LIMITED WAIVER AND FORBEARANCE AGREEMENT

Exhibit 10.16

LIMITED WAIVER AND FORBEARANCE AGREEMENT

This Limited Waiver and Forbearance Agreement is entered into this 14th day of May, 2004 to be effective for all purposes as of May 14, 2004 by and between BIODELIVERY SCIENCES INTERNATIONAL, INC., a Delaware corporation (the “Borrower”) and GOLD BANK, a Florida banking corporation, its successors and assigns (“Bank”) in connection with that certain Loan Agreement dated as of April 22, 2003 between Borrower and Bank (the “Loan Agreement”) and the documents related thereto (collectively, the “Loan Documents”).

WHEREAS, Borrower has requested that Bank waive the requirement that the Borrower comply with the covenant set forth in Section 6.2 of the Loan Agreement to maintain a certain stated “Minimum Cash Balances to Total Liabilities Ratio” (as defined in the Loan Agreement); and

WHEREAS, the Bank is willing to waive such requirement only on the terms and conditions and for the limited period set forth herein.

NOW, THEREFORE, in consideration of the premises (which shall be a material part hereof and not mere recitations), the mutual covenants and agreements contained herein, and other good and valuable consideration in hand paid by the parties hereto, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. For the period from the effective date hereof through June 30, 2004, Bank agrees that so long as the Borrower is in compliance with all other provisions of the Loan Documents (including without limitation the obligation to make payments of principal and interest thereunder), Bank shall waive compliance by the Borrower with the Minimum Cash Balances to Total Liabilities Ratio set forth in Section 6.2 of the Loan Agreement and shall forbear from taking any action pursuant to the Loan Documents related solely to any noncompliance by Borrower with such Minimum Cash Balances to Total Liabilities Ratio. In consideration of such waiver and forbearance, Borrower has paid to the Bank a non-refundable Waiver Fee in the amount of $10,000 at the time of execution and delivery of this Agreement. The parties acknowledge and agree that (i) the Waiver Fee is not a charge for the use of money but rather a purchase of the right to secure the continued extension of credit represented by the Loan Documents on the part of Borrower despite any noncompliance with the Minimum Cash Balances to Total Liabilities Ratio, and (ii) payment of the Waiver Fee was and is a material inducement to Lender to enter into this Agreement.

2. To the extent Borrower desires to extend the period of waiver and forbearance set forth in this Agreement for up to three (3) additional calendar months (that is, through July 31, 2004; August 30, 2004 and September 30, 2004), so long as (i) the Borrower is in compliance with all other provisions of the Loan Documents (including without limitation the obligation to make payments of principal and interest thereunder), Bank shall waive compliance by the Borrower with the Minimum Cash Balances to Total Liabilities Ratio set forth in Section 6.2 of the Loan Agreement and shall forbear from taking any action pursuant to the Loan Documents