environmental Claim against Borrower or any of its Subsidiaries that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Change. To the Knowledge of Borrower, no predecessor of Borrower or any of its Subsidiaries has filed any notice under any Environmental Law indicating past or present treatment of Hazardous Materials at any Facility, which would reasonably be expected to form the basis of an Environmental Claim against Borrower or any of its Subsidiaries that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Change (but, for the avoidance of doubt, Borrower has not undertaken any investigation of or made any inquiries to, or relating to, any of its or its Subsidiaries’ predecessors), and neither Borrower’s nor any of its Subsidiaries’ operations involves the generation, transportation, treatment, storage or disposal of hazardous waste, as defined under 40 C.F.R. Parts 260 270 or any state equivalent, which would reasonably be expected to form the basis of an Environmental Claim against Borrower or any of its Subsidiaries that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Change. No event or condition has occurred or is occurring with respect to any Credit Party relating to any Environmental Law, any Release of Hazardous Materials, or any Hazardous Materials Activity which, individually or in the aggregate, has resulted in, or could reasonably be expected to result in, a Material Adverse Change.

4.12. Material Contracts . After giving effect to the consummation of the transactions contemplated by this Agreement, except as described on Schedule 4.12 of the Disclosure Letter, each Material Contract is a valid and binding obligation of the applicable Credit Party and, to the Knowledge of Borrower, each other party thereto, and is in full force and effect, and neither the applicable Credit Party nor, to the Knowledge of Borrower, any other party thereto is in material breach thereof or default thereunder, except where such breach or default (which default has not been cured or waived) could not reasonably be expected to give rise to any cancellation, termination or acceleration right of the applicable counterparty thereto or result in the invalidation thereof. No Credit Party or any of its Subsidiaries has received any written notice from any party thereto asserting or, to the Knowledge of Borrower threatening to assert, circumstances that could reasonably be expected to result in the cancellation, termination or invalidation of any Material Contract or the acceleration of such Credit Party’s or Subsidiary’s obligations thereunder.

4.13. Regulatory Compliance . No Credit Party is or is required to be, or is a company “controlled” by, an “investment company” as defined in, or is subject to regulation under, the Investment Company Act of 1940, as amended. Each Credit Party has complied in all material respects with the Federal Fair Labor Standards Act. Except as could not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Change, each Plan is in compliance with the applicable provisions of ERISA, the IRC and other U.S. federal or state Requirements of Law, respectively. (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) neither any Credit Party nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability)

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under Section 4201 et seq . or 4243 of ERISA with respect to a Multiemployer Plan; and (iii) neither any Credit Party nor any ERISA Affiliate has engaged in a transaction that would be subject to Section 4069 or 4212(c) of ERISA, except, with respect to each of clauses (i) , (ii) and (iii) above, as could not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Change.

4.14. Margin Stock . No Credit Party is engaged principally, or as one of its important activities, in extending credit for the purpose of, whether immediate or ultimate, of purchasing or carrying Margin Stock. No Credit Party owns any Margin Stock. No Credit Party or any of its Subsidiaries has taken or permitted to be taken any action that might cause any Loan Document to violate Regulation T, U or X of the Federal Reserve Board.

4.15. Subsidiaries . Schedule 4.15 of the Disclosure Letter (a) sets forth the name and jurisdiction of incorporation, organization or formation of Borrower and each of its Subsidiaries and (b) sets forth the ownership interest of Borrower and any other Credit Party in each of their respective Subsidiaries, including the percentage of such ownership.

4.16. Employee Matters . Neither Borrower nor any of its Subsidiaries is engaged in any unfair labor practice that could reasonably be expected to result in a Material Adverse Change. There is (a) no unfair labor practice complaint pending against Borrower or any of its Subsidiaries or, to the Knowledge of Borrower, threatened in writing against any of them before the National Labor Relations Board, and no grievance or arbitration proceeding arising out of or under any collective bargaining agreement that is pending against Borrower or any of its Subsidiaries or, to the Knowledge of Borrower, threatened in writing against any of them, (b) no strike or work stoppage in existence or, to the Knowledge of Borrower, threatened in writing involving Borrower or any of its Subsidiaries, and (c) to the Knowledge of Borrower, no union representation question existing with respect to the employees of Borrower or any of its Subsidiaries and, to the Knowledge of Borrower, no union organization activity that is taking place that in each case specified in any of clauses (a) , (b) and (c) , individually or together with any other matter specified in clause (a) , (b) or (c) , could reasonably be expected to result in a Material Adverse Change.

4.17. Full Disclosure . None of the documents, certificates or written statements (excluding any projections and forward-looking statements, estimates, budgets and general economic or industry data of a general nature) furnished or otherwise made available to Lender by or on behalf of any Credit Party for use in connection with the transactions contemplated hereby (in each case, taken as a whole and as modified or supplemented by other information so furnished promptly after the same becomes available) contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein, as of the time when made or delivered, not misleading in light of the circumstances in which the same were made; provided, that, with respect to projected financial information, Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time (it being understood that such projections are not a guarantee of financial performance and are subject to uncertainties and contingencies, many of which are beyond the control of Borrower or any Subsidiary, and neither Borrower nor any Subsidiary can give any assurance that such projections will be attained, that actual results may differ in a material manner from such projections and any failure to meet such projections shall not be deemed to be a breach of any representation or covenant herein). To the Knowledge of Borrower, there are no facts (other than matters of a general economic or industry nature) that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Change and that have not been disclosed herein or in such other documents, certificates and written statements furnished or made available to Lender for use in connection with the transactions contemplated hereby.

4.18. FCPA; Patriot Act ; OFAC .

(a) None of Borrower, its Subsidiaries or, to the Knowledge of Borrower, any director, officer, agent or employee of Borrower or any Subsidiary of Borrower has (i) used any corporate funds of Borrower or any of its Subsidiaries for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity, (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds of Borrower or any of its Subsidiaries, (iii) violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977, as amended (the “ FCPA ”) or (iv) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment, and no part of the proceeds of any Credit Extension will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office or anyone else acting in an official capacity, in order to obtain, retain or direct business, or to obtain any improper advantage, in violation of the FCPA;

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(b) (i) The operations of Borrower and its Subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the Bank Secrecy Act of 1970, as amended by Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001 and the anti-money laundering laws, rules and regulations of each jurisdiction (foreign or domestic) in which Borrower or any of its Subsidiaries is subject to such jurisdiction’s Requirements of Law (collectively, the “ Anti-Money Laundering Laws ”) and (ii) no action, suit or proceeding by or before any Governmental Authority or any arbitrator involving Borrower or any of its Subsidiaries with respect to the Anti-Money Laundering Laws is pending or to the Knowledge of Borrower, threatened in writing; and

(c) None of Borrower, its Subsidiaries or, to the Knowledge of Borrower, any director, officer, agent or employee of Borrower or any Subsidiary of Borrower is currently the target of or subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury (“ OFAC ”) or imposed by the Trading with the Enemy Act, 50 U.S.C. App. 1 et seq. Borrower will not, directly or, to the Knowledge of Borrower, indirectly through an agent, use the proceeds of the Credit Extension, or lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture partner or other Person, for the purpose of financing the activities of any Person currently the target of or subject to any U.S. sanctions administered by OFAC.

4.19. Health Care Matters .

(a) Compliance with Health Care Laws . Each Credit Party and, to the Knowledge of Borrower, each of its Subsidiaries and each officer, Affiliate, and employee acting on behalf of such Credit Party or any of its Subsidiaries, is in compliance in all material respects with all Health Care Laws applicable to the research, development, manufacture, production, use, commercialization, marketing, importing, storage, transport, offer for sale, distribution or sale of the Product in the Territory.

(b) Compliance with FDA Laws . Each Credit Party and, to the Knowledge of Borrower, each of its Subsidiaries, are in compliance in all material respects with all applicable FDA Laws, including those related to the adulteration or misbranding of products within the meaning of Sections 501 and 502 of the Food Drug and Cosmetics Act (including any foreign equivalent, the “ FDCA ”), relating to any research, development, manufacture, production, use, commercialization, marketing, importing, storage, transport, offer for sale, distribution or sale of the Product in the Territory. The Product distributed or sold in the Territory at all times during the past five (5) years has been (i) manufactured in all material respects in accordance with current FDA Good Manufacturing Practices, FDA Good Clinical Practices, and FDA Good Laboratory Practices, and (ii) if and to the extent the Product is required to be approved or cleared by the FDA pursuant to the FDCA, the Product has been so approved or cleared, and no inquiries regarding material issues have been initiated by FDA

(c) Compliance with DEA Laws. Each Credit Party and, to the Knowledge of Borrower, each of its Subsidiaries, is in compliance in all material respects with all applicable DEA Laws, including those related to the reporting of controlled substances within the meaning of the Controlled Substances Act (including any foreign and state equivalent, the “ CSA ” ) , relating to any development, manufacture, production, use, commercialization, marketing, importing, storage, transport, offer for sale, distribution or sale of the Product in the Territory. The Product distributed or sold in the Territory at all times during the past five (5) years has been (i) stored, transported, imported, offered for sale, documented, secured, and distributed in all material respects in accordance with DEA Laws and any state laws applicable to controlled substances, as defined under the CSA and applicable state laws, and implementing regulations, and (ii) to the extent the Product is required to be authorized by the DEA pursuant to the CSA and its implementing regulations, the Product has been so authorized, and no inquiries regarding material issues have been initiated by the DEA.

(d) Material Statements . Within the past five (5) years, neither any Credit Party, nor, to the Knowledge of Borrower, any Subsidiary or any officer, Affiliate or employee of any Credit Party or Subsidiary in its capacity as a Subsidiary or as an officer, Affiliate or employee of a Credit Party or Subsidiary (as applicable), nor, to the Knowledge of Borrower, any agent of any Credit Party or Subsidiary, (i) has made an untrue statement of a material fact or a fraudulent statement to any Governmental Authority, (ii) has failed to disclose a material fact to any Governmental Authority, or (iii) has otherwise committed an act, made a statement or failed to make a statement

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that, at the time such statement or disclosure was made (or, in the case of such failure, should have been made) or such act was committed, would reasonably be expected to constitute a material violation of any Health Care Law.

(e) Proceedings; Audits . There is no material investigation, suit, claim, audit, action (legal or regulatory) or proceeding (legal or regulatory) by a Governmental Authority pending or, to the Knowledge of Borrower, threatened in writing against any Credit Party or any of its Subsidiaries relating to any of the Health Care Laws, Data Protection Laws, FDA Laws or DEA Laws. To the Knowledge of Borrower, there are no facts, circumstances or conditions which could reasonably be expected to form the basis for any such material investigation, suit, claim, audit, action or proceeding, except as has been disclosed in the Exchange Act Documents.

(f) Prohibited Transactions . Within the past six (6) years, neither any Credit Party, nor, to the Knowledge of Borrower, any Subsidiary or any of officer, Affiliate or employee of a Credit Party or Subsidiary, nor any other Person acting on behalf of any Credit Party or any Subsidiary, directly or indirectly: (i) has offered or paid any remuneration, in cash or in kind, to, or made any financial arrangements with, any past, present or potential patient, supplier, physician or contractor, in order to illegally obtain business or payments from such Person in material violation of any Health Care Law; (ii) has given or made, or is party to any illegal agreement to give or make, any illegal gift or gratuitous payment of any kind, nature or description (whether in money, property or services) to any past, present or potential patient, supplier, physician or contractor, or any other Person in material violation of any Health Care Law; (iii) has given or made, or is party to any agreement to give or make on behalf of any Credit Party or any of its Subsidiaries, any contribution, payment or gift of funds or property to, or for the private use of, any governmental official, employee or agent where either the contribution, payment or gift or the purpose of such contribution, payment or gift is a material violation of the laws of any Governmental Authority having jurisdiction over such payment, contribution or gift; (iv) has established or maintained any unrecorded fund or asset for any purpose or made any materially misleading, false or artificial entries on any of its books or records for any reason; or (v) has made, or is party to any agreement to make, any payment to any Person with the intention or understanding that any part of such payment would be in material violation of any Health Care Law. To the Knowledge of Borrower, there are no actions pending or threatened (in writing) against any Credit Party or any of its Subsidiaries or any of their respective Affiliates under any foreign, federal or state whistleblower statute, including under the False Claims Act of 1863 (31 U.S.C. § 3729 et seq.).

(g) Exclusion . Neither any Credit Party nor, to the Knowledge of Borrower, any Subsidiary or any officer, Affiliate or employee having authority to act on behalf of any Credit Party or any Subsidiary, is or, to the Knowledge of Borrower, has been threatened in writing to be: (i) excluded from any Governmental Payor Program pursuant to 42 U.S.C. § 1320a-7b and related regulations; (ii) “suspended” or “debarred” from selling any products to the U.S. government or its agencies pursuant to the Federal Acquisition Regulation relating to debarment and suspension applicable to federal government agencies generally (42 C.F.R. Subpart 9.4), or other U.S. Requirements of Law; (iii) debarred, disqualified, suspended or excluded from participation in Medicare, Medicaid or any other Governmental Payor Program or is listed on the General Services Administration list of excluded parties; or (iv) a party to any other action or proceeding by any Governmental Authority that would prohibit the applicable Credit Party or Subsidiary from distributing or selling the Product in the Territory or providing any services to any governmental or other purchaser pursuant to any Health Care Laws.

(h) HIPAA . Each Credit Party and, to the Knowledge of Borrower, each of its Subsidiaries, to the extent applicable, is in material compliance with all applicable, federal, state and local laws and regulations regarding the privacy, security, and notification of breaches of health information and regarding electronic transactions, including HIPAA, and each Credit Party and, to the Knowledge of Borrower, each of its Subsidiaries, to the extent applicable, has implemented policies, procedures and training customary in the pharmaceutical industry or otherwise adequate to assure continued compliance and to detect non-compliance. No Credit Party is a “covered entity” as defined in 45 C.F.R. § 160.103. Each Credit Party and each of its Subsidiaries is not required to comply with the General Data Protection Regulation (EU 2016/679).

(i) Corporate Integrity Agreement . Neither any Credit Party or Subsidiary, nor any of their respective Affiliates, nor any officer, director, managing employee or, to the Knowledge of Borrower, agent (as those terms are defined in 42 C.F.R. § 1001.1001) of any Credit Party or Subsidiary, is a party or is otherwise subject to any order, individual integrity agreement, or corporate integrity agreement with any U.S. Governmental Authority concerning compliance with any laws, rules, or regulations, issued under or in connection with a Governmental Payor Program.

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4.20. Regulatory Approvals.

(a) Each Credit Party and each Subsidiary involved in any research, development, manufacture, production, use, commercialization, marketing, importing, storage, transport, offer for sale, distribution or sale of the Product in the Territory has all Regulatory Approvals material to its business and operations.

(b) Each Credit Party, each Subsidiary (as applicable) and, to the Knowledge of Borrower, each licensee of a Credit Party or a Subsidiary of any Intellectual Property, is in compliance with, and at all times during the past five (5) years, has complied with, all applicable, federal, state and local laws, rules, and regulations, governing the research, development, manufacture, production, use, commercialization, marketing, importing, distribution or sale of the Product in the Territory, including all such regulations promulgated by each applicable Regulatory Agency (including the FDA and DEA), the failure of compliance with which, individually or together with any other such failures, could reasonably be expected to result in a Material Adverse Change. No Credit Party or its Subsidiaries has received any written notice from any Regulatory Agency citing action or inaction by any Credit Party or any of its Subsidiaries that would constitute a violation of any applicable foreign, federal, state or local laws, rules, or regulations, which could reasonably be expected to result in a Material Adverse Change.

4.21. Supply and Manufacturing .

(a) To the Knowledge of Borrower, the Product has at all times been manufactured in sufficient quantities and of a sufficient quality to satisfy demand of the Product, without the occurrence of any event causing inventory of the Product to have become exhausted prior to satisfying such demand or any other event in which the manufacture and release to the market of the Product does not satisfy the sales demand for the Product.

(b) Except as disclosed in the Exchange Act Documents or set forth on Schedule 4.21(b) of the Disclosure Letter, to the Knowledge of Borrower, no manufacturer of the Product has received in the past five (5) years a Form 483 or is currently subject to a Form 483 impacting the Product with respect to any facility manufacturing the Product and that, with respect to each such Form 483, all scientific and technical violations or other issues relating to good manufacturing practice requirements documented therein, and any disputes regarding any such violations or issues, have been corrected or otherwise resolved.

(c) No Credit Party or any of its Subsidiaries has received any notice, oral or written, from any party to any Manufacturing Agreement containing any indication by or intent or threat of, such party to reduce or cease, in any material respect, the supply of Product or the active pharmaceutical ingredient incorporated therein through calendar year 2025 (or such earlier date in accordance with the terms and conditions of such Manufacturing Agreement, as applicable).

4.22. Cybersecurity and Data Protection.

(a) The information technology systems used in the business of Borrower and its Subsidiaries operate and perform in all material respects as required to permit Borrower and its Subsidiaries to conduct their business as presently conducted. Neither Borrower, nor any of its Subsidiaries, nor to the Knowledge of Borrower, any vendor of Borrower or any of its Subsidiaries, has suffered any data breaches that (A) have resulted in any unauthorized access, acquisition, use, control, disclosure, destruction, or modification of any information subject to Data Protection Laws or any Company IP, or (B) have resulted in unauthorized access to, control of, or disruption of the information technology systems of Borrower or any of its Subsidiaries. Except as would not cause or could not be reasonably expected to result in, individually or in the aggregate, a Material Adverse Change, (i) Borrower and its Subsidiaries have implemented and maintain a reasonable enterprise-wide privacy and information security program with plans, policies and procedures for privacy, physical and cyber security, disaster recovery, business continuity and incident response, including reasonable and appropriate administrative, technical and physical safeguards to protect information subject to Data Protection Laws and the information technology systems of Borrower and each of its Subsidiaries from any unauthorized access, use, control, disclosure, destruction or modification, (ii) Borrower and each of its Subsidiaries is in compliance with all applicable Requirements of Law and Material Contracts regarding the privacy and security of customer, consumer, patient, employee and other personal data and is compliant with their respective published privacy policies and (iii) there have not been any incidents of, or, to the Knowledge of Borrower, any third party claims related to, any loss,

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theft, unauthorized access to, or unauthorized acquisition, modification, disclosure, corruption, destruction, or other misuse of any information subject to Data Protection Laws (including any ransomware incident) that Borrower or any of its Subsidiaries creates, receives, maintains, or transmits.

(b) Except as would not cause or could not be reasonably expected to result in, individually or in the aggregate, a Material Adverse Change, neither Borrower nor any of its Subsidiaries has received any written notice of any claims, investigations (including investigations by any Governmental Authority), or alleged violations of any Requirements of Law with respect to information subject to Data Protection Laws created, received, maintained, or transmitted by Borrower or any of its Subsidiaries.

4.23. Additional Representations and Warranties .

(a) After giving effect to consummation of the transactions contemplated by this Agreement, (i) there is no Indebtedness other than Permitted Indebtedness described in clauses (a) and (b) of the definition of “Permitted Indebtedness”, and (ii) all amounts due and owing by Borrower under the Existing CRG Credit Agreement is repaid in full and no further extension of credit is available thereunder.

(b) There are no Hedging Agreements.

(c) Except as has been disclosed in the Exchange Act Documents, there is no registration rights agreement, investors’ rights agreement or other similar agreement relating to, governing or otherwise affecting the ownership of the capital stock or other equity ownership interests of any Credit Party.

5. AFFIRMATIVE COVENANTS

Each Credit Party covenants and agrees that, until payment in full of all Obligations (other than inchoate indemnity obligations), each Credit Party shall, and shall cause each of its Subsidiaries to:

5.1. Maintenance of Existence . (a) Preserve, renew and maintain in full force and effect its and all its Subsidiaries’ legal existence under the Requirements of Law in their respective jurisdictions of organization, incorporation or formation; (b) take all commercially reasonable action to maintain all rights, privileges (including its good standing), permits, licenses and franchises necessary or desirable for it and all of its Subsidiaries in the ordinary course of its business, except in the case of clause (a) (other than with respect to Borrower) and clause (b) above, (i) to the extent that failure to do so could not reasonably be expected to result in a Material Adverse Change or (ii) pursuant to a transaction permitted by this Agreement; and (c) comply with all Requirements of Law of any Governmental Authority to which it is subject, except where the failure to do so could not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Change.

5.2. Financial Statements, Notices . Deliver to Lender:

(a) Financial Statements .

(i) Annual Financial Statements . As soon as available, but in any event within *** after the end of each fiscal year of Borrower (or such earlier date on which Borrower is required to file a Form 10-K under the Exchange Act, as applicable), beginning with the fiscal year ending December 31, 2018, a consolidated balance sheet of Borrower and its Subsidiaries as of the end of such fiscal year, and the related consolidated statements of income, cash flows and stockholders’ equity for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all prepared in accordance with Applicable Accounting Standards, with such consolidated financial statements to be audited and accompanied by (x) a report and opinion of Borrower’s independent certified public accounting firm of recognized national standing (which report and opinion shall be prepared in accordance with Applicable Accounting Standards and shall not be subject to any qualification as to “going concern” or scope of audit), stating that such financial statements fairly present, in all material respects, the consolidated financial condition, results of operations and cash flows of Borrower and its Subsidiaries as of the dates and for the periods specified in accordance with Applicable Accounting Standards, and (y) if and only if Borrower is required to comply with the internal control provisions pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 requiring an attestation report of such independent certified public accounting

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firm, an attestation report of such independent certified public accounting firm as to Borrower’s internal controls pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 attesting to management’s assessment that such internal controls meet the requirements of the Sarbanes-Oxley Act of 2002; provided , however , that Borrower shall be deemed to have made such delivery of such consolidated financial statements if such consolidated financial statements shall have been made available within the time period specified above on the SEC’s EDGAR system (or any successor system adopted by the SEC);

(ii) Quarterly Financial Statements . As soon as available, but in any event within *** after the end of each of the first three (3) fiscal quarters of each fiscal year of Borrower (or such earlier date on which Borrower is required to file a Form 10-K under the Exchange Act, as applicable), beginning with the fiscal quarter ending March 31, 2019, a consolidated balance sheet of Borrower and its Subsidiaries as of the end of such fiscal quarter, and the related consolidated statements of income and cash flows and for such fiscal quarter and (in respect of the second and third fiscal quarters of such fiscal year) for the then-elapsed portion of Borrower’s fiscal year, setting forth in each case in comparative form the figures for the comparable period or periods in the previous fiscal year, all prepared in accordance with Applicable Accounting Standards, subject to normal year-end audit adjustments and the absence of disclosures normally made in footnotes; provided , however , that Borrower shall be deemed to have made such delivery of such consolidated financial statements if such consolidated financial statements shall have been made available within the time period specified above on the SEC’s EDGAR system (or any successor system adopted by the SEC). Such consolidated financial statements shall be certified by a Responsible Officer of Borrower as, to his or her knowledge, fairly presenting, in all material respects, the consolidated financial condition, results of operations and cash flows of Borrower and its Subsidiaries as of the dates and for the periods specified in accordance with Applicable Accounting Standards consistently applied, and on a basis consistent with the audited consolidated financial statements referred to under Section 5.2(a)(i) , subject to normal year-end audit adjustments and the absence of footnotes; and

(iii) Information During Event of Default . As promptly as practicable (and in any event within five (5) Business Days of the request therefor), such additional information regarding the business or financial affairs of Borrower or any of its Subsidiaries, or compliance with the terms of this Agreement or any other Loan Documents, as Lender may from time to time reasonably request during the existence of any Event of Default (subject to reasonable requirements of confidentiality, including requirements imposed by Requirements of Law or contract; provided that Borrower shall not be obligated to disclose any information that is reasonably subject to the assertion of attorney-client privilege or attorney work-product).

(b) Notice of Defaults or Events of Default, ERISA Events and Material Adverse Changes . Written notice as promptly as practicable (and in any event within ***) after a Responsible Officer of Borrower shall have obtained knowledge thereof, of the occurrence of any (i) Default or Event of Default (including, for the avoidance of doubt, any failure to comply with the minimum net sales covenant set forth in Section 6.15 ), (ii) ERISA Event or (iii) Material Adverse Change.

(c) Legal Action Notice . Prompt written notice (which shall be deemed given to the extent reported in the Borrower’s periodic reporting under the Exchange Act and available on the SEC’s EDGAR system (or any successor system adopted by the SEC)) of any legal action, litigation, investigation or proceeding pending or threatened in writing against any Credit Party or any Subsidiary (i) that could reasonably be expected to result in uninsured damages or costs to such Credit Party or such Subsidiary in an amount in excess of the materiality thresholds applied by Borrower in accordance with the Exchange Act and related regulations and standards for purposes of its Exchange Act reporting or (ii) which alleges potential violations of the Health Care Laws, the FDA Laws or any applicable statutes, rules, regulations, standards, guidelines, policies and order administered or issued by any foreign Governmental Authority, which, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Change; and in each case, provide such additional information (including any material development therein) as Lender may reasonably request in relation thereto; provided that Borrower shall not be obligated to disclose any information that is reasonably subject to the assertion of attorney-client privilege or attorney work-product).

5.3. Taxes . Timely file all foreign, federal and state income and other material required Tax returns and reports or extensions therefor and timely pay all material foreign, federal, state and local Taxes, assessments,

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deposits and contributions imposed upon it or any of its properties or assets or in respect of any of its income, businesses or franchises before any penalty or fine accrue thereon; provided , however , that no such Tax or any claim for Taxes that have become due and payable and have or may become a Lien on any Collateral shall be required to be paid if (a) it is being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, so long as adequate reserves therefor have been set aside on its books and maintained in conformity with Applicable Accounting Standards and (b) solely in the case of a Tax or claim that has or may become a Lien against any Collateral, such contest proceedings conclusively operate to stay the sale or forfeiture of any portion of any Collateral to satisfy such Tax or claim. No Credit Party will, nor will it permit any of its Subsidiaries to, file or consent to the filing of any consolidated income Tax return with any Person (other than Borrower or any of its Subsidiaries).

5.4. Insurance . Maintain with financially sound and reputable insurance companies, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons of comparable size engaged in the same or similar business, of such types and in such amounts (after giving effect to any self-insurance reasonable and customary for similarly situated Persons of comparable size engaged in the same or similar businesses as Borrower and its Subsidiaries) as are customarily carried under similar circumstances by such other Persons. Any products liability or general liability insurance maintained in the United States regarding Collateral shall name Lender as additional insured or loss payee, as applicable. So long as no Event of Default shall have occurred and be continuing, the Borrower and its Subsidiaries may retain all or any portion of the proceeds of any insurance of the Borrower and its Subsidiaries (and Lender shall promptly remit to the Borrower any proceeds with respect to any insurance received by it).

5.5. Operating Accounts . In the case of any Credit Party, contemporaneously with the establishment of any new Collateral Account at or with any bank or other depository or financial institution located in the United States, subject such account to a Control Agreement that is reasonably acceptable to Lender. For each Collateral Account that each Credit Party at any time maintains, such Credit Party shall cause the applicable bank or other depository or financial institution located in the United States at or with which any Collateral Account is maintained to execute and deliver a Control Agreement or other appropriate instrument with respect to such Collateral Account to perfect Lender’s Lien in favor and for the benefit of Lender and the other Secured Parties in such Collateral Account in accordance with the terms hereunder, which Control Agreement may not be terminated without the prior written consent of Lender. The provisions of the previous two (2) sentences shall not apply to deposit accounts exclusively used for payroll, payroll Taxes and other employee wage and benefit payments to or for the benefit of any Credit Party’s employees, zero balance accounts, accounts (including trust accounts) used exclusively for escrow, customs, insurance or fiduciary purposes, merchant accounts, accounts used exclusively for compliance with any Requirements of Law to the extent such Requirements of Law prohibit the granting of a Lien thereon, accounts which constitute cash collateral in respect of a Permitted Lien and any other account designated as an Excluded Account by a Responsible Officer of Borrower in writing delivered to Lender, the cash balance of which does not exceed *** in the aggregate at any time (all such accounts, collectively, the “ Excluded Accounts ”). Notwithstanding the foregoing, the Credit Parties shall have until the date that is *** (or such longer period as Lender may agree in its sole discretion) following (i) the Closing Date to comply with the provisions of this Section 5.5 with regard to Collateral Accounts of the Credit Parties in existence on the Closing Date (or opened during such *** period (or such longer period as Lender may agree in its sole discretion)) and (ii) the closing date of any Acquisition or other Investment to comply with the provisions of this Section 5.5 with regard to Collateral Accounts of the Credit Parties acquired in connection with such Acquisition or other Investment.

5.6. Compliance with Laws . Comply in all respects with the Requirements of Law and all orders, writs, injunctions, decrees and judgments applicable to it or to its business or its assets or properties (including Environmental Laws, ERISA, Anti-Money Laundering Laws, OFAC, FCPA, Health Care Laws, FDA Laws, DEA Laws, Data Protection Laws, and the Federal Fair Labor Standards Act), except if the failure to comply therewith could not, individually or together with any other such failures, reasonably be expected to result in a Material Adverse Change.

5.7. Protection of Intellectual Property Rights .

(a) Except as could not reasonably be expected to result in a Material Adverse Change, (i) protect, defend and maintain the validity and enforceability of the Company IP material to the research, development, manufacture, production, use, commercialization, marketing, importing, storage, transport, offer for

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sale, distribution or sale of the Product in the Territory, including defending any future or current oppositions, interference proceedings, reissue proceedings, reexamination proceedings, inter-partes review proceedings, post-grant review proceedings, cancellation proceedings, injunctions, lawsuits, paragraph IV patent certifications or lawsuits under the Hatch-Waxman Act, hearings, investigations, complaints, arbitrations, mediations, demands, International Trade Commission investigations, decrees, or any other disputes, disagreements, or claims, challenging the legality, validity, enforceability or ownership of any Company IP; (ii) maintain the confidential nature of any material trade secrets and trade secret rights used in any research, development, manufacture, production, use, commercialization, marketing, importing, storage, transport, offer for sale, distribution or sale of the Product in the Territory; and (iii) not allow any Company IP material to the research, development, manufacture, production, use, commercialization, marketing, importing, storage, transport, offer for sale, distribution or sale of the Product in the Territory to be abandoned, forfeited or dedicated to the public or any Current Company IP Agreement to be terminated by Borrower or any of its Subsidiaries, as applicable, without Lender’s prior written consent (such consent not to be unreasonably withheld or delayed); provided , however , that with respect to any such Company IP that is not owned by Borrower or any of its Subsidiaries, the obligations in clauses (i) and (iii) above shall apply only to the extent Borrower or any of its Subsidiaries have the right to take such actions or to cause any licensee or other third party to take such actions pursuant to applicable agreements or contractual rights.

(b) (i) Except as Borrower may otherwise determine in its reasonable business judgment, use commercially reasonable efforts, at its (or its Subsidiaries’, as applicable) sole expense, either directly or indirectly, with respect to any licensee or licensor under the terms of any Credit Party’s (or any of its Subsidiary’s) agreement with the respective licensee or licensor, as applicable, to take any and all actions (including taking legal action to specifically enforce the applicable terms of any license agreement) and prepare, execute, deliver and file agreements, documents or instruments which are necessary or desirable to (A) prosecute and maintain the Company IP material to the research, development, manufacture, production, use, commercialization, marketing, importing, storage, transport, offer for sale, distribution or sale of the Product in the Territory and (B) diligently defend or assert the Company IP material to the research, development, manufacture, production, use, commercialization, marketing, importing, storage, transport, offer for sale, distribution or sale of the Product in the Territory against material infringement, misappropriation, violation or interference by any other Persons and, in the case of Copyrights, Trademarks and Patents within the Company IP, against any claims of invalidity or unenforceability (including by bringing any legal action for infringement, dilution, violation or defending any counterclaim of invalidity or action of a non-Affiliate third party for declaratory judgment of non-infringement or non-interference); and (ii) use commercially reasonable efforts to cause any licensee or licensor of any Company IP not to, and such Credit Party shall not, disclaim or abandon, or fail to take any action necessary or desirable to prevent the disclaimer or abandonment of Company IP material to the research, development, manufacture, production, use, commercialization, marketing, importing, storage, transport, offer for sale, distribution or sale of the Product in the Territory.

(c) Protect, defend and maintain market exclusivity for the manufacture, production, use, commercialization, marketing, importing, storage, transport, offer for sale, distribution or sale of the Product in the Territory through ***, and not allow for the manufacture, production, use, commercialization, marketing, importing, storage, transport, offer for sale, distribution or sale of a generic version of the Product in the Territory before ***, without Lender’s prior written consent. Borrower agrees to notify Lender in writing, keep Lender informed, and allow Lender to comment on any filings in any opposition, interference proceeding, reissue proceeding, reexamination proceeding, inter-partes review proceeding, post-grant review proceeding, cancellation proceeding, injunction, lawsuit, paragraph IV patent certification or lawsuits under the Hatch-Waxman Act, hearing, investigation, complaint, arbitration, mediation, demand, International Trade Commission investigation, decree, or any other dispute, disagreement, or claim, in each case challenging the legality, validity, enforceability or ownership of any Company IP.

5.8. Books and Records . Maintain proper Books, in which entries that are full, true and correct in all material respects and are in conformity with Applicable Accounting Standards consistently applied shall be made of all material financial transactions and matters involving the assets, properties and business of such Credit Party (or such Subsidiary), as the case may be.

5.9. Access to Collateral; Audits . Allow Lender, or its agents or representatives, at any time during the occurrence and continuance of an Event of Default during normal business hours and upon reasonable advance

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notice, to visit and inspect the Collateral and inspect, copy and audit any Credit Party’s Books. The foregoing inspections and audits shall be at the relevant Credit Party’s expense.

5.10. Use of Proceeds . Use the proceeds of the Term Loans solely to repay the Indebtedness outstanding under the Existing CRG Credit Agreement and any and all associated costs and expenses and to fund its general corporate requirements, and (b) not use the proceeds of the Term Loans or any other Credit Extensions, directly or indirectly, for the purpose of purchasing or carrying any Margin Stock, for the purpose of reducing or retiring any Indebtedness that was originally incurred to purchase or carry any Margin Stock, for the purpose of extending credit to any other Person for the purpose of purchasing or carrying any Margin Stock or for any other purpose that might cause any Term Loan or other Credit Extension to be considered a “purpose credit” within the meaning of Regulation T, U or X of the Federal Reserve Board. If requested by Lender, Borrower shall complete and sign Part I of a copy of Federal Reserve Form G-3 referred to in Regulation U and deliver such copy to Lender.

5.11. Further Assurances . Promptly upon the reasonable written request of Lender, execute, acknowledge and deliver such further documents and do such other acts and things in order to effectuate or carry out more effectively the purposes of this Agreement and the other Loan Documents at its expense, including after the Closing Date taking such steps as are reasonably deemed necessary or desirable by Lender to maintain, protect and enforce Lender’s Lien in favor and for the benefit of Lender and the other Secured Parties on Collateral securing the Obligations created under the Security Agreement and the other Loan Documents in accordance with the terms of the Security Agreement and the other Loan Documents, subject to Permitted Liens.

5.12. Additional Collateral; Guarantors .

(a) From and after the Closing Date, except as otherwise approved in writing by Lender, each Credit Party shall cause each of its Subsidiaries (other than Excluded Subsidiaries) to guarantee the Obligations and to cause each such Subsidiary to grant to Lender in favor and for the benefit of Lender and the other Secured Parties a first priority security interest in and Lien upon, and pledge to Lender in favor and for the benefit of Lender and the other Secured Parties, subject to Permitted Liens, all of such Subsidiary’s properties and assets constituting Collateral, whether now existing or hereafter acquired or existing, to secure such guaranty; provided , that such Credit Party’s obligations to cause any Subsidiaries formed or acquired after the Closing Date to take the foregoing actions shall be subject to the timing requirements of Section 5.13 . Furthermore, except as otherwise approved in writing by Lender, each Credit Party, from and after the Closing Date, shall, and shall cause each of its Subsidiaries to grant Lender in favor and for the benefit of Lender and the other Secured Parties a first priority security interest in and Lien upon, and pledge to Lender in favor and for the benefit of Lender and the other Secured Parties, subject to Permitted Liens, the limitations set forth herein and the limitations set forth in the other Loan Documents, all of the Equity Interests (other than Excluded Equity Interests) of each of its Subsidiaries. In connection with each pledge of certificated Equity Interests required under the Loan Documents, the Credit Parties shall deliver, or cause to be delivered, to Lender, such certificate(s) together with stock powers or assignments, as applicable, properly endorsed for transfer to Lender or duly executed in blank, in each case reasonably satisfactory to Lender. In connection with each pledge of uncertificated Equity Interests required under the Loan Documents, the Credit Parties shall deliver, or cause to be delivered, to Lender an executed uncertificated stock control agreement among the issuer, the registered owner and Lender substantially in the form attached as an Annex to the Security Agreement.

(b) In the event any Credit Party acquires any fee title to real estate in the U.S. with a fair market value (reasonably determined in good faith by a Responsible Officer of Borrower) in excess of ***, unless otherwise agreed by Lender, such Person shall execute or deliver, or cause to be executed or delivered, to Lender, (i) within *** after such acquisition, an appraisal complying with the Financial Institutions Reform, Recovery and Enforcement Act of 1989, (ii) within *** after receipt of notice from Lender that such real estate is located in a Special Flood Hazard Area, Federal Flood Insurance, (iii) within *** after such acquisition, a fully executed Mortgage, in form and substance reasonably satisfactory to Lender, together with an A.L.T.A. lender’s title insurance policy issued by a title insurer reasonably satisfactory to Lender, in form and substance (including any endorsements) and in an amount reasonably satisfactory to Lender insuring that the Mortgage is a valid and enforceable first priority Lien on the respective property, free and clear of all defects, encumbrances and Liens (other than Permitted Liens), (iv) simultaneously with such acquisition, then-current A.L.T.A. surveys, certified to Lender by a licensed surveyor sufficient to allow the issuer of the lender’s title insurance policy to issue such policy without a survey exception and (v) within *** after such acquisition, an environmental site assessment prepared by a qualified firm reasonably acceptable to Lender, in form and substance satisfactory to Lender.

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5.13. Formation or Acquisition of Subsidiaries. If Borrower or any of its Subsidiaries at any time after the Closing Date forms or acquires a Subsidiary (other than an Excluded Subsidiary) (including by division), as promptly as practicable but in no event later than *** (or such longer period as Lender may agree in its sole discretion) after such formation or acquisition: (a) without limiting the generality of clause (d) below, Borrower will cause such Subsidiary to execute and deliver to Lender a joinder to the Security Agreement in the form attached thereto and any relevant IP Security Agreement or other Collateral Documents, as applicable; (b) Borrower will deliver to Lender (i) true, correct and complete copies of the Operating Documents of such Subsidiary, (ii) a Secretary’s Certificate, certifying that the copies of such Operating Documents are true, correct and complete (such Secretary’s Certificate to be in form and substance reasonably satisfactory to Lender) and (iii) a good standing certificate for such Subsidiary certified by the Secretary of State (or the equivalent thereof) of its jurisdiction of organization, incorporation or formation; (c) Borrower will deliver to Lender a Perfection Certificate, updated to reflect the formation or acquisition of such Subsidiary; and (d) Borrower will cause such Subsidiary to satisfy all requirements contained in this Agreement (including Section 5.12 ) and each other Loan Document if and to the extent applicable to such Subsidiary. Borrower and Lender hereby agree that any such Subsidiary shall constitute a Credit Party for all purposes hereunder as of the date of the execution and delivery of the joinder contemplated by clause (a) above. Any document, agreement or instrument executed or issued pursuant to this Section 5.13 shall be a Loan Document.

5.14. Post-Closing Requirements. Borrower will, and will cause each of its Subsidiaries to, take each of the actions set forth on Schedule 5.14 of the Disclosure Letter within the time period prescribed therefor on such schedule (or such longer period as Lender may agree in its sole discretion), which shall include, among other things, that notwithstanding anything to the contrary in Section 5.5 , the Credit Parties shall have until the date that is *** following the Closing Date (or such longer period as Lender may agree in its sole discretion) to comply with the provisions of Section 5.5 with regard to Collateral Accounts of the Credit Parties in existence on the Closing Date or opened during such *** period (or such longer period as Lender may agree in its sole discretion). All representations and warranties and covenants contained in this Agreement and the other Loan Documents shall be deemed modified to the extent necessary to take the actions set forth on Schedule 5.14 of the Disclosure Letter within the time periods set forth therein, rather than elsewhere provided in the Loan Documents, such that to the extent any such action set forth in Schedule 5.14 of the Disclosure Letter is not overdue, the applicable Credit Party shall not be in breach of any representation or warranty or covenant contained in this Agreement or any other Loan Document applicable to such action for the period from the Closing Date until the date on which such action is required to be fulfilled as set forth on Schedule 5.14 of the Disclosure Letter.

5.15. Environmental .

(a) Deliver to Lender:

(i) as soon as practicable following receipt thereof, copies of all environmental audits, investigations, analyses and reports of any kind or character, whether prepared by personnel of Borrower or any of its Subsidiaries or by independent consultants, governmental authorities or any other Persons, with respect to significant environmental matters at any Facility or with respect to any material Environmental Claims;

(ii) promptly upon a Responsible Officer of any Credit Party or any of its Subsidiaries obtaining knowledge of the occurrence thereof, written notice describing in reasonable detail (A) any Release required to be reported to any federal, state or local governmental or regulatory agency under any applicable Environmental Laws, (B) any remedial action taken by any Credit Party or any other Person in response to (x) any Hazardous Materials Activities, the existence of which, individually or in the aggregate, could reasonably be expected to result in one or more Environmental Claims resulting in a Material Adverse Change, or (y) any Environmental Claims that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Change, and (C) any Credit Party’s discovery of any occurrence or condition on any real property adjoining or in the vicinity of any Facility that could cause such Facility or any part thereof to be subject to any material restrictions on the ownership, occupancy, transferability or use thereof under any Environmental Laws, provided , that with respect to real property adjoining or in the vicinity of any Facility, Borrower shall have no duty to affirmatively investigate or make any efforts to become or stay informed regarding any such adjoining or nearby properties;

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(iii) as soon as practicable following the sending or receipt thereof by any Credit Party, a copy of any and all written communications with respect to (A) any Environmental Claims that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Change, (B) any Release required to be reported to any federal, state or local governmental or regulatory agency, or (C) any request for information from any Governmental Authority that suggests such Governmental Authority is investigating whether any Credit Party or any of its Subsidiaries may be potentially responsible for any Hazardous Materials Activity that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Change;

(iv) prompt written notice describing in reasonable detail (A) any proposed acquisition of stock, assets, or property by Borrower or any of its Subsidiaries that, individually or in the aggregate, could reasonably be expected to (x) expose Borrower or any of its Subsidiaries to, or result in, Environmental Claims that could reasonably be expected to result in a Material Adverse Change or (y) affect the ability of Borrower or any of its Subsidiaries to maintain in full force and effect all material Governmental Approvals required under any Environmental Laws for their respective operations, and (B) any proposed action to be taken by Borrower or any of its Subsidiaries to modify current operations in a manner that, individually or together with any other such proposed actions, could reasonably be expected to subject Borrower or any of its Subsidiaries to any additional material obligations or requirements under any Environmental Laws; and

(v) with reasonable promptness, such other documents and information as from time to time may be reasonably requested by Lender in relation to any matters disclosed pursuant to this Section 5.15(a) .

(b) Each Credit Party shall, and shall cause each of its Subsidiaries to, promptly take any and all actions reasonably necessary to (i) cure any violation of applicable Environmental Laws by Borrower or any of its Subsidiaries that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Change, and (ii) make an appropriate response to any Environmental Claim against Borrower or any of its Subsidiaries and discharge any obligations it may have to any Person thereunder where failure to do so, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Change.

5.16. Inventory; Returns; Maintenance of Properties . Keep all Inventory in good and marketable condition, free from material defects and otherwise keep all Inventory in material compliance with all applicable FDA Good Manufacturing Practices. Returns and allowances between Borrower and its Account Debtors shall follow Borrower’s customary practices as they exist at the Effective Date or, solely with respect to the Acquired Business, any new returns and allowances practices established thereafter in good faith by Borrower. Each Credit Party will, and will cause each of its Subsidiaries to, maintain or cause to be maintained in good repair, working order and condition, ordinary wear and tear, casualty and condemnation excepted, all material tangible properties used or useful in its respective business, and from time to time will make or cause to be made all appropriate repairs, renewals and replacements thereof except where failure to do so could not reasonably be expected to result in a Material Adverse Change.

6. NEGATIVE COVENANTS

Each Credit Party covenants and agrees that, until payment in full of all Obligations (other than inchoate indemnity obligations), such Credit Party shall not, and shall cause each of its Subsidiaries not to:

6.1. Dispositions . Convey, sell, lease, transfer, assign, covenant not to sue, enter into a coexistence agreement, exclusively or non-exclusively license out, or otherwise dispose of (including any sale-leaseback or any transfer of assets pursuant to a plan of division), directly or indirectly and whether in one or a series of transactions (collectively, “ Transfer ”), all or any part of its properties or assets constituting Collateral or any Company IP that does not constitute Collateral under the Loan Documents but is related to any research, development, manufacture, production, use, commercialization, marketing, importing, storage, transport, offer for sale, distribution or sale of the Product in the Territory; except, in each case of this Section 6.1 , for Permitted Transfers (unless otherwise expressly provided in Section 6.6(b )).

6.2. Fundamental Changes ; Location of Collateral .

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(a) Without at least *** prior written notice to Lender, solely in the case of a Credit Party: (i) change its jurisdiction of organization, incorporation or formation, (ii) change its organizational structure or type, (iii) change its legal name, or (iv) change any organizational number (if any) assigned by its jurisdiction of organization, incorporation or formation.

(b) Not deliver any material portion of the Collateral to one or more leased locations or bailees, unless (i) such Credit Party has delivered at least *** prior written notice to Lender, which such notice shall in reasonable detail identify such Collateral and indicate the location from which it is being delivered and the location to which it is being delivered (and may be in the form of an updated Perfection Certificate; provided that any update to the Perfection Certificate by any Credit Party pursuant to this Section 6.2(b) shall not relieve any Credit Party of any other Obligation under this Agreement), and (ii) Lender and such landlord or bailee are already parties to a landlord’s consent in favor of Lender for such leased location or a bailee agreement governing both such Collateral and the location to which such Collateral will be delivered (in form and substance reasonably satisfactory to Lender).

6.3. Mergers, Acquisitions, Liquidations or Dissolutions .

(a) Merge, divide itself into two (2) or more entities, consolidate, liquidate or dissolve, or permit any of its Subsidiaries to merge, divide itself into two (2) or more entities, consolidate, liquidate or dissolve with or into any other Person, except that:

(i) any Subsidiary of Borrower may merge or consolidate with or into Borrower, provided that Borrower is the surviving entity,

(ii) any Subsidiary of Borrower may merge or consolidate with any other Subsidiary of Borrower, provided that if any party to such merger or consolidation is a Credit Party then either (x) such Credit Party is the surviving entity or (y) the surviving or resulting entity executes and delivers to Lender a joinder to the Security Agreement in the form attached thereto and any relevant IP Security Agreement or other Collateral Documents, as applicable, and otherwise satisfies the requirements of Section 5.13 substantially contemporaneously with completion of such merger or consolidation to;

(iii) any Subsidiary of Borrower may divide itself into two (2) or more entities or be dissolved or liquidated, provided that the properties and assets of such Subsidiary are allocated or distributed to an existing or newly-formed Credit Party; and

(iv) any Permitted Investment may be structured as a merger or consolidation; or

(b) make, or permit any of its Subsidiaries to make, Acquisitions outside the ordinary course of business, including any purchase of the assets of any division or line of business of any other Person, other than Permitted Acquisitions or Permitted Investments.

6.4. Indebtedness . Directly or indirectly, create, incur, assume or guaranty, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness (including any Indebtedness consisting of obligations evidenced by a bond, debenture, note or other similar instrument) that is not Permitted Indebtedness; provided , however , that the accrual of interest, the accretion of accreted value and the payment of interest in the form of additional Indebtedness shall not be deemed to be an incurrence of Indebtedness for purposes of this Section 6.4 .

6.5. Encumbrance s . Except for Permitted Liens, (i) create, incur, allow, or suffer to exist any Lien on any Collateral, or (ii) permit (other than pursuant to the terms of the Loan Documents) any material portion of the Collateral not to be subject to the first priority security interest granted in the Loan Documents or otherwise pursuant to the Collateral Documents, in each case of this clause (ii) , other than as a direct result of any action by Lender or failure of Lender to perform an obligation of Lender under the Loan Documents.

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6.6. No Further Negative Pledges; Negative Pledge .

(a) No Credit Party nor any of its Subsidiaries shall enter into any agreement, document or instrument directly or indirectly prohibiting (or having the effect of prohibiting) or limiting the ability of such Credit Party or Subsidiary to create, incur, assume or suffer to exist any Lien upon any Collateral, whether now owned or hereafter acquired, in favor and for the benefit of Lender and the other Secured Parties with respect to the Obligations or under the Loan Documents, in each case of this Section 6.6(a) , other than Permitted Negative Pledges.

(b) Notwithstanding Section 6.1 , no Credit Party will sell, assign, transfer, exchange or otherwise dispose of, or create, incur, allow or suffer to exist any Lien on, any Equity Interests constituting Collateral issued by any Subsidiary which are owned or otherwise held by such Credit Party, except for: (i) Permitted Liens; (ii) transfers between or among Credit Parties, provided that any and all steps as may be required to be taken in order to create and maintain a first priority security interest in and Lien upon such Equity Interests in favor and for the benefit of Lender and the other Secured Parties are taken contemporaneously with the completion of any such transfer; and (iii) sales, assignments, transfers, exchanges or other dispositions to qualify directors if required by Requirements of Law or otherwise permitted under this Agreement, provided that such sale, assignment, transfer, exchange or other disposition shall be for the minimum number of Equity Interests as are necessary for such qualification under Requirements of Law.

6.7. Maintenance of Collateral Accounts . Maintain any Collateral Account except pursuant to the terms of Section 5.5 hereof.

6.8. Distributions ; Investments .

(a) Pay any dividends or make any distribution or payment on or redeem, retire or purchase any Equity Interests, except, in each case of this Section 6.8 , for Permitted Distributions.

(b) Directly or indirectly make any Investment other than Permitted Investments.

6.9. No Restrictions on Subsidiary Distributions. No Credit Party nor any of its Subsidiaries shall enter into any agreement, document or instrument directly or indirectly prohibiting (or having the effect of prohibiting) or limiting the ability of any Subsidiary of Borrower to (a) pay dividends or make any other distributions on any of such Subsidiary’s Equity Interests owned by Borrower or any other Subsidiary of Borrower, (b) repay or prepay any Indebtedness owed by such Subsidiary to Borrower or any other Subsidiary of Borrower, (c) make loans or advances to Borrower or any other Subsidiary of Borrower, or (d) transfer, lease or license any Collateral to Borrower or any other Subsidiary of Borrower, except, in each case of this Section 6.9 , for Permitted Subsidiary Distribution Restrictions.

6.10. Subordinated Debt Make or permit any voluntary or optional prepayment of any Subordinated Debt.

6.11. Amendments or Waivers of Organizational Documents . Amend, restate, supplement or otherwise modify, or waive, any provision of its Operating Documents in a manner that would reasonably be expected to result in a Material Adverse Change.

6.12. Compliance .

(a) Become an “investment company” under the Investment Company Act of 1940, as amended, or undertake as one of its important activities extending credit to purchase or carry margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System), or use the proceeds of any Credit Extension for that purpose;

(b) No ERISA Affiliate shall cause or suffer to exist (i) any event that would result in the imposition of a Lien on any assets or properties of any Credit Party or a Subsidiary of a Credit Party with respect to any Plan or Multiemployer Plan or (ii) any other ERISA Event that, in the case of clauses (i) and (ii) , could reasonably be expected to, individually or in the aggregate, result in a Material Adverse Change; or

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(c) Permit the occurrence of any other event with respect to any present pension, profit sharing or deferred compensation plan which could reasonably be expected to result in a Material Adverse Change.

6.13. Compliance with Anti-Terrorism Laws . Lender hereby notifies each Credit Party that pursuant to the requirements of Anti-Terrorism Laws, and such Person’s policies and practices, Lender is required to obtain, verify and record certain information and documentation that identifies each Credit Party and its principals, which information includes the name and address of each Credit Party and its principals and such other information that will allow Lender to identify such party in accordance with Anti-Terrorism Laws. No Credit Party will, nor will any Credit Party permit any of its Subsidiaries or Affiliates to, directly or indirectly, knowingly enter into any documents or contracts with any Person listed on the OFAC Lists. Each Credit Party shall promptly (but in any event within three (3) Business Days) notify Lender in writing upon any Responsible Officer of Borrower having knowledge that any Credit Party or any Subsidiary or Affiliate of any Credit Party is listed on the OFAC Lists or (a) is convicted on, (b) pleads nolo contendere to, (c) is indicted on, or (d) is arraigned and held over on charges involving money laundering or predicate crimes to money laundering. No Credit Party will, nor will any Credit Party permit any of its Subsidiaries or Affiliates to, directly or indirectly, (i) conduct any business or engage in any transaction or dealing with any Blocked Person, including the making or receiving of any contribution of funds, goods or services to or for the benefit of any Blocked Person, (ii) deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to Executive Order No. 13224, any similar executive order or other Anti-Terrorism Law, or (iii) engage in or conspire to engage in any transaction that evades or avoids or violates, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in Executive Order No. 13224 or other Anti-Terrorism Law.

6.14. Amendments or Waivers of Current Company IP Agreements . (a) Waive, amend, cancel or terminate, exercise or fail to exercise, any material rights constituting or relating to any of the Current Company IP Agreements or (b) breach, default under, or take any action or fail to take any action that, with the passage of time or the giving of notice or both, would constitute a default or event of default under any of the Current Company IP Agreements, in each case of this Section 6.14 , which could reasonably be expected to, individually or together with any other such waivers, amendments, cancellations, terminations, exercises or failures, result in a Material Adverse Change.

6.15. Minimum Net Sales . Permit trailing twelve-month Net Sales of BELBUCA ^® , tested at the end of each calendar month commencing with the calendar month ending December 31, 2020 and without violating any other term or provision of this Agreement, to fall below $95,000,000 (the “ Net Sales Threshold ”), provided , that such Net Sales shall include the proceeds from any business interruption insurance or similar loss of income insurance that the Borrower or its Subsidiaries may receive during such period which do not in the aggregate exceed *** of the Net Sales Threshold for such period.

7. EVENTS OF DEFAULT

Any one of the following shall constitute an event of default (an “ Event of Default ”) under this Agreement:

7.1. Payment Default . Any Credit Party fails to (a) make any payment of any principal of the Term Loan when and as the same shall become due and payable, whether at the due date thereof (including pursuant to Section 2.2(c) ) or at a date fixed for prepayment (whether voluntary or mandatory) thereof or by acceleration thereof or otherwise, or (b) within *** after the same becomes due, any payment of interest or premium pursuant to Section 2.2 , including any applicable Additional Consideration, Makewhole Amount or Prepayment Premium, or any other Obligations (which *** cure period shall not apply to any such payments due on the Term Loan Maturity Date, such earlier date pursuant to Section 2.2(c)(iii) hereof or the date of acceleration pursuant to Section 8.1(a) hereof). A failure to pay any such interest, premium or Obligations pursuant to the foregoing clause (b) prior to the end of such *** period shall not constitute an Event of Default (unless such payment is due on the Term Loan Maturity Date, such earlier date pursuant to Section 2.2(c)(iii) hereof or the date of acceleration pursuant to Section 8.1(a) hereof).

7.2. Covenant Default .

(a) The Credit Parties: (i) fail or neglect to perform any obligation in Sections 5.2 , 5.3 , 5.4 , 5.5 , 5.6 , 5.7 , 5.10 , 5.12 , 5.13 , 5.14 or 5.16 or (ii) violate any covenant in Section 6 ; or

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(b) The Credit Parties fail or neglect to perform, keep, or observe any other term, provision, condition, covenant or agreement contained in this Agreement or any Loan Documents on its part to be performed, kept or observed and such failure continues for ***, after the earlier of the date on which (i) a Responsible Officer of any Credit Party becomes aware of such failure and (ii) written notice thereof shall have been given to the Borrower by Lender. Cure periods provided under this Section 7.2(b) shall not apply, among other things, to any of the covenants referenced in clause (a) above.

7.3. Material Adverse Change . A Material Adverse Change of the type described in clause (iii) or clause (iv) of the definition of “Material Adverse Change” occurs.

7.4. Attachment; Levy; Restraint on Business .

(a) (i) The service of process seeking to attach, by trustee or similar process, any funds of any Credit Party or of any entity under the control of any Credit Party (including a Subsidiary) in excess of *** on deposit or otherwise maintained with Lender, or (ii) a notice of lien or levy is filed against any of material portion of Collateral by any Governmental Authority, and the same under sub-clauses (i) and (ii) hereof are not, within *** after the occurrence thereof, discharged or stayed (whether through the posting of a bond or otherwise); provided , however , that no Credit Extensions shall be made during any *** cure period; or

(b) (i) Any material portion of Collateral is attached, seized, levied on, or comes into possession of a trustee or receiver, or (ii) any court order enjoins, restrains, or prevents Borrower and its Subsidiaries from conducting any material part of their business, taken as a whole.

7.5. Insolvency .

(a) An involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking: (i) relief in respect of any Credit Party, or of a substantial part of the property of any Credit Party, under Title 11 of the United States Code, as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law; (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Credit Party or for a substantial part of the property or assets of any Credit Party; or (iii) the winding-up or liquidation of any Credit Party, and such proceeding or petition shall continue undismissed or unstayed for *** or an order or decree approving or ordering any of the foregoing shall be entered; or

(b) Any Credit Party shall: (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law; (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in clause (a) above; (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Credit Party or for a substantial part of the property or assets of any Credit Party; (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding; (v) make a general assignment for the benefit of creditors; (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due; (vii) take any action for the purpose of effecting any of the foregoing; or (viii) wind up or liquidate (except as otherwise expressly permitted hereunder).

7.6. Other Agreements . Any Credit Party fails to pay any Indebtedness (other than the Indebtedness represented by this Agreement and the other Loan Documents) within any applicable grace period after such payment is due and payable (including at final maturity) or after the acceleration of any such Indebtedness by the holder(s) thereof because of a default, in each case, if the total amount of such Indebtedness unpaid or accelerated exceeds ***.

7.7. Judgments . One or more final, non-appealable judgments, orders, or decrees for the payment of money in an amount in excess of *** (but excluding any final judgments, orders, or decrees for the payment of money that are covered by independent third-party insurance as to which liability has not been denied by such insurance carrier or by an indemnification claim against a solvent and unaffiliated Person that is not a Credit Party as to which such Person has not denied liability for such claim), shall be rendered against one or more Credit Parties

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and the same are not, within *** after the entry thereof, discharged or execution thereof stayed or bonded pending appeal, or such judgments are not discharged prior to the expiration of any such stay.

7.8. Misrepresentations . Any Credit Party or any Person acting for any Credit Party makes or is deemed to make any representation, warranty, or other statement now or later in this Agreement, any other Loan Document or in any writing delivered to Lender or to induce Lender to enter this Agreement or any other Loan Document, and such representation, warranty, or other statement is incorrect in any material respect (or, to the extent any such representation, warranty or other statement is qualified by materiality or Material Adverse Change, in any respect) when made or deemed to be made.

7.9. Loan Documents; Collateral . Any material provision of any Loan Document shall for any reason cease to be valid and binding on or enforceable against any Credit Party, or any Credit Party shall so state in writing or bring an action to limit its obligations or liabilities thereunder; or any Collateral Document shall for any reason (other than pursuant to the terms thereof) cease to create a valid security interest in any material portion of the Collateral purported to be covered thereby or such security interest shall for any reason (other than pursuant to the terms of the Loan Documents) cease to be a perfected and first priority security interest in any material portion of the Collateral subject thereto, subject only to Permitted Liens, in each case, other than as a direct result of any action by Lender or failure of Lender to perform an obligation of Lender under the Loan Documents.

7.10. ERISA Event . An ERISA Event occurs that, individually or together with any other ERISA Events, results or could reasonably be expected to result in a Material Adverse Change or the imposition of a Lien on any Collateral.

8. RIGHTS AND REMEDIES UPON AN EVENT OF DEFAULT

8.1. Rights and Remedies . While an Event of Default occurs and continues, Lender may, without notice or demand:

(a) declare all Obligations (including, for the avoidance of doubt, the Makewhole Amount or Prepayment Premium that is payable pursuant to Section 2.2(e) and Section 2.2(f) , as applicable) immediately due and payable (but if an Event of Default described in Section 7.5 occurs all Obligations, including the Makewhole Amount and Prepayment Premium that is payable pursuant to Section 2.2(e) and Section 2.2(f) , as applicable, are automatically and immediately due and payable without any action by Lender), whereupon all Obligations for principal, interest, premium or otherwise (including, for the avoidance of doubt, the Makewhole Amount and Prepayment Premium that is payable pursuant to Section 2.2(e) and Section 2.2(f) , as applicable) shall become due and payable by Borrower without presentment, demand, protest or other notice of any kind, which are all expressly waived by the Credit Parties hereby;

(b) stop advancing money or extending credit for Borrower’s benefit under this Agreement;

(c) settle or adjust disputes and claims directly with Account Debtors for amounts on terms and in any order that Lender considers advisable, notify any Person owing Borrower money of Lender’s security interest in such funds, and verify the amount of the Collateral Accounts;

(d) make any payments and do any acts it considers necessary or reasonable to protect the Collateral or Lender’s security interest in favor and for the benefit of Lender and the other Secured Parties in the Collateral. Borrower shall assemble the Collateral if Lender requests and make it available as Lender designates. Lender or its agents or representatives may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise any Lien which appears to be prior or superior to its security interest in favor and for the benefit of Lender and the other Secured Parties and pay all expenses incurred. Borrower grants Lender a license to enter and occupy (and for its agents or representatives to enter and occupy) any of its premises, without charge, to exercise any of Lender’s rights or remedies;

(e) apply to the Obligations (i) any balances and deposits of Borrower it holds, or (ii) any amount held by Lender owing to or for the credit or the account of Borrower;

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(f) ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell the Collateral. With respect to any and all Intellectual Property owned by any Credit Party and included in Collateral, each Credit Party hereby grants to Lender, for the benefit of all Secured Parties, as of the Closing Date, a non-exclusive, royalty-free license or other right to use, without charge, such Intellectual Property in advertising for sale and selling any Collateral and, in connection with Lender’s exercise of its rights under this Section 8.1 , Borrower’s rights under all licenses and all franchise Contracts inure to the benefit of all Secured Parties. Each Credit Party shall retain the right to control Lender’s use of its trade names and Trademarks and such trade names and Trademarks, together with the goodwill associated therewith, are and remain the exclusive property of the Credit Parties, and any and all use of the same by Lender shall inure to the benefit of the Credit Parties;

(g) place a “hold” on any account maintained with Lender or deliver a notice of exclusive control, any entitlement order, or other directions or instructions pursuant to any Control Agreement or similar agreements providing control of any Collateral;

(h) demand and receive possession of Borrower’s Books regarding Collateral; and

(i) exercise all rights and remedies available to Lender under the Collateral Documents or any other Loan Documents or at law or equity, including all remedies provided under the Code (including disposal of the Collateral pursuant to the terms thereof).

Lender agrees that in connection with any foreclosure or other exercise of rights under this Agreement or any other Loan Document with respect to any Intellectual Property included in the Collateral, the rights of the licensees under any license of such Intellectual Property will not be terminated, limited or otherwise adversely affected so long as no default exists thereunder in a way that would permit the licensor to terminate such license (commonly termed a non-disturbance). Without limitation to any other provision herein or in any other Loan Document, while an Event of Default occurs and continues, at Lender’s request, representatives from Borrower and Lender shall promptly meet (in person or telephonically) to discuss in good faith how to collect, receive, appropriate and realize upon Borrower’s rights and interests in, to and under the Current Company IP Agreement, including in connection with any foreclosure or other exercise of Lender’s rights with respect thereto. If Borrower and Lender do not mutually agree with respect thereto within ten (10) Business Days after such request by Lender (or such later date as agreed by Lender), then Lender may request Borrower to, and Borrower (promptly following the receipt of such request) shall, use reasonable best efforts to obtain the written consent of Shionogi Inc., pursuant to Section 16.5 of the Symproic License Agreement, to the exercise by Lender of any and all rights and remedies under this Agreement or any other Loan Document with respect to the Current Company IP Agreement, in form and substance reasonably satisfactory to Lender.

8.2. Power of Attorney . Borrower hereby irrevocably appoints Lender and any Related Party thereof as its lawful attorney-in-fact, exercisable upon the occurrence and during the continuance of an Event of Default, to: (a) endorse Borrower’s name on any checks or other forms of payment or security; (b) sign Borrower’s name on any invoice or bill of lading for any Account or drafts against Account Debtors; (c) settle and adjust disputes and claims about the Collateral Accounts directly with depository banks where the Collateral Accounts are maintained, for amounts and on terms Lender determines reasonable; (d) make, settle, and adjust all claims under Borrower’s products liability or general liability insurance policies maintained in the United States regarding Collateral; (e) pay, contest or settle any Lien, charge, encumbrance, security interest, and adverse claim in or to the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same; and (f) transfer the Collateral into the name of Lender or a third party as the Code permits. Borrower hereby appoints Lender and any Related Party thereof as its lawful attorney-in-fact to file or record any documents necessary to perfect or continue the perfection of Lender’s security interest in favor and for the benefit of Lender and the other Secured Parties in the Collateral regardless of whether an Event of Default has occurred until all Obligations (other than inchoate indemnity obligations) have been satisfied in full and Lender is not under any further obligation to make Credit Extensions hereunder. The foregoing appointment of Lender and any Related Party thereof as Borrower’s attorney in fact, and all of Lender’s (or such Related Party’s) rights and powers, coupled with an interest, are irrevocable until all Obligations (other than inchoate indemnity obligations) have been fully repaid and performed and Lender’s obligation to provide Credit Extensions terminates.

8.3. Application of Payments and Proceeds Upon Default . If an Event of Default has occurred and is continuing, Lender shall apply any funds in its possession, whether from Borrower account balances, payments,

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proceeds realized as the result of any collection of Collateral Accounts or disposition of any other Collateral, or otherwise, to the Obligations in such order as Lender shall determine in its sole discretion. Any surplus shall be paid to Borrower or other Persons legally entitled thereto; Borrower shall remain liable to Lender for any deficiency. If Lender directly or indirectly enters into a deferred payment or other credit transaction with any purchaser at any sale of Collateral, Lender shall have the option, exercisable at any time, of either reducing the Obligations by the principal amount of the purchase price or deferring the reduction of the Obligations until the actual receipt by Lender of cash therefor.

8.4. Lender ’ s Liability for Collateral . So long as Lender complies with Requirements of Law regarding the safekeeping of the Collateral in the possession or under the control of Lender, Lender shall not be liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral; or (c) any act or default of any other Person. In no event shall Lender have any liability for any diminution in the value of the Collateral for any reason. Borrower bears all risk of loss, damage or destruction of the Collateral.

8.5. No Waiver; Remedies Cumulative . Lender’s failure, at any time or times, to require strict performance by Borrower of any provision of this Agreement or any other Loan Document shall not waive, affect, or diminish any right of Lender thereafter to demand strict performance and compliance herewith or therewith. No waiver hereunder shall be effective unless signed by the party granting the waiver and then is only effective for the specific instance and purpose for which it is given. Lender’s rights and remedies under this Agreement and the other Loan Documents are cumulative. Lender has all rights and remedies provided under the Code, by law, or in equity. The exercise by Lender of one right or remedy is not an election and shall not preclude Lender from exercising any other remedy under this Agreement or other remedy available at law or in equity, and the waiver by Lender of any Event of Default is not a continuing waiver. Lender’s delay in exercising any remedy is not a waiver, election, or acquiescence.

8.6. Demand Waiver ; Makewhole Amount; Prepayment Premium . Borrower waives demand, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by Lender on which Borrower is liable. Borrower acknowledges and agrees that if the maturity of all Obligations shall be accelerated pursuant to Section 8.1(a) by reason of the occurrence of an Event of Default, the Makewhole Amount or Prepayment Premium, as applicable, that is payable pursuant to Section 2.2(e) or Section 2.2(f) , as the case may be, shall become due and payable by Borrower upon such acceleration, whether such acceleration is automatic or is effected by Lender’s declaration thereof, as provided in Section 8.1(a) , and Borrower shall pay the Makewhole Amount or Prepayment Premium, as applicable, that is payable pursuant to Section 2.2(e) or Section 2.2(f) , as the case may be, as compensation to Lender for the loss of its investment opportunity and not as a penalty, and Borrower waives any right to object thereto in any voluntary or involuntary bankruptcy, insolvency or similar proceeding or otherwise.

9. NOTICES

All notices, consents, requests, approvals, demands, or other communication by any party to this Agreement or any other Loan Document must be in writing and shall be deemed to have been validly served, given, or delivered: (a) upon the earlier of actual receipt and three (3) Business Days after deposit in the U.S. mail, first class, registered or certified mail return receipt requested, with proper postage prepaid; (b) upon transmission, when sent by electronic mail or facsimile transmission; (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address, facsimile number, or email address (if any) indicated below. Any party to this Agreement may change its mailing or electronic mail address or facsimile number by giving all other parties hereto written notice thereof in accordance with the terms of this Section 9 .

If to Borrower or any other Credit Party:

BioDelivery Sciences International, Inc.

4131 ParkLake Avenue, Suite #225

Raleigh, NC 27612

Attention: Jim Vollins

Telephone: (919) 582-9050

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Email: jvollins@bdsi.com

with a copy to:

BioDelivery Sciences International, Inc.

4131 ParkLake Avenue, Suite #225

Raleigh, NC 27612

Attention: Terry Coelho

Telephone: (919) 582-9050

Email: tcoelho@bdsi.com

with a copy to (which shall not constitute notice) to:

Goodwin Procter LLP

Three Embarcadero Center

28th Floor

San Francisco, California 94111

Attn: William Burnet Pearce

Telephone: (415) 733-6031

Facsimile: (415) 384-6015

Email: WPearce@goodwinlaw.com

If to Lender: BioPharma Credit PLC

c/o Beaufort House

51 New North Road

Exeter EX4 4EP

United Kingdom

Attn: Company Secretary

Tel: +44 01 392 477 500

Fax: +44 01 392 253 282

with copies (which shall not constitute notice) to:

Pharmakon Advisors LP

110 East 59 ^th Street, #3300

New York, NY 10022

Attn: Pedro Gonzalez de Cosio

Phone: +1 (212) 883-2296

Fax: +1 (917) 210-4048

Email: pg@PharmakonAdvisors.com

and

Akin Gump Strauss Hauer & Feld LLP

One Bryant Park

New York, NY 10036-6745

Attn: Geoffrey E. Secol

Phone: (212) 872-8081

Fax: (212) 872-1002

Email: gsecol@akingump.com

10. CHOICE OF LAW, VENUE, AND JURY TRIAL WAIVER

THE LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY PRINCIPLES OF CONFLICTS OF LAW THAT COULD REQUIRE THE APPLICATION OF THE LAW OF

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ANY OTHER JURISDICTION. Each party hereto submits to the exclusive jurisdiction of the courts of the State of New York sitting in New York County, and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, and agrees that all claims in respect of any such action, litigation or proceeding may be heard and determined in such New York State court or, to the fullest extent permitted by Requirements of Law, in such Federal court; provided , however , that nothing in this Agreement shall be deemed to operate to preclude Lender from bringing suit or taking other legal action in any other jurisdiction to realize on the Collateral or any other security for the Obligations, or to enforce a judgment or other court order in favor of the Lender. Each Credit Party expressly submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and each Credit Party hereby waives any objection that it may have based upon lack of personal jurisdiction, improper venue, or forum non conveniens and hereby consents to the granting of such legal or equitable relief as is deemed appropriate by such court. Each Credit Party hereby waives personal service of the summons, complaints, and other process issued in such action or suit and agrees that service of such summons, complaints, and other process may be made by registered or certified mail addressed to such party at the address set forth in (or otherwise provided in accordance with the terms of) Section 9 of this Agreement and that service so made shall be deemed completed upon the earlier to occur of such party’s actual receipt thereof or three (3) days after deposit in the U.S. mails, proper postage prepaid.

TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HERETO WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR ALL PARTIES HERETO TO ENTER INTO THIS AGREEMENT. EACH PARTY HERETO HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

11. GENERAL PROVISIONS

11.1. Successors and Assigns .

(a) This Agreement binds and is for the benefit of the parties hereto and their respective successors and permitted assigns.

(b) No Credit Party may transfer, pledge or assign this Agreement or any other Loan Document or any rights or obligations hereunder or thereunder without the prior written consent of Lender. Lender may at any time sell, transfer, assign or pledge this Agreement or any other Loan Document or any of its rights or obligations hereunder or thereunder, including with respect to any Term Loan (or any portion thereof), to any Eligible Transferee without Borrower’s prior written consent, including to grant a participation in all or any part of, or any interest in, Lender’s obligations, rights or benefits under this Agreement and the other Loan Documents, including with respect to any Term Loan (or any portion thereof) (any such sale, transfer, assignment, pledge or grant of a participation, a “ Lender Transfer ”); provided , however , that after the occurrence and during the continuance of an Event of Default, Lender may make a Lender Transfer to any Person without Borrower’s prior written consent; provided , further , that Lender may not make a Lender Transfer to a Competitor of Borrower without Borrower’s prior written consent.

(c) In the case of a Lender Transfer in the form of a participation granted by Lender to any third party, (i) Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of its obligations hereunder, (iii) Borrower shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement and (iv) any agreement or instrument pursuant to which such Lender sells such participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification, or other modification hereto, in each case subject to the terms and conditions of this Agreement. Borrower agrees that each participant shall be entitled to the benefits of Sections 2.5 and 2.6 (subject to the requirements and limitations therein, including the requirements under Section 2.6(d) (it being understood that the documentation required under Section 2.6(d) shall be delivered to Lender)) to the same extent as if it were a Person that had acquired its interest by assignment pursuant to clause (b) above; provided that, with respect to any participation, such participant shall not be entitled to receive any greater payment under Sections 2.5 or 2.6 than Lender (the party that participated the interest) would have been entitled to receive, except to the extent of any

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entitlement to receive a greater payment resulting from a Change in Law that occurs after such participant acquired the applicable participation.

(d) Lender shall record any Lender Transfer in the Register. Lender shall provide Borrower with written notice of a Lender Transfer delivered no later than five (5) Business Days prior to the date on which such Lender Transfer is consummated. For the avoidance of doubt, if Lender sells a participation, Lender shall, acting solely for this purpose as a non-fiduciary agent of Borrower, maintain a register on which it enters the name and address of each participant and principal amounts (and stated interest) of each participant’s interest in the Term Loan or other obligations under the Loan Documents (the “ Participant Register ”); provided , however , that Lender shall have no obligation to disclose all or any portion of the Participant Register (including the identity of any participant or any information relating to a participant’s interest in any commitments, loans or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary.

(e) Any attempted transfer, pledge or assignment of this Agreement or any other Loan Document or any rights or obligations hereunder or thereunder in violation of this Section 11.1 shall be null and void.

11.2. Indemnification .

(a) Borrower agrees to indemnify and hold harmless each of Lender and its Affiliates (and its or their respective successors and assigns) and each manager, member, partner, controlling Person, director, officer, employee, agent or sub-agent, advisor and affiliate thereof (each such Person, an “ Indemnified Person ”) from and against any and all Indemnified Liabilities; provided , however , that (i) Borrower shall have no obligation to any Indemnified Person hereunder with respect to any Indemnified Liabilities to the extent such Indemnified Liabilities arise from the bad faith, gross negligence or willful misconduct of that Indemnified Person (or its Affiliates or controlling Persons or their respective directors, officers, managers, partners, members, agents, sub-agents or advisors), in each case, as determined by a final, non-appealable judgment of a court of competent jurisdiction, (ii) Borrower shall have no obligation to any Indemnified Person hereunder with respect to any Indemnified Liabilities to the extent such Indemnified Liabilities arise from a material breach of any obligation of such Indemnified Person hereunder, and (iii) Borrower shall have no obligation to any Indemnified Person hereunder with respect to any Indemnified Liabilities to the extent such Indemnified Liabilities arise from any claim by one Indemnified Person against another Indemnified Person that does not relate to any act or omission of any Credit Party, and (iv) no Credit Party shall be liable for any settlement of any claim or proceeding effected by any Indemnified Person without the prior written consent of such Credit Party (which consent shall not be unreasonably withheld or delayed), but if settled with such consent or if there shall be a final judgment against an Indemnified Person, each of the Credit Parties shall, jointly and severally, indemnify and hold harmless such Indemnified Person from and against any loss or liability by reason of such settlement or judgment in the manner set forth in this Agreement. This Section 11.2(a) shall not apply with respect to Taxes other than any Taxes that represent liabilities, obligations, losses, damages, penalties, claims, costs, expenses and disbursements arising from any non-Tax claim.

(b) To the extent permitted by Requirements of Law, no party to this Agreement shall assert, and each party to this Agreement hereby waives, any claim against any other party hereto (and its or their successors and assigns), and each manager, member, partner, controlling Person, director, officer, employee, agent or sub-agent, advisor and affiliate thereof, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) (whether or not the claim therefor is based on contract, tort or duty imposed by any applicable legal requirement) arising out of, in connection with, arising out of, as a result of, or in any way related to, this Agreement or any Loan Document or any agreement or instrument contemplated hereby or thereby or referred to herein or therein, the transactions contemplated hereby or thereby, the Term Loan or the use of the proceeds thereof or any act or omission or event occurring in connection therewith, and each party to this Agreement hereby waives, releases and agrees not to sue upon any such claim or any such damages, whether or not accrued and whether or not known or suspected to exist in its favor.

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11.3. Severability of Provisions . In case any provision in or obligation hereunder or under any other Loan Document shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.

11.4. Correction of Loan Documents . Lender may correct patent errors and fill in any blanks in the Loan Documents consistent with the agreement of the parties hereto so long as Lender provides the Credit Parties with written notice of such correction and allows the Credit Parties at least ten (10) days to object to such correction in writing delivered to Lender. In the event of such objection, such correction shall not be made except by an amendment to this Agreement in accordance with Section 11.5 .

11.5. Amendments in Writing; Integration .

(a) No amendment or modification of any provision of this Agreement or any other Loan Document, or waiver, discharge or termination of any obligation hereunder or thereunder, no approval or consent hereunder or thereunder (including any consent to any departure by Borrower or any other Credit Party herefrom or therefrom), shall in any event be effective unless the same shall be in writing and signed by Borrower (on its own behalf and on behalf of each other Credit Party) and Lender. Any such waiver, approval or consent granted shall be limited to the specific circumstance expressly described in it, and shall not apply to any subsequent or other circumstance, whether similar or dissimilar, or give rise to, or evidence, any obligation or commitment to grant any further waiver, approval or consent.

(b) This Agreement and the Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations among the parties hereto about the subject matter of this Agreement and the Loan Documents merge into this Agreement and the Loan Documents.

11.6. Counterparts . This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, is an original, and all taken together, constitute one Agreement.

11.7. Survival . All covenants, representations and warranties made in this Agreement continue in full force until this Agreement has terminated pursuant to its terms and all Obligations (other than inchoate indemnity obligations and any other obligations which, by their terms, are to survive the termination of this Agreement) have been paid in full and satisfied. The obligation of Borrower or any other the Credit Parties in Section 11.2 to indemnify Indemnified Persons shall survive until the statute of limitations with respect to such claim or cause of action shall have run.

11.8. Confidentiality . Any information regarding the Credit Parties and their Subsidiaries and their businesses provided to Lender by or on behalf of any Credit Party pursuant to the Loan Documents shall be deemed “Confidential Information”; provided , however , that Confidential Information does not include information that is either: (i) in the public domain or in the possession of Lender or any of its Affiliates or when disclosed to Lender or any of its Affiliates, or becomes part of the public domain after disclosure to Lender or any of its Affiliates, in each case, other than as a result of a breach by Lender or any of its Affiliates of the obligations under this Section 11.8 ; or (ii) disclosed to Lender or any of its Affiliates by a third party if Lender or any of its Affiliates do not know that the third party is prohibited from disclosing the information. Lender shall not disclose any Confidential Information to a third party or use Confidential Information for any purpose other than the exercise of its rights and the performance of its duties or obligations under the Loan Documents. The foregoing in this Section 11.8 notwithstanding, Lender may disclose Confidential Information: (a) to any of Lender’s Subsidiaries or Affiliates; (b) to prospective transferees or purchasers of any interest in the Credit Extensions (including, for the avoidance of doubt, in connection with any proposed Lender Transfer); (c) as required by law, regulation, subpoena, or other order, provided , that (x) prior to any disclosure under this clause (c) , Lender agrees to endeavor to provide Borrower with prior written notice thereof and with respect to any law, regulation, subpoena or other order, to the extent that Lender is permitted to provide such prior notice to Borrower pursuant to the terms hereof, and (y) any disclosure under this clause (c) shall be limited solely to that portion of the Confidential Information as may be specifically compelled by such law, regulation, subpoena or other order; (d) to the extent requested by regulators having jurisdiction over Lender or as otherwise required in connection with Lender’s examination or audit by such regulators; (e) as Lender considers reasonably necessary in exercising remedies under the Loan Documents; (f) to third-party service providers of Lender; and (g) to any of Lender’s Related Parties; provided , however , that the third

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parties to which Confidential Information is disclosed pursuant to clauses (a) , (b) , ( f) and (g) are bound by obligations of confidentiality and non-use that are no less restrictive than those contained herein.

The provisions of this Section 11.8 shall survive the termination of this Agreement.

11.9. Attorneys ’ Fees, Costs and Expenses . In any action or proceeding between any Credit Party and Lender arising out of or relating to the Loan Documents, the prevailing party shall be entitled to recover its reasonable attorneys’ fees and other costs and expenses incurred, in addition to any other relief to which it may be entitled.

11.10. Right of Set-Off . In addition to any rights now or hereafter granted under Requirements of Law and not by way of limitation of any such rights, upon the occurrence of an Event of Default and at any time thereafter during the continuance of any Event of Default, Lender is hereby authorized by each Credit Party at any time or from time to time, without prior notice to any Credit Party, any such notice being hereby expressly waived by Borrower (on its own behalf and on behalf of each other Credit Party), to set off and to appropriate and to apply any and all deposits (general or special, including Indebtedness evidenced by certificates of deposit, whether matured or unmatured, but not including trust accounts) and any other Indebtedness at any time held or owing by Lender to or for the credit or the account of any Credit Party against and on account of the obligations and liabilities of any Credit Party to Lender hereunder and under the other Loan Documents, including all claims of any nature or description arising out of or connected hereto or with any other Loan Document, irrespective of whether or not (a) Lender shall have made any demand hereunder or (b) the principal of or the interest on the Term Loan or any other amounts due hereunder shall have become due and payable pursuant to Section 2 and although such obligations and liabilities, or any of them, may be contingent or unmatured. Lender agrees promptly to notify Borrower after any such set off and application made by Lender; provided that the failure to give such notice shall not affect the validity of such set off and application.

11.11. Marshalling; Payments Set Aside . Lender shall not be under any obligation to marshal any assets in favor of any Credit Party or any other Person or against or in payment of any or all of the Obligations. To the extent that any Credit Party makes a payment or payments to Lender or Lender enforces any Liens or exercises its rights of setoff, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, any other state or federal law, common law or any equitable cause, then, to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor or related thereto, shall be revived and continued in full force and effect as if such payment or payments had not been made or such enforcement or setoff had not occurred.

11.12. Electronic Execution of Documents . The words “execution,” “signed,” “signature” and words of like import in any Loan Document shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity and enforceability as a manually executed signature or the use of a paper-based recordkeeping systems, as the case may be, to the extent and as provided for in any Requirements of Law, including any state law based on the Uniform Electronic Transactions Act.

11.13. Captions . Section headings herein are included herein for convenience of reference only and shall not constitute a part hereof for any other purpose or be given any substantive effect.

11.14. Construction of Agreement . The parties hereto mutually acknowledge that they and their respective attorneys have participated in the preparation and negotiation of this Agreement. In cases of uncertainty, this Agreement shall be construed without regard to which of the parties hereto caused the uncertainty to exist.

11.15. Third Parties . Nothing in this Agreement, whether express or implied, is intended to: (a) except as expressly provided in Section 11.2(a) , confer any benefits, rights or remedies under or by reason of this Agreement on any Persons other than the express parties to it and their respective successors and permitted assigns; (b) relieve or discharge the obligation or liability of any Person not an express party to this Agreement; or (c) give any Person not an express party to this Agreement any right of subrogation or action against any party to this Agreement.

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11.16. No Advisory or Fiduciary Duty . Lender may have economic interests that conflict with those of the Credit Parties. Each Credit Party agrees that nothing in the Loan Documents or otherwise will be deemed to create an advisory, fiduciary or agency relationship or fiduciary or other implied duty between Lender, on the one hand, and such Credit Party, its Subsidiaries, and any of their respective stockholders or affiliates, on the other hand. Each Credit Party acknowledges and agrees that (i) the transactions contemplated by the Loan Documents are arm’s-length commercial transactions between Lender, on the one hand, and such Credit Party, its Subsidiaries and their respective affiliates, on the other hand, (ii) in connection therewith and with the process leading to such transaction, Lender is acting solely as a principal and not the advisor, agent or fiduciary of such Credit Party, its Subsidiaries or their respective affiliates, management, stockholders, creditors or any other Person, (iii) Lender has not assumed an advisory or fiduciary responsibility in favor of any Credit Party, its Subsidiaries or their respective affiliates with respect to the transactions contemplated hereby or the process leading thereto (irrespective of whether Lender or any of its affiliates has advised or is currently advising such Credit Party, its Subsidiaries or their respective affiliates on other matters) or any other obligation to such Credit Party, its Subsidiaries or their respective affiliates except the obligations expressly set forth in the Loan Documents and (iv) each Credit Party, its Subsidiaries and their respective affiliates have consulted their own legal and financial advisors to the extent each deemed appropriate. Each Credit Party further acknowledges and agrees that it is responsible for making its own independent judgment with respect to such transactions and the process leading thereto. Each Credit Party agrees that it will not claim that Lender has rendered advisory services of any nature or respect, or owes a fiduciary or similar duty to such Credit Party, its Subsidiaries or their respective affiliates in connection with such transaction or the process leading thereto.

12. DEFINITIONS

12.1. Definitions . For the purposes of and as used in the Loan Documents: (a) references to any Person include its successors and assigns and, in the case of any Governmental Authority, any Person succeeding to its functions and capacities; (b) except as the context otherwise requires (including to the extent otherwise expressly provided in any Loan Document), (i) references to any law, statute, treaty, order, policy, rule or regulation include any amendments, supplements and successors thereto and (ii) references to any contract, agreement, instrument or other document include any amendments, restatements, supplements or modifications thereto or thereof from time to time to the extent permitted by the provisions thereof; (c) the word “shall” is mandatory; (d) the word “may” is permissive; (e) the word “or” has the inclusive meaning represented by the phrase “and/or”; (f) the words “include”, “includes” and “including” are not limiting; (g) the singular includes the plural and the plural includes the singular; (h) numbers denoting amounts that are set off in parentheses are negative unless the context dictates otherwise; (i) each authorization herein shall be deemed irrevocable and coupled with an interest; (j) all accounting terms shall be interpreted, and all determinations relating thereto shall be made, in accordance with Applicable Accounting Standards; (k) references to any time of day shall be to New York time; (l) the words “herein”, “hereof”, “hereby”, “hereto” and “hereunder” refer to this Agreement as a whole; and (m) unless otherwise expressly provided, references to specific sections, articles, clauses, sub-clauses, annexes and exhibits are to this Agreement and references to specific schedules are to the Disclosure Letter. As used in this Agreement, the following capitalized terms have the following meanings:

“ Account ” means any “account” as defined in the Code with such additions to such term as may hereafter be made, and includes all accounts receivable, book debts, and other sums owing to Credit Parties.

“ Account Debtor ” means any “account debtor” as defined in the Code with such additions to such term as may hereafter be made.

“ Acquisition ” means (a) any Stock Acquisition, or (b) any Asset Acquisition.

“ Additional Consideration ” is defined in Section 2.7 .

“ Adverse Proceeding ” means any action, suit, proceeding, hearing (whether administrative, judicial or otherwise), governmental investigation or arbitration (whether or not purportedly on behalf of any Credit Party or any of its Subsidiaries) at law or in equity, or before or by any Governmental Authority, domestic or foreign (including any Environmental Claims), whether pending or, to the Knowledge of Borrower, threatened against or adversely affecting any Credit Party or any of its Subsidiaries or any property of any Credit Party or any of its Subsidiaries.

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“ Affiliate ” means, with respect to any Person, each other Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by or is under common control with the Person, and each of that Person’s senior executive officers, directors, partners and, for any Person that is a limited liability company or limited liability partnership, that Person’s managers and members. As used in this definition, “control” means (a) direct or indirect beneficial ownership of at least fifty percent (50%) (or such lesser percentage which is the maximum allowed to be owned by a foreign corporation in a particular jurisdiction) of the voting share capital or other equity interest in a Person or (b) the power to direct or cause the direction of the management of such Person by contract or otherwise. In no event shall Lender be deemed to be an Affiliate of Borrower or any of its Subsidiaries.

“ Agreement ” is defined in the preamble hereof.

“ Anti-Money Laundering Laws ” is defined in Section 4.18(b) .

“ Anti-Terrorism Laws ” means any Anti-Money Laundering Laws or other laws relating to terrorism or money laundering, including Executive Order No. 13224 (effective September 24, 2001), the Patriot Act, the laws comprising or implementing the Bank Secrecy Act, and the laws administered by OFAC.

“ Applicable Accounting Standards ” means with respect to Borrower and its Subsidiaries, generally accepted accounting principles in the United States as set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination, consistently applied.

“ Asset Acquisition ” means, with respect to Borrower or any of its Subsidiaries, any purchase, in-license or other acquisition of any properties or assets of any other Person (including any purchase or other acquisition of any business unit, line of business or division of such Person). For the avoidance of doubt, “Asset Acquisition” includes any co-promotion or co-marketing arrangement pursuant to which Borrower or any Subsidiary acquires rights to promote or market the products of another Person.

“ Bankruptcy Code ” means Title 11 of the United States Code entitled “Bankruptcy,” as now and hereafter in effect, or any successor statute.

“ Blocked Person ” means (a) any Person listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224, (b) a Person fifty percent (50%) or more owned by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224, (c) a Person with which Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law, (d) a Person that commits, threatens or conspires to commit or supports “terrorism” as defined in Executive Order No. 13224, or (e) a Person that is named a “specially designated national” or “blocked person” on the most current list published by OFAC or other similar list.

“ Board of Directors ” means, with respect to any Person, (i) in the case of any corporation, the board of directors of such Person, (ii) in the case of any limited liability company, the board of managers of such Person, or if there is none, the Board of Directors of the managing member of such Person, (iii) in the case of any partnership, the Board of Directors of the general partner of such Person and (iv) in any other case, the functional equivalent of the foregoing.

“ Board of Governors ” means the Board of Governors of the United States Federal Reserve System, or any successor thereto.

“ Books ” means all books and records including ledgers, records regarding a Credit Party’s assets or liabilities, the Collateral, business operations or financial condition, and all computer programs or storage or any equipment containing such information.

“ Borrower ” is defined in the preamble hereof.

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“ Borrowing Resolutions ” means, with respect to any Person, those resolutions adopted by such Person’s Board of Directors and delivered by such Person to Lender pursuant to Section 3.1 approving the Loan Documents to which such Person is a party and the transactions contemplated thereby (including the Term Loan), together with a certificate executed by its Secretary on behalf of such Person certifying that (a) such Person has the authority to execute, deliver, and perform its obligations under each of the Loan Documents to which it is a party, (b) that attached as Exhibit A to such certificate is a true, correct, and complete copy of the resolutions then in full force and effect authorizing and ratifying the execution, delivery, and performance by such Person of the Loan Documents to which it is a party, (c) the name(s) and title(s) of the officers of such Person authorized to execute the Loan Documents to which such Person is a party on behalf of such Person, together with a sample of the true signature(s) of such Person(s), and (d) that Lender may conclusively rely on such certificate with respect to the authority of such officers unless and until such Person shall have delivered to Lender a further certificate canceling or amending such prior certificate.

“ Business Day ” means any day that is not a Saturday or a Sunday or a day on which banks are authorized or required to be closed in New York, New York, London or the Cayman Islands.

“ Capital Lease ” means, as applied to any Person, any lease of any property by that Person as lessee which, in accordance with Applicable Accounting Standards, is required to be accounted for as a capital lease on the balance sheet of that Person.

“ Cash Equivalents ” means

(a) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality of the United States government or by the government of any other member country of O.E.C.D. (provided that the full faith and credit of the United States or such other member country of O.E.C.D., as applicable, is pledged in support of those securities), in each case, having maturities of not more than two (2) years from the date of acquisition;

(b) certificates of deposit, time deposits with maturities of one year or less from the date of acquisition, bankers’ acceptances with maturities not exceeding one year and overnight bank deposits and demand deposits, in each case, with any commercial bank having (i) capital and surplus in excess of $500,000,000 in the case of U.S. banks or (ii) capital and surplus in excess of $100,000,000 (or the U.S. dollar equivalent as of the date of determination) in the case of non-U.S. banks;

(c) commercial paper or marketable short-term money market or readily marketable direct obligations and similar securities having one of the two highest ratings obtainable from Moody’s Investors Services, Inc. or S&P Global Ratings and, in each case, maturing within two (2) years after the date of acquisition;

(d) repurchase obligations with a term of not more than seven (7) days for underlying securities of the types described in clauses (a) and (c) above entered into with any financial institution meeting the qualifications specified in clause (b) above;

(e) investment funds investing ninety-five percent (95.0%) of their assets in securities of the types described in clauses (a) through (d) above and clause (f) below;

(f) investments in money market funds rated “AAA” (or the equivalent thereof) or better by S&P Global Ratings or “Aaa” (or the equivalent thereof) or better by Moody’s Investors Services, Inc. (or, if at any time neither Moody’s Investors Services, Inc. nor S&P Global Ratings shall be rating such obligations, an equivalent rating from another rating agency) and that have portfolio assets of at least $1,000,000,000; and

(g) other investments in accordance with the Borrower’s investment policy as of the Closing Date.

“ Change in Control ” means: (a) a transaction or series of transactions (including any merger or consolidation with Borrower) in which any “person” or “group” (within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such Person or its Subsidiaries, and any Person acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or

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indirectly, of a majority of shares of the then outstanding capital stock of Borrower ordinarily entitled to vote in the election of directors; (b) a sale of all or substantially all of the consolidated assets of Borrower and its Subsidiaries in one transaction or a series of transactions (whether by way of merger, stock purchase, asset purchase or otherwise); or (c) a merger or consolidation involving Borrower in which Borrower is not the surviving Person.

“ Change in Law ” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking into effect of any law, treaty, order, policy, rule or regulation, (b) any change in any law, treaty, order, policy, rule or regulation or in the administration, interpretation or application thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.

“ Closing Date ” means the date on which the Term Loan is advanced by Lender, which, subject to the satisfaction of the conditions precedent to the Term Loan set forth in Section 3.1 , Section 3.2 and Section 3.4 , shall be ten (10) Business Days following the Effective Date (unless otherwise mutually agreed in writing by Borrower and Lender).

“ Code ” means the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the State of New York; provided , that, to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles of the Code, the definition of such term contained in Article 9 of the Code shall govern; provided , further , that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, or priority of, or remedies with respect to, Lender’s Lien in favor and for the benefit of Lender and the other Secured Parties on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the State of New York, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies and for purposes of definitions relating to such provisions.

“ Collateral ” means, collectively, “Collateral” (as such term is defined in the Security Agreement) and all other property of whatever kind and nature subject or purported to be subject from time to time to a Lien under any Collateral Document, but in any event excluding all Excluded Property (as such term is defined in the Security Agreement).

“ Collateral Account ” means any Deposit Account of a Credit Party maintained with a bank or other depository or financial institution located in the United States, any Securities Account of a Credit Party maintained with a securities intermediary located in the United States, or any Commodity Account of a Credit Party maintained with a commodity intermediary located in the United States, in each case, other than an Excluded Account.

“ Collateral Documents ” means the Security Agreement, the Control Agreements, the IP Agreements, any Mortgages and all other instruments, documents and agreements delivered by any Credit Party pursuant to this Agreement or any of the other Loan Documents, in each case, in order to grant to Lender in favor and for the benefit of Lender and the other Secured Parties or perfect a Lien on any Collateral as security for the Obligations, and all amendments, restatements, modifications or supplements thereof or thereto.

“ Commodity Account ” means any “commodity account” as defined in the Code with such additions to such term as may hereafter be made.

“ Company IP ” means any and all of the following, as they exist in and throughout the world: (a) Current Company IP; (b) improvements, continuations, continuations-in-part, divisions, provisionals or any substitute applications, any patent issued with respect to any of the Current Company IP, any reissue, reexamination, renewal or patent term extension or adjustment (including any supplementary protection certificate) of any such patent, and any confirmation patent or registration patent or patent of addition based on any such patent; (c) trade secrets or trade secret rights, including any rights to unpatented inventions, know-how, show-how, operating manuals,

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confidential or proprietary information, research in progress, algorithms, data, databases, data collections, designs, processes, procedures, methods, protocols, materials, formulae, drawings, schematics, blueprints, flow charts, models, strategies, prototypes, techniques, and the results of experimentation and testing, including samples, in each case, as specifically related to any research, development, manufacture, production, use, commercialization, marketing, importing, storage, transport, offer for sale, distribution or sale of the Product in the Territory; (d) any and all IP Ancillary Rights specifically relating to any of the foregoing; and (e) regulatory filings, submissions and approvals related to any research, development, manufacture, production, use, commercialization, marketing, importing, storage, transport, offer for sale, distribution or sale of the Product in the Territory and all data provided in any of the foregoing.

“ Competito r” means, at any time of determination, any Person that is an operating company directly and primarily engaged in the same or substantially the same line of business as Borrower and its Subsidiaries as of such time.

“ Connection Income Taxes ” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

“ Contingent Obligation ” means, for any Person, any direct or indirect liability, contingent or not, of that Person for (a) any indebtedness, lease, dividend, letter of credit or other obligation of another Person directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable; (b) any obligation for undrawn letters of credit for the account of that Person; or (c) any obligation of that Person to pay an earn-out, milestone payment or similar contingent or deferred consideration to a counterparty incurred or created in connection with an Acquisition, Transfer, Investment or other sale or disposition, including, with respect to any purchase price holdback in respect of a portion of the purchase price of an asset sold to that Person to satisfy unperformed obligations of the seller of such asset, any obligation to pay such seller the excess of such holdback over such obligations. The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it reasonably determined by such Person in good faith; but the amount may not exceed the maximum of the obligations under any guarantee or other support arrangement.

“ Control Agreement ” means, with respect to any Credit Party, any control agreement entered into among such Credit Party, Lender and, in the case of a Deposit Account, the bank or other depository or financial institution located in the United States at which such Credit Party maintains such Deposit Account, or, in the case of a Securities Account or a Commodity Account, the securities intermediary or commodity intermediary located in the United States at which such Credit Party maintain such Securities Account or Commodities Account, in either case, pursuant to which Lender obtains control (within the meaning of the Code) over such Collateral Account.

“ Copyrights ” means any and all copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret (and all related IP Ancillary Rights).

“ Credit Extension ” means the Term Loan or any other extension of credit by Lender for Borrower’s benefit pursuant to this Agreement.

“ Credit Party ” means Borrower and each Guarantor.

“ CSA ” is defined in Section 4.19(c) .

“ Current Company IP ” is defined in Section 4.6(c) .

“ Current Company IP Agreement ” means each of: (a) the Exclusive License Agreement, dated as of April 4, 2019, between Borrower and Shionogi Inc. (the “ Symproic License Agreement ”); (b) the Transition Services and Distribution Agreement between Borrower and Shionogi Inc. and effective as of April 4, 2019, (c) the Supply Agreement between Borrower and Shionogi Inc. effective as of April 4, 2019 (the “ Supply Agreement ”), (d) the Quality Agreement between Borrower and Shionogi Inc. described in the Supply Agreement, and (e) the PVG Agreement between Borrower and Shionogi Inc. contemplated in Section 5.3 of the Symproic License Agreement.

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“ Data Protection Laws ” means any and all current or future, foreign or domestic, statutes, ordinances, orders, rules, regulations, judgments, Governmental Approvals, or any other requirements of Governmental Authorities relating to the privacy, security, or confidentiality of personal data (including individually identifiable information) and other sensitive information, including HIPAA and Section 5 of the Federal Trade Commission Act (15 U.S.C. § 45).

“ DEA ” means the United States Drug Enforcement Administration.

“ DEA Laws ” means all applicable statutes, including the CSA, rules, regulations and orders implemented, administered, enforced or issued by DEA (and any foreign or United States state equivalent).

“ Default ” means any breach of or default under any term, provision, condition, covenant or agreement contained in this Agreement or any other Loan Document or any other event, in each case that, with the giving of notice or the lapse of time or both, would constitute an Event of Default.

“ Deposit Account ” means any “deposit account” as defined in the Code with such additions to such term as may hereafter be made.

“ Disclosure Letter ” means the disclosure letter, dated as of the Effective Date, delivered by the Credit Parties to Lender, as updated on the Closing Date (if required).

“ Dollars ,” “ dollars ” or use of the sign “ $ ” means only lawful money of the United States and not any other currency, regardless of whether that currency uses the “$” sign to denote its currency or may be readily converted into lawful money of the United States.

“ Effective Date ” is defined in the preamble hereof.

“ Eligible Transferee ” means and includes a commercial bank, an insurance company, a finance company, a financial institution, any investment fund that invests in loans or any other institutional “accredited investor” (as defined in Regulation D of the Securities Act) that is principally in the business of managing investments or holding assets for investment purposes; provided , that any such Eligible Transferee (other than any Affiliate of BioPharma Credit PLC) shall (i) have assets under management of no less than $1,000,000,000, (ii) have a rating of BBB or higher from S&P Global Ratings and a rating of Baa2 or higher from Moody’s Investors Services, Inc. at the date it becomes a Lender and (iii) shall be capable of fulfilling of the assigning Lender’s obligations (including funding obligations with respect to the Tranche B Loan, if applicable) hereunder.

“ Environmental Claim ” means any investigation, notice, notice of violation, claim, action, suit, proceeding, demand, abatement order or other order or directive (conditional or otherwise), by any Governmental Authority or any other Person, arising (i) pursuant to or in connection with any actual or alleged violation of any Environmental Law; (ii) in connection with any Hazardous Material or any actual or alleged Hazardous Materials Activity; or (iii) in connection with any actual or alleged damage, injury, threat or harm to health, safety, natural resources or the environment.

“ Environmental Laws ” means any and all current or future, foreign or domestic, statutes, ordinances, orders, rules, regulations, judgments, Governmental Approvals, or any other requirements of Governmental Authorities relating to (i) environmental matters, including those relating to any Hazardous Materials Activity; (ii) the generation, use, storage, transportation or disposal of Hazardous Materials; or (iii) occupational safety and health, industrial hygiene, land use or the protection of human, plant or animal health or welfare, in each case, in any manner applicable to any Credit Party or any of its Subsidiaries or any Facility.

“ Equity Interests ” means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in such Person (other than a corporation), including partnership interests and membership interests, and any and all warrants, rights or options to purchase or other arrangements or rights to acquire (by purchase, conversion, dividend, distribution or otherwise) any of the foregoing (and all other rights, powers, privileges, interests, claims and other property in any manner arising therefrom or relating thereto).

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“ ERISA ” means the Employee Retirement Income Security Act of 1974, and its regulations.

“ ERISA Affiliate ” means, with respect to any Person, any trade or business (whether or not incorporated) that, together with such Person, is treated as a single employer under Section 414 of the IRC.

“ ERISA Event ” means (a) any “reportable event,” as defined in Section 4043 of ERISA or the regulations issued thereunder, with respect to a Plan (other than an event for which the 30-day notice period is waived by regulation); (b) with respect to a Plan, the failure to satisfy the minimum funding standard of Section 412 of the IRC and Section 302 of ERISA, whether or not waived; (c) the failure to make by its due date a required installment under Section 430(j) of the IRC (or Section 430(j) of the IRC, as amended by the Pension Protection Act of 2006) with respect to any Plan or the failure to make any required contribution to a Multiemployer Plan; (d) the filing pursuant to Section 412(c) of the IRC or Section 303(d) of ERISA (or after the effective date of the Pension Protection Act of 2006, Section 412(c) of the IRC and Section 302(c) of ERISA) of an application for a waiver of the minimum funding standard with respect to any Plan; (e) the incurrence by Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (f) the receipt by Borrower or its Subsidiaries or any of their respective ERISA Affiliates from the Pension Benefit Guaranty Corporation (referred to and defined in ERISA) or a plan administrator of any notice relating to the intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan, or the occurrence of any event or condition which would reasonably be expected to constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Plan; (g) the incurrence by Borrower or its Subsidiaries or any of their respective ERISA Affiliates of any liability with respect to the withdrawal from any Plan or Multiemployer Plan; (h) the receipt by Borrower or its Subsidiaries or any of their respective ERISA Affiliates of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA; (i) the “substantial cessation of operations” within the meaning of Section 4062(e) of ERISA with respect to a Plan; (j) the making of any amendment to any Plan which would result in the imposition of a lien or the posting of a bond or other security; and (k) the occurrence of a nonexempt prohibited transaction (within the meaning of Section 4975 of the IRC or Section 406 of ERISA) which would reasonably be expected to result in material liability to Borrower or its Subsidiaries.

“ Event of Default ” is defined in Section 7 .

“ Exchange Act ” means the Securities Exchange Act of 1934.

“ Exchange Act Documents ” is defined in Section 4.8(a) .

“ Excluded Accounts ” is defined in Section 5.5 .

“ Excluded Equity Interests ” means, collectively: (i) any Equity Interests of any Subsidiary with respect to which the grant to Lender in favor and for the benefit of Lender and the other Secured Parties of a security interest in and Lien upon, and the pledge to Lender in favor and for the benefit of Lender and the other Secured Parties of, such Equity Interests, to secure the Obligations (and any guaranty thereof) are validly prohibited by Requirements of Law; (ii) any Equity Interests of any Subsidiary with respect to which the grant to Lender in favor and for the benefit of Lender and the other Secured Parties of a security interest in and Lien upon, and the pledge to Lender in favor and for the benefit of Lender and the other Secured Parties of, such Equity Interests, to secure the Obligations (and any guaranty thereof) require the consent, approval or waiver of any Governmental Authority or other third party and such consent, approval or waiver has not been obtained by Borrower following Borrower’s commercially reasonable efforts to obtain the same; (iii) any Equity Interests of any Subsidiary that is a non-Wholly-Owned Subsidiary that the grant to Lender in favor and for the benefit of Lender and the other Secured Parties of a security interest in and Lien upon, and the pledge to Lender of, such Equity Interests, to secure the Obligations (and any guaranty thereof) are validly prohibited by, or would give any third party (other than Borrower or an Affiliate of Borrower) the right to terminate its obligations under, the Operating Documents or the joint venture agreement or shareholder agreement with respect to, or any other contract with such third party relating to such non-Wholly-Owned Subsidiary, including any contract evidencing Indebtedness of such non-Wholly-Owned Subsidiary (other than customary non-assignment provisions which are ineffective under Article 9 of the Code or other Requirements of Law), but only, in each case, to the extent, and for so long as such Operating Document, joint venture agreement, shareholder agreement or other contract is in effect; and (iv) any Equity Interests of any other Subsidiary with respect to which, Borrower and Lender reasonably determine by mutual agreement that the cost of granting Lender in favor and for the benefit of

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Lender and the other Secured Parties a security interest, in and Lien upon, and pledging to Lender in favor and for the benefit of Lender and the other Secured Parties, such Equity Interests, to secure the Obligations (and any guaranty thereof) are excessive, relative to the value to be afforded to the Secured Parties thereby.

“ Excluded Subsidiaries ” means, collectively: (i) any Subsidiary with respect to which the grant to Lender in favor and for the benefit of Lender and the other Secured Parties of a security interest in and Lien upon, and the pledge to Lender in favor and for the benefit of Lender and the other Secured Parties of, such Subsidiary’s properties and assets subject or purported to be subject from time to time to a Lien under any Collateral Document and the Equity Interests of such Subsidiary to secure the Obligations (and any guaranty thereof) are validly prohibited by Requirements of Law; (ii) any Subsidiary with respect to which the grant to Lender in favor and for the benefit of Lender and the other Secured Parties of a security interest in and Lien upon, and the pledge to Lender in favor and for the benefit of Lender and the other Secured Parties of, such Subsidiary’s properties and assets subject or purported to be subject from time to time to a Lien under any Collateral Document and the Equity Interests of such Subsidiary to secure the Obligations (and any guaranty thereof) require the consent, approval or waiver of any Governmental Authority or other third party (other than Borrower or an Affiliate of Borrower) and such consent, approval or waiver has not been obtained by Borrower or such Subsidiary following Borrower’s and such Subsidiary’s commercially reasonable efforts to obtain the same; (iii) any Subsidiary that is a non-Wholly-Owned Subsidiary, with respect to which, the grant to Lender in favor and for the benefit of Lender and the other Secured Parties of a security interest in and Lien upon, and the pledge to Lender of, the properties and assets of such non-Wholly-Owned Subsidiary, to secure the Obligations (and any guaranty thereof) are validly prohibited by, or would give any third party (other than Borrower or an Affiliate of Borrower) the right to terminate its obligations under, such non-Wholly-Owned Subsidiary’s Operating Documents or the joint venture agreement or shareholder agreement with respect thereto or any other contract with such third party relating to such non-Wholly-Owned Subsidiary, including any contract evidencing Indebtedness of such non-Wholly-Owned Subsidiary (other than customary non-assignment provisions which are ineffective under Article 9 of the Code or other Requirements of Law), but only, in each case, to the extent, and for so long as such Operating Document, joint venture agreement, shareholder agreement or other contract is in effect; (iv) any Subsidiary that owns properties and assets with an aggregate fair market value (reasonably determined in good faith by a Responsible Officer of Borrower) of less than ***; (v) any other Subsidiary with respect to which, Borrower and Lender reasonably determine by mutual agreement that the cost of granting Lender in favor and for the benefit of Lender and the other Secured Parties a security interest in and Lien upon, and pledging to Lender in favor and for the benefit of Lender and the other Secured Parties, such Subsidiary’s properties and assets subject or purported to be subject from time to time to a Lien under any Collateral Document and the Equity Interests of such Subsidiary to secure the Obligations (and any guaranty thereof) are excessive relative to the value to be afforded to the Secured Parties thereby; and (vi) Bioral Nutrient Delivery, LLC, a Delaware limited liability company, so long as such entity is dissolved, liquidated and terminated on or prior to June 30, 2019.

“ Excluded Taxes ” means any of the following Taxes imposed on or with respect to Lender or required to be withheld or deducted from a payment to Lender, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed by the United States or as a result of Lender being organized under the laws of, or having its principal office or its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) U.S. federal withholding Taxes imposed on amounts payable to or for the account of Lender with respect to any Obligation pursuant to a law in effect on the date on which (i) Lender acquires such interest in any Obligation or (ii) Lender changes its lending office, except in each case to the extent that, pursuant to Section 2.6 , amounts with respect to such Taxes were payable either to Lender’s assignor immediately before Lender became a party hereto or to Lender immediately before it changed its lending office, (c) Taxes attributable to Lender’s failure to comply with Section 2.6(d), and (d) any U.S. federal withholding Taxes imposed under FATCA.

“ Existing CRG Credit Agreement ” means, collectively, that certain Term Loan Agreement, dated as of February 21, 2017, by and among Borrower, the other Credit Parties party thereto, CRG Servicing LLC, as administrative agent and collateral agent, and the lenders party thereto, as amended on December 15, 2017 and as further amended on May 16, 2018, April 4, 2019 and April 25, 2019, together with each other Loan Document (as such term is defined in the Existing CRG Credit Agreement).

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“ Facility ” means, with respect to any Credit Party, any real property (including all buildings, fixtures or other improvements located thereon) now, hereafter or heretofore owned, leased, operated or used by such Credit Party or any of its Subsidiaries or any of their respective predecessors or Affiliates.

“ FATCA ” means Sections 1471 through 1474 of the IRC, as of the date of this Agreement (including, for the avoidance of doubt, any agreements between the governments of the United States and the jurisdiction in which the applicable Lender is resident implementing such provisions), or any amended or successor version that is substantively comparable and not materially more onerous to comply with, and any current or future regulations promulgated thereunder or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(i) of the IRC, any intergovernmental agreement entered into in connection with the implementation of the foregoing sections of the IRC and any fiscal or regulatory legislation, regulations, rules or practices adopted pursuant to, or official interpretations implementing such, intergovernmental agreements.

“ FCPA ” is defined in Section 4.18(a) .

“ FDA ” means the United States Food and Drug Administration (and any foreign equivalent, including the European Agency for the Evaluation of Medicinal Products).

“ FDA Good Manufacturing Practices ” means the standards set forth in 21 C.F.R. Parts 210, 211 and 600 (and any foreign equivalents) and FDA’s implementing guidance documents.

“ FDA Good Clinical Practices ” means the standards set forth in 21 C.F.R. Parts 50, 56, 312, and 314 (and any foreign equivalents) and FDA’s implementing guidance documents.

“ FDA Good Laboratory Practices ” means the standards set forth in 21 C.F.R. Part 58 (and any foreign equivalents) and FDA’s implementing guidance documents.

“ FDA Laws ” means all applicable statutes, including the FDCA, rules, regulations and orders implemented, administered, enforced or issued by FDA (and any foreign equivalent).

“ FDCA ” is defined in Section 4.19(b) .

“ Federal Reserve Board ” means the Board of Governors of the Federal Reserve System.

“ Foreign Lender ” means a Lender that is not a “United States person” as defined in Section 7701(a)(30) of the IRC.

“ Governmental Approval ” means any consent, authorization, approval, order, license, franchise, permit, certificate, accreditation, registration, filing or notice, of, issued by, from or to, or other act by or in respect of, any Governmental Authority.

“ Governmental Authority ” means any nation or government, any state or other political subdivision thereof, any agency (including Regulatory Agencies), government department, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization.

“ Governmental Payor Programs ” means all governmental third party payor programs in which any Credit Party or its Subsidiaries participates, including Medicare, Medicaid, TRICARE or any other federal or state health care programs.

“ Guarantor ” means any Subsidiary that is a present or future guarantor of the Obligations.

“ Hazardous Materials ” means any chemical, material or substance, exposure to which is prohibited, limited or regulated by any Governmental Authority or which may or could pose a hazard to the health and safety of the owners, occupants or any Persons in the vicinity of any Facility or to the indoor or outdoor environment.

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“ Hazardous Materials Activity ” means any past, current, proposed or threatened activity, event or occurrence involving any Hazardous Materials, including the use, manufacture, possession, storage, holding, presence, existence, location, Release, threatened Release, discharge, placement, generation, transportation, processing, construction, treatment, abatement, removal, remediation, disposal, disposition or handling of any Hazardous Materials, and any corrective action or response action with respect to any of the foregoing.

“ Health Care Laws ” means, collectively: (a) applicable federal, state or local laws, rules, regulations, orders, ordinances, statutes and requirements issued under or in connection with Medicare, Medicaid or any other Government Payor Program; (b) applicable federal and state laws and regulations governing the confidentiality of health information, including HIPAA; (c) accreditation standards and requirements of applicable state laws or regulatory bodies; (d) applicable federal, state and local fraud and abuse laws of any Governmental Authority, including the federal Anti-Kickback Statute (42 U.S.C. § 1320a-7(b)), the civil False Claims Act (31 U.S.C. § 3729 et seq.), Sections 1320a-7 and 1320a-7a of Title 42 of the United States Code and the regulations promulgated pursuant to such statutes; (e) the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. No. 108-173) and the regulations promulgated thereunder; (f) the Physician Payment Sunshine Act (42 U.S.C. § 1320a-7h); (g) all reporting and disclosure requirements under the Medicaid Drug Rebate Program (e.g., Monthly and Quarterly Average Manufacturer Price, Baseline Average Manufacturer Price, and Rebate Per Unit, as applicable), Medicare Part B (Quarterly Average Sales Price), Section 602 of the Veteran’s Health Care Act (Public Health Service 340B Quarterly Ceiling Price), Section 603 of the Veteran’s Health Care Act (Quarterly and Annual Non-Federal Average Manufacturer Price and Federal Ceiling Price), Best Price, Federal Supply Schedule Contract Prices and Tricare Retail Pharmacy Refunds, and Medicare Part D; (h) applicable health care laws, rules, codes, statutes, regulations, manuals, orders, ordinances, policies, and requirements pertaining to Medicare or Medicaid; in each case, in any manner applicable to any Credit Party or any of its Subsidiaries; (i) applicable federal, state or local laws, rules, regulations, ordinances, statutes and requirements relating to (A) the regulation of managed care, third party payors and Persons bearing the financial risk for the provision or arrangement of health care services, (B) billings to insurance companies, health maintenance organizations and other Managed Care Plans or otherwise relating to insurance fraud, and (C) any insurance, health maintenance organization or managed care Requirements of Law; and (j) any other applicable health care laws, rules, codes, regulations, manuals, orders, ordinances, statutes, or requirements.

“ Hedging Agreement ” means any interest rate, currency, commodity or equity swap, collar, cap, floor or forward rate agreement, or other agreement or arrangement designed to protect a Person against fluctuations in interest rates, currency exchange rates or commodity or equity prices or values (including any option with respect to any of the foregoing and any combination of the foregoing agreements or arrangements), and any confirmation execution in connection with any such agreement or arrangement.

“ HIPAA ” means the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act (HITECH) of 2009, any and all rules or regulations promulgated from time to time thereunder, and any state or federal laws with regard to the security, privacy, or notification of breaches of the confidentiality of health information which are not preempted pursuant to 45 C.F.R. Part 160, Subpart B.

“ Indebtedness ” means, with respect to any Person, without duplication: (a) all indebtedness for advanced or borrowed money of, or credit extended to, such Person; (b) all obligations issued, undertaken or assumed by such Person as the deferred purchase price of assets, properties, services or rights (other than (i) accrued expenses and trade payables entered into in the ordinary course of business consistent with past practice which are not more than *** past due or subject to a bona fide dispute, (ii) obligations to pay for services provided by employees and individual independent contractors in the ordinary course of business consistent with past practice which are not more than *** past due or subject to a bona fide dispute, (iii) liabilities associated with customer prepayments and deposits and (iv) prepaid or deferred revenue arising in the ordinary course of business consistent with past practice), including any obligation or liability to pay deferred or contingent purchase price or other consideration for such assets, properties, services or rights; (c) the face amount of all letters of credit issued for the account of such Person and, without duplication, all drafts drawn thereunder and all reimbursement or payment obligations with respect to letters of credit, surety bonds, performance bonds and other similar instruments issued by such Person; (d) all obligations of such Person evidenced by notes, bonds, debentures or other debt securities or similar instruments (including debt securities convertible into Equity Interests), including obligations so evidenced incurred in connection with the acquisition of properties, assets or businesses; (e) all indebtedness of such Person created or

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arising under any conditional sale or other title retention agreement or incurred as financing, in either case with respect to property acquired by such Person (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property); (f) all capital lease obligations of such Person; (g) the principal balance outstanding under any synthetic lease, off-balance sheet loan or similar off balance sheet financing product by such Person; (h) all obligations of such Person, whether or not contingent, to purchase, redeem, retire, defease or otherwise acquire for value any of its own Equity Interests (or any Equity Interests of a direct or indirect parent entity thereof) prior to the date that is *** after the Term Loan Maturity Date, valued at, in the case of redeemable preferred Equity Interests, the greater of the voluntary liquidation preference and the involuntary liquidation preference of such Equity Interests plus accrued and unpaid dividends; (i) all indebtedness referred to in clauses (a) through (h) above of other Persons secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in assets or properties (including accounts and contracts rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such indebtedness of such other Persons; and (j) all Contingent Obligations of such Person.

“ Indemnified Liabilities ” means, collectively, any and all liabilities, obligations, losses, damages (including natural resource damages), penalties, claims, actions, judgments, suits, costs, reasonable and documented out-of-pocket expenses and disbursements of any kind or nature whatsoever (including the reasonable and documented fees and disbursements of one counsel for Indemnified Persons plus, if required, one local legal counsel in each relevant material jurisdiction, and in the case of an actual or perceived conflict of interest, one additional counsel for such affected Indemnified Persons, in connection with any investigative, administrative or judicial proceeding or hearing commenced or threatened in writing by any Person, whether or not any such Indemnified Person shall have commenced such proceeding or hearing or be designated as a party or a potential party thereto, and any fees or expenses incurred by Indemnified Persons in enforcing the indemnity hereunder), whether direct, indirect or consequential and whether based on any federal, state or foreign laws, statutes, rules or regulations, on common law or equitable cause or on contract or otherwise, that may be imposed on, incurred by, or asserted against any such Indemnified Person, in any manner relating to or arising out of this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby (including Lender’s agreement to make Credit Extensions or the use or intended use of the proceeds thereof, or any enforcement of any of the Loan Documents (including any sale of, collection from, or other realization upon any of the Collateral or the enforcement of any guaranty of the Obligations)).

“ Indemnified Person ” is defined in Section 11.2(a) .

“ Indemnified Taxes ” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Credit Party under any Loan Document and (b) to the extent not otherwise described in clause (a) above, Other Taxes.

“ Insolvency Proceeding ” means, with respect to any Person, any proceeding by or against such Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.

“ Intellectual Property ” means all:

(a) Copyrights, Trademarks, and Patents;

(b) trade secrets and trade secret rights, including any rights to unpatented inventions, know-how, show-how and operating manuals;

(c) (i) all computer programs, including source code and object code versions, (ii) all data, databases and compilations of data, whether machine readable or otherwise, and (iii) all documentation, training materials and configurations related to any of the foregoing (collectively, “ Software ”);

(d) all right, title and interest arising under any contract or Requirements of Law in or relating to Internet domain names;

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(e) design rights;

(f) IP Ancillary Rights (including all IP Ancillary Rights related to any of the foregoing); and

(g) any similar or equivalent rights to any of the foregoing anywhere in the world.

“ Interest Date ” means the last day of each calendar quarter.

“ Interest Period ” means, with respect to the Term Loan, (a) the period commencing on (and including) the applicable borrowing date of the Term Loan and ending on (and including) the first Interest Date following such Borrowing, provided , that if such Interest Date is not a Business Day, the applicable Interest Period shall end on the first Business Day immediately preceding such Interest Date, and (b) thereafter, each period beginning on (and including) the first day following the end of the preceding Interest Period and ending on the earlier of (and including) (x) the next Interest Date, provided , that if any such last day is not a Business Day, the applicable Interest Period shall end on the first Business Day immediately preceding such Interest Date, (y) the next Payment Date, provided , that if any such day is not a Business Day, the applicable Interest Period shall end on the first Business Day immediately preceding such Payment Date and (z) the Term Loan Maturity Date. For the avoidance of doubt, if an Interest Period ends on a Payment Date, the next Interest Period shall commence on (and include) the first day following such Payment Date and shall end on (and include) the earlier of the next Interest Date, the next Payment Date or the Term Loan Maturity Date, as described above.

“ Interest Rate Determination Date ” means (a) initially, the Closing Date and (b) thereafter, the first day of each Interest Period (or, if any such day is not a Business Day, the first Business Day immediately following such day).

“ Internet Domain Name ” means all right, title and interest (and all related IP Ancillary Rights) arising under any contract or Requirements of Law in or relating to Internet domain names.

“ Inventory ” means all “inventory” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products, including such inventory as is temporarily out of a Credit Party’s or Subsidiary’s custody or possession or in transit and including any returned goods and any documents of title representing any of the above.

“ Investment ” means (a) any beneficial ownership interest in any Person (including Equity Interests), (b) any Acquisition or (c) the making of any advance, loan, extension of credit or capital contribution in or to, any Person.

“ IP Agreements ” means, collectively, (a) those certain Intellectual Property Security Agreements entered into by and between Borrower and Lender, each dated as of the Tranche A Closing Date, and (b) any Intellectual Property Security Agreement entered into by and between Borrower and Lender after the Tranche A Closing Date in accordance with the Loan Documents.

“ IP Ancillary Rights ” means, with respect to any Copyright, Trademark, Patent, Software, trade secrets or trade secret rights, including any rights to unpatented inventions, know-how, show-how and operating manuals, all income, royalties, proceeds and liabilities at any time due or payable or asserted under or with respect to any of the foregoing or otherwise with respect thereto, including all rights to sue or recover at law or in equity for any past, present or future infringement, misappropriation, dilution, violation or other impairment thereof, and, in each case, all rights to obtain any other intellectual property right ancillary to any Copyright, Trademark, Patent, Software, trade secrets or trade secret rights.

“ IRC ” means the Internal Revenue Code of 1986, as amended.

“ IRS ” is defined in Section 2.6(d)(ii)(1) .

“ Knowledge ” of Borrower means the actual knowledge, after reasonable investigation, of the Responsible Officers of Borrower or such other Credit Party, as the context dictates.

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“ Lender ” means each Person signatory hereto as a “Lender” and its successors and assigns.

“ Lender Expenses ” means (i) all reasonable and documented out-of-pocket fees and expenses of Lender and its Related Parties for developing, preparing, amending, modifying, negotiating, executing and delivering, and administering the Loan Documents or any other document prepared in connection therewith or the consummation and administration of any transaction contemplated therein or otherwise incurred with respect to the Credit Parties in connection with the Loan Documents, including any filing or recording fees and expenses (including the reasonable and documented out-of-pocket fees and expenses of primary legal counsel to Lender and its Related Parties (taken as a whole) (plus, if required, local legal counsel to Lender and its Related Parties (taken as a whole) in each relevant material jurisdiction)), and (ii) all reasonable and documented out-of-pocket costs and expenses incurred by Lender and its Related Parties (including the reasonable and documented out-of-pocket fees and expenses of primary legal counsel for Lender and its Related Parties (taken as a whole), and of local legal counsel to Lender and its Related Parties (taken as a whole) in each relevant material jurisdiction (and, in the case of an actual or perceived conflict of interest where the party affected by such conflict informs the Borrower of such conflict and thereafter retains its own legal counsel, of one additional primary firm of counsel for all such affected parties (taken as a whole) and one additional firm of local counsel for all such affected parties (taken as a whole) in each relevant material jurisdiction)), in connection with (A) any refinancing or restructuring of the credit arrangements provided hereunder in the nature of a “work-out”, (B) the enforcement or preservation of any right or remedy under any Loan Document, any Obligation, with respect to the Collateral or any other related right or remedy or (C) the commencement, defense, conduct of, intervention in, or the taking of any other action with respect to, any proceeding (including any Insolvency Proceeding) related to any Credit Party, any Subsidiary of any Credit Party, Loan Document or Obligation (or the response to and preparation for any subpoena or request for document production relating thereto).

“ Lender Transfer ” is defined in Section 11.1(b) .

“ LIBOR Rate ” means, as of any Interest Rate Determination Date and for any Interest Period, the rate per annum equal to (a) the rate of interest appearing via a Bloomberg Terminal on Page US003M Index of the Bloomberg Financial Markets Information System (or any successor page) for three-month Dollar deposits or (b) if no such rate is available via a Bloomberg Terminal, the rate of interest determined by Lender to be the rate or the arithmetic mean of rates at which Dollar deposits in immediately available funds are offered to first-tier banks in the London interbank Eurodollar market, in each case under clause (a) or (b) above at approximately 11:00 a.m., London time, on such Interest Rate Determination Date for a period of three (3) months; provided , however , that, for purposes of calculating the Term Loan Rate, the LIBOR Rate shall at all times have a floor of two percent (2.00%); provided , further , that, for purposes of calculating the Term Loan Rate, the LIBOR Rate shall at all times be subject to a cap equal to the sum of (i) 1.50%, plus (ii) the LIBOR Rate on the Tranche A Closing Date.

“ Lien ” means a claim, mortgage, deed of trust, levy, charge, pledge, security interest or other encumbrance of any kind or assignment for security purposes, whether voluntarily incurred or arising by operation of law or otherwise against any property or assets.

“ Loan Documents ” means, collectively, this Agreement, the Disclosure Letter, the Term Loan Note, the Security Agreement, the IP Agreements, the Perfection Certificates, any Control Agreement, any other Collateral Document, any guaranties executed by a Guarantor in favor of Lender in connection with this Agreement, and any other present or future agreement between or among a Credit Party and Lender in connection with this Agreement, including in each case, for the avoidance of doubt, any annexes, exhibits or schedules thereto.

“ Makewhole Amount ” means the Tranche A Makewhole Amount or the Tranche B Makewhole Amount (as applicable) or both of the Tranche A Makewhole Amount and the Tranche B Makewhole Amount, as the context dictates.

“ Managed Care Plans ” means all health maintenance organizations, preferred provider organizations, individual practice associations, competitive medical plans and similar arrangements.

“ Margin Stock ” means “margin stock” within the meaning of Regulations U and X of the Federal Reserve Board as now and from time to time hereafter in effect.

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“ Material Adverse Change ” means any material adverse change in or effect on: (i) the business, financial condition, properties or assets (including all or any portion of Collateral), liabilities (actual or contingent), operations, or performance of the Credit Parties, taken as a whole, since December 31, 2018; (ii) without limiting the generality of clause (i) above, the rights of the Credit Parties, taken as a whole, in or related to the research, development, manufacture, production, use, commercialization, marketing, importing, storage, transport, offer for sale, distribution or sale of the Product in the Territory; (iii) the ability of the Credit Parties, taken as a whole, to fulfill the payment or performance obligations under this Agreement or any other Loan Document; or (iv) the binding nature or validity of, or the ability of Lender to enforce, the Loan Documents or any of its rights or remedies under the Loan Documents.

“ Material Contract ” means any contract or other arrangement to which any Credit Party or any of its Subsidiaries is a party (other than the Loan Documents) or by which any of its assets or properties are bound, in each case, relating to the research, development, manufacture, production, use, commercialization, marketing, importing, storage, transport, offer for sale, distribution or sale of the Product in the Territory, for which the breach of, default or nonperformance under, cancellation or termination of or the failure to renew could reasonably be expected to result in a Material Adverse Change. For the avoidance of doubt, each Current Company IP Agreement is a Material Contract.

“ Medicaid ” means, collectively, the health care assistance program established by Title XIX of the SSA (42 U.S.C. 1396 et seq.) and all laws, rules, regulations, manuals, orders, or requirements pertaining to such program, including (a) all federal statutes affecting such program; (b) all state statutes and plans for medical assistance enacted in connection with such program and federal rules and regulations promulgated in connection with such program; and (c) all applicable provisions of all rules, regulations, manuals, orders and administrative, reimbursement, and requirements of all Government Authorities promulgated in connection with such program (whether or not having the force of law).

“ Medicare ” means, collectively, the health insurance program for the aged and disabled established by Title XVIII of the SSA (42 U.S.C. 1395 et seq.) and all laws, rules, regulations, manuals, or orders pertaining to such program including (a) all federal statutes (whether set forth in Title XVIII of the SSA or elsewhere) affecting such program; and (b) all applicable provisions of all rules, regulations, manuals, orders and administrative, reimbursement and requirements of all Governmental Authorities promulgated in connection with such program (whether or not having the force of law).

“ Mortgage ” means any deed of trust, leasehold deed of trust, mortgage, leasehold mortgage, deed to secure debt, leasehold deed to secure debt or other document creating a Lien on real estate or any interest in real estate.

“ Multiemployer Plan ” means a multiemployer plan within the meaning of Section 4001(a)(3) or Section 3(37) of ERISA (a) to which Borrower or its Subsidiaries or their respective ERISA Affiliates is then making or accruing an obligation to make contributions; (b) to which Borrower or its Subsidiaries or their respective ERISA Affiliates has within the preceding five (5) plan years made contributions; or (c) with respect to which Borrower or its Subsidiaries could incur material liability.

“ Net Sales ” means, solely with respect to sales of BELBUCA ^® as of any date of determination, the “net sales” (or substantially similar term) of Borrower and its Subsidiaries of such Product for the period in question occurring either prior to or after such date, as the context dictates, determined on a consolidated basis in accordance with Applicable Accounting Standards as set forth in Borrower’s financial statements or as otherwise evidenced in a manner reasonably satisfactory to Lender.

“ Net Sales Threshold ” is defined in Section 6.15 .

“ Obligations ” means, collectively, the Credit Parties’ obligations to pay when due any and all debts, principal, interest, Lender Expenses, the Additional Consideration, the Makewhole Amount, the Prepayment Premium and any other fees, expenses, indemnities and amounts any Credit Party owes Lender now or later, under this Agreement or any other Loan Document, including interest accruing after Insolvency Proceedings begin (whether or not allowed), and to perform Borrower’s duties under the Loan Documents.

“ OFAC ” is defined in Section 4.18(c) .

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“ OFAC Lists ” means, collectively, the Specially Designated Nationals and Blocked Persons List maintained by OFAC pursuant to Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001) or any other list of terrorists or other restricted Persons maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable Executive Orders.

“ Operating Documents ” means, collectively with respect to any Person such Person’s formation documents as certified with the Secretary of State or other applicable Governmental Authority of such Person’s jurisdiction of formation on a date that is no earlier than thirty (30) days prior to the date on which such documents are due to be delivered under this Agreement and, (a) if such Person is a corporation, its bylaws (or similar organizational regulations) in current form, (b) if such Person is a limited liability company, its limited liability company agreement (or similar agreement), and (c) if such Person is a partnership, its partnership agreement (or similar agreement), in each case, with all current amendments, restatements, supplements or modifications thereto.

“ ordinary course of business ” means, in respect of any transaction involving any Person, the ordinary course of such Person’s business, undertaken by such Person in good faith and not for purposes of evading any covenant, prepayment obligation or restriction in any Loan Document.

“ Other Connection Taxes ” means, with respect to Lender, Taxes imposed as a result of a present or former connection (including present or former connection of its agents) between Lender and the jurisdiction imposing such Tax (other than connections arising solely from Lender having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document).

“ Other Taxes ” means all present or future stamp, court or documentary, intangible, recording, filing, mortgage or property Taxes, charges or similar levies or similar Taxes that arise from any payment made hereunder, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment.

“ Participant Register ” is defined in Section 11.1(d) .

“ Patents ” means all patents and patent applications (including any improvements, continuations, continuations-in-part, divisions, provisionals or any substitute applications), any patent issued with respect to any of the foregoing patent applications, any reissue, reexamination, renewal or patent term extension or adjustment (including any supplementary protection certificate) of any such patent, and any confirmation patent or registration patent or patent of addition based on any such patent, and all foreign counterparts of any of the foregoing. For the avoidance of doubt, patents and patent applications under this definition include all those filed with the U.S. Patent and Trademark Office.

“ Patriot Act ” is defined in Section 3.1(i) .

“ Payment/Advance Form ” means that certain form attached hereto as Exhibit A .

“ Payment Date ” means each of the date that is (a) the 36 ^th -month anniversary of the Tranche A Closing Date, (b) the 39 ^th -month anniversary of the Tranche A Closing Date, (c) the 42 ^nd -month anniversary of the Tranche A Closing Date, (d) the 45 ^th -month anniversary of the Tranche A Closing Date, (e) 48 ^th -month anniversary of the Tranche A Closing Date, (f) the 51 ^st -month anniversary of the Tranche A Closing Date, (g) the 54 ^th -month anniversary of the Tranche A Closing Date, (h) the 57 ^th -month anniversary of the Tranche A Closing Date, (i) the 60 ^th -month anniversary of the Tranche A Closing Date, (j) the 63 ^rd -month anniversary of the Tranche A Closing Date, (k) the 66 ^th -month anniversary of the Tranche A Closing Date, (l) the 69 ^th -month anniversary of the Closing Date and (m) the Term Loan Maturity Date, as the context dictates.

“ Perfection Certificate ” is defined in Section 4.6 .

“ Permitted Acquisition ” means any Acquisition, so long as:

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(a) no Default or Event of Default shall have occurred and be continuing as of, or could reasonably be expected to result from, the consummation of such Acquisition;

(b) the properties or assets being acquired or licensed, or the Person whose Equity Interests are being acquired, are useful in or engaged in, as applicable, (i) the same or a related line of business as that then-conducted by Borrower or its Subsidiaries, or (ii) a line of business that is ancillary to and in furtherance of a line of business as that then-conducted by Borrower or its Subsidiaries;

(c) in the case of an Asset Acquisition, the subject assets are being acquired or licensed by a Credit Party, and such Credit Party shall have executed and delivered or authorized, as applicable, any and all security agreements, financing statements, fixture filings, and other documentation reasonably requested by Lender (if any), in order to include the newly acquired or licensed assets within the Collateral, as applicable, to the extent required by Section 5.12 ;

(d) in the case of a Stock Acquisition, the subject Equity Interests are being acquired in such Acquisition directly by a Credit Party, and such Credit Party shall have complied with its obligations under Section 5.13 ; and

(e) any Indebtedness or Liens assumed in connection with such Acquisition are otherwise permitted under Section 6.4 or 6.5 , respectively.

“ Permitted Distributions ” means, in each case subject to Section 6.8 if applicable:

(a) dividends, distributions or other payments by any Wholly-Owned Subsidiary on its Equity Interests to, or the redemption, retirement or purchase by any Wholly-Owned Subsidiary of its Equity Interests from, Borrower or any other Wholly-Owned Subsidiary;

(b) dividends, distributions or other payments by any non-Wholly-Owned Subsidiary on its Equity Interests to, or the redemption, retirement or purchase by any non-Wholly-Owned Subsidiary of its Equity Interests from, Borrower or any other Subsidiary or each other owner of such non-Wholly-Owned Subsidiary’s Equity Interests based on their relative ownership interests of the relevant class of such Equity Interests;

(c) redemptions by Borrower in whole or in part any of its Equity Interests for another class of its Equity Interests or rights to acquire its Equity Interests or with proceeds from substantially concurrent equity contributions or issuances of new Equity Interests;

(d) any such payments arising from a Permitted Acquisition or other Permitted Investment by Borrower or any of its Subsidiaries;

(e) the payment of dividends by Borrower solely in non-cash pay and non-redeemable capital stock (including, for the avoidance of doubt, dividends and distributions payable solely in Equity Interests);

(f) cash payments in lieu of the issuance of fractional shares arising out of stock dividends, splits or combinations or in connection with the exercise of warrants, options or other securities convertible into or exchangeable for Equity Interests;

(g) in connection with any Acquisition or other Investment by Borrower or any of its Subsidiaries, (i) the receipt or acceptance of the return to Borrower or any of its Subsidiaries of Equity Interests of Borrower constituting a portion of the purchase price consideration in settlement of indemnification claims, or as a result of a purchase price adjustment (including earn-outs or similar obligations) and (ii) payments or distributions to equity holders pursuant to appraisal rights required under Requirements of Law;

(h) the distribution of rights pursuant to any shareholder rights plan or the redemption of such rights for nominal consideration in accordance with the terms of any shareholder rights plan;

(i) dividends, distributions or payments on its Equity Interests by any Subsidiary to any Credit Party;

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(j) dividends, distributions or payments on its Equity Interests by any Subsidiary that is not a Credit Party to any other Subsidiary that is not a Credit Party;

(k) purchases of Equity Interests of Borrower or its Subsidiaries in connection with the exercise of stock options by way of cashless exercise, or in connection with the satisfaction of withholding tax obligations;

(l) issuance to directors, officers, employees or contractors of Borrower of common stock of Borrower upon the vesting of restricted stock, restricted stock units, or other rights to acquire common stock of Borrower pursuant to plans or agreements approved by Borrower’s Board of Directors or stockholders;

(m) the repurchase, retirement or other acquisition or retirement for value of Equity Interests of Borrower or any of its Subsidiaries held by any future, present or former employee, consultant, officer or director (or spouse, ex-spouse or estate of any of the foregoing or trust for the benefit of any of the foregoing or any lineal descendants thereof) of Borrower or any of its Subsidiaries pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement, or any stock subscription or shareholder agreement or employment agreement; provided , however , that the aggregate payments made under this clause (m) do not exceed in any calendar year the sum of (i) *** plus (ii) the amount of any payments received in such calendar year under key-man life insurance policies; and

(n) dividends or distributions on its Equity Interests by Borrower payable solely in additional shares of its common stock within *** after the date of declaration thereof.

“ Permitted Indebtedness ” means:

(a) Indebtedness of the Credit Parties to Secured Parties under this Agreement and the other Loan Documents;

(b) Indebtedness existing on the Effective Date and shown on Schedule 12.1 of the Disclosure Letter;

(d) Indebtedness not to exceed *** in the aggregate at any time outstanding, consisting of (i) Indebtedness incurred to finance the purchase, construction, repair, or improvement of fixed assets and (ii) capital lease obligations;

(e) unsecured Indebtedness in connection with corporate credit cards, purchasing cards or bank card products;

(f) guarantees of Permitted Indebtedness;

(g) Indebtedness assumed in connection with any Permitted Acquisition or Permitted Investment, so long as such Indebtedness (i) was not incurred in connection with, or in anticipation of, such Acquisition or Investment and (ii) is at all times Subordinated Debt;

(h) Indebtedness of Borrower or any of its Subsidiaries with respect to letters of credit outstanding and secured solely by cash or Cash Equivalents entered into in the ordinary course of business;

(i) Indebtedness owed (i) by a Credit Party to another Credit Party, (ii) by a Subsidiary of Borrower that is not a Credit Party to another Subsidiary of Borrower that is not a Credit Party, (iii) by a Credit Party to a Subsidiary of Borrower that is not a Credit Party or (iv) by a Subsidiary of Borrower that is not a Credit Party to a Credit Party, not to exceed *** in the aggregate at any time outstanding;

(j) Indebtedness consisting of Contingent Obligations set forth in clause (a) of the definition of “Contingent Obligation” (i) of a Credit Party of Permitted Indebtedness (or obligations that are not Indebtedness) of another Credit Party, (ii) of a Subsidiary of Borrower which is not a Credit Party of Permitted Indebtedness (or obligations that are not Indebtedness) of another Subsidiary of Borrower which is not a Credit Party, (iii) of a Subsidiary of Borrower which is not a Credit Party of Permitted Indebtedness (or obligations that are not

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Indebtedness) of a Credit Party, (iv) of a Credit Party of lease obligations of a Subsidiary of Borrower which is not a Credit Party, or (v) of a Credit Party of Permitted Indebtedness (or obligations that are not Indebtedness) of a Subsidiary of Borrower which is not a Credit Party not to exceed *** in the aggregate at any time outstanding;

(k) Indebtedness consisting of Contingent Obligations (i) set forth in clause (b) of the definition of “Contingent Obligation”, and (ii) set forth in clause (c) of the definition of “Contingent Obligation” in connection with any Permitted Acquisition, not to exceed *** in the aggregate at any time outstanding;

(l) Indebtedness of any Person that becomes a Subsidiary (or of any Person not previously a Subsidiary that is merged or consolidated with or into a Subsidiary in a transaction permitted hereunder) of Borrower after the Effective Date, or Indebtedness of any Person that is assumed after the Effective Date by any Subsidiary in connection with an acquisition of assets by such Subsidiary; provided that such Indebtedness is at all times Subordinated Debt;

(m) (i) Indebtedness with respect to workers’ compensation claims, payment obligations in connection with health, disability or other types of social security benefits, unemployment or other insurance obligations, reclamation and statutory obligations or (ii) Indebtedness related to employee benefit plans, including annual employee bonuses, accrued wage increases and 401(k) plan matching obligations; in each case, incurred in the ordinary course of business consistent with past practice;

(n) Indebtedness in respect of performance bonds, bid bonds, appeal bonds, surety bonds and completion guarantees and similar obligations arising in the ordinary course of business consistent with past practice;

(o) Indebtedness in respect of netting services, overdraft protection and other cash management services, in each case in the ordinary course of business consistent with past practice;

(p) Indebtedness consisting of the financing of insurance premiums in the ordinary course of business consistent with past practice;

(q) Indebtedness consisting of guarantees resulting from endorsement of negotiable instruments for collection by any Credit Party in the ordinary course of business consistent with past practice;

(r) unsecured Indebtedness incurred in connection with any items of Permitted Distributions in clause (m) of the definition of “Permitted Distributions”; and

(s) subject to the proviso immediately below, extensions, refinancings, modifications, amendments, restatements and, in the case of any items of Permitted Indebtedness in clause (b) of the definition of “Permitted Indebtedness” or Permitted Indebtedness constituting notes governed by an indenture, exchanges, of any items of Permitted Indebtedness in clauses (a) through (r) above, provided , that in the case of clauses (b) and (g) above, the principal amount thereof is not increased (other than by any reasonable amount of premium (if any), interest (including post-petition interest), fees, expenses, charges or additional or contingent interest reasonably incurred in connection with the same and the terms thereof).

Notwithstanding the foregoing, “Permitted Indebtedness” shall not include any Hedging Agreements.

“ Permitted Investments ” means:

(a) Investments (including Investments in Subsidiaries) existing on the Effective Date and shown on Schedule 12.2 of the Disclosure Letter, and any extensions, renewals or reinvestments thereof;

(b) Investments consisting of cash and Cash Equivalents;

(c) Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business consistent with past practice;

(d) subject to Section 5.5 , Investments consisting of deposit accounts or securities accounts;

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(e) Investments in connection with Permitted Transfers;

(f) Investments consisting of (i) travel advances and employee relocation loans and other employee advances in the ordinary course of business consistent with past practice, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of Borrower pursuant to employee stock purchase plans or agreements approved by Borrower’s Board of Directors;

(g) Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business consistent with past practice;

(h) Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business consistent with past practice; provided that this clause (h) shall not apply to Investments of any Credit Party in any of its Subsidiaries;

(i) joint ventures or strategic alliances consisting of the non-exclusive licensing of technology, the development of technology or the providing of technical support;

(j) Investments (i) required in connection with a Permitted Acquisition (including the formation of any Subsidiary for the purpose of effectuating such Permitted Acquisition, the capitalization of such Subsidiary whether by capital contribution or intercompany loans, in each case, to the extent otherwise permitted by the terms of this Agreement, related Investments in Subsidiaries necessary to consummate such Permitted Acquisition, and the receipt of any non-cash consideration in a Permitted Acquisition), and (ii) consisting of earnest money deposits required in connection with a Permitted Acquisition or other acquisition of properties or assets not otherwise prohibited hereunder;

(k) Investments constituting the formation of any Subsidiary for the purpose of consummating a merger or acquisition transaction permitted by Section 6.3(a)(i) through (iv) hereof, which such transaction is otherwise a Permitted Investment;

(l) Investments of any Person that (i) becomes a Subsidiary of Borrower (or of any Person not previously a Subsidiary of Borrower that is merged or consolidated with or into a Subsidiary of Borrower in a transaction permitted hereunder) after the Effective Date, or (ii) are assumed after the Effective Date by any Subsidiary of Borrower in connection with an acquisition of assets from such Person by such Subsidiary, in either case, in a Permitted Acquisition; provided , that in each case, any such Investment (x) exists at the time such Person becomes a Subsidiary of Borrower (or is merged or consolidated with or into a Subsidiary of Borrower) or such assets are acquired, (y) was not made in contemplation of or in connection with such Person becoming a Subsidiary of Borrower (or merging or consolidating with or into a Subsidiary of Borrower) or such acquisition of assets, and (z) could not reasonably be expected to result in a Default or Event of Default;

(m) Investments arising as a result of the licensing of Intellectual Property in the ordinary course of business consistent with past practice;

(n) Investments by (i) any Credit Party in any other Credit Party, (ii) any Subsidiary of Borrower which is not a Credit Party in another Subsidiary of Borrower which is not a Credit Party, (iii) any Subsidiary of Borrower which is not a Credit Party in any Credit Party and (iv) any Credit Party in a Subsidiary of Borrower which is not a Credit Party not to exceed *** in the aggregate at any time; and

(o) Repurchases of capital stock of Borrower or any of its Subsidiaries deemed to occur upon the exercise of options, warrants or other rights to acquire capital stock of Borrower or such Subsidiary solely to the extent that shares of such capital stock represent a portion of the exercise price of such options, warrants or such rights;

provided , however , that, none of the foregoing Investments shall be a “Permitted Investment” if any Indebtedness or Liens assumed in connection with such Investment are not otherwise permitted under Section 6.4 or 6.5 , respectively.

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Notwithstanding the foregoing, “Permitted Investments” shall not include any Hedging Agreements.

“ Permitted Liens ” means:

(a) Liens in favor and for the benefit of Lender and the other Secured Parties securing the Obligations pursuant to any Loan Document;

(b) Liens existing on the Effective Date and set forth on Schedule 12.3 of the Disclosure Letter;

(c) Liens for Taxes, assessments or governmental charges (i) which are not yet delinquent or (ii) which are being contested in good faith and by appropriate proceedings promptly instituted and diligently conducted; provided that adequate reserves therefor have been set aside on the books of the applicable Person and maintained in conformity with Applicable Accounting Standards, if required; provided , further , that in the case of a Tax, assessment or charge that has or may become a Lien against any Collateral, such contest proceedings conclusively operate to stay the sale or forfeiture of any portion of any Collateral to satisfy such Tax, assessment or charge;

(d) pledges or deposits made in the ordinary course of business (other than Liens imposed by ERISA) in connection with workers’ compensation, payroll taxes, unemployment insurance, old-age pensions, or other similar social security legislation, (ii) pledges or deposits made in the ordinary course of business consistent with past practice securing liability for reimbursement or indemnification obligations of (including obligations in respect of letters of credit or bank guarantees for the benefit of) insurance carriers providing property, casualty or liability insurance to Borrower or any of its Subsidiaries, (iii) subject to Section 6.2(b) , statutory or common law Liens of landlords, and (iv) pledges or deposits to secure performance of tenders, bids, leases, statutory or regulatory obligations, surety and appeal bonds, government contracts, performance and return-of-money bonds and other obligations of like nature, in each case other than for borrowed money and entered into in the ordinary course of business consistent with past practice;

(e) Liens arising from attachments or judgments, orders, or decrees in circumstances not constituting an Event of Default under either Section 7.4 or 7.7 ;

(f) Liens (including the right of set-off) in favor of banks or other financial institutions incurred on deposits made in accounts held at such institutions in the ordinary course of business; provided that such Liens (i) are not given in connection with the incurrence of any Indebtedness, (ii) relate solely to obligations for administrative and other banking fees and expenses incurred in the ordinary course of business in connection with the establishment or maintenance of such accounts and (iii) are within the general parameters customary in the banking industry;

(g) Liens that are contractual rights of set-off (i) relating to pooled deposit or sweep accounts of Borrower or any of its Subsidiaries to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business consistent with past practice or (ii) relating to purchase orders and other agreements entered into with customers of Borrower or any of its Subsidiaries in the ordinary course of business consistent with past practice;

(h) Liens solely on any cash earnest money deposits made by Borrower or any of its Subsidiaries in connection with any Permitted Acquisition, Permitted Investment or other acquisition of assets or properties not otherwise prohibited under this Agreement;

(i) Liens existing on assets or properties at the time of its acquisition or existing on the assets or properties of any Person at the time such Person becomes a Subsidiary of Borrower, in each case after the Effective Date; provided that (i) neither such Lien was created nor the Indebtedness secured thereby was incurred in contemplation of such acquisition or such Person becoming a Subsidiary of Borrower, (ii) such Lien does not extend to or cover any other assets or properties (other than the proceeds or products thereof and other than after-acquired assets or properties subject to a Lien securing Indebtedness and other obligations incurred prior to such time and which Indebtedness and other obligations are permitted hereunder that requires, pursuant to its terms and conditions in effect at such time, a pledge of after-acquired assets or properties, it being understood that such requirement shall not be permitted to apply to any assets or properties to which such requirement would not have applied but for such

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acquisition), (iii) the Indebtedness and other obligations secured thereby is permitted under Section 6.4 hereof and (iv) such Liens are of the type otherwise permitted under Section 6.5 hereof;

(j) Liens securing Indebtedness permitted under clause (d)(i) of the definition of “Permitted Indebtedness” (including any extensions, refinancings, modifications, amendments or restatements of such Indebtedness permitted under clause (r) of the definition of “Permitted Indebtedness”); provided , that such Lien does not extend to or cover any assets or properties other than those described in clause (d)(i) of the definition of “Permitted Indebtedness”;

(k) servitudes, easements, rights-of-way, restrictions and other similar encumbrances on real property imposed by Requirements of Law and encumbrances consisting of zoning or building restrictions, easements, licenses, restrictions on the use of property or minor defects or other irregularities in title which, in the aggregate, are not material, and which do not in any case materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the business of any Credit Party or any Subsidiary of any Credit Party;

(l) to the extent constituting a Lien, escrow arrangements securing indemnification obligations associated with any Permitted Acquisition or Permitted Investment;

(m) licenses, sublicenses, leases or subleases of personal property (other than relating to Intellectual Property) granted to third parties in the ordinary course of business consistent with past practice, in each case which do not interfere in any material respect with the operations of the business of any Credit Party or any of its Subsidiaries and do not prohibit granting a Lender a security interest therein;

(n) Liens on cash or other current assets pledged to secure (i) Indebtedness in respect of corporate credit cards, purchasing cards or bank card products, or (ii) Indebtedness in the form of letters of credit or bank guarantees;

(o) Liens on properties or assets of Borrower or any of its Subsidiaries which do not constitute Collateral under the Loan Documents, other than (i) any Company IP that does not constitute Collateral under the Loan Documents but is related to any research, development, manufacture, production, use, commercialization, marketing, importing, storage, transport, offer for sale, distribution or sale of the Product in the Territory and (ii) Equity Interests of any Subsidiary;

(p) Liens on properties or assets of Borrower or any of its Subsidiaries imposed by law or regulation which were incurred in the ordinary course of business, including landlords’, carriers’, warehousemen’s, mechanics’, materialmen’s, contractors’, suppliers of materials’, architects’ and repairmen’s Liens, and other similar Liens arising in the ordinary course of business consistent with past practice; provided that such Liens (i) do not materially detract from the value of such properties or assets subject thereto or materially impair the use of such properties or assets subject thereto in the operations of the business of Borrower or such Subsidiary or (ii) are being contested in good faith by appropriate proceedings, which conclusively operate to stay the sale or forfeiture of any portion of such properties or assets subject thereto and for which adequate reserves have been set aside on the books of the applicable Person and maintained in conformity with Applicable Accounting Standards, if required; and

(q) subject to the provisos immediately below, the modification, replacement, extension or renewal of the Liens described in clauses (a) through (p) above; provided , however , that any such modification, replacement, extension or renewal must (i) be limited to the assets or properties encumbered by the existing Lien (and any additions, accessions, parts, improvements and attachments thereto and the proceeds thereof) and (ii) not increase the principal amount of any Indebtedness secured by the existing Lien (other than by any reasonable premium or other reasonable amount paid and fees and expenses reasonably incurred in connection therewith); provided , further , that to the extent any of the Liens described in clauses (a) through (p) above secure Indebtedness of a Credit Party, such Liens, and any such modification, replacement, extension or renewal thereof, shall constitute Permitted Liens if and only to the extent that such Indebtedness is permitted under Section 6.4 hereof.

“ Permitted Negative Pledges ” means:

(a) prohibitions or limitations with regard to specific properties or assets encumbered by Permitted Liens, if and only to the extent each such prohibition or limitation applies only to such properties or assets;

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(b) prohibitions or limitations set forth in any lease, license or other similar agreement entered into in the ordinary course of business;

(c) prohibitions or limitations relating to Permitted Indebtedness, in the case of each such agreement if and only to the extent such prohibitions or limitations, taken as a whole, are not materially more restrictive than the prohibitions and limitations set forth in this Agreement and the other Loan Documents, taken as a whole (as reasonably determined by a Responsible Officer of Borrower in good faith);

(d) customary provisions restricting assignments, subletting, sublicensing or other transfer of properties or assets subject thereto set forth in leases, subleases, licenses and other similar agreements that are not otherwise prohibited under this Agreement or any other Loan Document, if and only to the extent each such restriction applies only to the properties or assets subject to such leases, subleases, licenses or agreements, and customary provisions restricting assignment, pledges or transfer of any agreement entered into in the ordinary course of business consistent with past practice;

(e) prohibitions or limitations imposed by Requirements of Law;

(f) prohibitions or limitations that exist as of the Effective Date under Indebtedness existing on the Effective Date;

(g) customary prohibitions or limitations arising in connection with any Permitted Transfer or contained in any agreement relating to any Permitted Transfer pending the consummation of such Permitted Transfer;

(h) customary provisions in shareholders’ agreements, joint venture agreements, organizational documents or similar binding agreements relating to, or any agreement evidencing Indebtedness of, any joint venture entity or non-Wholly-Owned Subsidiary and applicable solely to such joint venture entity or non-Wholly-Owned Subsidiary and the Equity Interests issued thereby;

(i) customary net worth provisions set forth in real property leases entered into by Subsidiaries of Borrower, so long as such net worth provisions could not reasonably be expected to impair the ability of Borrower or its Subsidiaries to meet their ongoing obligations (as reasonably determined by a Responsible Officer of Borrower in good faith);

(j) customary net worth provisions set forth in customer agreements entered into in the ordinary course of business consistent with past practice that are not otherwise prohibited under this Agreement or any other Loan Document, so long as such net worth provisions could not reasonably be expected to impair the ability of Borrower or its Subsidiaries to meet their ongoing obligations (as reasonably determined by a Responsible Officer of Borrower in good faith);

(k) restrictions on cash or other deposits (including escrowed funds) imposed by agreements entered into in the ordinary course of business consistent with past practice that are not otherwise prohibited under this Agreement or any other Loan Document;

(l) prohibitions or limitations set forth in any agreement in effect at the time any Person becomes a Subsidiary (but not any amendment, modification, restatement, renewal, extension, supplement or replacement expanding the scope of any such restriction or condition); provided that such agreement was not entered into in contemplation of such Person becoming a Subsidiary and each such prohibition or limitation does not apply to Borrower or any other Subsidiary (other than such Person and any other Person that is a Subsidiary of such first Person at the time such first Person becomes a Subsidiary);

(m) prohibitions or limitations imposed by any Loan Document;

(n) customary provisions set forth in joint venture agreements or agreements governing minority investments that are not otherwise prohibited by this Agreement or any other Loan Document, if and only to the extent each such prohibition or limitation applies only to the joint venture entity or minority investment that is the subject of such agreement;

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(o) limitations imposed with respect to any license acquired in a Permitted Acquisition;

(p) customary provisions restricting assignments or other transfer of properties or assets subject thereto set forth in any agreement entered into in the ordinary course of business consistent with past practice, if and only to the extent each such restriction applies only to the properties or assets subject to such agreement;

(q) prohibitions or limitations imposed by any agreement evidencing any Permitted Indebtedness of the type described in any of clause (d) of the definition of “Permitted Indebtedness”; and

(r) prohibitions or limitations imposed by any amendments, modifications, restatements, renewals, extensions, supplements or replacements of any of the agreements referred to in clauses (a) through (p) above, except to the extent that any such amendment, modification, restatement, renewal, extension, supplement or replacement expands the scope of any such prohibition or limitation.

“ Permitted Subsidiary Distribution Restrictions ” means, in each case notwithstanding Section 6.8 :

(b) prohibitions or limitations set forth in any lease, license or other similar agreement entered into in the ordinary course of business;

(e) prohibitions or limitations on the transfer or assignment of any properties, assets or Equity Interests set forth in any agreement entered into in the ordinary course of business consistent with past practice that is not otherwise prohibited under this Agreement or any other Loan Document, if and only to the extent each such prohibition or limitation applies only to such properties, assets or Equity Interests;

(f) prohibitions or limitations imposed by Requirements of Law;

(g) prohibitions or limitations that exist as of the Effective Date under Indebtedness existing on the Effective Date;

(h) customary prohibitions or limitations arising in connection with any Permitted Transfer or contained in any agreement relating to any Permitted Transfer pending the consummation of such Permitted Transfer;

(i) customary provisions in shareholders’ agreements, joint venture agreements, organizational documents or similar binding agreements relating to, or any agreement evidencing Indebtedness of, any joint venture entity or non-Wholly-Owned Subsidiary and applicable solely to such joint venture entity or non-Wholly-Owned Subsidiary and the Equity Interests issued thereby;

(j) customary net worth provisions set forth in real property leases entered into by Subsidiaries of Borrower, so long as such net worth provisions could not reasonably be expected to impair the ability of Borrower or its Subsidiaries to meet their ongoing obligations (as reasonably determined by a Responsible Officer of Borrower in good faith);

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(k) customary net worth provisions set forth in customer agreements entered into in the ordinary course of business consistent with past practice that are not otherwise prohibited under this Agreement or any other Loan Document, so long as such net worth provisions could not reasonably be expected to impair the ability of Borrower or its Subsidiaries to meet their ongoing obligations (as reasonably determined by a Responsible Officer of Borrower in good faith);

(l) restrictions on cash or other deposits (including escrowed funds) imposed by agreements entered into in the ordinary course of business consistent with past practice that are not otherwise prohibited under this Agreement or any other Loan Document;

(m) prohibitions or limitations set forth in any agreement in effect at the time any Person becomes a Subsidiary (but not any amendment, modification, restatement, renewal, extension, supplement or replacement expanding the scope of any such restriction or condition); provided that such agreement was not entered into in contemplation of such Person becoming a Subsidiary and each such prohibition or limitation does not apply to Borrower or any other Subsidiary (other than such Person and any other Person that is a Subsidiary of such first Person at the time such first Person becomes a Subsidiary);

(n) prohibitions or limitations imposed by any Loan Document;

(o) customary provisions set forth in joint venture agreements or agreements governing minority investments that are not otherwise prohibited by this Agreement or any other Loan Document, if and only to the extent each such prohibition or limitation applies only to the joint venture entity or minority investment that is the subject of such agreement;

(q) prohibitions or limitations imposed by any agreement evidencing any Permitted Indebtedness of the type described in any of clause (d) of the definition of “Permitted Indebtedness”; and

“ Permitted Transfers ” means:

(a) Transfers of any properties or assets which do not constitute Collateral under the Loan Documents, other than any Company IP that does not constitute Collateral under the Loan Documents but is related to any research, development, manufacture, production, use, commercialization, marketing, importing, storage, transport, offer for sale, distribution or sale of the Product in the Territory;

(b) Transfers of Inventory in the ordinary course of business consistent with past practice;

(c) Transfers of surplus, damaged, worn out or obsolete equipment that is, in the reasonable judgment of Borrower exercised in good faith, no longer economically practicable to maintain or useful in the ordinary course of business consistent with past practice, and Transfers of other properties or assets in lieu of any pending or threatened institution of any proceedings for the condemnation or seizure of such properties or assets or for the exercise of any right of eminent domain;

(d) Transfers made in connection with Permitted Liens;

(e) Transfers of cash and Cash Equivalents in the ordinary course of business for equivalent value and in a manner that is not prohibited by the terms of this Agreement or the other Loan Documents;

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(f) Transfers (i) between or among Credit Parties, provided that, with respect to any properties or assets constituting Collateral under the Loan Documents, any and all steps as may be required to be taken in order to create and maintain a first priority security interest in and Lien upon such properties and assets in favor and for the benefit of Lender and the other Secured Parties are taken contemporaneously with the completion of any such Transfer, and (ii) between or among non-Credit Parties;

(g) the sale or issuance of Equity Interests of any Subsidiary of Borrower to any Credit Party or Subsidiary, provided , that any such sale or issuance by a Credit Party shall be to another Credit Party;

(h) the discount without recourse or sale or other disposition of unpaid and overdue accounts receivable arising in the ordinary course of business consistent with past practice in connection with the compromise, collection or settlement thereof and not part of a financing transaction;

(i) any abandonment, cancellation, non-renewal or discontinuance of use or maintenance of Company IP that Borrower reasonably determines in good faith (i) is no longer economically practicable to maintain or useful in the ordinary course of business consistent with past practice and that (ii) could not reasonably be expected to be adverse to the rights, remedies and benefits available to, or conferred upon, Lender under any Loan Document in any material respect;

(j) Transfers by Borrower or any of its Subsidiaries pursuant to: (i) a non-exclusive license of (or grant of a covenant not to sue with respect to) Intellectual Property or a non-exclusive grant of development, manufacturing, production, commercialization, marketing, co-promotion, distribution, sale or similar commercial rights to third parties in the ordinary course of business consistent with general market practice, in each case except to the extent relating in any way to any Product with respect to geography within the Territory; (ii) an exclusive license of (or grant of a covenant not to sue with respect to) Intellectual Property or an exclusive grant of development, manufacturing, production, commercialization, marketing, co-promotion, distribution, sale or similar commercial rights, to third parties, in each case except to the extent relating in any way to any Product with respect to geography within the Territory; (iii) a non-exclusive license of (or grant of a covenant not to sue with respect to) technology or Intellectual Property to third parties for developing technology or providing technical support in the ordinary course of business consistent with general market practice, in each case except to the extent relating in any way to any Product with respect to geography within the Territory; and (iv) a non-exclusive or an exclusive manufacturing license to third parties in the ordinary course of business consistent with general market practice, in each case except to the extent relating in any way to any Product with respect to geography within the Territory; provided , that an exclusive or non-exclusive license out of Intellectual Property relating to any Product with respect to geography outside of the Territory that is not otherwise prohibited under this Agreement or any other Loan Document shall constitute a Permitted Transfer; provided , further , that a Transfer of Intellectual Property unrelated in any way to any Product with respect to geography within or outside the Territory that is not otherwise prohibited under this Agreement or any other Loan Document shall constitute a Permitted Transfer; and

(k) intercompany licenses or grants of rights of distribution, co-promotion or similar commercial rights between or among the Credit Parties, or (ii) between or among the Credit Parties and Subsidiaries that are not Credit Parties entered into prior to the Effective Date, and renewals, replacements and extensions thereof (including additional licenses or grants in relation to new territories) on comparable terms in the ordinary course of business consistent with past practice.

“ Person ” means any individual, sole proprietorship, partnership, limited liability company, joint venture, company, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency.

“ Plan ” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the IRC or Section 302 of ERISA which is maintained or contributed to by Borrower or its Subsidiaries or their respective ERISA Affiliates or with respect to which Borrower or its Subsidiaries are subject to liability (including under Section 4069 of ERISA).

“ Prepayment Premium ” means the Tranche A Prepayment Premium or the Tranche B Prepayment Premium (as applicable) or both of the Tranche A Prepayment Premium and the Tranche B Prepayment Premium, as the context dictates.

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“ Private Third Party Payor Programs ” means all U.S. third party payor programs in which any Credit Party or its Subsidiaries participates, including Managed Care Plans, or any other private insurance programs, but excluding all Governmental Payor Programs.

“ Product ” means, collectively, (a)(i) BELBUCA ^® (buprenorphine buccal film), (ii) any successor to BELBUCA ^® (buprenorphine buccal film) and (iii) any other product for use in the treatment of chronic pain that includes buprenorphine, and (b)(i) Symproic ^® (naldemedine tosylate), (ii) any successor to Symproic ^® (naldemedine tosylate) and (iii) any other product for use in the treatment of chronic pain that includes naldemedine tosylate and is subject to the Symproic License Agreement.

“ Register ” is defined in Section 2.8(a) .

“ Registered Organization ” means any “registered organization” as defined in the Code with such additions to such term as may hereafter be made.

“ Regulatory Agency ” means a U.S. Governmental Authority with responsibility for the approval of the marketing and sale of pharmaceuticals or other regulation of pharmaceuticals, including the FDA and DEA.

“ Regulatory Approval ” means all approvals, product or establishment licenses, registrations or authorizations of any Regulatory Agency necessary for the manufacture, use, storage, import, export, transport, offer for sale, or sale of the Product.

“ Related Parties ” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and of such Person’s Affiliates.

“ Release ” means any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching or migration of any Hazardous Material into the indoor or outdoor environment (including the abandonment or disposal of any barrels, containers or other closed receptacles containing any Hazardous Material), including the movement of any Hazardous Material through the air, soil, surface water or groundwater, in each case, in the United States.

“ Requirements of Law ” means, as to any Person, the organizational or governing documents of such Person, and any law (statutory or common), treaty, order, policy, rule or regulation or determination of an arbitrator or a court or other Governmental Authority (including Health Care Laws, Data Protection Laws, FDA Laws, DEA Laws, and all applicable statutes, rules, regulations, standards, guidelines, policies and orders administered or issued by any foreign Governmental Authority), in each case, applicable to and binding upon such Person or any of its assets or properties or to which such Person or any of its assets or properties are subject.

“ Responsible Officers ” means, with respect to Borrower, collectively, the Chief Executive Officer, President, Chief Commercial Officer, Chief Medical Officer, Chief Compliance Officer, General Counsel and Chief Financial Officer of Borrower.

“ Restricted License ” means any material license or other agreement of the kind or nature subject or purported to be subject from time to time to a Lien under any Collateral Document, with respect to which a Credit Party is the licensee, (a) that prohibits or otherwise restricts such Credit Party from granting a security interest in such Credit Party’s interest in such license or agreement in a manner enforceable under Requirements of Law, or (b) for which a breach of or default under could interfere with Lender’s right to sell any Collateral.

“ SEC ” shall mean the Securities and Exchange Commission and any analogous Governmental Authority.

“ Secured Parties ” means Lender, each other Indemnified Person and each other holder of any Obligation of a Credit Party.

“ Securities Account ” means any “securities account” as defined in the Code with such additions to such term as may hereafter be made.

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“ Securities Act ” means the Securities Act of 1933.

“ Security Agreement ” means the Guaranty and Security Agreement, dated as of the Closing Date, by and among the Credit Parties and Lender, in form and substance substantially similar to Exhibit C attached hereto or in such form or substance as the Credit Parties and Lender may otherwise agree.

“ Solvent ” means, with respect to any Person as of any date of determination, that, as of such date, (a) the value of the assets (including goodwill minus disposition costs) of such Person (both at fair value and present fair saleable value), on a going concern basis, is greater than the total amount of liabilities (including contingent and unliquidated liabilities) of such Person, (b) such Person is able to generally pay all liabilities (including trade debt) of such Person as such liabilities become absolute and mature in the ordinary course of business consistent with past practice and (c) such Person does not have unreasonably small capital after giving due consideration to the prevailing practice in the industry in which it is engaged or will be engaged. In computing the amount of contingent or unliquidated liabilities at any time, such liabilities shall be computed at the amount that, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

“ Specified Disputes ” is defined in Section 4.6(j) .

“ SSA ” means the Social Security Act of 1935, codified at Title 42, Chapter 7, of the United States Code.

“ Stock Acquisition ” means the purchase or other acquisition by Borrower or any of its Subsidiaries of all of the Equity Interests (by merger, stock purchase or otherwise) of any other Person.

“ Subordinated Debt ” means any Indebtedness in the form of or otherwise constituting term debt incurred by any Credit Party or any Subsidiary thereof (including any Indebtedness incurred in connection with any Acquisition or other Investment) that: (a) is subordinated in right of payment to the Obligations at all times until all of the Obligations have been paid, performed or discharged in full and Borrower has no further right to obtain any Credit Extension hereunder pursuant to a subordination or other similar agreement that is in form and substance reasonably satisfactory to Lender (which agreement shall include turnover provisions that are reasonably satisfactory to Lender); (b) except as permitted by clause (d) below, is not subject to scheduled amortization, redemption (mandatory), sinking fund or similar payment and does not have a final maturity, in each case, before a date that is at least *** following the Term Loan Maturity Date; (c) does not include covenants and agreements (other than with respect to maturity, amortization, pricing and other economic terms) that, taken as a whole, are more restrictive or onerous on the Credit Parties in any material respect than the comparable covenants and agreements in the Loan Documents, taken as a whole (as reasonably determined by a Responsible Officer of Borrower in good faith); (d) is not subject to repayment or prepayment, including pursuant to a put option exercisable by the holder of any such Indebtedness, prior to a date that is at least *** following the final maturity thereof except in the case of an event of default or change of control (or the equivalent thereof, however described); and (e) does not provide or otherwise include provisions having the effect of providing that a default or event of default (or the equivalent thereof, however described) under or in respect of such Indebtedness shall exist, or such Indebtedness shall otherwise become due prior to its scheduled maturity or the holder or holders thereof or any trustee or agent on its or their behalf shall be permitted (with or without the giving of notice, the lapse of time or both) to cause any such Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity, in any such case upon the occurrence of a Default or Event of Default hereunder unless and until the Obligations have been declared, or have otherwise automatically become, immediately due and payable pursuant to Section 8.1(a) .

“ Subsidiary ” means, with respect to any Person, a corporation, partnership, limited liability company or other entity of which more than fifty percent (50.0%) of whose shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the Board of Directors (or similar body) of such corporation, partnership or other entity are at the time owned, directly or indirectly through one or more intermediaries, or both, by such Person. Unless the context otherwise requires, each reference to a Subsidiary herein shall be a reference to a Subsidiary of a Credit Party.

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“ Tax ” means any present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

“ Term Loan ” means each of the Tranche A Loan and the Tranche B Loan, as applicable, and “ Term Loans ” means, collectively, the Tranche A Loan and the Tranche B Loan; provided , however , that in the event the Tranche B Loan is not made on the Tranche B Closing Date, “Term Loans” shall mean only the Tranche A Loan.

“ Term Loan Maturity Date ” means the 72-month anniversary of the Tranche A Closing Date.

“ Term Loan Rate ” is defined in Section 2.3(a)(i) .

“ Territory ” means, with respect to the Product, the United States.

“ Third Party IP ” is defined in Section 4.6(l) .

“ Trademark License ” means any agreement, whether written or oral, providing for the grant by or to a Person of any right to use any Trademark.

“ Trademarks ” means (a) all trademarks, trade names, corporate names, company names, business names, fictitious business names, service marks, elements of package or trade dress of goods or services, logos and other source or business identifiers, together with the goodwill associated therewith, all registrations and recordings thereof, and all applications in connection therewith, in the United States Patent and Trademark Office or in any similar office or agency of the United States or any state thereof or in any similar office or agency anywhere in the world in which foreign counterparts are registered or issued, and (b) all renewals thereof.

“ Tranche A Closing Date ” means the date on which the Tranche A Loan is advanced by Lender, which, subject to the satisfaction of the conditions precedent to the Tranche A Loan set forth in Section 3.1 , Section 3.3 and Section 3.5 , shall be May 28, 2019.

“ Tranche A Loan ” is defined in Section 2.2(a)(i) .

“ Tranche A Loan Amount ” means an original principal amount equal to Sixty Million Dollars ($60,000,000.00).

“ Tranche A Makewhole Amount ” means, as of any date of determination occurring prior to the *** anniversary of the Tranche A Closing Date, an amount equal to the sum of all interest accruing from such date through the *** anniversary of the Tranche A Closing Date.

“ Tranche A Note ” means a promissory note in substantially the form attached hereto as Exhibit B-1 , as it may be amended, restated, supplemented or otherwise modified from time to time.

“ Tranche A Prepayment Premium ” means, with respect to any prepayment of the Tranche A Loan by Borrower pursuant to Section 2.2(c) , an amount equal to the product of the amount of such prepayment, multiplied by:

(a) if such prepayment occurs prior to the 24th-month anniversary of the Tranche A Closing Date, ***;

(b) if such prepayment occurs prior to the 36th-month anniversary of the Tranche A Closing Date, ***; and

“ Tranche B Closing Date ” means the date on which the Tranche B Loan is advanced by Lender, which, at Borrower’s option and as indicated in the Payment/Advance Form for the Tranche B Loan and subject to the

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satisfaction of the conditions precedent to the Tranche B Loan set forth in Section 3.2 , Section 3.3 and Section 3.5 , shall be *** (or such shorter period as may be agreed to by Lender) following the delivery to Borrower of a completed Payment/Advance Form in the form of Exhibit A hereto for the Tranche B Loan and, in no event, later than the 12-month anniversary of the Tranche A Closing Date.

“ Tranche B Loan ” is defined in Section 2.2(a)(ii) .

“ Tranche B Loan Amount ” means an original principal amount equal to Twenty Million Dollars ($20,000,000.00).

“ Tranche B Makewhole Amount ” means, as of any date of determination occurring prior to the *** anniversary of the Tranche B Closing Date, an amount equal to the sum of all interest accruing from such date through the *** anniversary of the Tranche B Closing Date.

“ Tranche B Note ” means a promissory note in substantially the form attached hereto as Exhibit B-2 , as it may be amended, restated, supplemented or otherwise modified from time to time.

“ Tranche B Prepayment Premium ” means, with respect to any prepayment of the Tranche B Loan by Borrower pursuant to Section 2.2(c) , an amount equal to the product of the amount of such prepayment, multiplied by:

(a) if such prepayment occurs prior to the 24th-month anniversary of the Tranche B Closing Date, ***;

(b) if such prepayment occurs prior to the 36th-month anniversary of the Tranche B Closing Date, ***; and

“ Transfer ” is defined in Section 6.1 .

“ TRICARE ” means, collectively, a program of medical benefits covering former and active members of the uniformed services and certain of their dependents, financed and administered by the United States Departments of Defense, Health and Human Services and Transportation, and all laws applicable to such programs.

“ United States ” or “ U.S. ” means the United States of America, its fifty (50) states, the District of Columbia and Puerto Rico.

“ voting Equity Interests ” means, with respect to any issuer, the issued and outstanding shares of each class of Equity Interests of such issuer entitled to vote.

“ Wholly-Owned Subsidiary ” means, with respect to any Person, a Subsidiary of such Person, all of the Equity Interests of which (other than directors’ qualifying shares or nominee or other similar shares required pursuant to Requirements of Law) are owned by such Person or another Wholly-Owned Subsidiary of such Person. Unless the context otherwise requires, each reference to a Wholly-Owned Subsidiary herein shall be a reference to a Wholly-Owned Subsidiary of a Credit Party.

“ Withdrawal Liability ” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

[Signature page follows.]

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IN WITNESS WHEREOF , the parties hereto have caused this Agreement to be executed as of the Effective Date.


BIODELIVERY SCIENCES INTERNATIONAL, INC., as Borrower

By
Name:
Title:

Signature Page to Loan Agreement


ARIUS PHARMACEUTICALS, INC., as an additional Credit Party

By
Name:
Title:

Signature Page to Loan Agreement


ARIUS TWO, INC., as an additional Credit Party

By
Name:
Title:

Signature Page to Loan Agreement


BIOPHARMA CREDIT PLC, as Lender

By: Pharmakon Advisors, LP,
		its Investment Manager

		By: Pharmakon Management I, LLC,
		its General Partner

By
Name: Pedro Gonzalez de Cosio
Title: Managing Member

Signature Page to Loan Agreement

EXHIBIT A – PAYMENT/ADVANCE FORM

The undersigned, being the duly elected and acting of BIODELIVERY SCIENCES INTERNATIONAL, INC., a Delaware corporation (“ Borrower ”), does hereby certify, solely in his/her capacity as an authorized officer of Borrower and not in his/her personal capacity, to BIOPHARMA CREDIT PLC (“ Lender ”), in connection with that certain Loan Agreement dated as of May __, 2019 by and among Borrower, Lender and the other parties thereto (the “ Loan Agreement ”; with other capitalized terms used below having the meanings ascribed thereto in the Loan Agreement) that, subject to the satisfaction (or waiver by Lender) of the conditions precedent to the Tranche [A][B] Loan ¹ set forth in Section 3 of the Loan Agreement, on [the Tranche A Closing Date] ² [________, 20__ (the “ Tranche B Closing Date ”)] ³ :

1. the representations and warranties made by the Credit Parties in Section 4 of the Loan Agreement and in the other Loan Documents are true and correct in all material respects, unless any such representation or warranty is stated to relate to a specific earlier date, in which case such representation or warranty shall be true and correct in all material respects as of such earlier date (it being understood that any representation or warranty that is qualified as to “materiality,” “Material Adverse Change,” or similar language shall be true and correct in all respects on the Tranche [A][B] Closing Date ⁴ or as of such earlier date, as applicable);

2. no Default or Event of Default has occurred since the [Effective Date] ⁵ [Tranche A Closing Date] ⁶ or is occurring as of the date hereof;

3. each of the Credit Parties is in compliance with the covenants and requirements contained in Sections 5 and 6 of the Loan Agreement;

4. all conditions referred to in Section 3 of the Loan Agreement to the making of the Tranche [A][B] Loan ⁷ to be made on the Tranche [A][B] Closing Date ⁸ have been satisfied (or waived in writing by Lender);

5. no Material Adverse Change has occurred since the [Effective Date] ⁹ [Tranche A Closing Date] ¹⁰ ;

6. the undersigned is a Responsible Officer of Borrower; and

7. the proceeds of the [Tranche A Loan] ¹¹ [Tranche B Loan] ¹² shall be disbursed as set forth on Attachment A hereto ¹³ .

Dated: ___________________, 20__ ¹⁴

[signature page follows]

¹	As applicable.

²	To be included in Payment/Advance Form for Tranche A Loan only.

³	To be included in Payment /Advance Form for Tranche B Loan only; insert date no later than the 12-month anniversary of the Tranche A Closing Date.

⁴	As applicable.

⁵	To be included in Payment/Advance Form for Tranche A Loan only.

⁶	To be included in Payment/Advance Form for Tranche B Loan only.

⁷	As applicable.

⁸	As applicable.

⁹	To be included in Payment/Advance Form for Tranche A Loan only.

¹⁰	To be included in Payment/Advance Form for Tranche B Loan only.

¹¹	To be included in Payment/Advance Form for Tranche A Loan only.

¹²	To be included in Payment/Advance Form for Tranche B Loan only.

¹³	To be prepared in coordination with Lender (or Lender’s counsel).

¹⁴	In Payment/Advance Form for Tranche B Loan, insert date no later than 15 days prior to the Tranche B Closing Date.


BIODELIVERY SCIENCES INTERNATIONAL, INC., as Borrower

By
Name:
Title:

EXHIBIT B-1

THIS NOTE CONTAINS ORIGINAL ISSUE DISCOUNT, AS DEFINED IN SECTION 1273 OF THE INTERNAL REVENUE CODE OF 1986 AS AMENDED. PLEASE CONTACT ERNEST R. DEPAOLANTONIO, CHIEF FINANCIAL OFFICER, 4131 PARKLANE AVENUE, SUITE 225, RALEIGH, NC 27612, TELEPHONE: (919) 582-9050 TO OBTAIN INFORMATION REGARDING THE ISSUE PRICE OF THE NOTE, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IN THE NOTE AND THE YIELD TO MATURITY.

TRANCHE A NOTE


$60,000,000.00		Dated: [________], 2019

FOR VALUE RECEIVED, the undersigned, BIODELIVERY SCIENCES INTERNATIONAL, INC., a Delaware corporation (“ Borrower ”), HEREBY PROMISES TO PAY to BIOPHARMA CREDIT PLC (“ Lender ”), or its registered assignees, the principal amount of SIXTY MILLION DOLLARS ($60,000,000.00), plus interest on the aggregate unpaid principal amount hereof at a per annum rate equal to the LIBOR Rate plus seven and one-half percent (7.50%) per annum, and in accordance with the terms of the Loan Agreement dated as of May __, 2019 by and among Borrower, Lender and the other parties thereto (as amended, restated, supplemented or otherwise modified from time to time, the “ Loan Agreement ”). If not sooner paid, the entire principal amount, all accrued and unpaid interest hereunder, all due and unpaid Lender Expenses and any other amounts payable under the Loan Documents shall be due and payable on the Term Loan Maturity Date. Any capitalized term not otherwise defined herein shall have the meaning attributed to such term in the Loan Agreement.

Borrower shall make thirteen (13) equal quarterly payments of principal of the Term Loans commencing on the first Payment Date on or following the 36 ^th -month anniversary of the Tranche A Closing Date. All unpaid principal with respect to the Term Loans (and, for the avoidance of doubt, all accrued and unpaid interest, all due and unpaid Lender Expenses and any other amounts payable under the Loan Documents) is due and payable in full on the Term Loan Maturity Date. `Interest shall accrue on this Tranche A Note commencing on, and including, the date of this Tranche A Note, and shall accrue on this Tranche A Note, or any portion thereof, for the day on which this Tranche A Note or such portion is paid. Interest on this Tranche A Note shall be payable in accordance with Section 2.3 of the Loan Agreement.

Principal, interest and all other amounts due with respect to this Tranche A Note are payable in lawful money of the United States of America to Lender as set forth in the Loan Agreement and this Tranche A Note.

The Loan Agreement, among other things, (a) provides for the making of secured Term Loans by Lender to Borrower, and (b) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events.

This Tranche A Note may not be prepaid except as set forth in Section 2.2(c) of the Loan Agreement or as expressly provided in Section 8.1 of the Loan Agreement.

This Tranche A Note and the obligation of Borrower to repay the unpaid principal amount of this Tranche A Note, interest thereon, and all other amounts due Lender under the Loan Agreement are secured pursuant to the Collateral Documents.

Presentment for payment, demand, notice of protest and all other demands and notices of any kind in connection with the execution, delivery, performance and enforcement of this Tranche A Note are hereby waived.

THIS TRANCHE A NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY PRINCIPLES OF CONFLICTS OF LAW THAT COULD REQUIRE THE APPLICATION OF THE LAW OF ANY OTHER JURISDICTION.

Note Register; Ownership of Note . The ownership of an interest in this Tranche A Note shall be registered on a record of ownership maintained by Lender. Notwithstanding anything else in this Tranche A Note to the contrary, the right to the principal of, and stated interest on, this Tranche A Note may be transferred only if the transfer is registered on such record of ownership and the transferee is identified as the owner of an interest in the obligation. Borrower shall be entitled to treat the registered holder of this Tranche A Note (as recorded on such record of ownership) as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in this Tranche A Note on the part of any other Person.

IN WITNESS WHEREOF, Borrower has caused this Tranche A Note to be duly executed by one of its officers thereunto duly authorized on the date hereof.


BORROWER:

BIODELIVERY SCIENCES INTERNATIONAL, INC., as Borrower

By
Name:
Title:

EXHIBIT B-2

TRANCHE B NOTE


$20,000,000.00		Dated: [________], 20__

FOR VALUE RECEIVED, the undersigned, BIODELIVERY SCIENCES INTERNATIONAL, INC., a Delaware corporation (“ Borrower ”), HEREBY PROMISES TO PAY to BIOPHARMA CREDIT PLC (“ Lender ”), or its registered assignees, the principal amount of TWENTY MILLION DOLLARS ($20,000,000.00), plus interest on the aggregate unpaid principal amount hereof at a per annum rate equal to the LIBOR Rate plus seven and one-half percent (7.50%) per annum, and in accordance with the terms of the Loan Agreement dated as of May __, 2019 by and among Borrower, Lender and the other parties thereto (as amended, restated, supplemented or otherwise modified from time to time, the “ Loan Agreement ”). If not sooner paid, the entire principal amount, all accrued and unpaid interest hereunder, all due and unpaid Lender Expenses and any other amounts payable under the Loan Documents shall be due and payable on the Term Loan Maturity Date. Any capitalized term not otherwise defined herein shall have the meaning attributed to such term in the Loan Agreement.

Borrower shall make thirteen (13) equal quarterly payments of principal of the Term Loans commencing on the first Payment Date on or following the 36 ^th -month anniversary of the Tranche A Closing Date. All unpaid principal with respect to the Term Loans (and, for the avoidance of doubt, all accrued and unpaid interest, all due and unpaid Lender Expenses and any other amounts payable under the Loan Documents) is due and payable in full on the Term Loan Maturity Date. Interest shall accrue on this Tranche B Note commencing on, and including, the date of this Tranche B Note, and shall accrue on this Tranche B Note, or any portion thereof, for the day on which this Tranche B Note or such portion is paid. Interest on this Tranche B Note shall be payable in accordance with Section 2.3 of the Loan Agreement.

Principal, interest and all other amounts due with respect to this Tranche B Note are payable in lawful money of the United States of America to Lender as set forth in the Loan Agreement and this Tranche B Note.

This Tranche B Note may not be prepaid except as set forth in Section 2.2(c) of the Loan Agreement or as expressly provided in Section 8.1 of the Loan Agreement.

This Tranche B Note and the obligation of Borrower to repay the unpaid principal amount of this Tranche B Note, interest thereon, and all other amounts due Lender under the Loan Agreement are secured pursuant to the Collateral Documents.

THIS TRANCHE B NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY PRINCIPLES OF CONFLICTS OF LAW THAT COULD REQUIRE THE APPLICATION OF THE LAW OF ANY OTHER JURISDICTION.

Note Register; Ownership of Note . The ownership of an interest in this Tranche B Note shall be registered on a record of ownership maintained by Lender. Notwithstanding anything else in this Tranche B Note to the contrary, the right to the principal of, and stated interest on, this Tranche B Note may be transferred only if the transfer is registered on such record of ownership and the transferee is identified as the owner of an interest in the obligation. Borrower shall be entitled to treat the registered holder of this Tranche B Note (as recorded on such record of ownership) as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in this Tranche B Note on the part of any other Person.

IN WITNESS WHEREOF, Borrower has caused this Tranche B Note to be duly executed by one of its officers thereunto duly authorized on the date hereof.


BORROWER:

BIODELIVERY SCIENCES INTERNATIONAL, INC., as Borrower

By
Name:
Title:

EXHIBIT C

FORM OF SECURITY AGREEMENT

EXHIBIT D-1

FORM OF U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)

Reference is made to the Loan Agreement, dated as of May __, 2019 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “ Loan Agreement ”), among Borrower and the lenders and the subsidiary guarantors from time to time party thereto. [ ] (the “ Foreign Lender ”) is providing this certificate pursuant to Section 2.6(d)(ii)(4) of the Loan Agreement. The Foreign Lender hereby represents and warrants that:

1. The Foreign Lender is the sole record owner of the Term Loans in respect of which it is providing this certificate;

2. The Foreign Lender is not a “bank” that had entered into the Loan Agreement in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended (the “ Code ”).

3. The Foreign Lender is not a 10-percent shareholder of Borrower within the meaning of Section 881(c)(3)(B) of the Code; and

4. The Foreign Lender is not a controlled foreign corporation receiving interest from a related person within the meaning of Section 881(c)(3)(C) of the Code.

5. The undersigned has furnished Borrower with a certificate of its non-U.S. Person status on IRS Form W-8BEN or W-8BEN-E, as applicable.

Unless otherwise defined herein, terms defined in the Loan Agreement and used herein shall have the meanings given to them in the Loan Agreement.

[Signature follows]

IN WITNESS WHEREOF, the undersigned has caused this certificate to be duly executed and delivered as of the date indicated below.


[NAME OF NON-U.S. LENDER]

By
		Name:
		Title:

Date:

EXHIBIT D-2

FORM OF U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)

Reference is made to the Loan Agreement, dated as of May __, 2019 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “ Loan Agreement ”), among Borrower and the lenders and the subsidiary guarantors from time to time party thereto. [ ] (the “ Foreign Participant ”) is providing this certificate pursuant to Section 2.6(d)(ii)(5) of the Loan Agreement. The Foreign Participant hereby represents and warrants that:

1. The Foreign Participant is the sole record and beneficial owner of the participation in respect of which it is providing this certificate;

2. The Foreign Participant is not a “bank” for purposes of Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended (the “ Code ”). In this regard, the Foreign Participant further represents and warrants that:

(a) The Foreign Participant is not subject to regulatory or other legal requirements as a bank in any jurisdiction; and

(b) The Foreign Participant has not been treated as a bank for purposes of any tax, securities law or other filing or submission made to any Governmental Authority, any application made to a rating agency or qualification for any exemption from tax, securities law or other legal requirements;

3. The Foreign Participant is not a 10-percent shareholder of Borrower within the meaning of Section 881(c)(3)(B) of the Code; and

4. The Foreign Participant is not a controlled foreign corporation receiving interest from a related person within the meaning of Section 881(c)(3)(C) of the Code.

5. The undersigned has furnished its participating Lender with a certificate of its non-U.S. Person status on IRS Form W-8BEN or W-8BEN-E, as applicable.

Unless otherwise defined herein, terms defined in the Loan Agreement and used herein shall have the meanings given to them in the Loan Agreement.

[Signature follows]

IN WITNESS WHEREOF, the undersigned has caused this certificate to be duly executed and delivered as of the date indicated below.


[NAME OF NON-U.S. PARTICIPANT]

By
		Name:
		Title:
Date:

EXHIBIT D-4

FORM OF U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes)

Reference is made to the Loan Agreement, dated as of May , 2019 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “ Loan Agreement ”), among Borrower and the lenders and the subsidiary guarantors from time to time party thereto. [ ] (the “ Foreign Participant ”) is providing this certificate pursuant to Section 2.6(d)(ii)(5) of the Loan Agreement. The Foreign Participant hereby represents and warrants that:

1. The Foreign Participant is the sole record owner of the participation in respect of which it is providing this certificate;

2. The Foreign Participant’s direct or indirect partners/members are the sole beneficial owners of the participation in respect of which it is providing this certificate;

3. Neither the Foreign Participant nor its direct or indirect partners/members is a “bank” for purposes of Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended (the “ Code ”). In this regard, the Foreign Participant further represents and warrants that:

(a) neither the Foreign Participant nor its direct or indirect partners/members is subject to regulatory or other legal requirements as a bank in any jurisdiction; and

(b) neither the Foreign Participant nor its direct or indirect partners/members has been treated as a bank for purposes of any tax, securities law or other filing or submission made to any Governmental Authority, any application made to a rating agency or qualification for any exemption from tax, securities law or other legal requirements;

4. Neither the Foreign Participant nor its direct or indirect partners/members is a 10-percent shareholder of Borrower within the meaning of Section 881(c)(3)(B) of the Code; and

5. Neither the Foreign Participant nor its direct or indirect partners/members is a controlled foreign corporation receiving interest from a related person within the meaning of Section 881(c)(3)(C) of the Code.

6. The undersigned has furnished its participating Lender with IRS Form W-8IMY accompanied by one of the following forms for each of its partners/members that is claiming the portfolio interest exemption : (i) an IRS Form W-8BEN or W-8BEN-E, as applicable, or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or W-8BEN-E, as applicable, from each such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption.

Unless otherwise defined herein, terms defined in the Loan Agreement and used herein shall have the meanings given to them in the Loan Agreement.

[Signature follows]

IN WITNESS WHEREOF, the undersigned has caused this certificate to be duly executed and delivered as of the date indicated below.


[NAME OF NON-U.S. PARTICIPANT]

By
		Name:
		Title:


Date:

EXHIBIT D-3

FORM OF U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)

Reference is made to the Loan Agreement, dated as of May , 2019 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “ Loan Agreement ”), among Borrower and the lenders and the subsidiary guarantors from time to time party thereto. [ ] (the “ Foreign Lender ”) is providing this certificate pursuant to Section 2.6(d)(ii)(5) of the Loan Agreement. The Foreign Lender hereby represents and warrants that:

1. The Foreign Lender is the sole record owner of the Term Loans in respect of which it is providing this certificate;

2. The Foreign Lender’s direct or indirect partners/members are the sole beneficial owners of the Loans in respect of which it is providing this certificate;

3. Neither the Foreign Lender nor its direct or indirect partners/members is a “bank” for purposes of Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended (the “ Code ”). In this regard, the Foreign Lender further represents and warrants that:

(a) neither the Foreign Lender nor its direct or indirect partners/members is subject to regulatory or other legal requirements as a bank in any jurisdiction; and

(b) neither the Foreign Lender nor its direct or indirect partners/members has been treated as a bank for purposes of any tax, securities law or other filing or submission made to any Governmental Authority, any application made to a rating agency or qualification for any exemption from tax, securities law or other legal requirements;

4. Neither the Foreign Lender nor its direct or indirect partners/members is a 10-percent shareholder of Borrower within the meaning of Section 881(c)(3)(B) of the Code; and

5. Neither the Foreign Lender nor its direct or indirect partners/members is a controlled foreign corporation receiving interest from a related person within the meaning of Section 881(c)(3)(C) of the Code.

6. The undersigned has made available to Borrower (directly or through Administrative Agent) an IRS Form W-8IMY accompanied by one of the following forms for each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or W-8BEN-E, as applicable, or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or W-8BEN-E, as applicable, from each such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption.

Unless otherwise defined herein, terms defined in the Loan Agreement and used herein shall have the meanings given to them in the Loan Agreement.

[Signature follows]

IN WITNESS WHEREOF, the undersigned has caused this certificate to be duly executed and delivered as of the date indicated below.


[NAME OF NON-U.S. LENDER]

By
		Name:
		Title:


Date:

Exhibit 10.4

INCENTIVE STOCK OPTION AGREEMENT

UNDER THE BIODELIVERY SCIENCES INTERNATIONAL, INC.

2019 STOCK OPTION AND INCENTIVE PLAN


Name of Optionee:

No. of Option Shares:

Option Exercise Price per Share:		$
		[FMV on Grant Date (110% of FMV if a 10% owner)]

Grant Date:

Expiration Date:
		[up to 10 years (5 if a 10% owner)]

Pursuant to the BioDelivery Sciences International, Inc. 2019 Stock Option and Incentive Plan as amended through the date hereof (the “Plan”), BioDelivery Sciences International, Inc. (the “Company”) hereby grants to the Optionee named above an option (the “Stock Option”) to purchase on or prior to the Expiration Date specified above all or part of the number of shares of Common Stock, par value $0.001 per share (the “Stock”), of the Company specified above at the Option Exercise Price per Share specified above subject to the terms and conditions set forth herein and in the Plan.

1. Exercisability Schedule . No portion of this Stock Option may be exercised until such portion shall have become exercisable. Except as set forth below, and subject to the discretion of the Administrator (as defined in Section 2 of the Plan) to accelerate the exercisability schedule hereunder, this Stock Option shall be exercisable with respect to the following number of Option Shares on the dates indicated so long as the Optionee remains an employee of the Company or a Subsidiary on such dates:


		Incremental Number of Option Shares Exercisable*		Exercisability Date

		(___%)

		(___%)

		(___%)

*	Max. of $100,000 per yr.

Once exercisable, this Stock Option shall continue to be exercisable at any time or times prior to the close of business on the Expiration Date, subject to the provisions hereof and of the Plan.

2. Manner of Exercise .

(a) The Optionee may exercise this Stock Option only in the following manner: from time to time on or prior to the Expiration Date of this Stock Option, the Optionee may give written notice to the Administrator of his or her election to purchase some or all of the Option Shares purchasable at the time of such notice. This notice shall specify the number of Option Shares to be purchased.

Payment of the purchase price for the Option Shares may be made by one or more of the following methods: (i) in cash, by certified or bank check or other instrument acceptable to the Administrator; (ii) through the delivery (or attestation to the ownership) of shares of Stock that have been purchased by the Optionee on the open market or that are beneficially owned by the Optionee and are not then subject to any restrictions under any Company plan and that otherwise satisfy any holding periods as may be required by the Administrator; or (iii) by the Optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the option purchase price, provided that in the event the Optionee chooses to pay the option purchase price as so provided, the Optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Administrator shall prescribe as a condition of such payment procedure; or (iv) a combination of (i), (ii) and (iii) above. Payment instruments will be received subject to collection.

The transfer to the Optionee on the records of the Company or of the transfer agent of the Option Shares will be contingent upon (i) the Company’s receipt from the Optionee of the full purchase price for the Option Shares, as set forth above, (ii) the fulfillment of any other requirements contained herein or in the Plan or in any other agreement or provision of laws, and (iii) the receipt by the Company of any agreement, statement or other evidence that the Company may require to satisfy itself that the issuance of Stock to be purchased pursuant to the exercise of Stock Options under the Plan and any subsequent resale of the shares of Stock will be in compliance with applicable laws and regulations. In the event the Optionee chooses to pay the purchase price by previously-owned shares of Stock through the attestation method, the number of shares of Stock transferred to the Optionee upon the exercise of the Stock Option shall be net of the Shares attested to.

(b) The shares of Stock purchased upon exercise of this Stock Option shall be transferred to the Optionee on the records of the Company or of the transfer agent upon compliance to the satisfaction of the Administrator with all requirements under applicable laws or regulations in connection with such transfer and with the requirements hereof and of the Plan. The determination of the Administrator as to such compliance shall be final and binding on the Optionee. The Optionee shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Stock subject to this Stock Option unless and until this Stock Option shall have been exercised pursuant to the terms hereof, the Company or the transfer agent shall have transferred the shares to the Optionee, and the Optionee’s name shall have been entered as the stockholder of record on the books of the Company. Thereupon, the Optionee shall have full voting, dividend and other ownership rights with respect to such shares of Stock.

(c) The minimum number of shares with respect to which this Stock Option may be exercised at any one time shall be 100 shares, unless the number of shares with respect to which this Stock Option is being exercised is the total number of shares subject to exercise under this Stock Option at the time.

(d) Notwithstanding any other provision hereof or of the Plan, no portion of this Stock Option shall be exercisable after the Expiration Date hereof.

3. Termination of Employment . If the Optionee’s employment by the Company or a Subsidiary (as defined in the Plan) is terminated, the period within which to exercise the Stock Option may be subject to earlier termination as set forth below.

(a) Termination Due to Death . If the Optionee’s employment terminates by reason of the Optionee’s death, any portion of this Stock Option outstanding on such date, to the extent exercisable on the date of death, may thereafter be exercised by the Optionee’s legal representative or legatee for a period of 12 months from the date of death or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date of death shall terminate immediately and be of no further force or effect.

(b) Termination Due to Disability . If the Optionee’s employment terminates by reason of the Optionee’s disability (as determined by the Administrator), any portion of this Stock Option outstanding on such date, to the extent exercisable on the date of such termination of employment, may thereafter be exercised by the Optionee for a period of 12 months from the date of disability or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date of disability shall terminate immediately and be of no further force or effect.

(c) Termination for Cause . If the Optionee’s employment terminates for Cause, any portion of this Stock Option outstanding on such date shall terminate immediately and be of no further force and effect. For purposes hereof, “Cause” means (i) the Company or an Affiliate having “cause” to terminate the Optionee’s employment or service, as defined in any employment or consulting agreement or similar document or policy between the Optionee and the Company or an Affiliate in effect at the time of such termination or (ii) in the absence of any such employment or consulting agreement, document or policy (or the absence of any definition of “Cause” contained therein), (A) a continuing material breach or material default (including, without limitation, any material dereliction of duty) by the Optionee of any agreement between the Optionee and the Company, except for any such breach or default which is caused by the physical disability of the Optionee (as determined by a neutral physician), or a continuing failure by the Optionee to follow the direction of a duly authorized representative of the Company; (B) gross negligence, willful misfeasance or breach of fiduciary duty by the Optionee; (C) the commission by the Optionee of an act of fraud, embezzlement or any felony or other crime of dishonesty in connection with the Optionee’s duties; or (D) conviction of the Optionee of a felony or any other crime that would materially and adversely affect: (i) the business reputation of the Company or (ii) the performance of the Optionee’s duties to the Company. Any determination of whether Cause exists shall be made by the Administrator in its sole discretion.

(d) Retirement . If the Optionee’s employment terminates due to the Optionee’s Retirement, any portion of this Stock Option outstanding on such date may be exercised, to the extent exercisable on the date of termination, until the Expiration Date. For purposes hereof, “Retirement” means the fulfillment of each of the following conditions: (i) the Optionee is good standing with the Company as determined by the Administrator; (ii) the voluntary termination by an Optionee of such Optionee’s employment or service to the Company and (B) that at the time of such voluntary termination, the sum of: (1) the Optionee’s age (calculated to the nearest month, with any resulting fraction of a year being calculated as the number of months in the year divided by 12) and (2) the Optionee’s years of employment or service with the Company (calculated to the nearest month, with any resulting fraction of a year being calculated as the number of months in the year divided by 12) equals at least 62 (provided that, in any case, the foregoing shall only be applicable if, at the time of Retirement, the Optionee shall be at least 55 years of age and shall have been employed by or served with the Company for no less than 5 years).

(e) Other Termination . If the Optionee’s employment terminates for any reason other than the Optionee’s death, the Optionee’s disability, the Optionee’s Retirement, or for Cause, and unless otherwise determined by the Administrator, any portion of this Stock Option outstanding on such date may be exercised, to the extent exercisable on the date of termination, for a period of 90 days from the date of termination or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date of termination shall terminate immediately and be of no further force or effect.

The Administrator’s determination of the reason for termination of the Optionee’s employment shall be conclusive and binding on the Optionee and his or her representatives or legatees.

4. Incorporation of Plan . Notwithstanding anything herein to the contrary, this Stock Option shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.

5. Transferability . This Agreement is personal to the Optionee, is non-assignable and is not transferable in any manner, by operation of law or otherwise, other than by will or the laws of descent and distribution. This Stock Option is exercisable, during the Optionee’s lifetime, only by the Optionee, and thereafter, only by the Optionee’s legal representative or legatee.

6. Status of the Stock Option . This Stock Option is intended to qualify as an “incentive stock option” under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), but the Company does not represent or warrant that this Stock Option qualifies as such. The Optionee should consult with his or her own tax advisors regarding the tax effects of this Stock Option and the requirements necessary to obtain favorable income tax treatment under Section 422 of the Code, including, but not limited to, holding period requirements. To the extent any portion of this Stock Option does not so qualify as an “incentive stock option,” such portion shall be deemed to be a non-qualified stock option. If the Optionee intends to dispose or

does dispose (whether by sale, gift, transfer or otherwise) of any Option Shares within the one-year period beginning on the date after the transfer of such shares to him or her, or within the two-year period beginning on the day after the grant of this Stock Option, he or she will so notify the Company within 30 days after such disposition.

7. Tax Withholding . The Optionee shall, not later than the date as of which the exercise of this Stock Option becomes a taxable event for Federal income tax purposes, pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal, state, and local taxes required by law to be withheld on account of such taxable event. The Company shall have the authority to cause the required tax withholding obligation to be satisfied, in whole or in part, by withholding from shares of Stock to be issued to the Optionee a number of shares of Stock with an aggregate Fair Market Value that would satisfy the withholding amount due.

8. No Obligation to Continue Employment . Neither the Company nor any Subsidiary is obligated by or as a result of the Plan or this Agreement to continue the Optionee in employment and neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any Subsidiary to terminate the employment of the Optionee at any time.

9. Integration . This Agreement constitutes the entire agreement between the parties with respect to this Stock Option and supersedes all prior agreements and discussions between the parties concerning such subject matter.

10. Data Privacy Consent . In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process any and all personal or professional data, including but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or this Agreement (the “Relevant Information”). By entering into this Agreement, the Optionee (i) authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the Optionee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Optionee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.

11. Notices . Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Optionee at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.


BIODELIVERY SCIENCES
INTERNATIONAL, INC.



By:
		Title:

The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this Agreement pursuant to the Company’s instructions to the Optionee (including through an online acceptance process) is acceptable.


Dated:
				Optionee’s Signature

				Optionee’s name and address:

Exhibit 10.5

NON-QUALIFIED STOCK OPTION AGREEMENT

FOR COMPANY EMPLOYEES

UNDER THE BIODELIVERY SCIENCES INTERNATIONAL, INC.

2019 STOCK OPTION AND INCENTIVE PLAN


Name of Optionee:

No. of Option Shares:

Option Exercise Price per Share:		$
		[FMV on Grant Date]

Grant Date:

Expiration Date:

Pursuant to the BioDelivery Sciences International, Inc. 2019 Stock Option and Incentive Plan as amended through the date hereof (the “Plan”), BioDelivery Sciences International, Inc. (the “Company”) hereby grants to the Optionee named above an option (the “Stock Option”) to purchase on or prior to the Expiration Date specified above all or part of the number of shares of Common Stock, par value $0.001 per share (the “Stock”) of the Company specified above at the Option Exercise Price per Share specified above subject to the terms and conditions set forth herein and in the Plan. This Stock Option is not intended to be an “incentive stock option” under Section 422 of the Internal Revenue Code of 1986, as amended.

1. Exercisability Schedule . No portion of this Stock Option may be exercised until such portion shall have become exercisable. Except as set forth below, and subject to the discretion of the Administrator (as defined in Section 2 of the Plan) to accelerate the exercisability schedule hereunder, this Stock Option shall be exercisable with respect to the following number of Option Shares on the dates indicated so long as Optionee remains an employee of the Company or a Subsidiary on such dates:


		Incremental Number of Option Shares Exercisable		Exercisability Date

		(___%)

		(___%)

		(___%)

Once exercisable, this Stock Option shall continue to be exercisable at any time or times prior to the close of business on the Expiration Date, subject to the provisions hereof and of the Plan.

2. Manner of Exercise .

Payment of the purchase price for the Option Shares may be made by one or more of the following methods: (i) in cash, by certified or bank check or other instrument acceptable to the Administrator; (ii) through the delivery (or attestation to the ownership) of shares of Stock that have been purchased by the Optionee on the open market or that are beneficially owned by the Optionee and are not then subject to any restrictions under any Company plan and that otherwise satisfy any holding periods as may be required by the Administrator; (iii) by the Optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the option purchase price, provided that in the event the Optionee chooses to pay the option purchase price as so provided, the Optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Administrator shall prescribe as a condition of such payment procedure; (iv) by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Stock issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; or (v) a combination of (i), (ii), (iii) and (iv) above. Payment instruments will be received subject to collection.

entered as the stockholder of record on the books of the Company. Thereupon, the Optionee shall have full voting, dividend and other ownership rights with respect to such shares of Stock.

(d) Notwithstanding any other provision hereof or of the Plan, no portion of this Stock Option shall be exercisable after the Expiration Date hereof.

of the Company or (ii) the performance of the Optionee’s duties to the Company. Any determination of whether Cause exists shall be made by the Administrator in its sole discretion.

The Administrator’s determination of the reason for termination of the Optionee’s employment shall be conclusive and binding on the Optionee and his or her representatives or legatees.

6. Tax Withholding . The Optionee shall, not later than the date as of which the exercise of this Stock Option becomes a taxable event for Federal income tax purposes, pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal, state, and local taxes required by law to be withheld on account of such taxable event. The Company shall have the authority to cause the required tax withholding obligation to be

satisfied, in whole or in part, by withholding from shares of Stock to be issued to the Optionee a number of shares of Stock with an aggregate Fair Market Value that would satisfy the withholding amount due.

7. No Obligation to Continue Employment . Neither the Company nor any Subsidiary is obligated by or as a result of the Plan or this Agreement to continue the Optionee in employment and neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any Subsidiary to terminate the employment of the Optionee at any time.

8. Integration . This Agreement constitutes the entire agreement between the parties with respect to this Stock Option and supersedes all prior agreements and discussions between the parties concerning such subject matter.

9. Data Privacy Consent . In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process any and all personal or professional data, including but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or this Agreement (the “Relevant Information”). By entering into this Agreement, the Optionee (i) authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the Optionee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Optionee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.

10. Notices . Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Optionee at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.


BIODELIVERY SCIENCES
INTERNATIONAL, INC.



By:
		Title:


Dated:
		Optionee’s Signature

		Optionee’s name and address:

Exhibit 10.6

NON-QUALIFIED STOCK OPTION AGREEMENT

FOR NON-EMPLOYEE DIRECTORS

UNDER THE BIODELIVERY SCIENCES INTERNATIONAL, INC.

2019 STOCK OPTION AND INCENTIVE PLAN


Name of Optionee:

No. of Option Shares:

Option Exercise Price per Share:		$
		[FMV on Grant Date]

Grant Date:

Expiration Date:
		[No more than 10 years]

Pursuant to the BioDelivery Sciences International, Inc. 2019 Stock Option and Incentive Plan as amended through the date hereof (the “Plan”), BioDelivery Sciences International, Inc. (the “Company”) hereby grants to the Optionee named above, who is a Director of the Company but is not an employee of the Company, an option (the “Stock Option”) to purchase on or prior to the Expiration Date specified above all or part of the number of shares of Common Stock, par value $0.001 per share (the “Stock”), of the Company specified above at the Option Exercise Price per Share specified above subject to the terms and conditions set forth herein and in the Plan. This Stock Option is not intended to be an “incentive stock option” under Section 422 of the Internal Revenue Code of 1986, as amended.


		Incremental Number of Option Shares Exercisable		Exercisability Date

		(___%)

		(___%)

		(___%)

Once exercisable, this Stock Option shall continue to be exercisable at any time or times prior to the close of business on the Expiration Date, subject to the provisions hereof and of the Plan.

2. Manner of Exercise.

Payment of the purchase price for the Option Shares may be made by one or more of the following methods: (i) in cash, by certified or bank check or other instrument acceptable to the Administrator; (ii) through the delivery (or attestation to the ownership) of shares of Stock that have been purchased by the Optionee on the open market or that are beneficially owned by the Optionee and are not then subject to any restrictions under any Company plan and that otherwise satisfy any holding periods as may be required by the Administrator; (iii) by the Optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the option purchase price, provided that in the event the Optionee chooses to pay the option purchase price as so provided, the Optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Administrator shall prescribe as a condition of such payment procedure; (iv) by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Stock issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; or (v) a combination of (i), (ii), (iii) and (iv) above. Payment instruments will be received subject to collection.

entered as the stockholder of record on the books of the Company. Thereupon, the Optionee shall have full voting, dividend and other ownership rights with respect to such shares of Stock.

(d) Notwithstanding any other provision hereof or of the Plan, no portion of this Stock Option shall be exercisable after the Expiration Date hereof.

3. Termination as Director . If the Optionee ceases to be a Director of the Company, the period within which to exercise the Stock Option may be subject to earlier termination as set forth below.

(a) Termination Due to Death or Disability . If the Optionee’s service as a Director terminates by reason of the Optionee’s death or disability (as determined by the Administrator), any portion of this Stock Option outstanding on such date, to the extent exercisable on the date of death, may thereafter be exercised by the Optionee or the Optionee’s legal representative or legatee, if applicable, for a period of 12 months from the date of death or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date of death shall terminate immediately and be of no further force or effect.

(b) Retirement . If the Optionee’s service as a Director terminates due to the Optionee’s Retirement, any portion of this Stock Option outstanding on such date may be exercised, to the extent exercisable on the date of termination, until the Expiration Date. For purposes hereof, “Retirement” means the fulfillment of each of the following conditions: (i) the Optionee is good standing with the Company as determined by the Administrator; (ii) the voluntary termination by an Optionee of such Optionee’s employment or service to the Company and (B) that at the time of such voluntary termination, the sum of: (1) the Optionee’s age (calculated to the nearest month, with any resulting fraction of a year being calculated as the number of months in the year divided by 12) and (2) the Optionee’s years of employment or service with the Company (calculated to the nearest month, with any resulting fraction of a year being calculated as the number of months in the year divided by 12) equals at least 62 (provided that, in any case, the foregoing shall only be applicable if, at the time of Retirement, the Optionee shall be at least 55 years of age and shall have been employed by or served with the Company for no less than 5 years).

(c) Other Termination . If the Optionee ceases to be a Director for any reason other than the Optionee’s death, disability or Retirement, any portion of this Stock Option outstanding on such date may be exercised, to the extent exercisable on the date the Optionee ceased to be a Director, for a period of 90 days from the date the Optionee ceased to be a Director or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date the Optionee ceases to be a Director shall terminate immediately and be of no further force or effect.

6. No Obligation to Continue as a Director . Neither the Plan nor this Stock Option confers upon the Optionee any rights with respect to continuance as a Director.

7. Integration . This Agreement constitutes the entire agreement between the parties with respect to this Stock Option and supersedes all prior agreements and discussions between the parties concerning such subject matter.

8. Data Privacy Consent . In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process any and all personal or professional data, including but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or this Agreement (the “Relevant Information”). By entering into this Agreement, the Optionee (i) authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the Optionee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Optionee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.

9. Notices . Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Optionee at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.


BIODELIVERY SCIENCES INTERNATIONAL, INC.



By:
		Title:


Dated:
				Optionee’s Signature

				Optionee’s name and address:

Exhibit 10.7

RESTRICTED STOCK UNIT AWARD AGREEMENT

FOR COMPANY EMPLOYEES

UNDER THE BIODELIVERY SCIENCES INTERNATIONAL, INC.

2019 STOCK OPTION AND INCENTIVE PLAN


Name of Grantee:

No. of Restricted Stock Units:

Grant Date:

Pursuant to the BioDelivery Sciences International, Inc. 2019 Stock Option and Incentive Plan as amended through the date hereof (the “Plan”), BioDelivery Sciences International, Inc. (the “Company”) hereby grants an award of the number of Restricted Stock Units listed above (an “Award”) to the Grantee named above. Each Restricted Stock Unit shall relate to one share of Common Stock, par value $0.001 per share (the “Stock”) of the Company.

1. Restrictions on Transfer of Award . This Award may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of by the Grantee, and any shares of Stock issuable with respect to the Award may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of until (i) the Restricted Stock Units have vested as provided in Paragraph 2 of this Agreement and (ii) shares of Stock have been issued to the Grantee in accordance with the terms of the Plan and this Agreement.

2. Vesting of Restricted Stock Units . The restrictions and conditions of Paragraph 1 of this Agreement shall lapse on the Vesting Date or Dates specified in the following schedule so long as the Grantee remains an employee of the Company or a Subsidiary on such Dates. If a series of Vesting Dates is specified, then the restrictions and conditions in Paragraph 1 shall lapse only with respect to the number of Restricted Stock Units specified as vested on such date.


		Incremental Number of Restricted Stock Units Vested		Vesting Date

		(___%)

		(___%)

		(___%)

The Administrator may at any time accelerate the vesting schedule specified in this Paragraph 2.

3. Termination of Employment. If the Grantee’s employment with the Company and its Subsidiaries terminates for any reason (including death or disability) prior to the satisfaction of the vesting conditions set forth in Paragraph 2 above, any Restricted Stock Units that have not vested as of such date shall automatically and without notice terminate and be forfeited, and neither the Grantee nor any of his or her successors, heirs, assigns, or personal

representatives will thereafter have any further rights or interests in such unvested Restricted Stock Units. Notwithstanding the foregoing, in the case of a Grantee’s Retirement, any unvested Restricted Stock Units shall become immediately vested and nonforfeitable and the date of such Retirement shall be deemed the Vesting Date with respect to such accelerated Restricted Stock Units. For purposes of this Agreement, “Retirement” means the fulfillment of each of the following conditions: (i) the Grantee is in good standing with the Company as determined by the Administrator; (ii) the voluntary termination by the Grantee of the Grantee’s employment or service to the Company and (B) that at the time of such voluntary termination, the sum of: (1) the Grantee’s age (calculated to the nearest month, with any resulting fraction of a year being calculated as the number of months in the year divided by 12) and (2) the Grantee’s years of employment or service with the Company (calculated to the nearest month, with any resulting fraction of a year being calculated as the number of months in the year divided by 12) equals at least 62 (provided that, in any case, the foregoing shall only be applicable if, at the time of Retirement, the Grantee shall be at least 55 years of age and shall have been employed by or served with the Company for no less than 5 years).

4. Issuance of Shares of Stock . As soon as practicable following each Vesting Date (but in no event later than 30 days after the Vesting Date), the Company shall issue to the Grantee the number of shares of Stock equal to the aggregate number of Restricted Stock Units that have vested pursuant to this Agreement on such date and the Grantee shall thereafter have all the rights of a stockholder of the Company with respect to such shares. Notwithstanding the foregoing, in the event the Grantee becomes vested in the Restricted Stock Units on account of his or her Retirement, if the Grantee is a “specified employee” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended and the regulations promulgated thereunder (“Section 409A”) upon his Retirement, the shares of Stock shall not be issued to the Grantee until the seventh month after the Grantee’s “separation from service” within the meaning of Section 409A.

5. Incorporation of Plan . Notwithstanding anything herein to the contrary, this Agreement shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.

6. Tax Withholding . The Grantee shall, not later than the date as of which the receipt of this Award becomes a taxable event for Federal income tax purposes, pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal, state, and local taxes required by law to be withheld on account of such taxable event. The Company shall have the authority to cause the required tax withholding obligation to be satisfied, in whole or in part, by withholding from shares of Stock to be issued to the Grantee a number of shares of Stock with an aggregate Fair Market Value that would satisfy the withholding amount due.

7. Section 409A of the Code . This Agreement shall be interpreted in such a manner that all provisions relating to the settlement of the Award are either exempt from the requirements of Section 409A of the Code as “short-term deferrals” as described in Section 409A of the Code or compliant with Section 409A of the Code.

8. No Obligation to Continue Employment. Neither the Company nor any Subsidiary is obligated by or as a result of the Plan or this Agreement to continue the Grantee in employment and neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any Subsidiary to terminate the employment of the Grantee at any time.

9. Integration . This Agreement constitutes the entire agreement between the parties with respect to this Award and supersedes all prior agreements and discussions between the parties concerning such subject matter.

10. Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process any and all personal or professional data, including but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or this Agreement (the “Relevant Information”). By entering into this Agreement, the Grantee (i) authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the Grantee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Grantee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.

11. Notices . Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Grantee at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.


BIODELIVERY SCIENCES INTERNATIONAL, INC.



By:
		Title:

The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this Agreement pursuant to the Company’s instructions to the Grantee (including through an online acceptance process) is acceptable.


Dated:
				Grantee’s Signature

				Grantee’s name and address:

Exhibit 10.8

RESTRICTED STOCK UNIT AWARD AGREEMENT

FOR NON-EMPLOYEE DIRECTORS

UNDER THE BIODELIVERY SCIENCES INTERNATIONAL, INC.

2019 STOCK OPTION AND INCENTIVE PLAN


Name of Grantee:

No. of Restricted Stock Units:

Grant Date:

Pursuant to the BioDelivery Sciences International, Inc. 2019 Stock Option and Incentive Plan as amended through the date hereof (the “Plan”), BioDelivery Sciences International, Inc. (the “Company”) hereby grants an award of the number of Restricted Stock Units listed above (an “Award”) to the Grantee named above. Each Restricted Stock Unit shall relate to one share of Common Stock, par value $0.001 per share (the “Stock”) of the Company.

2. Vesting of Restricted Stock Units . The restrictions and conditions of Paragraph 1 of this Agreement shall lapse on the Vesting Date or Dates specified in the following schedule so long as the Grantee remains in service as a member of the Board on such Dates. If a series of Vesting Dates is specified, then the restrictions and conditions in Paragraph 1 shall lapse only with respect to the number of Restricted Stock Units specified as vested on such date.


		Incremental Number of Restricted Stock Units Vested		Vesting Date

		(___%)

		(___%)

		(___%)

The Administrator may at any time accelerate the vesting schedule specified in this Paragraph 2.

3. Termination of Service . If the Grantee’s service with the Company and its Subsidiaries terminates for any reason (including death or disability) prior to the satisfaction of the vesting conditions set forth in Paragraph 2 above, any Restricted Stock Units that have not vested as of such date shall automatically and without notice terminate and be forfeited, and neither the Grantee nor any of his or her successors, heirs, assigns, or personal representatives

will thereafter have any further rights or interests in such unvested Restricted Stock Units. Notwithstanding the foregoing, in the case of a Grantee’s Retirement, any unvested Restricted Stock Units shall become immediately vested and nonforfeitable and the date of such Retirement shall be deemed the Vesting Date with respect to such accelerated Restricted Stock Units. For purposes of this Agreement, “Retirement” means the fulfillment of each of the following conditions: (i) the Grantee is in good standing with the Company as determined by the Administrator; (ii) the voluntary termination by the Grantee of the Grantee’s employment or service to the Company and (B) that at the time of such voluntary termination, the sum of: (1) the Grantee’s age (calculated to the nearest month, with any resulting fraction of a year being calculated as the number of months in the year divided by 12) and (2) the Grantee’s years of employment or service with the Company (calculated to the nearest month, with any resulting fraction of a year being calculated as the number of months in the year divided by 12) equals at least 62 (provided that, in any case, the foregoing shall only be applicable if, at the time of Retirement, the Grantee shall be at least 55 years of age and shall have been employed by or served with the Company for no less than 5 years).

6. Section 409A of the Code . This Agreement shall be interpreted in such a manner that all provisions relating to the settlement of the Award are either exempt from the requirements of Section 409A of the Code as “short-term deferrals” as described in Section 409A of the Code or compliant with Section 409A of the Code.

7. No Obligation to Continue as a Director . Neither the Plan nor this Award confers upon the Grantee any rights with respect to continuance as a Director.

8. Integration . This Agreement constitutes the entire agreement between the parties with respect to this Award and supersedes all prior agreements and discussions between the parties concerning such subject matter.

9. Data Privacy Consent . In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its subsidiaries and affiliates and

certain agents thereof (together, the “Relevant Companies”) may process any and all personal or professional data, including but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or this Agreement (the “Relevant Information”). By entering into this Agreement, the Grantee (i) authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the Grantee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Grantee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.

10. Notices . Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Grantee at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.


BIODELIVERY SCIENCES INTERNATIONAL, INC.



By:
		Title:

The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this Agreement pursuant to the Company’s instructions to the Grantee (including through an online acceptance process) is acceptable.


Dated:
				Grantee’s Signature

				Grantee’s name and address:

Exhibit 31.1

Certification of Principal Executive Officer

Pursuant to Rule 13a-14(a)

I, Herm Cukier, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of BioDelivery Sciences International, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2019

/s/ Herm Cukier

Herm Cukier

Chief Executive Officer and Director

(Principal Executive Officer)

Exhibit 31.2

Certification of Chief Financial Officer

Pursuant to Rule 13a-14(a)

I, Mary Theresa Coelho, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of BioDelivery Sciences International, Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 8, 2019

/s/ Mary Theresa Coelho

Mary Theresa Coelho

Treasurer and Chief Financial Officer

(Principal Financial and Accounting Officer)

Exhibit 32.1

BIODELIVERY SCIENCES INTERNATIONAL, INC.

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of BioDelivery Sciences International, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Herm Cukier, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Herm Cukier

Herm Cukier

Chief Executive Officer and Director

(Principal Executive Officer)

August 8, 2019

Exhibit 32.2

BIODELIVERY SCIENCES INTERNATIONAL, INC.

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of BioDelivery Sciences International, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mary Theresa Coelho, Treasurer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Mary Theresa Coelho

Mary Theresa Coelho

Treasurer and Chief Financial Officer

(Principal Financial and Accounting Officer)

August 8, 2019

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