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Exhibit 10.3    
    

 
 

ZOGENIX, INC.
  
    2006 EQUITY INCENTIVE PLAN
  
    (as amended through May 20, 2008)    

 
 

ARTICLE 1    
    PURPOSE    
    

        1.1    General.    The purpose of the Zogenix, Inc. 2006 Equity Incentive
Plan (the "Plan") is to promote the success and enhance the value of Zogenix, Inc., a Delaware corporation
(the "Company"), by linking the personal interests of the members of the Board, Employees and Consultants of the Company and any Parent or
Subsidiary, to those of Company stockholders and by providing such individuals with an incentive for performance to generate returns to Company stockholders. The Plan is further intended to provide
flexibility to the Company in its ability to motivate, attract, and retain the services of members of the Board, Employees and Consultants of the Company and any Parent or Subsidiary upon whose
judgment, interest, and special effort the successful conduct of the Company's operation is largely dependent. 

 
 

ARTICLE 2    
    DEFINITIONS AND CONSTRUCTION    
    

        2.1    Definitions.    The following words and phrases shall have the following meanings: 

        (a)   "Administrator" means the Board or a committee of the Board as described in Article 12. 

        (b)   "Award" means an Option, a Restricted Stock award, a Stock Appreciation Right award, a Dividend Equivalents award, a
Stock Payment award, or a Restricted Stock Unit award granted to a Participant pursuant to the Plan. 

        (c)   "Award Agreement" means any written or electronic agreement, contract, or other instrument or document evidencing
an Award. 

        (d)   "Board" means the Board of Directors of the Company. 

        (e)   "Cause," unless otherwise defined in an employment or services agreement between the Participant and the Company or any
Parent or Subsidiary, means (i) a Participant's breach of any confidentiality or proprietary information agreement between the Participant and the Company or any Parent or Subsidiary;
(ii) a Participant's conviction by, or entry of a plea of guilty or nolo contendere in, a court of competent and final jurisdiction for any crime involving moral turpitude or punishable by
imprisonment in the jurisdiction involved; (iii) a Participant's commission of an act of fraud, whether prior to or subsequent to the date hereof upon the Company or any Parent or Subsidiary;
(iv) a Participant's continuing repeated willful failure or refusal to perform his or her duties (including, without limitation, a Participant's inability to perform his or her duties as a
result of chronic alcoholism or drug addiction and/or as a result of any failure to comply with any laws, rules or regulations of any governmental entity with respect to a Participant's employment by
the Company or any Parent or Subsidiary); (v) a Participant's gross negligence, insubordination or material violation of any duty of loyalty to the Company or any Parent or Subsidiary or any
other material misconduct on the part of a Participant; (vi) a Participant's intentional commission of any act which he or she knows (or reasonably should know) is likely to be
materially detrimental to the Company's or any Parent's or Subsidiary's business or goodwill; or (vii) a Participant's material breach of any other provision of any agreement between the
Participant and the Company or any 

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Parent
or Subsidiary, provided that termination of a Participant's employment pursuant to this subsection (vii) shall not constitute valid termination for good cause unless such Participant
shall have first received written notice from the Board or its designee stating with specificity the nature of such breach and affording the Participant at least fifteen days to correct the
breach alleged. 

The
foregoing definition shall not in any way preclude or restrict the right of the Company or any successor or Parent or Subsidiary thereof to discharge or dismiss any Participant in the service of
such entity for any other acts or omissions, but such other acts or omissions shall not be deemed, for purposes of this Plan, to constitute grounds for termination for Cause. 

        (f)    "Change in Control" means and includes each of the following: 

        (i)    the
acquisition, directly or indirectly, by any "person" or "group" (as those terms are defined in Sections 3(a)(9), 13(d), and 14(d) of the Exchange Act
and the rules thereunder) of "beneficial ownership" (as determined pursuant to Rule 13d-3 under the Exchange Act) of securities entitled to vote generally in the
election of directors ("voting securities") of the Company that represent 50% or more of the combined voting power of the Company's then outstanding
voting securities, other than: 

        (A)  an
acquisition by a trustee or other fiduciary holding securities under any employee benefit plan (or related trust) sponsored or maintained by the Company or any
person controlled by the Company or by any employee benefit plan (or related trust) sponsored or maintained by the Company or any person controlled by the Company, or 

        (B)  an
acquisition of voting securities by the Company or a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of the stock of the Company, or 

        (C)  an
acquisition of voting securities pursuant to a transaction described in subsection (iii) below that would not be a Change in Control under
subsection (iii); 

Notwithstanding
the foregoing, the following event shall not constitute an "acquisition" by any person or group for purposes of this Section 2.1(e): an acquisition of the Company's securities
by the Company which causes the Company's voting securities beneficially owned by a person or group to represent 50% or more of the combined voting power of the Company's then outstanding voting
securities; provided, however, that if a person or group shall become the beneficial owner of 50% or more of the combined voting power of the Company's
then outstanding voting securities by reason of share acquisitions by the Company as described above and shall, after such share acquisitions by the Company, become the beneficial owner of any
additional voting securities of the Company, then such acquisition shall constitute a Change in Control; or 

        (ii)   during
any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board together with any new director(s) (other than a
director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in subsections (a) or (c) of this Section 2.1(e)) whose
election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors
at the beginning of the two year period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof; or 

        (iii)  the
consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of a merger,
consolidation, reorganization, or business combination, a sale or other disposition of all or substantially all of the Company's assets, or the acquisition of assets or stock of another entity, in
each case, other than a transaction 

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        (A)  which
results in the Company's voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being
converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially
all of the Company's assets or otherwise succeeds to the business of the Company (the Company or such person, the "Successor Entity")) directly
or indirectly, at least 50% of the combined voting power of the Successor Entity's outstanding voting securities immediately after the transaction, and 

        (B)  after
which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the Successor Entity;  provided, however, that no person or group shall be treated
for purposes of this paragraph (iii) as beneficially owning 50% or more of combined
voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction; or 

        (iv)  the
Company's stockholders approve a liquidation or dissolution of the Company. 

For
purposes of subsection (i) above, the calculation of voting power shall be made as if the date of the acquisition were a record date for a vote of the Company's stockholders, and for
purposes of subsection (iii) above, the calculation of voting power shall be made as if the date of the consummation of the transaction were a record date for a vote of the Company's
stockholders. 

Notwithstanding
the foregoing, a transaction shall not constitute a "Change of Control" if: (i) its sole purpose is to change the state of the
Company's incorporation; (ii) its sole purpose is to create a holding company that will be owned in substantially the same proportions by the persons who held the Company's securities
immediately before such transaction; (iii) it constitutes the Company's initial public offering of its securities; or (iv) it is a transaction effected primarily for the purpose of
financing the Company with cash (as determined by the Administrator in its discretion and without regard to whether such transaction is effectuated by a merger, equity financing
or otherwise). 

The
Administrator shall have full and final authority, which shall be exercised in its sole discretion, to determine conclusively whether a Change in Control of the Company has occurred pursuant to
the above definition, and the date of the occurrence of such Change in Control and any incidental matters relating thereto. 

        (g)   "Code" means the Internal Revenue Code of 1986, as amended from time to time, and the regulations issued thereunder. 

        (h)   "Committee" means a committee of the Board described in Article 12. 

        (i)    "Consultant" means any consultant or adviser if: 

        (i)    The
consultant or adviser renders bona fide services to the Company or any Parent or Subsidiary; 

        (ii)   The
services rendered by the consultant or adviser are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or
indirectly promote or maintain a market for the Company's securities; and 

        (iii)  The
consultant or adviser is a natural person who has contracted directly with the Company or any Parent or Subsidiary to render such services. 

        (j)    "Disability" means a permanent and total disability within the meaning of Section 22(e)(3) of the Code, as it may
be amended from time to time. 

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        (k)   "Dividend Equivalents" means a right granted to a Participant pursuant to Article 8 to receive the
equivalent value (in cash or Stock) of dividends paid on Stock. 

        (l)    "Eligible Individual" means any person who is a member of the Board, a Consultant or an Employee, as determined by the
Administrator. 

        (m)  "Employee" means any officer or other employee (as defined in accordance with Section 3401(c) of the Code)
of the Company or any Parent or Subsidiary. 

        (n)   "Equity Restructuring" means a non-reciprocal transaction between the Company and its stockholders, such as a
stock dividend, stock split, spin-off, rights offering or recapitalization through a large, nonrecurring cash dividend, that affects the shares of Stock (or other securities of the
Company) or the share price of Stock (or other securities) and causes a change in the per share value of the Stock underlying outstanding Awards. 

        (o)   "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. 

        (p)   "Fair Market Value" means, as of any date, the value of Stock determined as follows: 

        (i)    If
the Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap
Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such Stock as quoted on such exchange or system for the last market trading day prior to the date of
determination for which a closing sales price is reported, as reported in The Wall Street Journal or such other source as the Administrator
deems reliable; 

        (ii)   If
the Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean of the closing bid and
asked prices for the Stock on the date prior to the date of determination as reported in The Wall Street Journal or such other source as the
Administrator deems reliable; or 

        (iii)  In
the absence of an established market for the Stock, the Fair Market Value thereof shall be determined in good faith by the Administrator. 

        (q)   "Good Reason" means a Participant's voluntary resignation following any one or more of the following that is effected
without the Participant's written consent: (i) a change in his or her position following the Change in Control that materially reduces his or her duties or responsibilities, (ii) a
reduction in his or her base salary following a Change in Control, unless the base salaries of all similarly situated individuals are similarly reduced, or (iii) a relocation of such
Participant's place of employment of more than fifty miles following a Change in Control. However, if the term or concept of "Good Reason" has been defined in an agreement between a Participant and
the Company or any successor or parent or Subsidiary thereof, then "Good Reason" shall have the definition set forth in such agreement. 

        (r)   "Incentive Stock Option" means an Option that is intended to be an incentive stock option and meets the requirements of
Section 422 of the Code or any successor provision thereto. 

        (s)   "Misconduct" means the commission of any commission of any act of fraud, embezzlement or dishonesty by the Participant,
any unauthorized use or disclosure by such person of confidential information or trade secrets of the Company (or any Parent or Subsidiary), or any other intentional misconduct by such person
adversely affecting the business or affairs of the Company (or any Parent or Subsidiary) in a material manner. The foregoing definition shall not in any way preclude or restrict the right of
the Company (or any Parent or Subsidiary) to discharge or dismiss any Participant or other person in the service of the Company (or any Parent or 

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Subsidiary)
for any other acts or omissions, but such other acts or omissions shall not be deemed, for purposes of the Plan, to constitute grounds for termination for Misconduct. 

        (t)    "Non-Employee Director" means a member of the Board who is not an Employee. 

        (u)   "Non-Qualified Stock Option" means an Option that is not intended to be or otherwise does not qualify as an
Incentive Stock Option. 

        (v)   "Option" means a right granted to a Participant pursuant to Article 5 of the Plan to purchase a specified number
of shares of Stock at a specified price during specified time periods. An Option may be either an Incentive Stock Option or a Non-Qualified Stock Option. 

        (w)  "Parent" means any corporation in an unbroken chain of corporations ending with the Company if each of the corporations
other than the Company then owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain at the relevant time, including
after the Effective Date (as defined in Section 13.1). 

        (x)   "Participant" means any Eligible Individual who, as a member of the Board, an Employee or a Consultant, has been granted
an Award pursuant to the Plan. 

        (y)   "Plan" means this Zogenix, Inc. 2006 Equity Incentive Plan, as it may be amended from time to time. 

        (z)   "Public Trading Date" means the first date upon which the issuer is subject to the reporting requirements of
Section 13 or 15(d)(2) of the Exchange Act. 

        (aa) "Restricted Stock" means Stock awarded to a Participant pursuant to Article 6 that is subject to certain
restrictions and may be subject to risk of forfeiture or repurchase. 

        (bb) "Restricted Stock Unit" means a right to receive a share of Stock during specified time periods granted pursuant to
Section 8.3. 

        (cc) "Securities Act" means the Securities Act of 1933, as amended from time to time. 

        (dd) "Section 409A Award" has the meaning set forth in Section 9.1. 

        (ee) "Stock" means the common stock of the Company and such other securities of the Company that may be substituted for Stock
pursuant to Article 11. 

        (ff)  "Stock Appreciation Right" or "SAR" means a right granted pursuant to
Article 7 to receive a payment equal to the excess of the Fair Market Value of a specified number of shares of Stock on the date the SAR is exercised over the Fair Market Value of such
number of shares of Stock on the date the SAR was granted as set forth in the applicable Award Agreement. 

        (gg) "Stock Payment" means (a) a payment in the form of shares of Stock, or (b) an option or other right to
purchase shares of Stock, as part of any bonus, deferred compensation or other arrangement, made in lieu of all or any portion of the compensation, granted pursuant to Section 8.2. 

        (hh) "Subsidiary" means any corporation or other entity of which a majority of the outstanding voting stock or voting power
is beneficially owned directly or indirectly by the Company at the relevant time, including after the Effective Date (as defined in Section 13.1). 

        (ii)   "Successor Entity" has the meaning set forth in Section 2.1(f)(iii). 

        (jj)   "Termination of Consultancy" means the time when the engagement of a Participant as a Consultant to the Company or a
Parent or Subsidiary is terminated for any reason, with or without cause, including, but not by way of limitation, by resignation, discharge, death or retirement, but excluding terminations where
there is a simultaneous commencement of employment with the 

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Company
or any Parent or Subsidiary. The Administrator, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Consultancy, including, but not
by way of limitation, the question of whether a Termination of Consultancy resulted from a discharge for good cause, and all questions of whether a particular leave of absence constitutes a
Termination of Consultancy. Notwithstanding any other provision of the Plan, the Company or any Parent or Subsidiary has an absolute and unrestricted right to terminate a Consultant's service at any
time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in writing. 

        (kk) "Termination of Directorship" shall mean the time when a Participant who is a Non-Employee Director ceases
to be a member of the Board for any reason, including, but not by way of limitation, a termination by resignation, failure to be elected, death or retirement. The Board, in its sole and absolute
discretion, shall determine the effect of all matters and questions relating to Termination of Directorship with respect to Non-Employee Directors. 

        (ll)   "Termination of Employment" shall mean the time when the employee-employer relationship between a Participant and the
Company or any Parent or Subsidiary is terminated for any reason, with or without cause, including, but not by way of limitation, a termination by resignation, discharge, death, disability or
retirement; but excluding: (a) terminations where there is a simultaneous reemployment or continuing employment of a Participant by the Company or any Parent or Subsidiary, (b) at the
discretion of the Administrator, terminations which result in a temporary severance of the employee-employer relationship, and (c) terminations which are followed by the simultaneous
establishment of a consulting relationship by the Company or a Parent or Subsidiary with the former employee. The Administrator, in its absolute discretion, shall determine the effect of all matters
and questions relating to Termination of Employment, including, but not by way of limitation, the question of whether a Termination of Employment resulted from a discharge for good cause, and all
questions of whether a particular leave of absence constitutes a Termination of Employment. 

        (ii)   "Termination of Service" shall mean the last to occur of a Participant's Termination of Employment, Termination of
Directorship or Termination of Consultancy. A Participant shall not be deemed to have a Termination of Service merely because of a change in the capacity in which the Participant renders service to
the Company or any Parent or Subsidiary (i.e., a Participant who is an Employee becomes a Consultant) or a change in the entity for which the Participant renders such service (i.e., an
Employee of the Company becomes an Employee of a Subsidiary), unless following such change in capacity or service the Participant is no longer serving as an Employee, Non-Employee Director
or Consultant of the Company or any Parent or Subsidiary. 

 
 

ARTICLE 3    
    SHARES SUBJECT TO THE PLAN    
    

        3.1    Number of Shares.    

        (a)   Subject
to Article 11, the aggregate number of shares of Stock which may be issued or transferred pursuant to Awards under the Plan shall be
11,340,000 shares. 

        (b)   To
the extent that an Award terminates, expires, or lapses for any reason, any shares of Stock subject to the Award shall again be available for the grant of an Award
pursuant to the Plan. Additionally, any shares of Stock tendered or withheld to satisfy the grant or exercise price or tax withholding obligation pursuant to any Award shall again be available for the
grant of an Award pursuant to the Plan. If shares of Stock issued pursuant to Awards are forfeited by a Participant or repurchased by the Company pursuant to Section 6.3 hereof, such shares of
Stock shall become available for future grant under the Plan (unless the Plan has terminated). The 

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payment
of Dividend Equivalents in cash in conjunction with any outstanding Awards shall not be counted against the shares available for issuance under the Plan. 

        (c)   Notwithstanding
the provisions of this Section 3.1, no shares of Stock may again be optioned, granted or awarded if such action would cause an Incentive Stock
Option to fail to qualify as an Incentive Stock Option under Section 422 of the Code. 

        3.2    Stock Distributed.    Any Stock distributed pursuant to an Award may consist, in
whole or in part, of authorized and unissued Stock, treasury Stock or, on and after the Public Trading Date, Stock purchased on the open market. 

 
 

ARTICLE 4    
    ELIGIBILITY AND PARTICIPATION    
    

        4.1    Eligibility.    Persons eligible to participate in this Plan include all
Employees, Consultants and all members of the Board, as determined by the Administrator. 

        4.2    Actual Participation.    Subject to the provisions of the Plan, the Administrator
may, from time to time, select from among all Eligible Individuals those to whom Awards shall be granted and shall determine the nature and amount of each Award. No individual shall have any right to
be granted an Award pursuant to this Plan. 

        4.3    Foreign Participants.    Notwithstanding any provision of the Plan to the
contrary, in order to comply with the laws in other countries in which the Company and its Parents or Subsidiaries operate or have Eligible Individuals, the Administrator, in its sole discretion,
shall have the power and authority to: (i) determine which Parents or Subsidiaries shall be covered by the Plan; (ii) determine which Eligible Individuals outside the
United States are eligible to participate in the Plan; (iii) modify the terms and conditions of any Award granted to Eligible Individuals outside the United States to comply with
applicable foreign laws; (iv) establish subplans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable (any such
subplans and/or modifications shall be attached to this Plan as appendices); provided, however, that no such subplans and/or modifications shall
increase the share limitation contained in Section 3.1 of the Plan; and (v) take any action, before or after an Award is made, that it deems advisable to obtain approval or comply with
any necessary local governmental regulatory exemptions or approvals. Notwithstanding the foregoing, the Administrator may not take any actions hereunder, and no Awards shall be granted, that would
violate the Exchange Act, the Code, any securities law or governing statute or any other applicable law. 

 
 

ARTICLE 5    
    STOCK OPTIONS    
    

        5.1    General.    The Administrator is authorized to grant Options to Eligible
Individuals on the following terms and conditions: 

        (a)   Exercise
Price.    The exercise price per share of Stock subject to an Option shall be determined by the Administrator and set forth in the Award Agreement;  provided that the exercise price
per share for any Option shall not be less than 100% of the Fair Market Value per share of the Stock on the date of
the grant. 

        (b)   Time
and Conditions of Exercise.    The Administrator shall determine the time or times at which an Option may be exercised in whole or in part;  provided that the term of any Option
granted under the Plan shall not exceed ten years. The Administrator shall also determine the performance or other
conditions, if any, that must be satisfied before all or part of an Option may be exercised. The Administrator may extend the term of any outstanding Option in connection with any Termination of
Employment, Termination of Directorship or Termination of Consultancy 

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of
the Participant holding such Option, or amend any other term or condition of such Option relating to such a Termination of Employment, Termination of Directorship or Termination
of Consultancy. 

        (c)   Payment.    The
Administrator shall determine the methods, terms and conditions by which the exercise price of an Option may be paid, and the form and manner
of payment, including, without limitation, payment in the form of cash, a promissory note bearing interest at no less than such rate as shall then preclude the imputation of interest under the Code,
shares of Stock previously owned by the Participant or otherwise issuable upon exercise of the Option, or other property acceptable to the Administrator and payment through the delivery of a notice
that the Participant has placed a market sell order with a broker with respect to shares of Stock then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient
portion of the net proceeds of the sale to the Company in satisfaction of the Option exercise price; provided that payment of such proceeds is then made
to the Company upon settlement of such sale, and the methods by which shares of Stock shall be delivered or deemed to be delivered to Participants. Notwithstanding any other provision of the Plan to
the contrary, no Participant who is a member of the Board or an "executive officer" of the Company within the meaning of Section 13(k) of the Exchange Act shall be permitted to pay the exercise
price of an Option, or continue any extension of credit with respect to the exercise price of an Option with a loan from the Company or a loan arranged by the Company, in any method which would
violate Section 13(k) of the Exchange Act. 

        (d)   Evidence
of Grant.    All Options shall be evidenced by an Award Agreement between the Company and the Participant. The Award Agreement shall include such
additional provisions as may be specified by the Administrator. 

        5.2    Incentive Stock Options.    Incentive Stock Options may be granted only to
employees (as defined in accordance with Section 3401(c) of the Code) of the Company or a Subsidiary which constitutes a
"subsidiary corporation" of the Company within Section 424(f) of the Code or a Parent which constitutes a "parent corporation" of the Company within the meaning of Section 424(e) of the
Code and the terms of any Incentive Stock Options granted pursuant to the Plan must comply with the following additional provisions of this Section 5.2 in addition to the requirements of
Section 5.1: 

        (a)   Ten
Percent Owners.    An Incentive Stock Option shall be granted to any individual who, at the date of grant, owns stock possessing more than ten percent of
the total combined voting power of all classes of stock of the Company or any "subsidiary corporation" of the Company or "parent corporation" of the Company (each within the meaning of
Section 424 of the Code) only if such Option is granted at an exercise price per share that is not less than 110% of the Fair Market Value per share of the Stock on the date of the grant and
the Option is exercisable for no more than five years from the date of grant. 

        (b)   Transfer
Restriction.    An Incentive Stock Option shall not be transferable by the Participant other than by will or by the laws of descent or distribution. 

        (c)   Right
to Exercise.    During a Participant's lifetime, an Incentive Stock Option may be exercised only by the Participant. 

        (d)   Failure
to Meet Requirements.    Any Option (or portion thereof) purported to be an Incentive Stock Option which, for any reason, fails to meet the
requirements of Section 422 of the Code shall be considered a Non-Qualified Stock Option. 

        5.3    Early Exercisability.    The Administrator may provide in the terms of a
Participant's Award Agreement that the Participant may, at any time before the Participant's status as an Employee, member of the Board or Consultant terminates, exercise the Option(s) granted to such
Participant in whole or in part prior to the full vesting of the Option(s); provided, however, shares of Stock acquired 

8

 

upon
exercise of an Option which has not fully vested may be subject to any forfeiture, transfer or other restrictions as the Administrator may determine in its sole discretion. 

        5.4    Paperless Exercise.    In the event that the Company establishes, for itself or
using the services of a third party, an automated system for the exercise of Options, such as a system using an internet website or interactive voice response, then the paperless exercise of Options
by a Participant may be permitted through the use of such an automated system. 

 
 

ARTICLE 6    
    RESTRICTED STOCK AWARDS    
    

        6.1    Grant of Restricted Stock.    The Administrator is authorized to make Awards of
Restricted Stock to any Eligible Individual selected by the Administrator in such amounts and subject to such terms and conditions as determined by the Administrator. All Awards of Restricted Stock
shall be evidenced by an Award Agreement. 

        6.2    Issuance and Restrictions.    Restricted Stock shall be subject to such repurchase
restrictions, forfeiture restrictions, restrictions on transferability and other restrictions as the Administrator may impose (including, without limitation, limitations on the right to vote
Restricted Stock or the right to receive dividends on the Restricted Stock). These restrictions may lapse separately or in combination at such times, pursuant to such circumstances or in such
installments or otherwise as the Administrator determines at the time of the grant of the Award or thereafter. 

        6.3    Repurchase or Forfeiture.    Except as otherwise determined by the Administrator
at the time of the grant of the Award or thereafter, upon a Participant's Termination of Service during the applicable restriction period, Restricted Stock that is at that time subject to restrictions
shall be forfeited or subject to repurchase by the Company (or its assignee) under such terms as the Administrator shall determine; provided,
however, that the Administrator may (a) provide in any Restricted Stock Award Agreement that restrictions or forfeiture conditions relating to Restricted Stock will be
waived in whole or in part in the event of a Participant's Termination of Service, and (b) in other cases waive in whole or in part restrictions or forfeiture conditions relating to Restricted
Stock. 

        6.4    Certificates for Restricted Stock.    Restricted Stock granted pursuant to the
Plan may be evidenced in such manner as the Administrator shall determine. If certificates representing shares of Restricted Stock are registered in the name of the Participant, certificates must bear
an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, and the Company may, at its discretion, retain physical possession of the certificate
until such time as all applicable restrictions lapse or the Award Agreement may provide that the shares shall be held in escrow by an escrow agent designated by the Company. 

 
 

ARTICLE 7    
    STOCK APPRECIATION RIGHTS    
    

        7.1    Grant of Stock Appreciation Rights.    A Stock Appreciation Right may be granted
to any Eligible Individual selected by the Administrator. A Stock Appreciation Right shall be subject to such terms and conditions not inconsistent with the Plan as the Administrator shall impose and
shall be evidenced by an Award Agreement. 

        7.2    Terms of Stock Appreciation Rights.    

        (a)   A
Stock Appreciation Right shall have a term set by the Administrator. A Stock Appreciation Right shall be exercisable in such installments as the Administrator may
determine. A Stock Appreciation Right shall cover such number of shares of Stock as the Administrator may determine. The exercise price per share of Stock subject to each Stock Appreciation Right
shall be set by the Administrator. 

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        (b)   A
Stock Appreciation Right shall entitle the Participant (or other person entitled to exercise the Stock Appreciation Right pursuant to the Plan) to exercise all
or a specified portion of the Stock Appreciation Right (to the extent then exercisable pursuant to its terms) and to receive from the Company an amount determined by multiplying (i) the
amount (if any) by which the Fair Market Value of a share of Stock on the date of exercise of the Stock Appreciation Right exceeds the exercise price per share of the Stock Appreciation Right,
by (ii) the number of shares of Stock with respect to which the Stock Appreciation Right shall have been exercised, subject to any limitations the Administrator may impose. 

        7.3    Payment and Limitations on Exercise.    

        (a)   Subject
to Sections 7.3(b) and (c), payment of the amounts determined under Section 7.2(b) above shall be in cash, in Stock (based on its Fair
Market Value as of the date the Stock Appreciation Right is exercised) or a combination of both, as determined by the Administrator. 

        (b)   To
the extent payment for a Stock Appreciation Right is to be made in cash, the Award Agreement shall, to the extent necessary to comply with the requirements of
Section 409A of the Code, specify the date of payment, which may be different than the date of exercise of the Stock Appreciation Right. If the date of payment for a Stock Appreciation Right is
later than the date of exercise, the Award Agreement may specify that the Participant be entitled to earnings on such amount until paid. 

        (c)   To
the extent any payment under Section 7.2(b) is effected in Stock, it shall be made subject to satisfaction of all provisions of Article 5 above
pertaining to Options. 

 
 

ARTICLE 8    
    OTHER TYPES OF AWARDS    
    

        8.1    Dividend Equivalents.    Any Eligible Individual selected by the Administrator may
be granted Dividend Equivalents based on the dividends declared on the shares of Stock that are subject to any Award, to be credited as of dividend payment dates, during the period between the date
the Award is granted and the date the Award is exercised, vests or expires, as determined by the Administrator. Such Dividend Equivalents shall be converted to cash or additional shares of Stock by
such formula and at such time and subject to such limitations as may be determined by the Administrator. 

        8.2    Stock Payments.    Any Eligible Individual selected by the Administrator may
receive Stock Payments in the manner determined from time to time by the Administrator; provided that, unless otherwise determined by the Administrator,
such Stock Payments shall be made in lieu of base salary, bonus or other cash compensation otherwise payable to such Eligible Individual. The number of shares shall be determined by the Administrator
and may be based upon the Performance Goals or other specific performance goals determined appropriate by the Administrator. 

        8.3    Restricted Stock Units.    The Administrator is authorized to make Awards of
Restricted Stock Units to any Eligible Individual selected by the Administrator in such amounts and subject to such terms and conditions as determined by the Administrator. At the time of grant, the
Administrator shall specify the date or dates on which the Restricted Stock Units shall become fully vested and nonforfeitable, and may specify such conditions to vesting as it deems appropriate.
Alternatively, Restricted Stock Units may become fully vested and nonforfeitable pursuant to the satisfaction of one or more Performance Goals or other specific performance goals as the Administrator
determines to be appropriate at the time of the grant of the Restricted Stock Units or thereafter, in each case on a specified date or dates or over any period or periods determined by the
Administrator. At the time of grant, the Administrator shall specify the maturity date applicable to each grant of Restricted Stock Units which shall be no earlier than the vesting date or dates of
the Award and, to the extent 

10

 

permitted
by the Administrator, may be determined at the election of the Eligible Individual to whom the Award is granted. On the maturity date, the Company shall transfer to the Participant one
unrestricted, fully transferable share of Stock for each Restricted Stock Unit that is vested and scheduled to be distributed on such date and not previously forfeited. The Administrator shall specify
the purchase price, if any, to be paid by the Participant to the Company for such shares of Stock. 

        8.4    Term.    Except as otherwise provided herein, the term of any Award of Performance
Shares, Dividend Equivalents, Stock Payments or Restricted Stock Units shall be set by the Administrator in its discretion. 

        8.5    Exercise or Purchase Price.    The Administrator may establish the exercise or
purchase price, if any, of any Award of Restricted Stock Units or Stock Payments; provided, however, that such price shall not be less than the par
value of a share of Stock on the date of grant, unless otherwise permitted by applicable state law. 

        8.6    Form of Payment.    Payments with respect to any Awards granted under
Sections 8.1, 8.2 or 8.3 shall be made in cash, in Stock or a combination of both, as determined by the Administrator. 

        8.7    Award Agreement.    All Awards under this Article 8 shall be subject to
such additional terms and conditions as determined by the Administrator and shall be evidenced by a written Award Agreement. 

 
 

ARTICLE 9    
    COMPLIANCE WITH SECTION 409A OF THE CODE    
    

        9.1    Awards subject to Code Section 409A.    Any Award that constitutes, or
provides for, a deferral of compensation subject to Section 409A of the Code (a "Section 409A Award") shall satisfy the
requirements of Section 409A of the Code and this Article 9, to the extent applicable. The Award Agreement with respect to a Section 409A Award shall incorporate the terms and
conditions required by Section 409A of the Code and this Article 9. 

        9.2    Distributions under a Section 409A Award.    

        (a)   Subject
to subsection (b), any shares of Stock or other property or amounts to be paid or distributed upon the grant, issuance, vesting, exercise or payment of a
Section 409A Award shall be distributed in accordance with the requirements of Section 409A(a)(2) of the Code, and shall not be distributed earlier than: 

        (i)    the
Participant's separation from service, as determined by the Secretary of the Treasury; 

        (ii)   the
date the Participant becomes disabled; 

        (iii)  the
Participant's death; 

        (iv)  a
specified time (or pursuant to a fixed schedule) specified under the Award Agreement at the date of the deferral compensation; 

        (v)   to
the extent provided by the Secretary of the Treasury, a change in the ownership or effective control of the Company or a Parent or Subsidiary, or in the ownership of
a substantial portion of the assets of the Company or a Parent or Subsidiary; or 

        (vi)  the
occurrence of an unforeseeable emergency with respect to the Participant. 

        (b)   In
the case of a Participant who is a "specified employee," the requirement of paragraph (a)(i) shall be met only if the distributions with respect to the
Section 409A Award may not be made before the date which is six months after the Participant's separation from service (or, 

11

 

if
earlier, the date of the Participant's death). For purposes of this subsection (b), a Participant shall be a "specified employee" if such Participant is a key employee (as defined in
Section 416(i) of the Code without regard to paragraph (5) thereof) of a corporation any stock of which is publicly traded on an established securities market or otherwise, as determined
under Section 409A(a)(2)(B)(i) of the Code and the Treasury Regulations thereunder. 

        (c)   The
requirement of paragraph (a)(vi) shall be met only if, as determined under Treasury Regulations under Section 409A(a)(2)(B)(ii) of the Code, the
amounts distributed with respect to the unforeseeable emergency do not exceed the amounts necessary to satisfy such unforeseeable emergency plus amounts necessary to pay taxes reasonably anticipated
as a result of the distribution, after taking into account the extent to which such unforeseeable emergency is or may be relieved through reimbursement or compensation by insurance or otherwise or by
liquidation of the Participant's assets (to the extent the liquidation of such assets would not itself cause severe financial hardship). 

        (d)   For
purposes of this Section, the terms specified therein shall have the respective meanings ascribed thereto under Section 409A of the Code and the Treasury
Regulations thereunder. 

        9.3    Prohibition on Acceleration of Benefits.    The time or schedule of any
distribution or payment of any shares of Stock or other property or amounts under a Section 409A Award shall not be accelerated, except as otherwise permitted under Section 409A(a)(3) of
the Code and the Treasury Regulations thereunder. 

        9.4    Elections under Section 409A Awards.    

        (a)   Any
deferral election provided under or with respect to an Award to any Eligible Individual, or to the Participant holding a Section 409A Award, shall satisfy the
requirements of Section 409A(a)(4)(B) of the Code, to the extent applicable, and, except as otherwise permitted under paragraph (i) or (ii) below, any such deferral election with
respect to compensation for services performed during a taxable year shall be made not later than the close of the preceding taxable year, or at such other time as provided in Treasury Regulations. 

        (i)    In
the case of the first year in which an Eligible Individual or a Participant holding a Section 409A Award, becomes eligible to participate in the Plan, any such
deferral election may be made with respect to services to be performed subsequent to the election with thirty days after the date the Eligible
Individual, or the Participant holding a Section 409A Award, becomes eligible to participate in the Plan, as provided under Section 409A(a)(4)(B)(ii) of the Code. 

        (ii)   In
the case of any performance-based compensation based on services performed by an Eligible Individual, or the Participant holding a Section 409A Award, over a
period of at least twelve months, any such deferral election may be made no later than six months before the end of the period, as provided under Section 409A(a)(4)(B)(iii) of the Code. 

        (b)   In
the event that a Section 409A Award permits, under a subsequent election by the Participant holding such Section 409A Award, a delay in a distribution
or payment of any shares of Stock or other property or amounts under such Section 409A Award, or a change in the form of distribution or payment, such subsequent election shall satisfy
the requirements of Section 409A(a)(4)(C) of the Code, and: 

        (i)    such
subsequent election may not take effect until at least twelve months after the date on which the election is made, 

12

 

        (ii)   in
the case such subsequent election relates to a distribution or payment not described in Section 9.2(a)(ii), (iii) or (vi), the first payment
with respect to such election may be deferred for a period of not less than five years from the date such distribution or payment otherwise would have been made, and 

        (iii)  in
the case such subsequent election relates to a distribution or payment described in Section 9.2(a)(iv), such election may not be made less than twelve months
prior to the date of the first scheduled distribution or payment under Section 9.2(a)(iv). 

        9.5    Compliance in Form and Operation.    A Section 409A Award, and any
election under or with respect to such Section 409A Award, shall comply in form and operation with the requirements of Section 409A of the Code and the Treasury Regulations thereunder. 

 
 

ARTICLE 10    
    PROVISIONS APPLICABLE TO AWARDS    
    

        10.1    Stand-Alone and Tandem Awards.    Awards granted pursuant to the Plan may, in the
discretion of the Administrator, be granted either alone, in addition to, or in tandem with, any other Award granted pursuant to the Plan. Awards granted in addition to or in tandem with other Awards
may be granted either at the same time as or at a different time from the grant of such other Awards. 

        10.2    Award Agreement.    Awards under the Plan shall be evidenced by Award Agreements
that set forth the terms, conditions and limitations for each Award which may include the term of an Award, the provisions applicable in the event of the Participant's Termination of Service, and the
Company's authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind an Award. 

        10.3    Limits on Transfer.    

        (a)   Except
as otherwise provided by the Administrator pursuant to Section 10.3(b), no right or interest of a Participant in any Award may be pledged, encumbered, or
hypothecated to or in favor of any party other than the Company or a Parent or Subsidiary, or shall be subject to any lien, obligation, or liability of such Participant to any other party other than
the Company or a Parent or Subsidiary. Except as otherwise provided by the Administrator pursuant to Section 10.3(b), no Award shall be assigned, transferred, or otherwise disposed of by a
Participant other than by will or the laws of descent and distribution, unless and until such Award has been exercised, or the shares underlying such Award have been issued, and all restrictions
applicable to such shares have lapsed. 

        (b)   Notwithstanding
Section 10.3(a), the Administrator, in its sole discretion, may permit an Award (other than an Incentive Stock Option) to be transferred to,
exercised by and paid to any one or more Permitted Transferees (as defined below), subject to the following terms and conditions: (i) an Award transferred to a Permitted Transferee shall
not be assignable or transferable by the Permitted Transferee other than by will or the laws of descent and distribution; (ii) any Award which is transferred to a Permitted Transferee shall
continue to be subject to all the terms and conditions of the Award as applicable to the original Participant (other than the ability to further transfer the Award); and (iii) the Participant
and the Permitted Transferee shall execute any and all documents requested by the Administrator, including, without limitation documents to (A) confirm the status of the transferee as a
Permitted Transferee, (B) satisfy any requirements for an exemption for the transfer under applicable federal and state securities laws and (C) evidence the transfer. For purposes of
this Section 10.3(b), "Permitted Transferee" shall mean, with respect to a Participant, any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the Participant's
household (other than a tenant or employee), a trust in which these persons (or the 

13

 

Participant)
control the management of assets, and any other entity in which these persons (or the Participant) own more than fifty percent of the voting interests, or any other transferee
specifically approved by the Administrator. 

        10.4    Beneficiaries.    Notwithstanding Section 10.3, a Participant may, in the
manner determined by the Administrator, designate a beneficiary to exercise the rights of the Participant and to receive any distribution with respect to any Award upon the Participant's death. A
beneficiary, legal guardian, legal representative, or other person claiming any rights pursuant to the Plan is subject to all terms and conditions of the Plan and any Award Agreement applicable to the
Participant, except to the extent the Plan and Award Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Administrator. If the Participant is married
and resides in a community property state, a designation of a person other than the Participant's spouse as his or her beneficiary with respect to more than 50% of the Participant's interest in the
Award shall not be effective without the prior written consent of the Participant's spouse. If no beneficiary has been designated or survives the Participant, payment shall be made to the person
entitled thereto pursuant to the Participant's will or the laws of descent and distribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Participant at any time
provided the change or revocation is filed with the Administrator. 

        10.5    Stock Certificates; Book Entry Procedures.    

        (a)   Notwithstanding
anything herein to the contrary, the Company shall not be required to issue or deliver any certificates evidencing shares of Stock pursuant to the
exercise or purchase of any Award, unless and until the Board has determined, with advice of counsel, that the issuance and delivery of such certificates is in compliance with all applicable laws,
regulations of governmental authorities and, if applicable, the requirements of any exchange on which the shares of Stock are listed or traded. All
Stock certificates delivered pursuant to the Plan are subject to any stop-transfer orders and other restrictions as the Administrator deems necessary or advisable to comply with federal,
state, or foreign jurisdiction, securities or other laws, rules and regulations and the rules of any national securities exchange or automated quotation system on which the Stock is listed, quoted, or
traded. The Administrator may place legends on any Stock certificate to reference restrictions applicable to the Stock. In addition to the terms and conditions provided herein, the Administrator may
require that a Participant make such reasonable covenants, agreements, and representations as the Administrator, in its discretion, deems advisable in order to comply with any such laws, regulations,
or requirements. The Administrator shall have the right to require any Participant to comply with any timing or other restrictions with respect to the settlement or exercise of any Award, including a
window-period limitation, as may be imposed in the discretion of the Administrator. 

        (b)   Notwithstanding
any other provision of the Plan, unless otherwise determined by the Administrator or required by applicable law, rule or regulation, the Company shall
not deliver to any Participant certificates evidencing shares of Stock issued in connection with any Award or exercise of any Award and instead such shares of Stock will be recorded in the books of
the Company (or as applicable, its transfer agent or stock plan administrator). 

 
 

ARTICLE 11    
    CHANGES IN CAPITAL STRUCTURE    
    

        11.1    Adjustments.    

        (a)   In
the event of any combination or exchange of shares, merger, consolidation, distribution of Company assets to stockholders (other than normal cash dividends), or any
other corporate event affecting the Stock or the share price of the Stock, other than an Equity Restructuring, the Administrator shall make such proportionate adjustments to reflect such change with
respect to 

14

 

(i) the
aggregate number and type of shares that may be issued under the Plan (including, but not limited to, adjustments of the limitation in Section 3.1); (ii) the terms and
conditions of any outstanding Awards (including, without limitation, any applicable performance targets or criteria with respect thereto); and (iii) the grant or exercise price per share for
any outstanding Awards under the Plan. 

        (b)   In
the event of any transaction or event described in Section 11.1(a) or any unusual or nonrecurring transactions or events affecting the Company, any
affiliate of the Company, or the financial statements
of the Company or any affiliate (including without limitation any Change in Control), other than an Equity Restructuring, or of changes in applicable laws, regulations or accounting principles, and
whenever the Administrator determines that such action is appropriate in order to prevent the dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan
or with respect to any Award under the Plan, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles, the Administrator, in its sole discretion
and on such terms and conditions as it deems appropriate, either by amendment of the terms of any outstanding Awards or by action taken prior to the occurrence of such transaction or event and either
automatically or upon the Participant's request, is hereby authorized to take any one or more of the following actions: 

        (i)    To
provide for either (A) termination of any such Award in exchange for an amount of cash and/or other property, if any, equal to the amount that would have been
received upon the exercise of such Award or realization of the Participant's rights (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction or event described in this
Section 11.1(b) the Administrator determines in good faith that no amount would have been attained upon the exercise of such Award or realization of the Participant's rights, then such Award
may be terminated by the Company without payment) or (B) the replacement of such Award with other rights or property selected by the Administrator in its sole discretion; 

        (ii)   To
provide that such Award be assumed by the successor or survivor entity, or a parent or subsidiary thereof, or shall be substituted for by similar options, rights or
awards covering the stock of the successor or survivor entity, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices; 

        (iii)  To
make adjustments in the number and type of shares of Stock (or other securities or property) subject to outstanding Awards, and in the number and kind of
outstanding Restricted Stock or Restricted Stock Units and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding options, rights and
awards, and options, rights and awards which may be granted in the future; 

        (iv)  To
provide that such Award shall be exercisable or payable or fully vested with respect to all shares covered thereby, notwithstanding anything to the contrary in the
Plan or the applicable Award Agreement; and 

        (v)   To
provide that the Award cannot vest, be exercised or become payable after such event. 

        (c)   In
connection with the occurrence of any Equity Restructuring, and notwithstanding anything to the contrary in Sections 11.1(a) and 11.1(b): 

        (i)    The
number and type of securities subject to each outstanding Award and the exercise price or grant price thereof, if applicable, will be proportionately adjusted by the
Administrator as the Administrator deems appropriate to reflect such Equity Restructuring. The adjustments provided under this Section 11(c)(i) shall be 

15

 

nondiscretionary
and shall be final and binding on the affected Participant and the Company. 

        (ii)   The
Administrator shall make such proportionate adjustments, if any, as the Administrator in its discretion may deem appropriate to reflect such Equity Restructuring
with respect to the aggregate number and kind of shares that may be issued under the Plan (including, but not limited to, adjustments of the limitations in Article 3). 

        11.2    Acceleration Upon a Change in Control.    

        (a)   Notwithstanding
anything to the contrary contained in Section 11.1, and except as may otherwise be provided in any applicable Award Agreement or other written
agreement entered into between the Company and a Participant, if a Change in Control occurs and a Participant's Awards are not continued, converted, assumed or replaced by (i) the Company or a
Parent or Subsidiary, or (ii) a Successor Entity, such Awards shall become fully exercisable and/or payable, as applicable, and all forfeiture, repurchase and other restrictions on such Awards
shall lapse immediately prior to such Change in Control. Upon, or in anticipation of, a Change in Control, the Administrator may cause any and all Awards outstanding hereunder to terminate at a
specific time in the future, including without limitation, the date of such Change in Control, and shall give each Participant the right to exercise such Awards during a period of time as the
Administrator, in its sole and absolute discretion, shall determine. The Administrator shall have sole discretion to determine whether an Award has been continued, converted, assumed or replaced in
connection with a Change in Control. 

        (b)   Except
as otherwise provided in the Agreement evidencing the Award, any such Awards that are continued, converted, assumed, or replaced by (i) the Company or a
Parent or Subsidiary of the Company, or (ii) a Successor Entity, in a Change in Control and do not otherwise accelerate at that time shall become fully exercisable and/or payable, as
applicable, and all forfeiture, repurchase and other restrictions on such Awards shall lapse in the event that the Participant has a Termination of Employment, Termination of Directorship or
Termination of Consultancy (i) in connection with the Change in Control or (ii) subsequently within twelve months following such Change in Control, unless such termination is by reason
of the Participant's discharge by the Company or a Parent or Subsidiary or a Successor Entity for Cause or by reason of the Participant's voluntary resignation without Good Reason. 

        11.3    No Other Rights.    Except as expressly provided in the Plan or pursuant to
action of the Administrator under the Plan, no Participant shall have any rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividend, any
increase or decrease in
the number of shares of stock of any class or any dissolution, liquidation, merger, or consolidation of the Company or any other corporation. Except as expressly provided in the Plan or pursuant to
action of the Administrator under the Plan, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by
reason thereof shall be made with respect to, the number of shares of Stock subject to an Award or the grant or exercise price of any Award. 

 
 

ARTICLE 12    
    ADMINISTRATION    
    

        12.1    Administrator.    The Plan shall be administered by the Board. The Board may
delegate administration of the Plan to a Committee or Committees of one or more members of the Board, and the term "Administrator" shall apply to any
person or persons who at the time have the authority to administer the Plan. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan,
the powers theretofore possessed by the Board, including the power to delegate to a subcommittee any of the administrative powers the Committee is 

16

 

authorized
to exercise (and references in this Plan to the Board shall thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. Notwithstanding the foregoing, however, from and after the Public Trading Date, a Committee of the Board shall administer the
Plan and such Committee shall consist solely of two or more members of the Board each of whom is an "outside director," within the meaning of Section 162(m) of the Code and a
Non-Employee Director. Notwithstanding the foregoing: (a) the full Board, acting by a majority of its members in office, shall conduct the general administration of the Plan with
respect to all Awards granted to Non-Employee Directors and for purposes of such Awards the term "Administrator" as used in this Plan shall
be deemed to refer to the Board, and (b) the Board or the Committee may delegate its authority hereunder to the extent permitted by Section 12.5. In its sole discretion, the Board may at
any time and from time to time exercise any and all rights and duties of the Administrator under the Plan except with respect to matters which, following the Public Trading Date, are required to be
determined in the sole discretion of the Committee under Rule 16b-3 under the Exchange Act or Section 162(m) of the Code, or any regulations or rules issued
thereunder. Committee members may resign at any time by delivering written notice to the Board. Vacancies in the Committee may only be filled by the Board. 

        12.2    Action by the Administrator.    A majority of the members of the Administrator
shall constitute a quorum. The acts of a majority of the members of the Administrator present at any meeting at which a quorum is present, and, subject to applicable law, acts approved in writing by a
majority of the
members of the Administrator in lieu of a meeting, shall be deemed the acts of the Administrator. Each member of the Administrator is entitled to, in good faith, rely or act upon any report or other
information furnished to that member by any officer or other employee of the Company or any Parent or Subsidiary, the Company's independent certified public accountants, or any executive compensation
consultant or other professional retained by the Company to assist in the administration of the Plan. 

        12.3    Authority of Administrator.    Subject to any specific designation in the Plan,
the Administrator has the exclusive power, authority and discretion to: 

        (a)   Designate
Eligible Individuals to receive Awards; 

        (b)   Determine
the type or types of Awards to be granted to each Eligible Individual; 

        (c)   Determine
the number of Awards to be granted and the number of shares of Stock to which an Award will relate; 

        (d)   Determine
the terms and conditions of any Award granted pursuant to the Plan, including, but not limited to, the exercise price, grant price, or purchase price, any
reload provision, any restrictions or limitations on the Award, any schedule for lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations or waivers
thereof, any provisions related to non-competition and recapture of gain on an Award, based in each case on such considerations as the Administrator in its sole discretion determines; 

        (e)   Determine
whether, to what extent, and pursuant to what circumstances an Award may be settled in, or the exercise price of an Award may be paid in, cash, Stock, other
Awards, or other property, or an Award may be canceled, forfeited, or surrendered; 

        (f)    Prescribe
the form of each Award Agreement, which need not be identical for each Participant; 

        (g)   Decide
all other matters that must be determined in connection with an Award; 

        (h)   Establish,
adopt, or revise any rules and regulations as it may deem necessary or advisable to administer the Plan; 

17

 

        (i)    Interpret
the terms of, and any matter arising pursuant to, the Plan or any Award Agreement; and 

        (j)    Make
all other decisions and determinations that may be required pursuant to the Plan or as the Administrator deems necessary or advisable to administer the Plan. 

        11.4    Decisions Binding.    The Administrator's interpretation of the Plan, any Awards
granted pursuant to the Plan, any Award Agreement and all decisions and determinations by the Administrator with respect to the Plan are final, binding, and conclusive on all parties. 

        11.5    Delegation of Authority.    Within the scope of such authority, the Board or the
Committee may delegate to a committee of one or more members of the Board or one or more officers of the Company the authority to grant or amend Awards to Participants other than Eligible Individuals
who are either (a) "covered employees" at the time of recognition of income resulting from such Awards, and/or (b) persons with respect to whom the Company wishes to comply with
Section 162(m) of the Code and/or (c) subject to Section 16 of the Exchange Act and/or (d) officers of the Company or members of the Board to whom authority to grant or
amend Awards has been delegated pursuant to this Section 12.5. At all times, the delegate(s) appointed under this Section 12.5 shall serve in such capacity at the pleasure of the Board
or the Committee. 

 
 

ARTICLE 13    
    EFFECTIVE AND EXPIRATION DATE    
    

        13.1    Effective Date.    The Plan will be effective on the date of the Board's initial
adoption of the Plan (the "Effective Date"). The Plan will be submitted for the approval of the Company's stockholders within twelve months after
the Effective Date. Awards may be granted or awarded prior to such stockholder approval, provided that such Awards shall not be exercisable, shall not vest and the restrictions thereon shall not lapse
prior to the time when the Plan is approved by the stockholders, and provided further that if such approval has not been obtained at the end of said twelve-month period, all Awards previously granted
or awarded under the Plan shall thereupon be canceled and become null and void. 

        13.2    Expiration Date.    The Plan will expire on, and no Award may be granted pursuant
to the Plan after, the tenth anniversary of the earlier of (i) the Effective Date or (ii) the date this Plan is approved by the Company's stockholders. Any Awards that are outstanding on
the tenth anniversary of the Effective Date shall remain in force according to the terms of the Plan and the applicable Award Agreement. 

 
 

ARTICLE 14    
    AMENDMENT, MODIFICATION, AND TERMINATION    
    

        14.1    Amendment, Modification, and Termination.    The Board may terminate, amend or
modify the Plan at any time and from time to time; provided, however, that to the extent necessary to comply with any applicable law, regulation, or
stock exchange rule, the Company shall obtain stockholder approval of any Plan amendment in such a manner and to such a degree as required. The Administrator shall have the authority to effect, at any
time and from time to time, with the consent of the affected Option holders, the cancellation of any or all outstanding Awards under the Plan and to grant in substitution therefor new Awards covering
the same or different number of shares of Stock and with a different or no exercise price per share. 

        14.2    Awards Previously Granted.    No termination, amendment, or modification of the
Plan shall adversely affect in any material way any Award previously granted pursuant to the Plan without the prior written consent of the Participant. 

18

 
 
 

ARTICLE 15    
    GENERAL PROVISIONS    
    

        15.1    No Rights to Awards.    No Participant, Employee, or other person shall have any
claim to be granted any Award pursuant to the Plan, and neither the Company nor the Administrator is obligated to treat Participants, Employees, and other persons uniformly. 

        15.2    No Stockholder Rights.    Except as otherwise provided herein, a Participant
shall have none of the rights of a stockholder with respect to shares of Stock covered by any Award until the Participant becomes the record owner of such shares of Stock. 

        15.3    Withholding.    The Company or any Parent or Subsidiary shall have the authority
and the right to deduct or withhold, or require a Participant to remit to the Company an amount sufficient to satisfy federal, state, local and foreign taxes (including the Participant's employment
tax obligations) required by law to be withheld with respect to any taxable event concerning a Participant arising as a result of this Plan. The Administrator may in its discretion and in satisfaction
of the foregoing requirement allow a Participant to elect to have the Company or a Parent or Subsidiary, as applicable, withhold shares of Stock otherwise issuable under an Award (or allow the
return of shares of Stock) having a Fair Market Value equal to the sums required to be withheld. Notwithstanding any other provision of the Plan, the number of shares of Stock which may be withheld
with respect to the issuance, vesting, exercise or payment of any Award (or which may be repurchased from the Participant of such Award within six months (or such other period as may be
determined by the Administrator) after such shares of Stock were acquired by the Participant from the Company) in order to satisfy the Participant's federal, state, local and foreign tax liabilities
with respect to the issuance, vesting, exercise or payment of the Award shall be limited to the number of shares which have a Fair Market Value on the date of withholding or repurchase equal to the
aggregate amount of such liabilities based on the minimum statutory withholding rates for federal, state, local and foreign income tax and employment tax purposes that are applicable to such
supplemental taxable income. 

        15.4    No Right to Employment or Services.    Nothing in the Plan or any Award Agreement
shall interfere with or limit in any way the right of the Company or any Parent or Subsidiary to terminate any Participant's employment or services at any time, nor confer upon any Participant any
right to continue in the employ or service of the Company or any Parent or Subsidiary. 

        15.5    Unfunded Status of Awards.    The Plan is intended to be an "unfunded" plan for
incentive compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give the Participant any rights that
are greater than those of a general creditor of the Company or any Parent or Subsidiary. 

        15.6    Indemnification.    To the extent allowable pursuant to applicable law, the
Administrator (and each member thereof) shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such
member in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action or failure to act
pursuant to the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in such action, suit, or proceeding against him or her;  provided he or she gives the Company
an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend
it on his or
her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled pursuant to the Company's Certificate of
Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless. 

        15.7    Relationship to Other Benefits.    No payment pursuant to the Plan shall be taken
into account in determining any benefits pursuant to any pension, retirement, savings, profit sharing, group 

19

 

insurance,
welfare or other benefit plan of the Company or any Parent or Subsidiary except to the extent otherwise expressly provided in writing in such other plan or an agreement thereunder. 

        15.8    Expenses.    The expenses of administering the Plan shall be borne by the Company
and its Parents and Subsidiaries. 

        15.9    Titles and Headings.    The titles and headings of the Sections in the Plan are
for convenience of reference only and, in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control. 

        15.10    Fractional Shares.    No fractional shares of Stock shall be issued and the
Administrator shall determine, in its discretion, whether cash shall be given in lieu of fractional shares or whether such fractional shares shall be eliminated by rounding up or down
as appropriate. 

        15.11    Limitations Applicable to Section 16 Persons.    Notwithstanding any
other provision of the Plan, the Plan, and any Award granted or awarded to any Participant who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations
set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 under the Exchange Act) that are requirements
for the application of such exemptive rule. To the extent permitted by applicable law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to
such applicable exemptive rule. 

        15.12    Government and Other Regulations.    The obligation of the Company to make
payment of awards in Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by government agencies as may be required. The Company shall be under no
obligation to register pursuant to the Securities Act any of the shares of Stock paid pursuant to the Plan. If the shares paid pursuant to the Plan may in certain circumstances be exempt from
registration pursuant to the Securities Act, the Company may restrict the transfer of such shares in such manner as it deems advisable to ensure the availability of any such exemption. 

        15.13    Governing Law.    The Plan and all Award Agreements shall be construed in
accordance with and governed by the laws of the State of California, without regard to the conflicts of law principles thereof. 

        15.14    Compliance with California Securities Laws.    Unless determined otherwise by
the Administrator, prior to the Public Trading Date, this Plan is intended to comply with Section 25102(o) of the California Corporations Code and the regulations issued thereunder.
Appendix I to the Plan sets forth the requirements under Section 25102(o) of the California Corporations Code and the regulations issued thereunder and is incorporated herein by
reference. If any of the provisions contained in this Plan are inconsistent with such requirements or Appendix I, such provisions shall be deemed null and void. The invalidity of any provision
of this Plan shall not affect the validity or enforceability of any other provision of this Plan, which shall remain in full force and effect. 

        15.15    Appendices.    The Board may approve such supplements to, or amendments, or
appendices to, the Plan as it may consider necessary or appropriate for purposes of compliance with applicable laws or otherwise and such supplements, amendments or appendices shall be considered a
part of the Plan; provided, however, that no such supplements, amendments or appendices shall increase the share limitation contained in
Section 3.1 of the Plan. 

20

 

 

 
 

APPENDIX I
  
    TO
  
    ZOGENIX, INC.
  
    2006 EQUITY INCENTIVE PLAN
  
    California State Securities Law Compliance    
    

        Notwithstanding anything to the contrary contained in the Plan and except as otherwise determined by the Administrator, the provisions set forth in this Appendix
shall apply to all Awards granted under the Zogenix, Inc. 2006 Equity Incentive Plan (the "Plan") prior to the Public Trading Date.
This Appendix shall be of no further force and effect on or after the Public Trading Date. Definitions as set out in Article 2 of the Plan are applicable to this Appendix. 

        The
purpose of this Appendix is to set forth those provisions of the Plan necessary to comply with Section 25102(o) of the California Corporations Code and the regulations issued
thereunder. If any of the provisions contained in this Appendix are inconsistent with such requirements, such provisions shall be deemed null and void. The invalidity of any provision of this Appendix
shall not affect the validity or enforceability of any other provision of this Appendix, which shall remain in full force and effect. 

        References
to Articles and Sections set forth in this Appendix are to those Articles and Sections of the Plan. 

        1.1    Term of Awards.    The term of each Award shall be no more than ten years from the
date of grant thereof. 

        2.1    Award Exercise or Purchase Price.    Except as provided in Article 11, the
per share exercise or purchase price for the Stock to be issued upon exercise of an Award shall be such price as is determined by the Administrator, but in the case of an Award granted to a
Participant who, at the time of grant of such Award, owns stock representing more than 10% of the voting power of all classes of stock of the Company or any parent (as defined in
Section 175 of the California Corporations Code) or
Subsidiary, the per share exercise or purchase price shall be no less than 110% of the Fair Market Value per share on the date of the grant (100% in the case of an Award other than an Option).
Notwithstanding the foregoing, Awards may be granted with a per share exercise or purchase price other than as required above pursuant to a merger or other corporate transaction. 

        3.1    Exercisability.    Except with regard to Awards granted to officers, members of
the Board, managers or consultants, in no event shall an Award granted hereunder become vested and exercisable at a rate of less than 20% per year over five years from the date the Award is granted,
subject to reasonable conditions, such as continuing to be a member of the Board, Employee or Consultant. 

        4.1    Exercisability Following Termination.    

        (a)   Termination
Other Than Death or Disability.    If a Participant has a Termination of Service for any reason other than by reason of the Participant's
Disability or death, such Participant may exercise his or her Award within such period of time as is specified in the Award Agreement to the extent that the Award is vested on the date of termination;  provided, however, that prior to the Public Trading Date, such period of time shall not be less than
thirty days (but in no event later than the expiration of the term of the Award as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option shall
remain exercisable for three months following the Participant's Termination of Service for any reason other than death or Disability. 

        (b)   Death.    If
a Participant has a Termination of Service as a result of the Participant's death, the Award may be exercised within such period of time as is
specified in the Award 

23

 

Agreement;
provided, however, that prior to the Public Trading Date, such period of time shall not be
less than six months (but in no event later than the expiration of the term of such Award as set forth in the Notice of Grant), by the Participant's estate or by a person who acquires the right
to exercise the Award by bequest or inheritance, but only to the extent that the Award is vested on the date of death. In the absence of a specified time in the Award Agreement, the Award shall remain
exercisable for twelve months following the Participant's Termination of Service for death. 

        (c)   Disability
of Participant.    If a Participant has a Termination of Service as a result of the Participant's Disability, the Participant may exercise his or
her Award within such period of time as is specified in the Award Agreement to the extent the Award is vested on the date of termination; provided,  however,
 that prior to the Public Trading Date, such period of time shall not be less than six months (but in no event later than the expiration
of the term of such Award as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Award shall remain exercisable for twelve months following the
Participant's Termination of Service for Disability. 

        (d)   Misconduct
of Participant.    If a Participant has a Termination of Service as a result of the Participant's Misconduct, the Award shall terminate immediately
and cease to remain outstanding. 

        5.1    Repurchase Provisions.    In the event the Administrator provides that the Company
may repurchase Stock acquired upon exercise of an Award upon the occurrence of certain specified events, including, without limitation, a Participant's Termination of Service, divorce, bankruptcy or
insolvency, then any such repurchase right shall be set forth in the applicable Award Agreement or in another agreement referred to in such agreement and, to the extent required by
Section 260.140.41 and Section 260.140.42 of Title 10 of the California Code of Regulations (or any successor regulation), any such repurchase right set forth in an Award granted
prior to the Public Trading Date to a person who is not an officer, member of the Board, manager or consultant shall be upon the following terms: (i) if the repurchase option gives the Company
the right to repurchase the shares upon the Participant's Termination of Service at not less than the Fair Market Value of the shares to be purchased on the date of termination of employment or
service, then (A) the right to repurchase shall be exercised for cash or cancellation of purchase money indebtedness for the shares within ninety days of termination (or in the case of
shares issued upon exercise of Awards after such date of termination, within ninety days after the date of the exercise) or such longer period as may be agreed to by the Administrator and the
Participant and (B) the right terminates on the Public Trading Date; and (ii) if the repurchase option gives the Company the right to repurchase the Stock upon the Participant's
Termination of Service at the original purchase price for such Stock, then (A) the right to repurchase at the original purchase price shall lapse at the rate of at least 20% of the shares per
year over five (5) years from the date the Award is granted (without respect to the date the Award was exercised or became exercisable) and (B) the right to repurchase shall be exercised
for cash or cancellation of purchase money indebtedness for the shares within ninety days of termination (or, in the case of shares issued upon exercise of Awards, after such date of termination,
within ninety days after the date of the exercise) or such longer period as may be agreed to by the Company and the Participant. 

        6.1    Information Rights.    Prior to the Public Trading Date and to the extent required
by Section 260.140.46 of Title 10 of the California Code of Regulations, the Company shall provide to each Participant and to each individual who acquires Stock pursuant to the Plan, not less
frequently than annually during the period such Participant has one or more Awards outstanding, and, in the case of an individual who acquires Stock pursuant to the Plan, during the period such
individual owns such Stock, copies of annual financial statements. Notwithstanding the preceding sentence, the Company shall not be required to provide such statements to key employees whose duties in
connection with the Company assure their access to equivalent information. 

24

 

        7.1    Transferability.    Prior to the Public Trading Date, no Award shall be assigned,
transferred, or otherwise disposed of by a Participant other than by will or the laws of descent and distribution or, with respect to Awards other than Incentive Stock Options, as permitted by
Rule 701 of the Securities Act. 

        8.1    Limitation on Number of Shares.    Prior to the Public Trading Date, at no time
shall the total number of shares of Stock issuable upon exercise of all outstanding Options under the Plan and any shares of Stock provided for under any bonus or similar plan or agreement of the
Company exceed 30% of the then-outstanding shares of Stock of the Company, as calculated pursuant to Section 260.140.45 of Title 10 of the California Code of Regulations
(or any successor regulation), unless a percentage higher than 30% is approved by at least two-thirds of the outstanding securities of the Company entitled to vote. The number of
shares of Stock which may be issued or transferred pursuant to Awards under the Plan shall be reduced to the extent necessary to comply with this provision. 

25

 

 
 

ZOGENIX, INC.
  
    2006 EQUITY INCENTIVE PLAN
  
    STOCK OPTION GRANT NOTICE AND
  STOCK OPTION AGREEMENT    
    

        Zogenix, Inc. (the "Company"), pursuant to its 2006 Equity Incentive Plan (the
"Plan"), hereby grants to the holder listed below ("Participant"), an option to purchase the number of
shares of the Company's Stock set forth below (the "Option"). This Option is subject to all of the terms and conditions as set forth herein and in the
Stock Option Agreement attached hereto as Exhibit A (the "Stock Option Agreement") and the Plan,
each of which are incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Stock Option
Agreement. 

	
 	

 	

 
	
 Participant:	

	
 Grant Date:	

	
 Vesting Commencement Date:	

	
 Exercise Price per Share:	

$	

	
 Total Exercise Price:	

$	

	
 Total Number of Shares Subject to the Option:	

	
 Expiration Date:	

	
 	
 	

 
	
 Type of Option:	
 	

o Incentive Stock Option        o Non-Qualified Stock Option
	
 Vesting Schedule:	
 	

[To be specified in individual agreements.]

        By his or her signature and the Company's signature below, Participant agrees to be bound by the terms and conditions of the Plan, the Stock Option Agreement and
this Grant Notice. Participant has reviewed the Stock Option Agreement, the Plan and this Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this
Grant Notice and fully understands all provisions of this Grant Notice, the Stock Option Agreement and the Plan. Participant hereby agrees to accept as binding, conclusive and final all decisions or
interpretations of the Administrator of the Plan upon any questions arising under the Plan or the Option. 

	 ZOGENIX, INC.	 	PARTICIPANT:
	
 By:	
 	

 	
 	

By:	
 	

 
	 	 	
	 	 	 	

	Print Name:	 	 	 	Print Name:	 	 
	 	 	 	 	 	 	

	Title:	 	 	 	 	 	 
	Address:	 	 	 	Address:	 	 
	 	 	 	 	 	 	

	 	 	 	 	 	 	

 
 
 

EXHIBIT A
  
    TO STOCK OPTION GRANT NOTICE
  
    STOCK OPTION AGREEMENT    
    

        Pursuant to the Stock Option Grant Notice ("Grant Notice") to which this Stock Option Agreement (this
"Agreement") is attached, Zogenix, Inc. (the "Company") has granted to Participant an option
under the Company's 2006 Equity Incentive Plan (the "Plan") to purchase the number of shares of Stock indicated in the Grant Notice. 

 
 

ARTICLE I
  
    GENERAL    
    

        1.1    Defined Terms.    Capitalized terms not specifically defined herein shall have the
meanings specified in the Plan and the Grant Notice. 

        1.2    Incorporation of Terms of Plan.    The Option is subject to the terms and
conditions of the Plan which are incorporated herein by reference. 

 
 

ARTICLE II
  
    GRANT OF OPTION    
    

        2.1    Grant of Option.    In consideration of Participant's past and/or continued
employment with or service to the Company or a Parent or Subsidiary and for other good and valuable consideration, effective as of the Grant Date set forth in the Grant Notice (the
"Grant Date"), the Company irrevocably grants to Participant the Option to purchase any part or all of an aggregate of the number of shares of Stock set
forth in the Grant Notice, upon the terms and conditions set forth in the Plan and this Agreement. Unless designated as a Non-Qualified Stock Option in the Grant Notice, the Option shall
be an Incentive Stock Option to the maximum extent permitted by law. 

        2.2    Exercise Price.    The exercise price of the shares of Stock subject to the Option
shall be as set forth in the Grant Notice, without commission or other charge; provided, however, that
if this Option is designated as an Incentive Stock Option, the price per share of the shares subject to the Option shall not be less than the greater of (i) 100% of the Fair Market Value of a
share of Stock on the Grant Date, or (ii) 110% of the Fair Market Value of a share of Stock on the Grant Date in the case of a Participant then owning (within the meaning of
Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or any "subsidiary corporation" of the Company or any "parent corporation" of
the Company (each within the meaning of Section 424 of the Code). 

 
 

ARTICLE III
  
    PERIOD OF EXERCISABILITY    
    

        3.1    Commencement of Exercisability.    

        (a)   Subject
to Sections 3.3 and 5.8, the Option shall become vested and exercisable in such amounts and at such times as are set forth in the Grant Notice. 

        (b)   No
portion of the Option which has not become vested and exercisable at the date of Participant's Termination of Service shall thereafter become vested and exercisable,
except as may be otherwise provided by the Administrator or as set forth in a written agreement between the Company and Participant. 

A-1

 

        3.2    Duration of Exercisability.    The installments provided for in the vesting
schedule set forth in the Grant Notice are cumulative. Each such installment which becomes vested and exercisable pursuant to the vesting schedule set forth in the Grant Notice shall remain vested and
exercisable until it becomes unexercisable under Section 3.3. 

        3.3    Expiration of Option.    The Option may not be exercised to any extent by anyone
after the first to occur of the following events: 

        (a)   The
expiration of ten years from the Grant Date; 

        (b)   If
this Option is designated as an Incentive Stock Option and Participant owned (within the meaning of Section 424(d) of the Code), at the time the Option was
granted, more than 10% of the total combined voting power of all classes of stock of the Company or any "subsidiary corporation" of the Company or "parent corporation" of the Company (each within the
meaning of Section 424 of the Code), the expiration of five years from the date the Option was granted; or 

        (c)   The
expiration of three months following the date of Participant's Termination of Service, unless such termination occurs by reason of Participant's death, Disability or
Misconduct; 

        (d)   The
expiration of one year following the date of Participant's Termination of Service by reason of Participant's death or Disability; or 

        (e)   The
date of Participant's Termination of Service as a result of Participant's Misconduct. 

        Participant
acknowledges that an Incentive Stock Option exercised more than three months after Participant's termination of status as an Employee, other than by reason of death or
Disability, will be taxed as a Non-Qualified Stock Option. 

        3.4    Special Tax Consequences.    Participant acknowledges that, to the extent that the
aggregate Fair Market Value (determined as of the time the Option is granted) of all shares of Stock with respect to which Incentive Stock Options, including the Option, are first exercisable for the
first time by Participant in any calendar year exceeds $100,000 (or such other limitation as imposed by Section 422(d) of the Code), the Option and such other options shall be treated as not
qualifying under Section 422 of the Code but rather shall be considered Non-Qualified Stock Options. Participant further acknowledges that the rule set forth in the preceding
sentence shall be applied by taking Options and other "incentive stock options" into account in the order in which they were granted. 

 
 

ARTICLE IV
  
    EXERCISE OF OPTION    
    

        4.1    Person Eligible to Exercise.    Except as provided in Sections 5.2(b) and
5.2(c), during the lifetime of Participant, only Participant may exercise the Option or any portion thereof. After the death of Participant, any exercisable portion of the Option may, prior to the
time when the Option becomes unexercisable under Section 3.3, be exercised by Participant's personal representative or by any person empowered to do so under the deceased Participant's will or
under the then applicable laws of descent and distribution. 

        4.2    Partial Exercise.    Any exercisable portion of the Option or the entire Option,
if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable under Section 3.3. 

A-2

 

        4.3    Manner of Exercise.    The Option, or any exercisable portion thereof, may be
exercised solely by delivery to the Secretary of the Company or the Secretary's office of all of the following prior to the time when the Option or such portion thereof becomes unexercisable under
Section 3.3: 

        (a)   An
Exercise Notice in writing signed by Participant or any other person then entitled to exercise the Option or portion thereof, stating that the Option or portion
thereof is thereby exercised, such notice complying with all applicable rules established by the Administrator. Such notice shall be substantially in the form attached as  Exhibit B to the Grant
Notice (or such other form as is prescribed by the Administrator); and 

        (b)   Subject
to Section 5.1(c) of the Plan: 

        (i)    Full
payment (in cash or by check) for the shares with respect to which the Option or portion thereof is exercised; or 

        (ii)   With
the consent of the Administrator, by delivery of a full recourse promissory note on such terms and conditions as may be approved by the Administrator; or 

        (iii)  With
the consent of the Administrator, by delivery of shares of Stock then issuable upon exercise of the Option having a Fair Market Value on the date of delivery
equal to the aggregate exercise price of the Option or exercised portion thereof; or 

        (iv)  On
and after the Public Trading Date, such payment may be made, in whole or in part, through the delivery of shares of Stock which have been owned by Participant for at
least six months, duly endorsed for transfer to the Company with a Fair Market Value on the date of delivery equal to the aggregate exercise price of the Option or exercised portion thereof; or 

        (v)   On
and after the Public Trading Date, through the delivery of a notice that Participant has placed a market sell order with a broker with respect to shares of Stock then
issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Option exercise price;  provided, that payment of such proceeds is made to the Company upon settlement of such sale; or 

        (vi)  Subject
to any applicable laws, any combination of the consideration provided in the foregoing paragraphs (i), (ii) and (iii); and 

        (c)   A
bona fide written representation and agreement, in such form as is prescribed by the Administrator, signed by Participant or the other person then entitled to exercise
such Option or portion thereof, stating that the shares of Stock are being acquired for Participant's own account, for investment and without any present intention of distributing or reselling said
shares or any of them except as may be permitted under the Securities Act and then applicable rules and regulations thereunder, and that Participant or other person then entitled to exercise such
Option or portion thereof will indemnify the Company against and hold it free and harmless from any loss, damage, expense or liability resulting to the Company if any sale or distribution of the
shares by such person is contrary to the representation and agreement referred to above. The Administrator may, in its absolute discretion, take whatever additional actions it deems appropriate to
ensure the observance and performance of such representation and agreement and to effect compliance with the Securities Act and any other federal or state securities laws or regulations. Without
limiting the generality of the foregoing, the Administrator may require an opinion of counsel acceptable to it to the effect that any subsequent transfer of shares acquired on an Option exercise does
not violate the Securities Act, and may issue stop-transfer orders covering such shares. Share certificates evidencing Stock issued on exercise of the Option shall bear an appropriate
legend referring to the provisions of this subsection (c) and the agreements herein. The written representation and agreement referred to in the first sentence of this subsection (c) 

A-3

 

shall,
however, not be required if the shares to be issued pursuant to such exercise have been registered under the Securities Act, and such registration is then effective in respect of such shares;
and 

        (d)   The
receipt by the Company of full payment for such shares, including payment of any applicable withholding tax, which may be in the form of consideration used by
Participant to pay for such shares under Section 4.3(b), subject to Section 15.3 of the Plan; and 

        (e)   In
the event the Option or portion thereof shall be exercised pursuant to Section 4.1 by any person or persons other than Participant, appropriate proof of the
right of such person or persons to exercise the Option. 

        4.4    Conditions to Issuance of Stock Certificates.    The shares of Stock deliverable
upon the exercise of the Option, or any portion thereof, may be either previously authorized but unissued shares or issued shares which have then been reacquired by the Company. Such shares shall be
fully paid and nonassessable. The Company shall not be required to issue or deliver any shares of Stock purchased upon the exercise of the Option or portion thereof prior to fulfillment of all of the
following conditions: 

        (a)   The
admission of such shares to listing on all stock exchanges on which such Stock is then listed; and 

        (b)   The
completion of any registration or other qualification of such shares under any state or federal law or under rulings or regulations of the Securities and Exchange
Commission or of any other governmental regulatory body, which the Administrator shall, in its absolute discretion, deem necessary or advisable; and 

        (c)   The
obtaining of any approval or other clearance from any state or federal governmental agency which the Administrator shall, in its absolute discretion, determine to be
necessary or advisable; and 

        (d)   The
lapse of such reasonable period of time following the exercise of the Option as the Administrator may from time to time establish for reasons of administrative
convenience; and 

        (e)   The
receipt by the Company of full payment for such shares, including payment of any applicable withholding tax, which may be in the form of consideration used by
Participant to pay for such shares under Section 4.3(b), subject to Section 15.3 of the Plan. 

        4.5    Rights as Stockholder.    The holder of the Option shall not be, nor have any of
the rights or privileges of, a stockholder of the Company in respect of any shares purchasable upon the exercise of any part of the Option unless and until such shares shall have been issued by the
Company to such holder. 

 
 

ARTICLE V
  
    OTHER PROVISIONS    
    

        5.1    Administration.    The Administrator shall have the power to interpret the Plan
and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. All actions
taken and all interpretations and determinations made by the Administrator in good faith shall be final and binding upon Participant, the Company and all other interested persons. No member of the
Administrator shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan, this Agreement or the Option. In its absolute discretion, the
Board may at any time and from time to time exercise any and all rights and duties of the Administrator under the Plan and this Agreement. 

A-4

 

        5.2    Option Not Transferable.    

        (a)   Subject
to Section 5.2(b), the Option may not be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution,
unless and until the shares underlying the Option have been issued, and all restrictions applicable to such shares have lapsed. Neither the Option nor any interest or right therein shall be liable for
the debts, contracts or engagements of Participant or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any
other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy),
and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence. 

        (b)   Notwithstanding
any other provision in this Agreement, with the consent of the Administrator and to the extent the Option is designated as a Non-Qualified
Stock Option, the Option may be transferred to, exercised by and paid to one or more Permitted Transferees, subject to the terms and conditions set forth in Section 10.3 of the Plan. 

        (c)   Unless
transferred to a Permitted Transferee in accordance with Section 5.2(b), during the lifetime of Participant, only Participant may exercise the Option or
any portion thereof. Subject to such conditions and procedures as the Administrator may require, a Permitted Transferee may exercise the Option or any portion thereof during Participant's lifetime.
After the death of Participant, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under Section 3.3, be exercised by Participant's personal
representative or by any person empowered to do so under the deceased Participant's will or under the then applicable laws of descent and distribution. 

        5.3    Lock-Up Period.    Participant hereby agrees that, if so requested by
the Company or any representative of the underwriters (the "Managing Underwriter") in connection with any registration of the offering of any securities
of the Company under the Securities Act, Participant shall not sell or otherwise transfer any shares of Stock or other securities of the Company during such period as may be requested in writing by
the Managing Underwriter and agreed to in writing by the Company (which period shall not be longer than one hundred eighty days) (the "Market Standoff
Period") following the effective date of a registration statement of the Company filed under the Securities Act; provided,  however, that such restriction shall apply only to the first registration statement of the Company to become effective under the Securities Act that
includes securities to be sold on behalf of the Company to the public in an underwritten public offering under the Securities Act. 

        5.4    Restrictive Legends and Stop-Transfer Orders.    

        (a)   The
share certificate or certificates evidencing the shares of Stock purchased hereunder shall be endorsed with any legends that may be required by state or federal
securities laws. 

        (b)   Participant
agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate "stop transfer" instructions to its
transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records. 

        (c)   The
Company shall not be required: (i) to transfer on its books any shares of Stock that have been sold or otherwise transferred in violation of any of the
provisions of this Agreement, or (ii) to treat as owner of such shares of Stock or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such shares shall
have been so transferred. 

A-5

 

        5.5    Shares to Be Reserved.    The Company shall at all times during the term of the
Option reserve and keep available such number of shares of Stock as will be sufficient to satisfy the requirements of this Agreement. 

        5.6    Notices.    Any notice to be given under the terms of this Agreement to the
Company shall be addressed to the Company in care of the Secretary of the Company at the address given beneath the signature of the Company's authorized officer on the Grant Notice, and any notice to
be given to Participant shall be addressed to Participant at the address given beneath Participant's signature on the Grant Notice. By a notice given pursuant to this Section 5.6, either party
may hereafter designate a different address for notices to be given to that party. Any notice which is required to be given to Participant shall, if Participant is then deceased, be given to the
person entitled to exercise his or her Option pursuant to Section 4.1 by written notice under this Section 5.6. Any notice shall be deemed duly given when sent via email or when sent by
certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service. 

        5.7    Titles.    Titles are provided herein for convenience only and are not to serve as
a basis for interpretation or construction of this Agreement. 

        5.8    Stockholder Approval.    The Plan will be submitted for approval by the Company's
stockholders within twelve months after the date the Plan was initially adopted by the Board. The Option may not be exercised to any extent by anyone prior to the time when the Plan is approved by the
stockholders, and
if such approval has not been obtained by the end of said twelve month period, the Option shall thereupon be canceled and become null and void. 

        5.9    Governing Law; Severability.    This Agreement shall be administered, interpreted
and enforced under the laws of the State of California, without regard to the conflicts of law principles thereof. Should any provision of this Agreement be determined by a court of law to be illegal
or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable. 

        5.10    Conformity to Securities Laws.    Participant acknowledges that the Plan is
intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission
thereunder, and state securities laws and regulations. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Option is granted and may be exercised, only in such a
manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such
laws, rules and regulations. 

        5.11    Amendments.    This Agreement may not be modified, amended or terminated except
by an instrument in writing, signed by Participant or such other person as may be permitted to exercise the Option pursuant to Section 4.1 and by a duly authorized representative of the
Company. 

        5.12    No Employment Rights.    If Participant is an Employee, nothing in the Plan or
this Agreement shall confer upon Participant any right to continue in the employ of the Company or any Subsidiary or shall interfere with or restrict in any way the rights of the Company and its
Subsidiaries, which are expressly reserved, to discharge Participant at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in a written
agreement between the Company and Participant. 

        5.13    Successors and Assigns.    The Company may assign any of its rights under this
Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this
Agreement shall be binding upon Participant and his or her heirs, executors, administrators, successors and assigns. 

A-6

 

        5.13    Notification of Disposition.    If this Option is designated as an Incentive
Stock Option, Participant shall give prompt notice to the Company of any disposition or other transfer of any shares of Stock acquired under this Agreement if such disposition or transfer is made
(a) within two years from the
Grant Date with respect to such shares or (b) within one year after the transfer of such shares to him. Such notice shall specify the date of such disposition or other transfer and the amount
realized, in cash, other property, assumption of indebtedness or other consideration, by Participant in such disposition or other transfer. 

        5.14    Limitations Applicable to Section 16 Persons.    Notwithstanding any other
provision of the Plan or this Agreement, if Participant is subject to Section 16 of the Exchange Act, the Plan, the Option and this Agreement shall be subject to any additional limitations set
forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the
application of such exemptive rule. To the extent permitted by applicable law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule. 

        5.15    Entire Agreement.    The Plan and this Agreement (including all Exhibits hereto)
constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof. 

A-7

 

 

 
 

EXHIBIT B
  
    TO STOCK OPTION GRANT NOTICE
  
    FORM OF EXERCISE NOTICE    
    

        Effective as of today,
                                    ,
                                    the undersigned  ("Participant") hereby elects to exercise Participant's option to
purchase                                    shares of the
Stock (the "Shares") of Zogenix, Inc. (the "Company") under and pursuant to the
Zogenix, Inc. 2006 Equity Incentive Plan (the "Plan") and the Stock Option Grant Notice and Stock Option Agreement
dated                                    ,
                        (the "Option Agreement"). Capitalized terms used
herein without definition shall have the meanings given in the Option Agreement. 

	Grant Date:	 	

	Number of Shares as to which Option is Exercised:	 	

	Exercise Price per Share:	 	$                                    
	Total Exercise Price:	 	$                                    
	Certificate to be issued in name of:	 	

	Cash Payment delivered herewith:

 	 	$
                                     (Representing the full
Exercise Price for the Shares, as well as any applicable withholding tax)

        Type of Option:    o Incentive Stock
Option            
o Non-Qualified Stock Option 

        1.    Representations of Participant.    Participant acknowledges
that Participant has received, read and understood the Plan and the Option Agreement. Participant agrees to abide by and be bound by their terms and conditions. 

        2.    Rights as Stockholder.    Until the Shares are issued (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with
respect to Shares subject to the Option, notwithstanding the exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares
are issued, except as provided in Article 10 of the Plan. 

        Participant
shall enjoy rights as a stockholder until such time as Participant disposes of the Shares or the Company and/or its assignee(s) exercises the Right of First Refusal
hereunder. Upon such exercise, Participant shall have no further rights as a holder of the Shares so purchased except the right to receive payment for the Shares so purchased in accordance with the
provisions of this Agreement, and Participant shall forthwith cause the certificate(s), if any issued, evidencing the Shares so purchased to be surrendered to the Company for transfer or cancellation. 

        3.    Participant's Rights to Transfer Shares.    

        (a)   Before
any Shares held by Participant or any permitted transferee (each, a "Holder") may be sold, pledged, assigned,
hypothecated, transferred, or otherwise disposed of (each, a "Transfer"), the Company or its assignee(s) shall have a right of first refusal to purchase
the Shares proposed to be Transferred on the terms and conditions set forth in this Section (the "Right of First Refusal"). In the event that the
Company's Bylaws contain a right of first refusal with respect to the Shares, such right of first refusal shall apply to the Shares to the extent such provisions are more restrictive than the Right of
First Refusal set forth in this Section and the Right of First Refusal set forth in this Section shall not in any way restrict the operation of the Company's Bylaws. 

B-1

 

        (b)   In
the event any Holder desires to Transfer any Shares, the Holder shall deliver to the Company a written notice (the
"Notice") stating: (i) the Holder's bona fide intention to sell or otherwise Transfer
such Shares; (ii) the name of each proposed purchaser or other transferee ("Proposed Transferee"); (iii) the number of Shares to be
Transferred to each Proposed Transferee; and (iv) the price for which the Holder proposes to Transfer the Shares (the "Offered Price"), and the
Holder shall offer such Shares at the Offered Price to the Company or its assignee(s). 

        (c)   Within
twenty-five days after receipt of the Notice, the Company and/or its assignee(s) may elect in writing to purchase all, but not less than all, of the
Shares proposed to be Transferred to any one or more of the Proposed Transferees by delivery of a written exercise notice to the Holder (a "Company
Notice"). The purchase price will be determined in accordance with subsection (d) below. 

        (d)   The
purchase price ("Purchase Price") for the Shares repurchased under this Section shall be the Offered Price. 

        (e)   Payment
of the Purchase Price shall be made, at the option of the Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any outstanding
indebtedness of the Holder to the Company (or, in the case of repurchase by an assignee, to the assignee), or by any combination thereof within five days after delivery of the Company Notice or in the
manner and at the times mutually agreed to by the Company and the Holder. Should the Offered Price specified in the Notice be payable in property other than cash, the Company shall have the right to
pay the purchase price in the form of cash equal in amount to the value of such property. If the Holder and the Company cannot agree on such cash value within ten days after the Company's receipt of
the Notice, the valuation shall be made by the Board. The payment of the purchase price shall then be held on the later of (i) five days following delivery of the Company Notice or
(ii) five days after such valuation shall have been made. 

        (f)    If
all or a portion of the Shares proposed in the Notice to be Transferred are not purchased by the Company and/or its assignee(s) as provided in this Section, then the
Holder may sell or otherwise Transfer such Shares to that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other Transfer is consummated within sixty days
after the date of the Notice and provided further that any such sale or other Transfer is effected in accordance with any applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section shall continue to apply to the Shares in the hands of such Proposed Transferee. If the Shares described in the Notice are not Transferred to the Proposed Transferee
within such sixty-day period, a new Notice shall be given to the Company, and the Company and/or its assignees shall again be offered the Right of First Refusal as provided herein before
any Shares held by the Holder may be sold or otherwise Transferred. 

        (g)   Anything
to the contrary contained in this Section notwithstanding, the Transfer of any or all of the Shares during Participant's lifetime or upon Participant's death by
will or intestacy to Participant's Immediate Family or a trust for the benefit of Participant's Immediate Family shall be exempt from the Right of First Refusal. As used herein,
"Immediate Family" shall mean spouse, lineal descendant or antecedent, father, mother, brother or sister or stepchild (whether or not adopted). In such
case, the transferee or other recipient shall receive and hold the Shares so Transferred subject to the provisions
of this Section (including the Right of First Refusal) and the Restricted Stock Purchase Agreement, if applicable, and there shall be no further Transfer of such Shares except in accordance with the
terms of this Section. 

        (h)   The
Right of First Refusal shall terminate as to all Shares upon the Public Trading Date. 

        (i)    Any
transfer or sale of the Shares is subject to restrictions on transfer imposed by any applicable state and federal securities laws. Any Transfer or attempted Transfer
of any of the 

B-2

 

Shares
not in accordance with the terms of this Agreement shall be void and the Company may enforce the terms of this Agreement by stop transfer instructions or similar actions by the Company and its
agents or designees. 

        4.    Tax Consultation.    Participant understands that Participant may suffer adverse
tax consequences as a result of Participant's purchase or disposition of the Shares. Participant represents that Participant has consulted with any tax consultants Participant deems advisable in
connection with the purchase or disposition of the Shares and that Participant is not relying on the Company for any tax advice. 

        5.    Restrictive Legends and Stop-Transfer Orders.    

        (a)   Legends.    Participant understands and agrees that the Company shall cause any certificates issued evidencing
the Shares shall have the legends set forth below or legends substantially equivalent thereto, together with any other legends that may be required by state or federal securities laws: 

THE
SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"), NOR HAVE THEY BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE.
NO TRANSFER OF SUCH SECURITIES WILL BE PERMITTED UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH TRANSFER, THE TRANSFER IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR IN
THE OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY) REGISTRATION UNDER THE ACT IS UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT AND WITH APPLICABLE STATE SECURITIES LAWS. 

THE
SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY
OF THE
COMPANY. SUCH TRANSFER RESTRICTIONS ARE BINDING ON TRANSFEREES OF THESE SHARES. 

        (b)   Participant
agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate "stop transfer" instructions to its
transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records. 

        (c)   The
Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of
this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred. 

        6.    Participant Representations.    Participant hereby makes the following
certifications and representations with respect to the Shares listed above: 

        (a)   Participant
is aware of the Company's business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and
knowledgeable decision to acquire the Shares. Participant is acquiring these Shares for investment for Participant's own account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act. 

B-3

 

        (b)   Participant
acknowledges and understands that the Shares constitute "restricted securities" under the Securities Act and have not been registered under the Securities
Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Participant's investment intent as expressed herein. Participant
understands that the Shares must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Participant further
acknowledges and understands that the Company is under no obligation to register the Shares. Participant understands that the certificate evidencing the Shares will be imprinted with a legend which
prohibits the transfer of the Shares unless they are registered or such registration is not required in the opinion of counsel satisfactory to the Company and any other legend required under
applicable state securities laws. 

        (c)   Participant
is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public
resale of "restricted securities" acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of the grant of the Option to Participant, the exercise will be exempt from
registration under the Securities Act. In the event the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, ninety days thereafter (or such longer
period as any market stand-off agreement may require) the securities exempt under Rule 701 may be resold, subject to the satisfaction of certain of the conditions specified by
Rule 144, including: (i) the resale being made through a broker in an unsolicited "broker's transaction" or in transactions directly with a market maker (as said term is defined under
the Exchange Act); and, in the case of an affiliate, (ii) the availability of certain public information about the Company, (iii) the amount of securities being sold during any three
month period not exceeding the limitations specified in Rule 144(e), and (iv) the timely filing of a Form 144, if applicable. 

        (d)   In
the event that the Company does not qualify under Rule 701 at the time of grant of the Option, then the securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires the resale to occur not less than one year after the later of the date the securities were sold by the Company or the date
the securities were sold by an affiliate of the Company, within the meaning of Rule 144; and, in the case of acquisition of the securities by an affiliate, or by a non-affiliate who
subsequently holds the securities less than two years, the satisfaction of the conditions set forth in sections (i), (ii), (iii) and (iv) of paragraph (c) above. 

        (e)   Participant
further understands that in the event all of the applicable requirements of Rule 701 or 144 are not satisfied, registration under the Securities Act,
compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rules 144 and 701 are not exclusive, the Staff of the
Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective
brokers who participate in such transactions do so at their own risk. Participant understands that no assurances can be given that any such other registration exemption will be available in such
event. 

        7.    Successors and Assigns.    The Company may assign any of its rights under this
Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this
Agreement shall be binding upon Participant and his or her heirs, executors, administrators, successors and assigns. 

B-4

 

        8.    Interpretation.    Any dispute regarding the interpretation of this Agreement shall
be submitted by Participant or by the Company forthwith to the Administrator, which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Administrator shall
be final and binding on the Company and on Participant. 

        9.    Governing Law; Severability.    This Agreement shall be governed by and construed
in accordance with the laws of the State of California, excluding that body of law pertaining to conflicts of law. Should any provision of this Agreement be determined by a court of law to be illegal
or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable. 

        10.    Notices.    Any notice required or permitted hereunder shall be given in
accordance with the provisions set forth in Section 5.6 of the Option Agreement. 

        11.    Further Instruments.    The parties agree to execute such further instruments and
to take such further action as may be reasonably necessary to carry out the purposes and intent of this Agreement. 

        12.    Entire Agreement.    The Plan and Option Agreement are incorporated herein by
reference. This Agreement, the Plan and the Option Agreement constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and
Participant with respect to the subject matter hereof. 

	ACCEPTED BY:

ZOGENIX, INC.	 	SUBMITTED BY

PARTICIPANT:
	
  By:
	
 	

By:

	Print Name:	 	 	Print Name:	 
	 	 	 	 	

	Title:	 	 	Address:	 
	 	 	 	 	

	    	 	 	 	 
	 	 	 	 	

B-5

 
 
 

CONSENT OF SPOUSE    
    

        I,
                                    , spouse
of                                    , have read and approve the
Option Agreement and this Exercise Notice between my spouse and Zogenix, Inc. In
consideration of granting of the right to my spouse to purchase shares of Zogenix, Inc. set forth in the Option Agreement and this Exercise Notice, I hereby appoint my spouse as my
attorney-in-fact in respect to the exercise of any rights under the Option Agreement and this Exercise Notice and agree to be bound by the provisions of the Plan, the Option
Agreement and this Exercise Notice insofar as I may have any rights in said agreements or any shares issued pursuant thereto under the community property laws or similar laws relating to marital
property in effect in the state of our residence as of the date of the signing of the foregoing Exercise Notice. 

	 

	 

	Dated:	
	,	
	 	

	 	 	 	 	 	Signature of Spouse

B-6

 

 
 

ZOGENIX, INC.
  
    2006 EQUITY INCENTIVE PLAN
  
    STOCK OPTION GRANT NOTICE AND
  STOCK OPTION AGREEMENT    
    

        Zogenix, Inc. (the "Company"), pursuant to its 2006 Equity Incentive Plan
(the "Plan"), hereby grants to the holder listed below ("Participant"), an option to purchase the
number of shares of the Company's Stock set forth below (the "Option"). This Option is subject to all of the terms and conditions as set forth
herein and in the Stock Option Agreement attached hereto as Exhibit A (the "Stock Option Agreement") and the
Plan, each of which are incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Stock Option
Agreement. 

	
 	

 	

 
	
 Participant:	

	
 Grant Date:	

	
 Vesting Commencement Date:	

	
 Exercise Price per Share:	

$	

	
 Total Exercise Price:	

$	

	
 Total Number of Shares Subject to the Option:	

	
 Expiration Date:	

	
 	
 	

 
	
 Type of Option:	
 	

o Incentive Stock Option        o Non-Qualified Stock Option
	
 Exercise Schedule:	
 	

ý Early Exercise Permitted
	
 Vesting Schedule:	
 	

This Option is exercisable immediately, in whole or in part, at such times as are established by the Administrator, conditioned upon Participant entering into a Restricted Stock Purchase Agreement with respect to any unvested shares of Stock. The
shares subject to this Option shall vest and/or be released from the Company's Repurchase Option, as set forth in the Restricted Stock Purchase Agreement attached hereto as Exhibit C (the "Restricted Stock
Purchase Agreement"), according to the following schedule:
	
 	
 	

[To be specified in individual agreements.]

        By his or her signature and the Company's signature below, Participant agrees to be bound by the terms and conditions of the Plan, the Stock Option Agreement and
this Grant Notice. Participant has reviewed the Stock Option Agreement, the Plan and this Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this
Grant Notice and fully understands all provisions of this Grant Notice, the Stock Option Agreement and the Plan. Participant hereby 

agrees
to accept as binding, conclusive and final all decisions or interpretations of the Administrator of the Plan upon any questions arising under the Plan or the Option. 

	 ZOGENIX, INC.	 	PARTICIPANT:
	
 By:	
 	

 	
 	

By:	
 	

 
	 	 	
	 	 	 	

	Print Name:	 	 	 	Print Name:	 	 
	 	 	 	 	 	 	

	Title:	 	 	 	 	 	 
	Address:	 	 	 	Address:	 	 
	 	 	 	 	 	 	

	 	 	 	 	 	 	

 

 

 
 

EXHIBIT A
  
    TO STOCK OPTION GRANT NOTICE
  
    STOCK OPTION AGREEMENT    
    

        Pursuant to the Stock Option Grant Notice ("Grant Notice") to which this Stock Option Agreement (this
"Agreement") is attached, Zogenix, Inc. (the "Company") has granted to Participant an
option under the Company's 2006 Equity Incentive Plan (the "Plan") to purchase the number of shares of Stock indicated in the
Grant Notice. 

 
 

ARTICLE I    
    GENERAL    
    

        1.1    Defined Terms.    Capitalized terms not specifically defined herein shall have the
meanings specified in the Plan and the Grant Notice. 

        1.2    Incorporation of Terms of Plan.    The Option is subject to the terms and
conditions of the Plan which are incorporated herein by reference. 

 
 

ARTICLE II    
    GRANT OF OPTION    
    

        2.1    Grant of Option.    In consideration of Participant's past and/or continued
employment with or service to the Company or a Parent or Subsidiary and for other good and valuable consideration, effective as of the Grant Date set forth in the Grant Notice
(the "Grant Date"), the Company irrevocably grants to Participant the Option to purchase any part or all of an aggregate of the number of shares
of Stock set forth in the Grant Notice, upon the terms and conditions set forth in the Plan and this Agreement. Unless designated as a Non-Qualified Stock Option in the Grant Notice, the
Option shall be an Incentive Stock Option to the maximum extent permitted by law. 

        2.2    Exercise Price.    The exercise price of the shares of Stock subject to the Option
shall be as set forth in the Grant Notice, without commission or other charge; provided, however, that
if this Option is designated as an Incentive Stock Option, the price per share of the shares subject to the Option shall not be less than the greater of (i) 100% of the Fair Market Value of a
share of Stock on the Grant Date, or (ii) 110% of the Fair Market Value of a share of Stock on the Grant Date in the case of a Participant then owning (within the meaning of
Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or any "subsidiary corporation" of the Company or any "parent corporation" of
the Company (each within the meaning of Section 424 of the Code). 

 
 

ARTICLE III    
    PERIOD OF EXERCISABILITY    
    

        3.1    Commencement of Exercisability.    

        (a)   Subject
to Sections 3.3 and 5.8, the Option shall become vested and exercisable in such amounts and at such times as are set forth in the Grant Notice.
Alternatively, at the election of the Participant, this Option may be exercised in whole or in part at such times as are established by the Administrator as to shares of Stock which have not yet
vested. Vested shares shall not be subject to the Company's Repurchase Option (as set forth in the Restricted Stock Purchase Agreement). As a condition to
exercising this Option for unvested shares of Stock, the Participant shall execute the Restricted Stock Purchase Agreement. 

        (b)   No
portion of the Option which has not become vested and exercisable at the date of Participant's Termination of Service shall thereafter become vested and exercisable,
except as may 

A-1

 

be
otherwise provided by the Administrator or as set forth in a written agreement between the Company and Participant. 

        3.2    Duration of Exercisability.    The installments provided for in the vesting
schedule set forth in the Grant Notice are cumulative. Each such installment which becomes vested and exercisable pursuant to the vesting schedule set forth in the Grant Notice shall remain vested and
exercisable until it becomes unexercisable under Section 3.3. 

        3.3    Expiration of Option.    The Option may not be exercised to any extent by anyone
after the first to occur of the following events: 

        (a)   The
expiration of ten years from the Grant Date; 

        (b)   If
this Option is designated as an Incentive Stock Option and Participant owned (within the meaning of Section 424(d) of the Code), at the time the Option was
granted, more than 10% of the total combined voting power of all classes of stock of the Company or any "subsidiary corporation" of the Company or "parent corporation" of the Company (each within the
meaning of Section 424 of the Code), the expiration of five years from the date the Option was granted; or 

        (c)   The
expiration of three months following the date of Participant's Termination of Service, unless such termination occurs by reason of Participant's death, Disability
or Misconduct; 

        (d)   The
expiration of one year following the date of Participant's Termination of Service by reason of Participant's death or Disability; or 

        (e)   The
date of Participant's Termination of Service as a result of Participant's Misconduct. 

        Participant
acknowledges that an Incentive Stock Option exercised more than three months after Participant's termination of status as an Employee, other than by reason of death or
Disability, will be taxed as a Non-Qualified Stock Option. 

        3.4    Special Tax Consequences.    Participant acknowledges that, to the extent that the
aggregate Fair Market Value (determined as of the time the Option is granted) of all shares of Stock with respect to which Incentive Stock Options, including the Option, are first exercisable for the
first time by Participant in any calendar year exceeds $100,000 (or such other limitation as imposed by Section 422(d) of the Code), the Option and such other options shall be treated as
not qualifying under Section 422 of the Code but rather shall be considered Non-Qualified Stock Options. Participant further acknowledges that the rule set forth in the preceding
sentence shall be applied by taking Options and other "incentive stock options" into account in the order in which they were granted. 

 
 

ARTICLE IV    
    EXERCISE OF OPTION    
    

        4.1    Person Eligible to Exercise.    Except as provided in Sections 5.2(b)
and 5.2(c), during the lifetime of Participant, only Participant may exercise the Option or any portion thereof. After the death of Participant, any exercisable portion of the Option may, prior
to the time when the Option becomes unexercisable under Section 3.3, be exercised by Participant's personal representative or by any person empowered to do so under the deceased Participant's
will or under the then applicable laws of descent and distribution. 

        4.2    Partial Exercise.    Any exercisable portion of the Option or the entire Option,
if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable under Section 3.3. 

A-2

 

        4.3    Manner of Exercise.    The Option, or any exercisable portion thereof, may be
exercised solely by delivery to the Secretary of the Company or the Secretary's office of all of the following prior to the time when the Option or such portion thereof becomes unexercisable under
Section 3.3: 

        (a)   An
Exercise Notice in writing signed by Participant or any other person then entitled to exercise the Option or portion thereof, stating that the Option or portion
thereof is thereby exercised, such notice complying with all applicable rules established by the Administrator. Such notice shall be substantially in the form attached as
Exhibit B to the Grant Notice (or such other form as is prescribed by the Administrator); and 

        (b)   A
Restricted Stock Purchase Agreement, if applicable, substantially in the form attached as Exhibit C to the
Grant Notice; 

        (c)   Subject
to Section 5.1(c) of the Plan: 

        (i)    Full
payment (in cash or by check) for the shares with respect to which the Option or portion thereof is exercised; or 

        (ii)   With
the consent of the Administrator, by delivery of a full recourse promissory note on such terms and conditions as may be approved by the Administrator; or 

        (iii)  With
the consent of the Administrator, by delivery of shares of Stock then issuable upon exercise of the Option having a Fair Market Value on the date of delivery
equal to the aggregate exercise price of the Option or exercised portion thereof; or 

        (iv)  On
and after the Public Trading Date, such payment may be made, in whole or in part, through the delivery of shares of Stock which have been owned by Participant for at
least six months, duly endorsed for transfer to the Company with a Fair Market Value on the date of delivery equal to the aggregate exercise price of the Option or exercised portion thereof; or 

        (v)   On
and after the Public Trading Date, through the delivery of a notice that Participant has placed a market sell order with a broker with respect to shares of Stock then
issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Option exercise price;  provided, that payment of such proceeds is made to the Company upon settlement of such sale; or 

        (vi)  Subject
to the consent of the Administrator and subject to any applicable laws, any combination of the consideration provided in the foregoing paragraphs (i),
(ii) and (iii); and 

        (d)   A
bona fide written representation and agreement, in such form as is prescribed by the Administrator, signed by Participant or the other person then entitled to
exercise such Option or portion thereof, stating that the shares of Stock are being acquired for Participant's own account, for investment and without any present intention of distributing or
reselling said shares or any of them except as may be permitted under the Securities Act and then applicable rules and regulations thereunder, and that Participant or other person then entitled to
exercise such Option or portion thereof will indemnify the Company against and hold it free and harmless from any loss, damage, expense or liability resulting to the Company if any sale or
distribution of the shares by such person is contrary to the representation and agreement referred to above. The Administrator may, in its absolute discretion, take whatever additional actions it
deems appropriate to ensure the observance and performance of such representation and agreement and to effect compliance with the Securities Act and any other federal or state securities laws or
regulations. Without limiting the generality of the foregoing, the Administrator may require an opinion of counsel acceptable to it to the effect that any subsequent transfer of shares acquired on an
Option exercise does not violate the Securities Act, and may issue stop-transfer orders covering such shares. Share certificates evidencing Stock issued on exercise of the Option shall
bear an 

A-3

 

appropriate
legend referring to the provisions of this subsection (d) and the agreements herein. The written representation and agreement referred to in the first sentence of this
subsection (d) shall, however, not be required if the shares to be issued pursuant to such exercise have been registered under the Securities Act, and such registration is then effective in
respect of such shares; and 

        (e)   The
receipt by the Company of full payment for such shares, including payment of any applicable withholding tax, which may be in the form of consideration used by
Participant to pay for such shares under Section 4.3(b), subject to Section 15.3 of the Plan; and 

        (f)    In
the event the Option or portion thereof shall be exercised pursuant to Section 4.1 by any person or persons other than Participant, appropriate proof of the
right of such person or persons to exercise the Option. 

        4.4    Conditions to Issuance of Stock Certificates.    The shares of Stock deliverable
upon the exercise of the Option, or any portion thereof, may be either previously authorized but unissued shares or issued shares which have then been reacquired by the Company. Such shares shall be
fully paid and nonassessable. The Company shall not be required to issue or deliver any shares of Stock purchased upon the exercise of the Option or portion thereof prior to fulfillment of all of the
following conditions: 

        (a)   The
admission of such shares to listing on all stock exchanges on which such Stock is then listed; and 

        (b)   The
completion of any registration or other qualification of such shares under any state or federal law or under rulings or regulations of the Securities and Exchange
Commission or of any other
governmental regulatory body, which the Administrator shall, in its absolute discretion, deem necessary or advisable; and 

        (c)   The
obtaining of any approval or other clearance from any state or federal governmental agency which the Administrator shall, in its absolute discretion, determine to be
necessary or advisable; and 

        (d)   The
lapse of such reasonable period of time following the exercise of the Option as the Administrator may from time to time establish for reasons of administrative
convenience; and 

        (e)   The
receipt by the Company of full payment for such shares, including payment of any applicable withholding tax, which may be in the form of consideration used by
Participant to pay for such shares under Section 4.3(b), subject to Section 15.3 of the Plan. 

        4.5    Rights as Stockholder.    The holder of the Option shall not be, nor have any of
the rights or privileges of, a stockholder of the Company in respect of any shares purchasable upon the exercise of any part of the Option unless and until such shares shall have been issued by the
Company to such holder. 

 
 

ARTICLE V    
    OTHER PROVISIONS    
    

        5.1    Administration.    The Administrator shall have the power to interpret the Plan
and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. All actions
taken and all interpretations and determinations made by the Administrator in good faith shall be final and binding upon Participant, the Company and all other interested persons. No member of the
Administrator shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan, this Agreement or the Option. In its absolute discretion, the
Board may at any time and from 

A-4

 

time
to time exercise any and all rights and duties of the Administrator under the Plan and this Agreement. 

        5.2    Option Not Transferable.    

        (a)   Subject
to Section 5.2(b), the Option may not be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution,
unless and until the shares underlying the Option have been issued, and all restrictions applicable to such shares have lapsed. Neither the Option nor any interest or right therein shall be liable for
the debts, contracts or engagements of Participant or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any
other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy),
and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence. 

        (b)   Notwithstanding
any other provision in this Agreement, with the consent of the Administrator and to the extent the Option is designated as a Non-Qualified
Stock Option, the Option may be transferred to, exercised by and paid to one or more Permitted Transferees, subject to the terms and conditions set forth in Section 10.3 of the Plan. 

        (c)   Unless
transferred to a Permitted Transferee in accordance with Section 5.2(b), during the lifetime of Participant, only Participant may exercise the Option or
any portion thereof. Subject to such conditions and procedures as the Administrator may require, a Permitted Transferee may exercise the Option or any portion thereof during Participant's lifetime.
After the death of Participant, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under Section 3.3, be exercised by Participant's personal
representative or by any person empowered to do so under the deceased Participant's will or under the then applicable laws of descent and distribution. 

        5.3    Lock-Up Period.    Participant hereby agrees that, if so requested by
the Company or any representative of the underwriters (the "Managing Underwriter") in connection with any registration of the offering of any
securities of the Company under the Securities Act, Participant shall not sell or otherwise transfer any shares of Stock or other securities of the Company during such period as may be requested in
writing by the Managing Underwriter and agreed to in writing by the Company (which period shall not be longer than one hundred eighty days) (the "Market Standoff
Period") following the effective date of a registration statement of the Company filed under the Securities Act; provided,  however, that such restriction shall apply only to the first registration statement of the Company to become effective under the Securities Act that
includes securities to be sold on behalf of the Company to the public in an underwritten public offering under the Securities Act. 

        5.4    Restrictive Legends and Stop-Transfer Orders.    

        (a)   The
share certificate or certificates evidencing the shares of Stock purchased hereunder shall be endorsed with any legends that may be required by state or federal
securities laws. 

        (b)   Participant
agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate "stop transfer" instructions to its
transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records. 

        (c)   The
Company shall not be required: (i) to transfer on its books any shares of Stock that have been sold or otherwise transferred in violation of any of the
provisions of this Agreement, or (ii) to treat as owner of such shares of Stock or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such shares shall
have been so transferred. 

A-5

 

        5.5    Shares to Be Reserved.    The Company shall at all times during the term of the
Option reserve and keep available such number of shares of Stock as will be sufficient to satisfy the requirements of this Agreement. 

        5.6    Notices.    Any notice to be given under the terms of this Agreement to the
Company shall be addressed to the Company in care of the Secretary of the Company at the address given beneath the signature of the Company's authorized officer on the Grant Notice, and any notice to
be given to Participant shall be addressed to Participant at the address given beneath Participant's signature on the Grant Notice. By a notice given pursuant to this Section 5.6, either party
may hereafter designate a different address for notices to be given to that party. Any notice which is required to be given to Participant shall, if Participant is then deceased, be given to the
person entitled to exercise his or her Option pursuant to Section 4.1 by written notice under this Section 5.6. Any notice shall be deemed duly given when sent via email or when sent by
certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service. 

        5.7    Titles.    Titles are provided herein for convenience only and are not to serve as
a basis for interpretation or construction of this Agreement. 

        5.8    Stockholder Approval.    The Plan will be submitted for approval by the Company's
stockholders within twelve months after the date the Plan was initially adopted by the Board. The Option may not be exercised to any extent by anyone prior to the time when the Plan is approved by the
stockholders, and if such approval has not been obtained by the end of said twelve month period, the Option shall thereupon be canceled and become null and void. 

        5.9    Governing Law; Severability.    This Agreement shall be administered, interpreted
and enforced under the laws of the State of California, without regard to the conflicts of law principles thereof. Should any provision of this Agreement be determined by a court of law to be illegal
or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable. 

        5.10    Conformity to Securities Laws.    Participant acknowledges that the Plan is
intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission
thereunder, and state securities laws and regulations. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Option is granted and may be exercised, only in such a
manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such
laws, rules and regulations. 

        5.11    Amendments.    This Agreement may not be modified, amended or terminated except
by an instrument in writing, signed by Participant or such other person as may be permitted to exercise the Option pursuant to Section 4.1 and by a duly authorized representative of
the Company. 

        5.12    No Employment Rights.    If Participant is an Employee, nothing in the Plan or
this Agreement shall confer upon Participant any right to continue in the employ of the Company or any Subsidiary or shall interfere with or restrict in any way the rights of the Company and its
Subsidiaries, which are expressly reserved, to discharge Participant at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in a written
agreement between the Company and Participant. 

        5.13    Successors and Assigns.    The Company may assign any of its rights under this
Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this
Agreement shall be binding upon Participant and his or her heirs, executors, administrators, successors and assigns. 

A-6

 

        5.13    Notification of Disposition.    If this Option is designated as an Incentive
Stock Option, Participant shall give prompt notice to the Company of any disposition or other transfer of any shares of Stock acquired under this Agreement if such disposition or transfer is made
(a) within two years from the Grant Date with respect to such shares or (b) within one year after the transfer of such shares to him. Such notice shall specify the date of such
disposition or other transfer and the amount realized, in cash, other property, assumption of indebtedness or other consideration, by Participant in such disposition or other transfer. 

        5.14    Limitations Applicable to Section 16 Persons.    Notwithstanding any other
provision of the Plan or this Agreement, if Participant is subject to Section 16 of the Exchange Act, the Plan, the Shares and this Agreement shall be subject to any additional limitations set
forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the
application of such exemptive rule. To the extent permitted by applicable law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule. 

        5.15    Entire Agreement.    The Plan and this Agreement (including all Exhibits hereto)
constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof. 

A-7

 

 

 
 

EXHIBIT B
  
    TO STOCK OPTION GRANT NOTICE
  
    FORM OF EXERCISE NOTICE    
    

        Effective as of today,
                                    ,
                                     the undersigned
("Participant") hereby elects to exercise Participant's option to purchase 
                                     shares of the Stock
(the "Shares") of Zogenix, Inc.
(the "Company") under and pursuant to Zogenix, Inc. 2006 Equity Incentive Plan
(the "Plan") and the Stock Option Grant Notice and Stock Option Agreement dated
                                    , 
                         (the "Option Agreement"). Capitalized
terms used herein without definition shall have the meanings given in the
Option Agreement. 

	Grant Date:	 	

	Number of Shares as to which Option is Exercised:	 	

	Exercise Price per Share:	 	$                                    
	Total Exercise Price:	 	$                                    
	Certificate to be issued in name of:	 	

	Cash Payment delivered herewith:

 	 	$
                                     (Representing the full
Exercise Price for the Shares, as well as any applicable withholding tax)

        Type of Option:    o Incentive Stock
Option            
o Non-Qualified Stock Option 

        1.    Representations of Participant.    Participant acknowledges
that Participant has received, read and understood the Plan and the Option Agreement. Participant agrees to abide by and be bound by their terms and conditions.    

        2.    Rights as Stockholder.    Until the Shares are issued (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with
respect to Shares subject to the Option, notwithstanding the exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares
are issued, except as provided in Article 10 of the Plan.    

        Participant
shall enjoy rights as a stockholder until such time as Participant disposes of the Shares or the Company and/or its assignee(s) exercises the Right of First Refusal
hereunder. Upon such exercise, Participant shall have no further rights as a holder of the Shares so purchased except the right to receive payment for the Shares so purchased in accordance with the
provisions of this Agreement, and Participant shall forthwith cause the certificate(s), if any issued, evidencing the Shares so purchased to be surrendered to the Company for transfer or cancellation. 

        3.    Participant's Rights to Transfer Shares.    

        (a)   Before
any Shares held by Participant or any permitted transferee (each, a "Holder") may be sold, pledged, assigned,
hypothecated, transferred, or otherwise disposed of (each, a "Transfer"), the Company or its assignee(s) shall have a right of first refusal to purchase
the Shares proposed to be Transferred on the terms and conditions set forth in this Section (the "Right of First Refusal"). In the event that the
Company's Bylaws contain a right of first refusal with respect to the Shares, such right of first refusal shall apply to the Shares to the extent such provisions are more restrictive than the Right of
First Refusal set forth in this Section and the Right of First Refusal set forth in this Section shall not in any way restrict the operation of the Company's Bylaws. 

B-1

 

        (b)   In
the event any Holder desires to Transfer any Shares, the Holder shall deliver to the Company a written notice
(the "Notice") stating: (i) the Holder's bona fide intention to sell or otherwise Transfer such
Shares; (ii) the name of each proposed purchaser or other transferee ("Proposed Transferee"); (iii) the number of Shares to be Transferred
to each Proposed Transferee; and (iv) the price for which the Holder proposes to Transfer the Shares (the "Offered Price"), and the Holder
shall offer such Shares at the Offered Price to the Company or its assignee(s). 

        (c)   Within
twenty-five days after receipt of the Notice, the Company and/or its assignee(s) may elect in writing to purchase all, but not less than all, of the
Shares proposed to be Transferred to any one or more of the Proposed Transferees by delivery of a written exercise notice to the Holder (a "Company
Notice"). The purchase price will be determined in accordance with subsection (d) below. 

        (d)   The
purchase price ("Purchase Price") for the Shares repurchased under this Section shall be the Offered Price. 

        (e)   Payment
of the Purchase Price shall be made, at the option of the Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any
outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an assignee, to the assignee), or by any combination thereof within five days after delivery of the Company
Notice or in the manner and at the times mutually agreed to by the Company and the Holder. Should the Offered Price specified in the Notice be payable in property other than cash, the Company shall
have the right to pay the purchase price in the form of cash equal in amount to the value of such property. If the Holder and the Company cannot agree on such cash value within ten days after the
Company's receipt of the Notice, the valuation shall be made by the Board. The payment of the purchase price shall then be held on the later of (i) five days following delivery of the Company
Notice or (ii) five days after such valuation shall have been made. 

        (f)    If
all or a portion of the Shares proposed in the Notice to be Transferred are not purchased by the Company and/or its assignee(s) as provided in this Section, then the
Holder may sell or otherwise Transfer such Shares to that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other Transfer is consummated within sixty days
after the date of the Notice and provided further that any such sale or other Transfer is effected in accordance with any applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section and the Restricted Stock Purchase Agreement, if applicable, shall continue to apply to the Shares in the hands of such Proposed Transferee. If the Shares described in
the Notice are not Transferred to the Proposed Transferee within such sixty-day period, a new Notice shall be given to the Company, and the Company and/or its assignees shall again be
offered the Right of First Refusal as provided herein before any Shares held by the Holder may be sold or otherwise Transferred. 

        (g)   Anything
to the contrary contained in this Section notwithstanding, the Transfer of any or all of the Shares during Participant's lifetime or upon Participant's death by
will or intestacy to Participant's Immediate Family or a trust for the benefit of Participant's Immediate Family shall be exempt from the Right of First Refusal. As used herein,
"Immediate Family" shall mean spouse, lineal descendant or antecedent, father, mother, brother or sister or stepchild (whether or not adopted). In such
case, the transferee or other recipient shall receive and hold the Shares so Transferred subject to the provisions of this Section (including the Right of First Refusal) and the Restricted Stock
Purchase Agreement, if
applicable, and there shall be no further Transfer of such Shares except in accordance with the terms of this Section. 

        (h)   The
Right of First Refusal shall terminate as to all Shares upon the Public Trading Date. 

B-2

 

        (i)    Any
transfer or sale of the Shares is subject to restrictions on transfer imposed by any applicable state and federal securities laws. Any Transfer or attempted Transfer
of any of the Shares not in accordance with the terms of this Agreement shall be void and the Company may enforce the terms of this Agreement by stop transfer instructions or similar actions by the
Company and its agents or designees. 

        4.    Tax Consultation.    Participant understands that Participant may suffer adverse
tax consequences as a result of Participant's purchase or disposition of the Shares. Participant represents that Participant has consulted with any tax consultants Participant deems advisable in
connection with the purchase or disposition of the Shares and that Participant is not relying on the Company for any tax advice.    

        5.    Restrictive Legends and Stop-Transfer Orders.    

        (a)   Legends.    Participant
understands and agrees that the Company shall cause any certificates issued evidencing the Shares shall
have the legends set forth below or legends substantially equivalent thereto, together with any other legends that may be required by state or federal securities laws: 

THE
SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"), NOR HAVE THEY BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE.
NO TRANSFER OF SUCH SECURITIES WILL BE PERMITTED UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH TRANSFER, THE TRANSFER IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT,
OR IN THE OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY) REGISTRATION UNDER THE ACT IS UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT AND WITH APPLICABLE STATE
SECURITIES LAWS. 

THE
SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND
THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY. SUCH TRANSFER RESTRICTIONS ARE BINDING ON TRANSFEREES OF THESE SHARES. 

        (b)   Participant
agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate "stop transfer" instructions to its
transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records. 

        (c)   The
Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of
this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been
so transferred. 

        6.    Participant Representations.    Participant hereby makes the following
certifications and representations with respect to the Shares listed above:    

        (a)   Participant
is aware of the Company's business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and
knowledgeable decision to acquire the Shares. Participant is acquiring these Shares for investment for Participant's 

B-3

 

own
account only and not with a view to, or for resale in connection with, any "distribution" thereof within the meaning of the Securities Act. 

        (b)   Participant
acknowledges and understands that the Shares constitute "restricted securities" under the Securities Act and have not been registered under the Securities
Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Participant's investment intent as expressed herein. Participant
understands that the Shares must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Participant further
acknowledges and understands that the Company is under no obligation to register the Shares. Participant understands that the certificate evidencing the Shares will be imprinted with a legend which
prohibits the transfer of the Shares unless they are registered or such registration is not required in the opinion of counsel satisfactory to the Company and any other legend required under
applicable state securities laws. 

        (c)   Participant
is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public
resale of "restricted securities" acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Rule 701
provides that if the issuer qualifies under Rule 701 at the
time of the grant of the Option to Participant, the exercise will be exempt from registration under the Securities Act. In the event the Company becomes subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, ninety days thereafter (or such longer period as any market stand-off agreement may require) the securities exempt under
Rule 701 may be resold, subject to the satisfaction of certain of the conditions specified by Rule 144, including: (i) the resale being made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as said term is defined under the Exchange Act); and, in the case of an affiliate, (ii) the availability of
certain public information about the Company, (iii) the amount of securities being sold during any three month period not exceeding the limitations specified in Rule 144(e), and
(iv) the timely filing of a Form 144, if applicable. 

        (d)   In
the event that the Company does not qualify under Rule 701 at the time of grant of the Option, then the securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires the resale to occur not less than one year after the later of the date the securities were sold by the Company or the date
the securities were sold by an affiliate of the Company, within the meaning of Rule 144; and, in the case of acquisition of the securities by an affiliate, or by a non-affiliate who
subsequently holds the securities less than two years, the satisfaction of the conditions set forth in sections (i), (ii), (iii) and (iv) of paragraph (c) above. 

        (e)   Participant
further understands that in the event all of the applicable requirements of Rule 701 or 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rules 144 and 701 are not exclusive,
the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than
pursuant to Rules 144 or 701 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and
their respective brokers who participate in such transactions do so at their own risk. Participant understands that no assurances can be given that any such other registration exemption will be
available in such event. 

        7.    Successors and Assigns.    The Company may assign any of its rights under this
Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns 

B-4

 

of
the Company. Subject to the restrictions on transfer herein set forth, this Agreement shall be binding upon Participant and his or her heirs, executors, administrators, successors
and assigns.    

        8.    Interpretation.    Any dispute regarding the interpretation of this Agreement shall
be submitted by Participant or by the Company forthwith to the Administrator, which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Administrator shall
be final and binding on the Company and on Participant.    

        9.    Governing Law; Severability.    This Agreement shall be governed by and construed
in accordance with the laws of the State of California, excluding that body of law pertaining to conflicts of law. Should any provision of this Agreement be determined by a court of law to be illegal
or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable.    

        10.    Notices.    Any notice required or permitted hereunder shall be given in
accordance with the provisions set forth in Section 5.6 of the Option Agreement.    

        11.    Further Instruments.    The parties agree to execute such further instruments and
to take such further action as may be reasonably necessary to carry out the purposes and intent of this Agreement.    

        12.    Entire Agreement.    The Plan and Option Agreement are incorporated herein by
reference. This Agreement, the Plan and the Option Agreement, and the Restricted Stock Purchase Agreement, if applicable, constitute the entire agreement of the parties and supersede in their entirety
all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.    

	ACCEPTED BY:

ZOGENIX, INC.	 	SUBMITTED BY

PARTICIPANT:
	
  By:
	
 	

By:

	Print Name:	 	 	Print Name:	 
	 	 	 	 	

	Title:	 	 	Address:	 
	 	 	 	 	

	    	 	 	 	 
	 	 	 	 	

B-5

 

 

 
 

CONSENT OF SPOUSE    
    

        I,
                                    , spouse
of                                    , have read and approve the
Option Agreement and this Exercise Notice between my spouse and Zogenix, Inc. In
consideration of granting of the right to my spouse to purchase shares of Zogenix, Inc. set forth in the Option Agreement and this Exercise Notice, I hereby appoint my spouse as my
attorney-in-fact in respect to the exercise of any rights under the Option Agreement and this Exercise Notice and agree to be bound by the provisions of the Plan, the Option
Agreement and this Exercise Notice insofar as I may have any rights in said agreements or any shares issued pursuant thereto under the community property laws or similar laws relating to marital
property in effect in the state of our residence as of the date of the signing of the foregoing Exercise Notice. 

	 

	 

	Dated:	
	,	
	 	

	 	 	 	 	 	Signature of Spouse

B-6

 

 

 
 

EXHIBIT C
  
    TO STOCK OPTION GRANT NOTICE
  
    RESTRICTED STOCK PURCHASE AGREEMENT    
    

        THIS RESTRICTED STOCK PURCHASE AGREEMENT is made between
                                    
(the "Purchaser") and Zogenix, Inc. (the "Company"), as of
                                    ,
                        . 

RECITALS  

        (1)   Pursuant
to the exercise of the Option granted to Purchaser under the Company's 2006 Equity Incentive Plan
(the "Plan") and pursuant to the Stock Option Agreement (the "Option Agreement") dated
                                    ,
                        , by and between the Company and Purchaser with respect to such grant, which Option Agreement is
hereby
incorporated by reference, Purchaser has elected to purchase
                                     of those shares which have
not become vested under the vesting schedule set forth in the
Option Agreement ("Unvested Shares"). The Unvested Shares and the shares subject to the Option Agreement which have become vested are sometimes
collectively referred to herein as the "Shares". 

        (2)   As
required by the Option Agreement, as a condition to Purchaser's election to exercise the option, Purchaser must execute this Restricted Stock Purchase Agreement,
which sets forth the rights and obligations of the parties with respect to Shares acquired upon exercise of the Option. 

        1.    Repurchase Option.    

        (a)   In
the event of Purchaser's Termination of Service (as defined in the Option Agreement), for any reason, including for cause, death, Disability or Misconduct, the
Company shall have the right and
option to purchase from Purchaser, or Purchaser's personal representative, as the case may be, all of Purchaser's Unvested Shares as of the date of the Purchaser's Termination of Service at the
exercise price paid by Purchaser for such Shares in connection with the exercise of the Option (the "Repurchase Option"). 

        (b)   The
Company may exercise its Repurchase Option by delivering, personally or by registered mail, to Purchaser (or his or her transferee or legal representative, as
the case may be), within ninety days of the date of the Purchaser's Termination of Service, a notice in writing indicating the Company's intention to exercise the Repurchase Option and setting forth a
date for closing not later than thirty days from the mailing of such notice. The closing shall take place at the Company's office. At the closing, the holder of the certificates for the Unvested
Shares being transferred shall deliver the stock certificate or certificates evidencing the Unvested Shares, and the Company shall deliver the purchase price therefor. 

        (c)   At
its option, the Company may elect to make payment for the Unvested Shares to a bank selected by the Company. The Company shall avail itself of this option by a notice
in writing to Purchaser stating the name and address of the bank, date of closing, and waiving the closing at the Company's office. 

        (d)   If
the Company does not elect to exercise the Repurchase Option conferred above by giving the requisite notice within ninety days following the date of Purchaser's
Termination of Service, the Repurchase Option shall terminate. 

        (e)   100%
of the Unvested Shares shall initially be subject to the Repurchase Option. The Unvested Shares shall be released from the Repurchase Option in accordance with the
Vesting Schedule set forth in the Option Agreement until all Shares are released from the Repurchase Option. Fractional Shares shall be rounded down to the nearest whole share. 

C-1

 

        2.    Transferability of the Shares; Escrow.    

        (a)   Purchaser
hereby authorizes and directs the secretary of the Company, or such other person designated by the Company from time to time, to transfer the Unvested Shares
as to which the Repurchase Option has been exercised from Purchaser to the Company. 

        (b)   To
insure the availability for delivery of Purchaser's Unvested Shares upon repurchase by the Company pursuant to the Repurchase Option under Section 1, Purchaser
hereby appoints the assistant secretary, or any other person designated by the Company from time to time as escrow agent, as its attorney-in-fact to sell, assign and transfer
unto the Company, such Unvested Shares, if any, repurchased by the Company pursuant to the Repurchase Option. If certificates for the Shares are issued, then Purchaser shall, upon execution of this
Agreement, deliver and deposit with the assistant secretary of the Company, or such other person designated by the Company from time to time, any share certificate(s) issued representing the Unvested
Shares, together with the stock assignment duly endorsed in blank, attached hereto as Exhibit C-1. The Unvested Shares and stock assignment shall be
held by the assistant secretary in escrow, pursuant to the Joint Escrow Instructions of the Company and Purchaser attached as Exhibit C-2 hereto, until
the Company exercises its Repurchase Option as provided in Section 1, until such Unvested Shares are vested, or until such time as this Agreement no longer is in effect. As a further condition
to the Company's obligations under this Agreement, the spouse of Purchaser, if any, shall execute and deliver to the Company the Consent of Spouse set forth on the signature page hereto. Upon vesting
of the Unvested Shares, the escrow agent shall promptly deliver to Purchaser the certificate or certificates representing such Shares in the escrow agent's possession belonging to Purchaser, and the
escrow agent shall be discharged of all further obligations hereunder; provided, however, that the
escrow agent shall nevertheless retain such certificate or certificates as escrow agent if so required pursuant to other restrictions imposed pursuant to this Agreement. If the Shares are held in book
entry form, then such entry will reflect that the Shares are subject to the restrictions of this Agreement. 

        (c)   The
Company, or its designee, shall not be liable for any act it may do or omit to do with respect to holding the Shares in escrow and while acting in good faith and in
the exercise of its judgment. 

        (d)   Transfer
or sale of the Shares is subject to restrictions on transfer imposed by any applicable state and federal securities laws. Any transferee shall hold such Shares
subject to all the provisions hereof and the Exercise Notice executed by Purchaser with respect to any Unvested Shares purchased by Purchaser and shall acknowledge the same by signing a copy of this
Agreement. Any transfer or attempted transfer of any of the Shares not in accordance with the terms of this Agreement shall be void and the Company may enforce the terms of this Agreement by stop
transfer instructions or similar actions by the Company and its agents or designees. 

        3.    Ownership, Voting Rights, Duties.    This Agreement shall not affect in any way the
ownership, voting rights or other rights or duties of Purchaser, except as specifically provided herein. 

        4.    Legends.    Any share certificate evidencing the Shares issued hereunder shall be
endorsed with the following legend (in addition to any legend required under applicable securities laws): 

THE
SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY
OF THE COMPANY. 

        5.    Adjustment for Stock Split.    In the event of any stock dividend, stock split,
reverse stock split, recapitalization, combination, reclassification, or similar change in the capital structure of the Company, the Administrator shall make appropriate and equitable adjustments in
the Unreleased Shares subject 

C-2

 

to
the Repurchase Option and the number of Shares, consistent with any adjustment under Section 11.1 of the Plan. The provisions of this Agreement shall apply, to the full extent set forth
herein with respect to the Shares, to any and all shares of capital stock or other securities or other property or cash which may be issued in respect of, in exchange for, or in substitution of the
Shares, and shall be appropriately adjusted for any stock dividends, splits, reverse splits, combinations, recapitalizations and the like occurring after the date hereof. 

        6.    Notices.    Notices required hereunder shall be given in person or by registered
mail to the address of Purchaser shown on the records of the Company, and to the Company at its principal executive office. 

        7.    Survival of Terms.    This Agreement shall apply to and bind Purchaser and the
Company and their respective permitted assignees and transferees, heirs, legatees, executors, administrators and legal successors. 

        8.    Section 83(b) Elections.    

        (a)   Election
for Unvested Shares Purchased Pursuant to a Non-Qualified Stock Option. Purchaser hereby acknowledges that he or she
has been informed that, with respect to the exercise of a Non-Qualified Stock Option for Unvested Shares, that unless an election is filed by Purchaser with the Internal Revenue Service
and, if necessary, the proper state taxing authorities, within thirty days of the purchase of the Shares, electing pursuant to Section 83(b) of the Code
(and similar state tax provisions if applicable) to be taxed currently on any difference between the purchase price of the Shares and their Fair Market Value on the date of purchase, there will
be a recognition of taxable income to the Purchaser, measured by the excess, if any, of the fair market value of the Shares, at the time the Company's Repurchase Option lapses over the purchase price
for the Shares. Purchaser represents that Purchaser has consulted any tax consultant(s) Purchaser deems advisable in connection with the purchase of the Shares or the filing of the election under
Section 83(b) and similar tax provisions. 

        (b)   Election
for Unvested Shares Purchased Pursuant to an Incentive Stock Option. Purchaser hereby acknowledges that he or she has been informed
that, with respect to the exercise of an Incentive Stock Option for Unvested Shares, that unless an election is filed by Purchaser with the Internal Revenue Service and, if necessary, the proper state
taxing authorities, within thirty days of the purchase of the Shares, electing pursuant to Section 83(b) of the Code (and similar state tax provisions if
applicable) to
be taxed currently on any difference between the purchase price of the Shares and their Fair Market Value on the date of purchase, there will be a recognition of income to the Purchaser, for
alternative minimum tax purposes measured by the excess, if any, of the fair market value of the Shares at the time the Company's Repurchase Option lapses over the purchase price for the Shares.
Purchaser further acknowledges that if an election is filed under Section 83(b) of the Code for the Unvested Shares and such shares are sold or transferred prior to the date two years following
the Grant Date and one year following the purchase date of such shares, there will be a recognition of income to the Purchaser, for ordinary income, measured by the excess, if any, of the fair market
value of the Shares at the time the Company's Repurchase Option lapses over the purchase price for the Shares. Purchaser represents that Purchaser has consulted any tax consultant(s) Purchaser deems
advisable in connection with the purchase of the Shares or the filing of the election under Section 83(b) and similar tax provisions. 

PURCHASER ACKNOWLEDGES THAT IT IS PURCHASER'S SOLE RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF PURCHASER REQUESTS THE
COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON PURCHASER'S BEHALF.

C-3

 

        9.    Representations.    Purchaser has reviewed with his or her own tax advisors the
federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. Purchaser is relying solely on such advisors and not on any statements or
representations of the Company or any of its agents. Purchaser understands that Purchaser (and not the Company) shall be responsible for his or her own tax liability that may arise as a result
of this investment or the transactions contemplated by this Agreement. 

        10.    Governing Law; Severability.    This Agreement shall be governed by and construed
in accordance with the laws of the State of California excluding that body of law pertaining to conflicts of law. Should any provision of this Agreement be determined by a court of law to be illegal
or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable. 

        Purchaser
represents that he or she has read this Agreement and is familiar with its terms and provisions. Purchaser hereby agrees to accept as binding, conclusive and final all
decisions or interpretations of the Administrator upon any questions arising under this Agreement. 

(Signature Page Follows)  

C-4

 

IN
WITNESS WHEREOF, this Agreement is deemed made as of the date first set forth above. 

	 	 	ZOGENIX, INC.
	
 	
 	

 	
 	

 
	 	 	By:	 	

	
 	
 	

 	
 	

 
	 	 	Title:	 	

	
 	
 	

 	
 	

 
	 	 	PURCHASER
	
 	
 	

 	
 	

 
	 	 	By:	 	

	
 	
 	

 	
 	

 
	 	 	Name:	 	

	
 	
 	

 	
 	

 
	 	 	Address:	 	 
	
 	
 	

 	
 	

 
	 	 	

	
 	
 	

 	
 	

 
	 	 	

C-5

 

 

 
 

CONSENT OF SPOUSE    
    

        I,
                                    , spouse
of                                    , have read and approve this
Agreement between my spouse and Zogenix, Inc. In consideration of granting of the
right to my spouse to purchase shares of Zogenix, Inc. set forth in the Agreement, I hereby appoint my spouse as my attorney-in-fact in respect to the exercise of any
rights under the Agreement and agree to be bound by the provisions of the Plan, the Option Agreement and this Agreement insofar as I may have any rights in said agreements or any shares issued
pursuant thereto under the community property laws or similar laws relating to marital property in effect in the state of our residence as of the date of the signing of the foregoing Agreement. 

	 

	 

	 	 	

	 	 	Signature of Spouse

C-6

 

 

 
 

EXHIBIT C-1
  
    TO RESTRICTED STOCK PURCHASE AGREEMENT
  
    ASSIGNMENT SEPARATE FROM CERTIFICATE    
    

        FOR VALUE RECEIVED, the undersigned,
                                    , hereby sells, assigns and
transfers unto Zogenix, Inc., a Delaware corporation
(the "Company"),                        shares of the common stock of
the Company standing in its name of the books of said corporation represented by
Certificate No.                         herewith and do hereby irrevocably constitute and
appoint                                    to transfer the said stock
on the books of the within named corporation with full power
of substitution in the premises. 

        This
Stock Assignment may be used only in accordance with the Restricted Stock Award Agreement between the Company and the undersigned
dated                                    ,
                        .
 

	 

	 

	Dated:	 	 	 	 	 	 
	 	
	,	
	 	

	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	Print Name:	 
	 	 	 	 	 	 	

        INSTRUCTIONS:    Please do not fill in the blanks other than the signature line. The purpose of this assignment is to enable the
Company to exercise its "Repurchase Option," as set forth in the Restricted Stock Award Agreement, without requiring additional signatures on the part of Purchaser. 

C-1-1

 

 

 
 

EXHIBIT C-2
  
    TO RESTRICTED STOCK PURCHASE AGREEMENT
  
    JOINT ESCROW INSTRUCTIONS    
    

	 	
	,	

Secretary

Zogenix, Inc.

12760 High Bluff Drive, Suite 130

San Diego, CA 92130 

        As
Escrow Agent for both Zogenix, Inc. (the "Company") and the undersigned purchaser of stock of the Company
(the "Purchaser"), you are hereby authorized and directed to hold the documents delivered to you pursuant to the terms of that certain Restricted
Stock Purchase Agreement ("Agreement") between the Company and the undersigned, in accordance with the following instructions: 

        1.     In
the event the Company and/or any assignee of the Company (referred to collectively for convenience herein as the
"Company") exercises the Company's Repurchase Option set forth in the Agreement, the Company shall give to Purchaser and you a written notice specifying
the number of
shares of stock to be purchased, the purchase price, and the time for a closing hereunder at the principal office of the Company. Purchaser and the Company hereby irrevocably authorize and direct you
to close the transaction contemplated by such notice in accordance with the terms of said notice. 

        2.     At
the closing, you are directed (a) to date the stock assignments necessary for the transfer in question, (b) to fill in the number of shares being
transferred, and (c) to deliver the same, together with the certificate evidencing the shares of stock to be transferred, to the Company or its assignee, against the simultaneous delivery to
you of the purchase price (by cash, a check, or a combination thereof) for the number of shares of stock being purchased pursuant to the exercise of the Company's Repurchase Option. 

        3.     Purchaser
irrevocably authorizes the Company to deposit with you any certificates evidencing shares of stock to be held by you hereunder and any additions and
substitutions to said shares as defined in the Agreement. Purchaser does hereby irrevocably constitute and appoint you as Purchaser's attorney-in-fact and agent for the term of
this escrow to execute, with respect to such securities, all documents necessary or appropriate to make such securities negotiable and to complete any transaction herein contemplated, including but
not limited to the filing with any applicable state blue sky authority of any required applications for consent to, or notice of transfer of, the securities. Subject to the provisions of this
paragraph 3, Purchaser shall exercise all rights and privileges of a stockholder of the Company while the stock is held by you. 

        4.     Upon
written request of Purchaser, but no more than once per calendar year, unless the Company's Repurchase Option has been exercised, you will deliver to Purchaser a
certificate or certificates representing the number of shares of stock as are not then subject to the Company's Repurchase Option. Within one hundred twenty days after the date of the Purchaser's
Termination of Service, you will deliver to Purchaser a certificate or certificates representing the aggregate number of shares held or issued pursuant to the Agreement and not purchased by the
Company or its assignees pursuant to exercise of the Company's Repurchase Option. 

C-2-1

 

        5.     If
at the time of termination of this escrow you should have in your possession any documents, securities, or other property belonging to Purchaser, you shall deliver all
of the same to Purchaser and shall be discharged of all further obligations hereunder. 

        6.     Your
duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto. 

        7.     You
shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in relying or refraining from
acting on any instrument reasonably believed by you to be genuine and to have been signed or presented by the proper party or parties. You shall not be personally liable for any act you may do or omit
to do hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith, and any act done or omitted by you pursuant to the advice of your own attorneys
shall be conclusive evidence of such good faith. 

        8.     You
are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or corporation, excepting only orders or
process of courts of law and are hereby expressly authorized to comply with and obey orders, judgments or decrees of any court. In case you obey or comply with any such order, judgment or decree, you
shall not be liable to any of the parties hereto or to any other person, firm or corporation by reason of such compliance, notwithstanding any such order, judgment or decree being subsequently
reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction. 

        9.     You
shall not be liable in any respect on account of the identity, authorities or rights of the parties executing or delivering or purporting to execute or deliver the
Agreement or any documents or papers deposited or called for hereunder. 

        10.   You
shall not be liable for the expiration of any rights under any applicable state, federal or local statute of limitations or similar statute or regulation with
respect to these Joint Escrow Instructions or any documents deposited with you. 

        11.   You
shall be entitled to employ such legal counsel and other experts as you may deem necessary properly to advise you in connection with your obligations hereunder, may
rely upon the advice of such counsel, and may pay such counsel reasonable compensation therefore. 

        12.   Your
responsibilities as Escrow Agent hereunder shall terminate if you shall cease to be an officer or agent of the Company or if you shall resign by written notice to
each party. In the event of any such termination, the Company shall appoint a successor Escrow Agent. 

        13.   If
you reasonably require other or further instruments in connection with these Joint Escrow Instructions or obligations in respect hereto, the necessary parties hereto
shall join in furnishing such instruments. 

        14.   It
is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the securities held by you hereunder,
you are authorized and directed to retain in your possession without liability to anyone all or any part of said securities until such disputes shall have been settled either by mutual written
agreement of the parties concerned or by
a final order, decree or judgment of a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but you shall be under no duty whatsoever to institute or
defend any such proceedings. 

        15.   Any
notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the
United States Post Office, by registered or certified mail with postage and fees prepaid, addressed to each of the other parties thereunto entitled at such addresses as a party may designate by
written notice to each of the other parties hereto. 

C-2-2

 

        16.   By
signing these Joint Escrow Instructions, you become a party hereto only for the purpose of said Joint Escrow Instructions; you do not become a party to
the Agreement. 

        17.   This
instrument shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and permitted assigns. 

        18.   These
Joint Escrow Instructions shall be governed by, and construed and enforced in accordance with, the laws of the State of California, excluding that body of law
pertaining to conflicts of law. 

(Signature Page Follows)  

C-2-3

 

        IN WITNESS WHEREOF, these Joint Escrow Instructions shall be effective as of the date first set forth above. 

	 	 	Very truly yours,
	

 	
 	
ZOGENIX, INC.
	

 	
 	

By:	

 
	 	 	 	
  Name:

  Title:
	

 	
 	

Address:
	

 	
 	
PARTICIPANT:
	

 	
 	

	 	 	Print

Name:	 
	 	 	 	

	 	 	Address:	 
	 	 	 	

	

 	
 	

 	

	ESCROW AGENT:	 
	 	 	 
	By:	 	 
	 	
  Secretary, Zogenix, Inc.	 
	

Address:	

 

C-2-4

QuickLinks

Exhibit 10.3

ZOGENIX, INC. 2006 EQUITY INCENTIVE PLAN (as amended through May 20, 2008)

ARTICLE 1 PURPOSE

ARTICLE 2 DEFINITIONS AND CONSTRUCTION

ARTICLE 3 SHARES SUBJECT TO THE PLAN

ARTICLE 4 ELIGIBILITY AND PARTICIPATION

ARTICLE 5 STOCK OPTIONS

ARTICLE 6 RESTRICTED STOCK AWARDS

ARTICLE 7 STOCK APPRECIATION RIGHTS

ARTICLE 8 OTHER TYPES OF AWARDS

ARTICLE 9 COMPLIANCE WITH SECTION 409A OF THE CODE

ARTICLE 10 PROVISIONS APPLICABLE TO AWARDS

ARTICLE 11 CHANGES IN CAPITAL STRUCTURE

ARTICLE 12 ADMINISTRATION

ARTICLE 13 EFFECTIVE AND EXPIRATION DATE

ARTICLE 14 AMENDMENT, MODIFICATION, AND TERMINATION

ARTICLE 15 GENERAL PROVISIONS

APPENDIX I TO ZOGENIX, INC. 2006 EQUITY INCENTIVE PLAN California State Securities Law Compliance

ZOGENIX, INC. 2006 EQUITY INCENTIVE PLAN STOCK OPTION GRANT NOTICE AND STOCK OPTION AGREEMENT

EXHIBIT A TO STOCK OPTION GRANT NOTICE STOCK OPTION AGREEMENT

ARTICLE I GENERAL

ARTICLE II GRANT OF OPTION

ARTICLE III PERIOD OF EXERCISABILITY

ARTICLE IV EXERCISE OF OPTION

ARTICLE V OTHER PROVISIONS

EXHIBIT B TO STOCK OPTION GRANT NOTICE FORM OF EXERCISE NOTICE

CONSENT OF SPOUSE

ZOGENIX, INC. 2006 EQUITY INCENTIVE PLAN STOCK OPTION GRANT NOTICE AND STOCK OPTION AGREEMENT

EXHIBIT A TO STOCK OPTION GRANT NOTICE STOCK OPTION AGREEMENT

ARTICLE I GENERAL

ARTICLE II GRANT OF OPTION

ARTICLE III PERIOD OF EXERCISABILITY

ARTICLE IV EXERCISE OF OPTION

ARTICLE V OTHER PROVISIONS

EXHIBIT B TO STOCK OPTION GRANT NOTICE FORM OF EXERCISE NOTICE

CONSENT OF SPOUSE

EXHIBIT C TO STOCK OPTION GRANT NOTICE RESTRICTED STOCK PURCHASE AGREEMENT

CONSENT OF SPOUSE

EXHIBIT C-1 TO RESTRICTED STOCK PURCHASE AGREEMENT ASSIGNMENT SEPARATE FROM CERTIFICATE

EXHIBIT C-2 TO RESTRICTED STOCK PURCHASE AGREEMENT JOINT ESCROW INSTRUCTIONSExhibit 10.7

 

CERTAIN MATERIAL (INDICATED
BY AN ASTERISK) HAS BEEN OMITTED FROM THIS DOCUMENT PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.

 

 

ASSET PURCHASE AGREEMENT

 

BY AND BETWEEN

 

ARADIGM CORPORATION.

 

AND

 

SJ2 THERAPEUTICS, INC.

 

Dated as of August 25, 2006

 

 

 

TABLE
OF CONTENTS

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
  DEFINITIONS
  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.01

  	
  Certain
  Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . . . . . .

  	
  1

  
	
  Section 1.02

  	
  Additional
  Definitions . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  ASSIGNMENT TRANSFER AND
  LICENSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . .

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.01

  	
  Assignment
  of Assigned Assets to Purchaser . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . . . .

  	
  6

  
	
  Section 2.02

  	
  Asset
  Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

  	
  6

  
	
  Section 2.03

  	
  Coordination
  Leads . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . . .

  	
  6

  
	
  Section 2.04

  	
  Transitional
  Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . .

  	
  7

  
	
  Section 2.05

  	
  Assumption
  of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . . . . . .

  	
  7

  
	
  Section 2.06

  	
  Consideration . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . .

  	
  7

  
	
  Section 2.07

  	
  Closing,
  Closing Place, Time and Date . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

  	
  9

  
	
  Section 2.08

  	
  Nontransferable
  Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . . .

  	
  10

  
	
  Section 2.09

  	
  FTO
  Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

  	
  11

  
	
  Section 2.10

  	
  Taking of
  Necessary Action; Further Action . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . . . .

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  REPRESENTATIONS AND
  WARRANTIES OF ARADIGM . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . 

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.01

  	
  Organization,
  Qualification, and Corporate Power . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . . .

  	
  12

  
	
  Section 3.02

  	
  Authorization . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . .

  	
  12

  
	
  Section 3.03

  	
  Assets . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . .

  	
  12

  
	
  Section 3.04

  	
  Transferred
  Books and Records . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . .

  	
  12

  
	
  Section 3.05

  	
  Transferred
  Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . .

  	
  12

  
	
  Section 3.06

  	
  Transferred
  Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . .

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  REPRESENTATIONS AND
  WARRANTIES OF PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . .

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.01

  	
  Organization,
  Qualification, and Corporate Power . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . . .

  	
  15

  
	
  Section 4.02

  	
  Authorization . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . .

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  OTHER
  AGREEMENTS AND COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . .

  	
  15

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.01

  	
  Additional
  Documents and Further Assurances . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . .

  	
  15

  
	
  Section 5.02

  	
  Reasonable
  Cooperation of Purchaser . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . .

  	
  15

  
	
  Section 5.03

  	
  Reasonable
  Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . . .

  	
  15

  
	
  Section 5.04

  	
  Indemnification . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . .

  	
  15

  
	
  Section 5.05

  	
  Covenant
  Not to Compete . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  MISCELLANEOUS . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . . .

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.01

  	
  Press
  Releases and Public Announcements . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . . . . .

  	
  17

  
	
  Section 6.02

  	
  No
  Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

  	
  17

  
					

 

 

	
  Section 6.03

  	
  Force
  Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . . . . 

  	
  17

  
	
  Section 6.04

  	
  Limitation
  of Liability . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

  	
  17

  
	
  Section 6.05

  	
  Entire
  Agreement and Modification . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . .

  	
  18

  
	
  Section 6.06

  	
  Amendment . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . .

  	
  18

  
	
  Section 6.07

  	
  Waivers . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . .

  	
  18

  
	
  Section 6.08

  	
  Successors
  and Assigns . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

  	
  18

  
	
  Section 6.09

  	
  Counterparts . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . 

  	
  18

  
	
  Section 6.10

  	
  Interpretation . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . .

  	
  18

  
	
  Section 6.11

  	
  Notices . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . . 

  	
  19

  
	
  Section 6.12

  	
  Governing
  Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . . . . 

  	
  20

  
	
  Section 6.13

  	
  Severability . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . 

  	
  20

  
	
  Section 6.14

  	
  Construction . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . .

  	
  20

  
	
  Section 6.15

  	
  Attorneys’
  Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . . . . 

  	
  20

  
	
  Section 6.16

  	
  Further
  Assurances . . . . . . . . . . . . . . . . . . . . . . . . .
  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

  	
  20

  

 

 

EXHIBITS

 

	
   

  	
  EXHIBIT
  A

  	
  Transferred
  Assets (including Transferred Technology)

  
	
   

  	
   

  	
   

  
	
   

  	
  EXHIBIT
  B

  	
  Transferred
  Books and Records

  
	
   

  	
   

  	
   

  
	
   

  	
  EXHIBIT
  C

  	
  Transferred
  Contracts

  
	
   

  	
   

  	
   

  
	
   

  	
  EXHIBIT
  D

  	
  Transferred
  Intellectual Property

  
	
   

  	
   

  	
   

  
	
   

  	
  EXHIBIT
  E

  	
  General
  Assignment and Bill of Sale

  
	
   

  	
   

  	
   

  
	
   

  	
  EXHIBIT
  F

  	
  Assumed
  Liabilities

  
	
   

  	
   

  	
   

  
	
   

  	
  EXHIBIT
  G

  	
  Transfer
  Plan

  
	
   

  	
   

  	
   

  
	
   

  	
  EXHIBIT
  H

  	
  Transitional
  Services Agreement

  
	
   

  	
   

  	
   

  
	
   

  	
  EXHIBIT
  I

  	
  Intraject
  Delivery System

  
	
   

  	
   

  	
   

  
	
   

  	
  EXHIBIT
  J

  	
  Nontransferable
  Assets

  

 

 

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of August 25,
2006 by and between Aradigm Corporation, a California corporation (“Aradigm”), and SJ2 Therapeutics, Inc., a Delaware
corporation (“Purchaser”). Aradigm and Purchaser
are sometimes referred to herein individually as a “Party”
and collectively as the “Parties.”

 

RECITALS

 

A.            Aradigm desires to assign and transfer to
Purchaser, and Purchaser desires to accept assignment and transfer from
Aradigm, on the terms and subject to the conditions set forth herein, those
certain assets of Aradigm related to the Intraject Delivery System.

 

B.            Furthermore, Aradigm and Purchaser desire
to make certain representations, warranties, covenants and other agreements in
connection with the transactions contemplated hereby.

 

NOW, THEREFORE, in consideration of the
covenants and representations set forth herein, and for other good and valuable
consideration, the parties agree as follows:

 

ARTICLE I

DEFINITIONS

 

Section 1.01           Certain Definitions.  As used in this Agreement, the following terms
have the following meanings (terms defined in the singular to have a
correlative meaning when used in the plural and vice versa). Certain other
terms are defined in the text of this Agreement.

 

(a)           “Affiliate”
means a corporation or any other entity that directly, or indirectly through
one or more intermediaries, controls, is controlled by, or is under common
control with, the designated Party, but only for so long as such control
exists. As used in this definition only, “control” shall mean ownership of
shares of stock having at least 50% of the voting power entitled to vote for
the election of directors in the case of a corporation (or, in the case of an
entity that is not a corporation, in the election of the corresponding managing
authority), or otherwise having the power to directly or indirectly control the
management of such entity.

 

(b)           “Assigned Assets”
shall mean any and all of Aradigm’s right, title and interest in and to the
following:

 

(i)            any
and all tangible assets owned or otherwise transferable by Aradigm as of the
Closing Date, in each case to the extent exclusively used or held for use in
the Business, including those assets listed on Exhibit A
(collectively, “Transferred Assets”);

 

(ii)           the
Books and Records listed on Exhibit B (collectively, “Transferred Books and Records”);

 

1

 

(iii)          all
agreements listed on Exhibit C (collectively, “Transferred
Contracts”);

 

(iv)          all
Patents (including in each case all rights to Prosecute and Enforce the same)
listed on Exhibit D (collectively, “Transferred
Patents”);

 

(v)           all
Trademarks (including in each case all rights to Prosecute and Enforce the
same) listed on Exhibit D (collectively, “Transferred
Trademarks”);

 

(vi)          any
and all Technology owned or otherwise transferable by Aradigm as of the Closing
Date, other than the Transferred Patents and Transferred Trademarks, in each
case to the extent exclusively used or held for use in the Business, including
that Technology listed on Exhibit A (collectively, “Transferred Technology”); and

 

(vii)         any and all
right to recover past, present and future damages for the breach, infringement
or misappropriation, as the case may be, of any of the foregoing.

 

(c)           “Books and Records”
shall mean all papers and records (in any format including paper or electronic)
kept or maintained including any and all laboratory notebooks, invention
disclosures, purchasing and sales records, all data and communications relating
to ongoing business development activities, preclinical and clinical data, all
Regulatory Documents, vendor lists, accounting and financial records, product
documentation, product specifications, marketing documents and the like, in
each case pertaining to the Business or the Assigned Assets.

 

(d)           “Business” shall
mean the research, development, commercialization, manufacture, marketing,
distribution, sale, support and other use and commercial exploitation of the
Intraject Delivery System.

 

(e)           “Business Intellectual
Property” shall mean any and all Technology and any and all
Intellectual Property Rights, including Registered Intellectual Property
Rights, that is or are owned (in whole or in part) by or exclusively licensed
to Aradigm, as of the Closing Date, in each case that are used in or necessary
to the Business.

 

(f)            “Dollars” shall
refer to United States currency unless expressly specified otherwise.

 

(g)           “Governmental Body”
shall mean any: (i) nation, province, state, county, city, town, village,
district, or other jurisdiction of any nature; (ii) federal, provincial,
state, local, municipal, foreign, or other government; (iii) governmental
or quasi-governmental authority of any nature (including any governmental
agency, branch, department, official, or entity and any court or other
tribunal); (iv) multi-national organization or body; or (v) body
exercising, or entitled to exercise, any administrative, executive, judicial,
legislative, police, regulatory, or taxing authority or power of any nature.

 

(h)           “Intraject Delivery System”
shall mean Aradigm’s Intraject® needle-free injection delivery system as more
fully described in Exhibit I (the “Existing Delivery System”) 

 

2

 

or any
modified, improved or derivative version thereof, in each case that includes
one or more material elements of the Existing Delivery System.

 

(i)            “Intellectual Property
Rights” shall mean any or all of the following and all rights in,
arising out of, or associated therewith: (i) all United States and foreign
patents and utility models and applications therefor and all reissues,
divisionals, re examinations, renewals, extensions, provisionals, supplementary
protection certificates, continuations and continuations in-part thereof, and
equivalent or similar registered rights anywhere in the world (“Patents”); (ii) all trade secrets and other rights in
know-how and confidential or proprietary information, inventions and
discoveries, including without limitation invention disclosures; (iii) all
copyrights, works of authorship, copyright registrations and applications
therefor and all other rights corresponding thereto throughout the world (“Copyrights”); (iv) all rights in Uniform Resource
Locators, World Wide Web addresses and domain names and applications and
registrations therefor (“Internet Property Rights”);
(v) all trade names, logos, common law trademarks and service marks,
trademark and service mark registrations and applications therefor and all
goodwill associated therewith throughout the world (“Trademarks”);
and (vi) any similar, corresponding or equivalent rights to any of the
foregoing anywhere in the world, including, without limitation, moral rights.

 

(j)            “Licensee” shall
mean a Person other than an Affiliate to whom Purchaser or its Affiliate has
granted the right, or to whom such a Person has sublicensed the right, to (i) make
and sell any Product or (ii) sell any Product, provided that distributors,
wholesalers and resellers as to which Purchaser does not receive compensation
on resales of Products by such entity shall not be considered Licensees.

 

(k)           “Lien” shall
mean any mortgage, pledge, lien, charge, claim, security interest, adverse
claims of ownership or use, restrictions on transfer, defect of title or other
encumbrance of any sort, other than (i) mechanic’s, materialmen’s, and
similar liens with respect to any amounts not yet due and payable, and (ii) liens
for taxes not yet due and payable.

 

(l)            “Net Sales” shall
mean the amounts actually received by Purchaser, its Affiliates, or Licensees,
in consideration of their sales of Product to Third Party customers, less: (i) normal
and customary trade, cash and other discounts; (ii) credits or allowances
for damaged goods, returns, rejections or recalls of Product; (iii) sales
taxes, value added taxes, withholding, import/export taxes or other similar
taxes (excluding taxes on the income of the selling entity) actually paid; (iv) normal
and customary charge back payments or rebates; and (v) packaging, handling
fees, prepaid freight, insurance and the like to the extent separately
identified on the invoice. Sales between or among Purchaser, its Affiliates or
Licensees for resale shall be excluded from the computation of Net Sales, but
the subsequent re sale of such Products by Purchaser, its Affiliates or
Licensees to an end user shall be included within the computation of Net Sales.
Net Sales shall not include amounts in respect of Product sold or used for
development applications (including for clinical trials) or commercial samples
(i.e., items provided for free or at or below cost plus a nominal profit for
promotional purposes).

 

(m)          “Nontransferable Asset”
shall have the meaning ascribed to the term in Section 9.

 

3

 

(n)           “Non-Sumatriptan Product”
shall mean any Product comprising the Intraject Delivery System combined with
an applicable drug formulation, other than Sumatriptan.

 

(o)           “Person” shall
mean any individual, corporation (including any non-profit corporation),
general or limited partnership, limited liability company, joint venture,
estate, trust, association, organization, labor union, Governmental Body or
other entity.

 

(p)           “Product” shall
mean any pharmaceutical product comprising the Intraject Delivery System
combined with Sumatriptan or other applicable drug formulation.

 

(q)           “Prosecution and
Enforcement” shall mean (i) the preparation, filing for,
prosecution, maintenance of registrations thereof and applications for any such
registration (ii) the conduct of interferences, re examinations, reissues,
oppositions or requests for term extensions with respect thereto and (iii) the
conduct of any enforcement proceeding with respect thereto (whether
infringement, misuse, misappropriation or otherwise) or any declaratory
judgment proceeding with respect thereto; and “Prosecute
and Enforce” shall have the correlative meaning.

 

(r)            “Pulmonary Field”
shall mean the delivery of one or more aerosolized active pharmaceutical ingredients
directly into the bronchia or lungs.

 

(s)           “Registered Intellectual
Property Rights” shall mean all United States, international and
foreign: (i) Patents, including applications therefor (each a “Registered Patent”); (ii) registered Trademarks, applications
to register Trademarks, including intent-to use applications, or other
registrations or applications related to Trademarks; (iii) Copyright
registrations and applications to register Copyrights; and (iv) any other
Technology or Intellectual Property Rights that is the subject of an
application, certificate, filing, registration or other document issued by,
filed with, or recorded by, any state, government or other public or private
legal authority at any time.

 

(t)            “Regulatory Documents”
shall mean any and all regulatory submissions (whether completed or in process)
to any Governmental Body anywhere in the world submitted by or on behalf of
Aradigm relating to the Business (including any product developed in connection
therewith), including all annual reports, adverse event reports, and other
adverse event submission tracking information, and amendments and supplements
to any of the foregoing. For purposes of clarity, “Regulatory Documents” shall
not include any filing or other submission made to the United States Securities
and Exchange Commission, the National Association of Securities Dealers, the
Nasdaq Stock Exchange or any similar entity.

 

(u)           “Representatives”
shall mean, with respect to a Person, that Person’s officers, directors,
employees, accountants, counsel, investment bankers, financial advisors, agents
and other representatives.

 

(v)           “Royalty  Revenue” shall
mean running royalties actually received by
Purchaser from a Licensee for sales of Non-Sumatriptan Products by or under
authority of such Licensee, plus any license fees or milestone or other
payments receive by Purchaser from a Licensee to the extent not allocable to
recovery of development or other costs incurred by Purchaser specific to 

 

4

 

the applicable Product. For clarity, Royalty Revenue shall exclude: (i) payments in consideration of goods (including Products) or
services at Purchaser’s fully-burdened cost therefor (any amounts in excess of
the fully-burdened cost shall be included in Royalty Revenue), (ii) payments
in consideration for equity at the fair market value therefor (any amounts in
excess of the fair market value shall be included in Royalty Revenue) and (iii) amounts
received by Purchaser in consideration for a sale of all, or substantially all,
of the business or assets of Purchaser (whether by way of merger, sale of
stock, sale of assets or otherwise), if the successor to such business or
assets has assumed the obligations under Section 2.06(a) of this
Agreement.

 

(w)          “Royalty Term”
shall mean, for a given Product, the period commencing on the Closing Date and
continuing until the later of (i) the ten-year anniversary of the first
commercial sale of such Product in the United States, but no more than twenty
years after the Closing Date cand (ii) the later of expiration or
abandonment of the last Valid Claim of the Transferred Patents covering the
manufacture, use or sale of such Product.

 

(x)            “Sumatriptan Product”
shall mean any Product comprising the Intraject Delivery System combined with
Sumatriptan.

 

(y)           “Technology”
shall mean any or all of the following: (i) works of authorship including,
without limitation, computer programs, source code and executable code, whether
embodied in software, firmware or otherwise, documentation, designs, files, net
lists, records, data and mask works; (ii) inventions (whether or not
patentable), improvements, and technology; (iii) proprietary and
confidential information, including technical data and customer and supplier
lists, trade secrets and know how; (iv) databases, data compilations and
collections and technical data; (v) logos, trade names, trade dress,
trademarks, service marks; (vi) World Wide Web addresses, domain names and
sites; (vii) protocols, methods and processes; and (viii) all
instantiations of the foregoing in any form and embodied in any media.

 

(z)            “Territory”
shall mean the entire world.

 

(aa)         “Third Party”
shall mean any Person other than Purchaser or Aradigm, or their respective
Affiliates.

 

(bb)         “Transfer Plan”
shall mean the plan for the transfer of the Assigned Assets attached hereto as Exhibit G.

 

(cc)         “Valid Claim”
shall mean (i) a claim of an issued and unexpired patent, which has not
been held unenforceable, unpatentable or invalid by a court or other governmental
agency of competent jurisdiction, and which has not been admitted to be invalid
or unenforceable through reissue, disclaimer or otherwise, or (ii) a claim
in a pending patent application being prosecuted in good faith that has not
been abandoned or finally rejected and that has been pending for fewer than
five years after the earliest priority date to which it is entitled.

 

Section 1.02           Additional
Definitions.  Each of the following definitions shall have
the meanings defined in the corresponding sections of this Agreement indicated
below:

 

5

 

	
  Definition

  	
  Section

  
	
  Agreement

  	
  Preamble

  
	
  Aradigm Indemnities

  	
  Section 6.04(b)

  
	
  Assumed Liabilities

  	
  Section 2.05(b)

  
	
  Claim

  	
  Section 6.04(a)

  
	
  Closing Date

  	
  Section 2.07

  
	
  Coordination Lead

  	
  Section 2.03

  
	
  Excluded Liabilities

  	
  Section 2.05(c)

  
	
  Indemnitee

  	
  Section 6.04(c)

  
	
  Indemnitor

  	
  Section 6.04(c)

  
	
  Party

  	
  Preamble

  
	
  PTO

  	
  Section 4.06(a)

  
	
  Purchaser Indemnities

  	
  Section 6.04(a)

  

 

ARTICLE II

ASSIGNMENT, TRANSFER AND LICENSE

 

Section 2.01           Assignment of
Assigned Assets to Purchaser.  Upon
the terms and subject to the conditions set forth herein, Aradigm hereby
assigns, conveys and transfers to Purchaser, at the Closing, all of Aradigm’s
right, title and interest in and to the Assigned Assets, subject to the
reservation on behalf of Aradigm of a perpetual, worldwide, royalty-free,
non-exclusive license, under the Transferred Patents and Transferred Technology
solely for purposes of the Pulmonary Field, which retained license shall include
the right to grant sublicenses to Persons solely within the scope of such
retained license in connection with the grant to such Persons of licenses under
other Patents owned or controlled by Aradigm.

 

Section 2.02           Asset Transfer.  Subject to the terms and conditions set forth
in this Agreement, on the Closing Date, Aradigm shall transfer all Assigned
Assets, in the shape, manner and form of their existence as of the date such
Assigned Assets are transferred to Purchaser, in accordance with the Transfer Plan.
Without limiting the specifics of the Transfer Plan, Aradigm shall promptly
transfer those assets (to the extent not previously transferred to the
Transferee hereunder) to Purchaser as required in the Transfer Plan and this Section 2.02.
Unless otherwise specified in the Transfer Plan, the mode of such transfer
shall be determined by the Coordination Leads with the goal of efficiency and
cost-effectiveness. Without limiting the foregoing and in connection with such
transfers of assets pursuant to this Section 2.02, Aradigm shall make
available such personnel reasonably familiar with the Assigned Assets to
consult with and assist Purchaser in implementing such assets at mutually
agreeable times.

 

Section 2.03           Coordination Leads.
 In order to facilitate the transfer of
assets pursuant to Section 2.02, each Party shall appoint, from time to
time, by written notice to the other Party, one of its personnel as its
coordination lead (each, a “Coordination Lead”).
The Coordination Leads shall be responsible for oversight and coordination of
the transfer of assets in accordance with Section 2.02 and the Transfer
Plan. The Coordination Leads shall carry out their responsibilities by any
reasonable means or practices as the Parties may mutually agree.

 

6

 

Section 2.04           Transitional Services.  Aradigm shall provide all reasonable
transitional services to Purchaser, including facilities, furnishings, access
to systems, document control, quality systems, IT support, accounting, payroll,
administration and other such services as the Parties may mutually agree, until
December 31, 2006 or until such later date as mutually agreed to by the
Parties, as more fully described in Exhibit H, and Purchaser shall
pay the fees therefor set forth in Exhibit H in accordance with the
schedule set forth therein.

 

Section 2.05           Assumption
of Liabilities.

 

(a)           Assumption.  Upon the terms and subject to the conditions
set forth herein, at the Closing, Purchaser shall assume from Aradigm, and
Aradigm shall irrevocably convey, transfer and assign to Purchaser, all of the
Assumed Liabilities (as defined in Section 2.05(b) hereof).  Purchaser shall not assume any liabilities of
Aradigm pursuant hereto, other than the Assumed Liabilities.

 

(b)           Definition of Assumed Liabilities.  For all purposes of and under this Agreement,
the term “Assumed Liabilities” shall mean, refer
to and include only those liabilities listed on Exhibit F.

 

(c)           Definition of Excluded Liabilities.  Except for the Assumed Liabilities, Purchaser
does not assume and is not assuming any debt, liability, duty or other
obligation (of any kind) of Aradigm, whether known or unknown, fixed or
contingent, and regardless of when such liabilities or obligations may arise or
may have arisen or when asserted, including any liabilities, or obligations
related to the Assigned Assets which are outstanding or unpaid as of the
Closing (the “Excluded Liabilities”), and
Aradigm shall remain responsible for the Excluded Liabilities.

 

Section 2.06           Consideration.  On the terms and subject to the conditions
set forth in this Agreement, in addition to the payments contemplated by Section 2.07(a),
the consideration for the Assigned Assets shall be the following:

 

(a)           Royalties.

 

(i)            In
consideration for the assignment and transfer of the Assigned Assets, with
respect to Net Sales Purchaser shall pay to Aradigm, during the Royalty Term:

 

(1)           For each
Non-Sumatriptan Product, [***] percent ([***]%) of Net Sales of such
Non-Sumatriptan Product, provided that in the event and to the extent such
Non-Sumatriptan Product is commercialized by a Licensee Purchaser may at its
election pay to Aradigm either [***] percent ([***]%) of such Licensee’s Net
Sales of such Non-Sumatriptan Product or [***] percent ([***]%) of Purchaser’s
Royalty Revenues from such Licensee in respect of such Non-Sumatriptan
Product.  Purchaser shall make its
election with respect to each such Non-Sumatriptan Product by written notice to
Aradigm of its election on or before the date its first payment would be due
under Section 2.06(a)(vi) in respect of such Non-Sumatriptan Product
under either of the foregoing alternatives.

 

(2)           For
Sumatriptan Products, [***] percent ([***]%) of Net Sales of Sumatriptan
Products.

 

*** Certain information on this page
has been omitted and filed separately with the Commission.  Confidential treatment has been requested
with respect to the omitted portions.

 

7

 

(ii)           Combination
Products.  In the event that a
Product is sold in the form of a combination product (a “Combination
Product”) containing both (1) such Product and (2) another
product or service for which no royalty would be due hereunder if sold
separately, the Net Sales from such combination sales for purposes of
calculating the amounts due under this Section 2.06(a) shall be
calculated by multiplying Net Sales of the Combination Product by a fraction
that reasonably reflects the fair value of the contribution of the Product in
the Combination Product to the total market value of such Combination Product,
which fraction shall be established by the Purchaser and Aradigm through good
faith negotiations and mutual agreement, on a Combination
Product-by-Combination Product basis.

 

(iii)          Single
Royalty.  Only one royalty shall be
paid with respect to each unit of Product that is subject to royalties under
this Section 2.06(a), without regard to the number of transfers or
otherwise.  In no event shall more than
one royalty be due under this Section 2.06(a) with respect to any
Product unit.

 

(iv)          Milestone
Payment.  Purchaser shall pay Aradigm
$4,000,000 within 30 days of the first U.S. commercial sale of the Sumatriptan
Product.

 

(v)           Records.  During the term of this Agreement and for a
period of three years thereafter, Purchaser and its Affiliates shall keep, and
shall cause its licensees and sublicensees to keep, complete and accurate
records of their Net Sales in sufficient detail to enable the amounts payable
under this Section 2.06(a) to be determined.  Upon Aradigm’s written request, but not more
frequently than once per calendar year, Purchaser shall permit representatives
or agents of Aradigm, at Aradigm’s expense, to examine such records during
Purchaser’s regular business hours for the purpose of and to the extent
necessary to verify any report required under this Agreement with respect to
Net Sales received not more than three years prior to the date of Aradigm’s
request.  In the event that the amounts
due to Aradigm are determined to have been underpaid, Purchaser shall promptly
pay to Aradigm any amount due and unpaid. 
In the event that it is determined, as a result of such examination,
that the amount underpaid with respect to a given payment is in excess of 5% of
the total amount of such payment, then Purchaser shall reimburse Aradigm for
all costs incurred by Aradigm in conducting such examination.

 

(vi)          Reports.  Beginning with the first accrual of royalties
or other payments due hereunder, Purchaser shall provide to Aradigm a quarterly
royalty report as follows: Within 60 days after the end of each quarterly
period, Purchaser shall deliver to Aradigm a true and accurate report, giving
such particulars of the business conducted by Purchaser, its Affiliates and
Licensees, during such quarterly period as are pertinent to account for
payments due under this Section 2.06(a). 
Such report shall include, as applicable, at least (A) the total of
Net Sales during such quarterly period; (B) the calculation of royalties; (C) the
calculation of Royalty Revenue for each applicable Non-Sumatriptan Product and (D) the
total royalties and other payments due Aradigm. 
Simultaneously with the delivery of each such report, Purchaser shall
pay to Aradigm the total amount, if any, due to Aradigm for the period of such
report.  If no payment is due, Purchaser
shall so report.  Aradigm shall not
provide to Third Parties any information contained

 

8

 

in reports provided to Aradigm
under this Section 2.06(a)(v), or learned by Aradigm under Section 2.06(a)(iii) above.

 

(vii)         Payments.  All amounts payable hereunder by Purchaser
shall be payable in Dollars to Aradigm. 
If any currency conversion shall be required in connection with the
payment of royalties hereunder, such conversion shall be made by using the
exchange rates reported in the Wall Street Journal on the last business day of
the quarter in respect of which such payment is made.

 

(viii)        Taxes.  Any withholding or other tax that is required
by law to be withheld on behalf of Aradigm with respect to payments owed by
Purchaser pursuant to this Agreement shall be deducted by Purchaser from such
payment prior to remittance.  Purchaser
shall promptly furnish Aradigm evidence of any such taxes withheld.

 

(ix)           Without
limiting Section 2.06(a)(v) above, Purchaser shall take reasonable
measures to keep Aradigm informed as to the progress of the development and
commercialization of the Intraject Delivery System and Products arising
therefrom until such time as Purchaser has fulfilled its royalty obligations to
Aradigm pursuant to Section 2.06(a).

 

Section 2.07           Closing, Closing Place, Time and
Date.  The closing of the
transactions contemplated by this Agreement (the “Closing”) shall be held at
the offices of Cooley Godward llp, 3175 Hanover Street, Palo Alto, California,
at 10:00 a.m. on the date of the Agreement (the actual date on which the
Closing shall occur being referred to herein as the “Closing Date”).

 

(a)           Closing Deliveries.

 

(i)            At the
Closing, Purchaser shall deliver, or cause to be delivered, to Aradigm the
following, dated as of the date of this Agreement and, where relevant, executed
for and on behalf of Purchaser by a duly authorized officer thereof:

 

(1)           any and
all instruments, certificates and agreements as Aradigm may reasonably request
in order to effectively make Purchaser responsible for all Assumed Liabilities
pursuant hereto to the fullest extent permitted by applicable law;

 

(2)           Purchaser
shall have provided Aradigm with evidence demonstrating that Purchaser has
obtained at least $15 million in equity financing;

 

(3)           Purchaser
shall have paid to Aradigm, by wire transfer, $4,000,000 in cash;

 

(4)           Purchaser
shall have reimbursed Aradigm for all documented expenses actually incurred by
Aradigm from July 1, 2006 through the Closing Date, that were pre-approved
in writing by Purchaser, up to $515,036;

 

(5)           Each of
Steve Farr and John Turanin shall have provided Aradigm with a release of all
claims over or rights to any severance payments relating to their cessation of
services to Aradigm, in a form that is reasonably acceptable to Aradigm and
including mutually agreed consideration for such releases; and

 

9

 

(6)           the
Transitional Services Agreement.

 

(ii)           At the
Closing, Aradigm shall deliver, or cause to be delivered, to Purchaser the
following, dated as of the date of this Agreement and executed for and on
behalf of Aradigm by a duly authorized officer thereof:

 

(1)           a general
assignment and bill of sale with respect to the Assigned Assets in the form
attached hereto as Exhibit F;

 

(2)           one or
more instruments of assignment and assumption, in customary form and substance
reasonably satisfactory to Purchaser and Aradigm and their respective counsel;

 

(3)           an
instrument of assignment of the Transferred Patents, the Transferred Trademarks,
and any other Registered Intellectual Property Rights included in the Assigned
Assets, in customary form and substance reasonably satisfactory to Purchaser
and Aradigm and their respective counsel;

 

(4)           any and
all required third party consents including those consents necessary for the
valid assignment and transfer of the Transferred Contracts;

 

(5)           any and
all other instruments, certificates and agreements as Purchaser may reasonably
request in order to effectively transfer to Purchaser all of the Assigned
Assets pursuant hereto and to the Transfer Plan to the fullest extent permitted
by applicable law; and

 

(6)           the
Transitional Services Agreement.

 

(b)           Closing.  From and after the Closing, the Assigned
Assets shall be held for the account and benefit, and at the risk, of
Purchaser.

 

Section 2.08           Nontransferable Assets.  To the extent that any Assigned Asset or
Assumed Liability to be sold, conveyed, assigned, transferred, delivered or
assumed to or by Purchaser pursuant hereto, or any claim, right or benefit
arising thereunder or resulting therefrom, is not capable of being sold,
conveyed, assigned, transferred or delivered without the approval, consent or
waiver of the issuer thereof or the other Party thereto, or any third Person
(including a Governmental Body), or if such sale, conveyance, assignment,
transfer or delivery or attempted sale, conveyance, assignment, transfer or
delivery would constitute a breach (or give rise to a termination right)
thereof or a violation of any law, decree, order, regulation or other
governmental edict (collectively, with respect to such Assigned Assets, as set
forth on Exhibit J, the “Nontransferable Assets”),
except as expressly otherwise provided herein, this Agreement shall not
constitute a sale, conveyance, assignment, transfer or delivery thereof, or an
attempted sale, conveyance, assignment, transfer or delivery thereof absent
such approvals, consents or waivers.  If
any such approval, consent or waiver shall not be obtained, or if an attempted
assignment of any such Assigned Asset or the assumption of any Assumed
Liability by Purchaser would be ineffective so that Purchaser would not in fact
receive all the Nontransferable Assets or assume all such Assumed Liabilities
pursuant hereto, Aradigm and 

 

10

 

Purchaser shall cooperate in
a mutually agreeable arrangement under which Purchaser would obtain the
benefits and assume the obligations of such Assigned Assets and Assumed
Liabilities, respectively, in accordance with this Agreement, including
subcontracting, sub-licensing, or sub-leasing to Purchaser, or under which
Aradigm, at Purchaser’s expense, would enforce for the benefit of Purchaser,
with Purchaser assuming all of Aradigm’s obligations thereunder, any and all
rights of Aradigm against a Third Party thereto.

 

Section 2.09           FTO
Licenses.

 

(a)           To Purchaser. Aradigm hereby
grants to Purchaser a non-exclusive, fully-paid, world-wide, perpetual,
irrevocable, transferable, sublicensable license to fully exercise any
Intellectual Property Rights that are (i) owned, controlled or employed by
Aradigm at any time prior to the Closing (or that arises thereafter to the
extent covering Technology created, owned, controlled or employed by Aradigm
prior to the Closing), (ii) necessary or useful for the operation of the
Business and (iii) not included in the Assigned Assets that are actually
assigned to Purchaser.

 

(b)           To Aradigm. Purchaser hereby
grants to Aradigm a non-exclusive, fully-paid, world-wide, perpetual, irrevocable,
transferable, sublicensable license to fully exercise any Intellectual Property
Rights that are (i) owned, controlled or employed by Purchaser as of the
Closing (or that arises thereafter to the extent covering Technology created,
owned, controlled or employed by Aradigm as of the Closing) and (ii) solely
for use in the Pulmonary Field.

 

Section 2.10           Taking of Necessary Action;
Further Action.  From time to time
after the Closing, at the request of either Party, the Parties hereto shall
execute and deliver such other instruments of sale, transfer, conveyance,
assignment and confirmation and take such action as the Parties may reasonably
determine is necessary to transfer, convey and assign to Purchaser, and to
confirm Purchaser’s title to or interest in the Assigned Assets, to put
Purchaser in actual possession and operating control thereof and to assist
Purchaser in exercising all rights with respect thereto.  Aradigm hereby constitutes and appoints
Purchaser and its successors and assigns as its true and lawful attorney in
fact in connection with the transactions contemplated by this Agreement, with
full power of substitution, in the name and stead of Aradigm but on behalf of
and for the benefit of Purchaser and its successors and assigns, to demand and
receive any and all of the Assigned Assets and to give receipt and releases for
and in respect of the same and any part thereof, and from time to time to
institute and prosecute, in the name of Aradigm or otherwise, for the benefit
of Purchaser or its successors and assigns, proceedings at law, in equity, or
otherwise, which Purchaser or its successors or assigns reasonably deem proper
in order to collect or reduce to possession or endorse any of the Assigned
Assets and to do all acts and things in relation to the Assigned Assets which
Purchaser or its successors or assigns reasonably deem desirable.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF ARADIGM

 

Aradigm
hereby represents and warrants to Purchaser as follows:

 

11

 

Section 3.01           Organization, Qualification, and
Corporate Power.  Aradigm (a) is
a corporation duly organized, validly existing, and in good standing under the
laws of the State of California, (b) has obtained all necessary corporate
approvals to enter into and execute this Agreement and (c) has the full
right, power and authority to enter into this Agreement.

 

Section 3.02           Authorization.  Aradigm has full power and authority to
execute and deliver this Agreement, and to consummate the transactions
contemplated hereunder and to perform its obligations hereunder, and no other
proceedings on the part of Aradigm are necessary to authorize the execution,
delivery and performance of this Agreement. 
This Agreement constitutes the valid and legally binding obligations of
Aradigm, enforceable against Aradigm in accordance with its terms and
conditions, except as such enforceability may be limited by principles of
public policy and subject to the laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies.

 

Section 3.03           Assets.  The Assigned Assets include all assets of
Aradigm and its Affiliates that are used or held for use by Aradigm and its
Affiliates primarily in the operation or conduct of the Business.

 

(a)           The Assigned Assets include all
assets of Aradigm and its Affiliates that are used or held for use by Aradigm
and its Affiliates primarily in the operation or conduct of the Business.

 

(b)           Following the consummation of the
transactions contemplated by this Agreement and the related agreements, and the
execution of the instruments of transfer contemplated hereby and thereby,
Purchaser will own, with good, valid and marketable title, or lease, under
valid and subsisting leases, or otherwise acquire the interests of Aradigm in
the Assigned Assets, free and clear of any Liens, and without incurring any
penalty or similar transfer fee.

 

Section 3.04           Transferred Books and Records.  The Transferred Books and Records listed on Exhibit B
are all of the Books and Records maintained by Aradigm that pertain to the
Business and the Assigned Assets.

 

Section 3.05           Transferred Contracts.  The Transferred Contracts listed on Exhibit C
are all of the contracts between Aradigm and any Third Party currently
necessary for or primarily related to, the operation of the Business, and true
and complete copies of all such Transferred Contracts have been delivered or
made available to Purchaser or its representatives.  Each Transferred Contract is in full force
and effect and, to Aradigm’s knowledge, Aradigm is not subject to any default
thereunder, nor, to Aradigm’s knowledge, is any party obligated to Aradigm
pursuant to any such Transferred Contract subject to any default
thereunder.  Aradigm has neither
breached, violated or defaulted under, nor received notice that Aradigm has
breached, violated or defaulted under, any of the terms or conditions of any
Transferred Contract.  Aradigm has
obtained, or will obtain prior to the Closing, all necessary consents, waivers
and approvals of parties to any Transferred Contract as are required thereunder
in connection with the Closing, or for any such Transferred Contract to be
transferred to Purchaser, and to remain in full force and effect without
limitation, modification or alteration after the Closing.  Following the Closing, Purchaser will be
permitted to exercise all of the rights Aradigm had under the Transferred 

 

12

 

Contracts without the
payment of any additional amounts or consideration other than ongoing fees,
royalties or payments which Aradigm would otherwise be required to pay pursuant
to the terms of such Transferred Contracts had the transactions contemplated by
this Agreement not occurred.

 

Section 3.06           Transferred
Intellectual Property.

 

(a)           The Exhibits listing the Transferred
Patents and the Transferred Trademarks are, to Aradigm’s knowledge, complete
and accurate.  With respect to
Transferred Patents, those Transferred Patents that are Registered Patents are
currently in compliance with formal legal requirements (including payment of
filing, examination and maintenance fees and proofs of use),  and are not subject to any unpaid maintenance
fees or taxes falling due within 90 days after the Closing Date.  There are no proceedings or actions known to
Aradigm before any court, tribunal (including the United States Patent and
Trademark Office (the “PTO”) or
equivalent authority anywhere in the world) related to any such Registered
Patent.

 

(b)           To Aradigm’s knowledge, each
Registered Patent that is a Transferred Patent is properly filed and is
currently pending or issued, and all necessary registration, maintenance and
renewal fees in connection with such Registered Patent that is a Transferred
Patent have been paid and all necessary documents and certificates in
connection with such Registered Patent have been filed with the relevant patent
authorities in the United States or foreign jurisdictions in which Aradigm has
elected to pursue such Registered Patent, as the case may be, for the purposes
of maintaining such Registered Patent. 
There are, to Aradigm’s knowledge, no actions that must be taken by
Aradigm within 90 days after the Closing Date, including the payment of any
registration, maintenance or renewal fees or the filing of any responses to PTO
office actions, documents, applications or certificates for the purposes of
obtaining, maintaining, perfecting or preserving or renewing any such
Registered Patent.  To the extent Aradigm
has acquired from any Person any Technology or Intellectual Property Right, in
each case that are included in the Assigned Assets, Aradigm has obtained a
valid and enforceable assignment sufficient to irrevocably transfer all rights
in such Technology and Intellectual Property Rights (including the right to
seek past and future damages with respect thereto) to Aradigm.  To the maximum extent provided for by, and in
accordance with, applicable laws and regulations, Aradigm has recorded each
such assignment of a Registered Intellectual Property Right assigned to Aradigm
with the relevant Governmental Body, including the PTO, the U.S. Copyright
Office, or their respective equivalents in any relevant foreign jurisdiction,
as the case may be.  Aradigm has not
claimed a particular status, including “Small Entity Status,” in the
application for any Registered Patent that is a Transferred Patent, which claim
of status was not at the time made, or which has since become, inaccurate or
false or that will no longer be true and accurate as of the Closing Date.

 

(c)           Aradigm has no knowledge of any
misrepresentation regarding, or failure to disclose, any fact or circumstances
in any application for any Registered Patent that is a Transferred Patent that
would materially and adversely affect the validity or enforceability of such
Registered Patent that is a Transferred Patent.

 

13

 

(d)           All Registered Intellectual Property
Rights included in the Assigned Assets are free and clear of any Liens.  Immediately prior to the Closing, Aradigm is
the exclusive owner or exclusive licensee of all Business Intellectual
Property.

 

(e)           Schedule 3.06(e) sets forth a
list of all Regulatory Documents.

 

(f)            All Assigned Assets will be fully
transferable, alienable or licensable by Purchaser without restriction and
without payment of any kind to any Third Party, including royalty obligations,
other than those restrictions and payments Aradigm would be subject to as of the
Closing Date with respect to such Assigned Assets had the transactions
contemplated by this Agreement not occurred.

 

(g)           Each material item of Technology used
in the conduct of the Business by Aradigm was (i) written and created by
then-current employees of Aradigm acting within the scope of their employment
or (ii) acquired or licensed by Aradigm from Third Parties who have
validly and irrevocably assigned such item to Aradigm, or granted Aradigm a
license to use such item of a sufficient scope to cover Aradigm’s use or prior
use of thereof in the Business.

 

(h)           To Aradigm’s knowledge, the conduct
of the Business by Aradigm as it was previously conducted does not, infringe or
misappropriate any Intellectual Property Right of any person, or constitute
unfair competition or trade practices under the laws of any jurisdiction, and
Aradigm has not received notice from any person claiming that such conduct by
Aradigm infringes or misappropriates any Intellectual Property Right of any
person or constitutes unfair competition or trade practices under the laws of
any jurisdiction.

 

(i)            Each employee and consultant of
Aradigm that provides services to Aradigm in connection with the Business has
entered into a valid and binding written agreement with Aradigm sufficient to
vest title in Aradigm of all Technology and Intellectual Property Rights
included in the Assigned Assets and created by such employee or consultant in
the scope of his or her services or employment for Aradigm.

 

(j)            Aradigm has not transferred
ownership of, nor granted any exclusive license of or exclusive right to use,
or authorized the retention of any exclusive rights to use or joint ownership
of, any Technology or Intellectual Property Right that is or was used in
connection with the Business, to any other person.

 

(k)           To Aradigm’s knowledge, no person is
infringing or misappropriating any Intellectual Property Right included in the
Assigned Assets.

 

(l)            No Business Intellectual Property is
subject to any proceeding or outstanding decree, order, judgment or settlement
agreement or stipulation against Aradigm or, to Aradigm’s knowledge, against
any Third Parties from whom Aradigm acquired or licensed Business Intellectual
Property that restricts in any material way the use, transfer or licensing of
such Business Intellectual Property by Aradigm or is reasonably likely to
affect the validity, use or enforceability of such Business Intellectual
Property.

 

14

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

Purchaser
hereby represents and warrants to Aradigm as follows:

 

Section 4.01           Organization,
Qualification, and Corporate Power.  Purchaser (a) is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of [Delaware], (b) has obtained all necessary corporate approvals to enter
into and execute this Agreement and (c) has the full right, power and
authority to enter into this Agreement.

 

Section 4.02           Authorization.  Purchaser has full power and authority to
execute and deliver this Agreement, and to consummate the transactions
contemplated hereunder and to perform its obligations hereunder, and no other
proceedings on the part of Purchaser are necessary to authorize the execution,
delivery and performance of this Agreement. 
This Agreement constitutes the valid and legally binding obligations of
Purchaser, enforceable against Purchaser in accordance with its terms and
conditions, except as such enforceability may be limited by principles of
public policy and subject to the laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies.

 

ARTICLE V

OTHER AGREEMENTS AND COVENANTS

 

Section 5.01           Additional
Documents and Further Assurances.  Each Party hereto, at the request of another
Party hereto, shall execute and deliver such other instruments and do and
perform such other acts and things as may be reasonably requested for effecting
completely the consummation of the transactions contemplated hereby.

 

Section 5.02           Reasonable
Cooperation of Purchaser. 
Purchaser shall cooperate, to the extent reasonable, with Aradigm’s
efforts to obtain any Third Party consents; provided, however, that this Section 6.02
shall not obligate Purchaser to incur any additional expense or liability.

 

Section 5.03           Reasonable
Efforts.  Each of the Parties will use
their reasonable efforts to take all action and to do all things necessary,
proper, or advisable in order to consummate and make effective the transactions
contemplated by this Agreement.

 

Section 5.04           Indemnification.

 

(a)           Indemnification
of Purchaser.

 

(i)             Aradigm shall indemnify and hold harmless each of Purchaser
and its Affiliates, and the directors, officers, and employees of Purchaser and
of such Affiliates, and the successors and assigns of any of the foregoing
(collectively, the “Purchaser Indemnitees”),
from and against any and all liabilities, damages, settlements, claims,
actions, suits, penalties, fines, costs and expenses (including, without
limitation, reasonable attorneys’ fees and other expenses of settlement) (any
of the foregoing, a “Claim”)
incurred by any Purchaser Indemnitee, based upon a Claim of a Third Party, to
the extent resulting from the breach of any of Aradigm’s 

 

15

 

express
representations and warranties set forth in Article III of this
Agreement.  Aradigm’s obligations to the
Purchaser Indemnitees pursuant to this Section 5.04(a)(i) shall be
limited, in the aggregate, to amounts actually received by Aradigm by operation
of Section 2.06(a)(i). 
Notwithstanding the foregoing, Aradigm shall not have any obligation to
the Purchaser Indemnitees in respect of any breach of representations and
warranties as to which Purchaser has actual knowledge (including for this
purpose the actual knowledge of Steve Farr, John Turanin or Jonathan Rigby)
prior to the Closing.

 

(b)           Aradigm shall indemnify and hold
harmless the Purchaser Indemnitees from and against all Claims arising from the
Excluded Liabilities.

 

(c)           Indemnification of Aradigm.  Purchaser shall indemnify and hold harmless
each of Aradigm and its Affiliates, and the directors, officers, and employees
of Aradigm and of such Affiliates, and the successors and assigns of any of the
foregoing (collectively, the “Aradigm Indemnitees”),
from and against any and all liabilities, damages, settlements, claims,
actions, suits, penalties, fines, costs and expenses (including, without
limitation, reasonable attorneys’ fees and other expenses of settlement)
incurred by any Aradigm Indemnitee, based upon (i) a Claim of a Third
Party, to the extent resulting from the breach of any of Purchaser’s express
representations and warranties set forth in Article IV of this Agreement, (ii) a
Claim relating to product liability concerning any of the Assigned Assets or (iii) a
Claim relating to the Assumed Liabilities.

 

(d)           Procedure.  A Party that intends to claim indemnification
under this Section 5.04 (the “Indemnitee”)
shall promptly notify the other Party (the “Indemnitor”)
in writing of any Claim in respect of which the Indemnitee intends to require
such indemnification, and the Indemnitor shall have sole control of the defense
and/or settlement thereof; provided that the Indemnitee shall have the right to
participate, at its own expense, with counsel of its own choosing in the
defense and/or settlement of such Claim. 
The indemnification obligations of the Parties in this Section 5.04
shall not apply to amounts paid in settlement of any Claim if such settlement
is effected without the consent of the Indemnitor, which consent shall not be
unreasonably withheld or delayed.  The
failure to deliver written notice to the Indemnitor within a reasonable time
after the commencement of any such Claim, if prejudicial to Indemnitor’s
ability to defend such action, shall relieve such Indemnitor of any liability
to the Indemnitee under this Section 5.04, but the omission to so deliver
written notice to the Indemnitor shall not relieve the Indemnitor of any
liability to any Indemnitee otherwise than under this Section 5.04.  The Indemnitee under this Section 5.04
and its directors, officers and employees shall cooperate fully with the Indemnitor
and its legal representatives and provide full information in the investigation
of any Claim covered by this indemnification.

 

(e)           Sole Remedy.  The indemnification rights provided for in
this Article V shall constitute the sole and exclusive remedy and the sole
basis and means of recourse among the Aradigm Indemnities and the Purchaser
Indemnities with respect to Claims arising out of or in connection with any
breach of or inaccuracy in any representation, warranty, covenant or agreement
contained in this Agreement.

 

Section 5.05           Covenant Not to Compete.  Aradigm and its Affiliates agree for a period
of four (4) years after the Closing Date (the “Initial
Period”) not to (i) conduct, participate in or 

 

16

 

sponsor, directly or
indirectly, any activities directed toward the research, development of
technologies or products for the delivery of one or more active pharmaceutical
ingredients via needle free injection or the manufacture, marketing or distribution
of such products (each, a “Competing Activity”)
or (ii) appoint, license or otherwise authorize any Third Party, whether
pursuant to such license, appointment, or authorization or otherwise to perform
any Competing Activities; provided that during the Initial Period, Purchaser
(itself or through one or more Third Parties) is diligently pursuing the
development (including preclinical development) or commercialization of one or
more Products.  Thereafter during the
Royalty Term, Aradigm and its Affiliates agree not to develop or commercialize
any product for needle free injection of any active pharmaceutical ingredient
for which Purchaser (itself or through one or more Third Parties) is then
actively developing or commercializing a Product incorporating such active
pharmaceutical ingredient (or any prodrug, metabolite, degradant, intermediate,
salt form, hydrate, ester, isomer thereof).

 

ARTICLE VI

MISCELLANEOUS

 

Section 6.01           Press Releases and Public
Announcements.  No Party shall issue
any press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior written
approval of the other Party; provided, however, that (a) either Party may
make any public disclosure it believes in good faith is required by applicable
law and (b) Aradigm may correspond with Third Parties in writings in form
and substance reasonably satisfactory to Purchaser with respect to obtaining
consents from such Third Parties.  In
furtherance of the foregoing sentence, the Parties agree and acknowledge that
either party may issue a press release regarding this Agreement and the
transactions contemplated herein at a time to be mutually agreed after the
Closing Date, which press release shall not provide the financial terms of the
Agreement.  The Parties will provide to
each other a copy of such press release at least five business days prior to
its release and such press release shall be subject to written approval of the
receiving Party, which approval shall not be unreasonably withheld or delayed.

 

Section 6.02           No Third-Party Beneficiaries.  This Agreement shall not confer any rights or
remedies upon any Person other than the Parties, and their respective
successors and permitted assigns.

 

Section 6.03           Force Majeure.  Except with respect to the payment of money,
in the event either Party hereto is prevented from or delayed in the
performance of any of its obligations hereunder by reason of acts of God,
terrorism, war, invasion, strikes, riots, earthquakes, storms, fires, energy
shortage, acts of government or governmental agencies, or any other cause
whatsoever beyond the reasonable control of the Party, the Party so prevented
or delayed shall be excused from the performance of any such obligation to the
extent and during the period of such prevention or delay.

 

Section 6.04           Limitation of Liability.  NEITHER PARTY SHALL BE LIABLE TO THE OTHER
PARTY OR ANY THIRD PARTY FOR ANY SPECIAL, CONSEQUENTIAL, EXEMPLARY OR
INCIDENTAL DAMAGES (INCLUDING LOST OR ANTICIPATED REVENUES OR PROFITS RELATING
TO THE SAME), ARISING FROM ANY CLAIM RELATING TO THIS AGREEMENT, WHETHER SUCH
CLAIM IS BASED ON 

 

17

 

CONTRACT, TORT (INCLUDING
NEGLIGENCE) OR OTHERWISE, EVEN IF AN AUTHORIZED REPRESENTATIVE OF SUCH PARTY IS
ADVISED OF THE POSSIBILITY OR LIKELIHOOD OF SAME.

 

Section 6.05           Entire
Agreement and Modification.  This Agreement (including the exhibits
hereto) constitutes the entire agreement among the Parties with respect to the
subject matter hereof and supersedes any prior understandings, agreements, or
representations by or among the Parties, written or oral, to the extent they
related in any way to the subject matter hereof.  This Agreement may not be amended except by a
written agreement executed by all Parties.

 

Section 6.06           Amendment.  This Agreement may be amended by Purchaser
and Aradigm or any successor thereto by execution by each Party (or their
successors) of an instrument in writing.

 

Section 6.07           Waivers.  The rights and remedies of the Parties to
this Agreement are cumulative and not alternative.  Neither the failure nor any delay by any
Party in exercising any right, power or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power or privilege, and no single or partial exercise of such right, power, or
privilege will preclude any other or further exercise of such right, power, or
privilege or the exercise of any other right, power, or privilege.  To the maximum extent permitted by applicable
law, (a) no claim or right arising out of this Agreement or the documents
referred to in this Agreement can be discharged by one Party, in whole or in
part, by a waiver or renunciation of the claim or right unless in writing
signed by the other Party, (b) no waiver that may be given by a Party will
be applicable except in the specific instance for which it is given and (c) no
notice to or demand on one Party will be deemed to be a waiver of any
obligation of such Party or of the right of the Party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.

 

Section 6.08           Successors and
Assigns.  This Agreement shall be
binding upon and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. 
This Agreement shall not be assigned by either Party without the prior
written consent of the other Party, except that either Party may assign this
Agreement, in whole or in part, to an Affiliate of such Party or to the
successor (including the surviving company in any consolidation, reorganization
or merger) or assignee of all or substantially all of its business pertaining
hereto.  This Agreement will be binding
upon any permitted assignee of either Party. 
No assignment shall have the effect of relieving any Party to this
Agreement of any of its obligations hereunder.

 

Section 6.09           Counterparts.  This Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.

 

Section 6.10           Interpretation.  The captions and headings to this Agreement
are for convenience only, and are to be of no force or effect in construing or
interpreting any of the provisions of this Agreement.  Unless specified to the contrary, references
to Articles, Sections or Exhibits mean the particular Articles, Sections and
Exhibits to this Agreement and references to this Agreement include all such
subparts.  Unless context otherwise
clearly requires, whenever 

 

18

 

used in this Agreement:  (a) the words “include” or “including”
shall be construed as incorporating, also, “but not limited to” or “without
limitation”; (b) the word “day” or “year” means a calendar day or year
unless otherwise specified; (c) the word “notice” means notice in writing
(whether or not specifically stated) and shall include notices, consents,
approvals and other written communications contemplated under this Agreement; (d) the
words “hereof,” “herein,” “hereby” and derivative or similar words refer to
this Agreement (including any and all subparts); (e) the word “or” shall
be construed as the inclusive meaning identified with the phrase “and/or”; (f) provisions
that require that a Party, the Parties or any committee hereunder “agree,” “consent”
or “approve” or the like shall require that such agreement, consent or approval
be specific and in writing, whether by written agreement, letter, approved
minutes or otherwise; (g) words of any gender include the other gender; (h) words
using the singular or plural number also include the plural or singular number,
respectively; and (i) references to any specific Law or article, section
or other division thereof shall be deemed to include the then-current
amendments thereto or any replacement Law thereof.

 

Section 6.11           Notices.  All notices and other communications required
or permitted hereunder shall be in writing, shall be effective when given, and
shall in any event be deemed to be given upon receipt or, if earlier, (a) five
days after deposit with the U.S. Postal Service or other applicable postal
service, if delivered by certified or registered first class mail, postage
prepaid, return receipt requested, (b) upon delivery, if delivered by
hand, (c) one (1) business day after the business day of deposit with
Federal Express or similar overnight courier, freight prepaid or (d) one
business day after the business day of facsimile transmission, if delivered by
facsimile transmission with copy by certified or registered first class mail,
postage prepaid, return receipt requested and shall be addressed to the
intended recipient as set forth below:

 

	
  If to Purchaser:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Addressed
  to:

  	
   

  	
  SJ2
  Therapeutics, Inc.

  
	
   

  	
   

  	
  3929
  Point Eden Way

  
	
   

  	
   

  	
  Hayward,
  California 94545

  
	
   

  	
   

  	
  Attention:
  President

  
	
   

  	
   

  	
  Facsimile:
  (510) 265 0277

  
	
   

  	
   

  	
   

  
	
  With
  a copy to:

  	
   

  	
  Wilson,
  Sonsini, Goodrich & Rosati

  
	
   

  	
   

  	
  650
  Page Mill Rd

  
	
   

  	
   

  	
  Palo
  Alto, California 94304-1050

  
	
   

  	
   

  	
  Attn:
  J. Casey McGlynn, Esq.

  
	
   

  	
   

  	
  Facsimile:
  (650) 493-6811

  
	
   

  	
   

  	
   

  
	
  If
  to Aradigm:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Addressed
  to:

  	
   

  	
  Aradigm
  Corporation.

  
	
   

  	
   

  	
  3929
  Point Eden Way

  
	
   

  	
   

  	
  Hayward,
  California 94545

  
	
   

  	
   

  	
  Attention:
  Chief Financial Officer

  
	
   

  	
   

  	
  Facsimile:
  (510) 265 0277

  
	
   

  	
   

  	
   

  
	
  With
  a copy to:

  	
   

  	
  Cooley
  Godward LLP

  

 

19

 

	
   

  	
   

  	
  3175
  Hanover Street

  
	
   

  	
   

  	
  Palo
  Alto, CA 94304-1130

  
	
   

  	
   

  	
  Attn:
  James Kitch, Esq.

  
	
   

  	
   

  	
  Facsimile:
  (650) 843-5027

  

 

Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
ten days’ advance written notice to the other Party pursuant to the provisions
above.

 

Section 6.12           Governing Law.  This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of California
without giving effect to any choice or conflict of law provision or rule (whether
of the State of California or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of California.

 

Section 6.13           Severability.  Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.

 

Section 6.14           Construction.  The Parties have participated jointly in the
negotiation and drafting of this Agreement. 
In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the Parties
and no presumption or burden of proof shall arise favoring or disfavoring any
Party by virtue of the authorship of any of the provisions of this
Agreement.  Any reference to any federal,
state, local, or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise.

 

Section 6.15           Attorneys’ Fees.  If any legal proceeding or other action
relating to this Agreement is brought or otherwise initiated, the prevailing
Party shall be entitled to recover reasonable attorney’s fees, costs and
disbursements (in addition to any other relief to which the prevailing Party
may be entitled).

 

Section 6.16           Further Assurances.  The Parties agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver
to each other such other documents and (c) to do such other acts and
things, all as the other Party may reasonably request for the purpose of
carrying out the intent of this Agreement and the documents referred to in this
Agreement.

 

[The remainder of this page left intentionally blank; signature page follows]

 

20

 

IN
WITNESS WHEREOF, the Parties hereto have executed this Agreement on of the date
first above written.

 

	
   

  	
  ARADIGM
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Tom Chesterman

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:  Tom Chesterman

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:  Senior Vice President and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SJ2
  THERAPEUTICS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Steven J. Farr

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:  Steven J. Farr

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:  President

  
				

 

 

Schedule 3.06(e)

 

Regulatory Documents

 

[***]

 

***
Certain information on this page has been omitted and filed separately with the
Commission.  Confidential treatment has
been requested with respect to the omitted portions.

 

 

EXHIBIT A

 

Transferred Assets (including Transferred Technology)

 

 

[***]

 

Seven
(7) pages have been omitted pursuant to a request for confidential treatment.

 

***
Certain information on this page has been omitted and filed separately with the
Commission.  Confidential treatment has
been requested with respect to the omitted portions.

 

 

EXHIBIT B

 

Transferred Books and Records

 

[***]

 

Three
hundred twenty four (324) pages have been omitted pursuant to a request for
confidential treatment.

 

***
Certain information on this page has been omitted and filed separately with the
Commission.  Confidential treatment has
been requested with respect to the omitted portions.

 

 

EXHIBIT C

 

Transferred Contracts

 

[***]

 

Two
(2) pages have been omitted pursuant to a request for confidential treatment.

 

***
Certain information on this page has been omitted and filed separately with the
Commission.  Confidential treatment has
been requested with respect to the omitted portions.

 

 

EXHIBIT D

 

Transferred Intellectual Property

 

[***]

 

Twenty-three
(23) pages have been omitted pursuant to a request for confidential treatment.

 

***
Certain information on this page has been omitted and filed separately with the
Commission.  Confidential treatment has
been requested with respect to the omitted portions.

 

EXHIBIT E

 

General Assignment and Bill of Sale

 

[Attached]

 

 

FORM OF BILL OF SALE AND ASSIGNMENT AGREEMENT

 

This Bill of Sale and Assignment Agreement is
made effective as of August 25, 2006, by and between SJ2 Therapeutics, Inc.,
a Delaware corporation (“Purchaser”),
and Aradigm Corporation, a California corporation (“Aradigm”).  All capitalized words and terms used in this
Agreement and not defined herein shall have the respective meanings ascribed to
them in the Asset Purchase Agreement dated August 25, 2006 between Aradigm
and the Purchaser (the “Asset Purchase Agreement”).

 

BACKGROUND

 

WHEREAS,
Aradigm and Purchaser have entered into the Asset Purchase Agreement, under
which Aradigm has agreed to sell, convey, assign, transfer and deliver the
Assigned Assets to Purchaser or its assigns.

 

AGREEMENT

 

1.             Sale.  Aradigm does hereby sell, convey, assign,
transfer and deliver to Purchaser, and Purchaser does hereby purchase, acquire
and accept from Aradigm, all of Aradigm’s right, title and interest in and to
the Assigned Assets, subject to the licensed reserved on behalf of Aradigm
pursuant to Section 2.01 of the Asset Purchase Agreement.

 

2.             Representations.  All representations, warranties, agreements
and indemnities of Aradigm with respect to the Assigned Assets set forth in the
Asset Purchase Agreement will continue in effect as provided therein and will
not be deemed to be amended, modified, terminated or superseded by or merged
with this Bill of Sale and Assignment Agreement.

 

3.             Miscellaneous
Provisions.

 

3.1.         Amendments; Waiver.  The terms, provisions and conditions of this
Bill of Sale and Assignment Agreement may be amended only by agreement in
writing of all parties.  No waiver of any
provision nor consent to any exception to the terms of this Bill of Sale and
Assignment Agreement or any agreement contemplated hereby will be effective
unless in writing and signed by the party to be bound and then only to the
specific purpose, extent and instance so provided.

 

3.2.         Further Assurances.  Each party will execute and deliver, both
before and after the Closing Date, such further certificates, agreements and
other documents and take such other actions as the other party may reasonably
request or as may be necessary or appropriate to consummate or implement the
Transactions, including to more effectively transfer the Assigned Assets, or to
evidence such events or matters.

 

3.3.         Assignment.  Neither this Bill of Sale and Assignment
Agreement nor any rights or obligations under it are assignable by one party
without the prior written consent of the other party.

 

 

3.4.         Descriptive Headings.  The descriptive headings of the sections and
subsections of this Bill of Sale and Assignment Agreement are for convenience
only and do not constitute a part of this Bill of Sale and Assignment
Agreement.

 

3.5.         Counterparts.  This Bill of Sale and Assignment Agreement
and any amendment hereto or any other agreement delivered pursuant hereto may
be executed in one or more counterparts and by different parties in separate
counterparts.  All counterparts will
constitute one and the same agreement and will become effective when one or
more counterparts have been signed by each party and delivered to the other
party.  A facsimile signature page will
be deemed an original.

 

3.6.         Governing Laws.  This Bill of Sale and Assignment Agreement
and the legal relations between the parties will be governed by and construed
in accordance with the laws of the State of California applicable to contracts
made and performed in such State and without regard to conflicts of law
doctrines unless certain matters are preempted by federal law.

 

3.7.         Waiver.  No failure on the part of any party to
exercise or delay in exercising any right hereunder will be deemed a waiver
thereof, nor will any single or partial exercise preclude any further or other
exercise of such or any other right.

 

3.8.         Representation By
Counsel; Interpretation.  The
parties each acknowledge that each has been represented by counsel in
connection with this Bill of Sale and Assignment Agreement and the transactions
contemplated by the Asset Purchase Agreement. 
Accordingly, any rule of law or any legal decision that would
require interpretation of any claimed ambiguities in this Bill of Sale and
Assignment Agreement against the party that drafted it has no application and
is expressly waived.  The provisions of
this Agreement will be interpreted in a reasonable manner to effect the intent
of the parties hereto.

 

3.9.         Severability.  If any provision of this Bill of Sale and
Assignment Agreement is held to be unenforceable for any reason, it will be
adjusted rather than voided, if possible, to achieve the intent of the parties.  All other provisions of this Bill of Sale and
Assignment Agreement will be deemed valid and enforceable to the extent
possible.

 

[signature page to follow]

 

2

 

IN WITNESS WHEREOF,
Aradigm and Purchaser have caused this Bill of Sale and Assignment Agreement to
be duly executed as of the day and year first above written.

 

	
  PURCHASER:

  	
   

  	
  ARADIGM:

  
	
   

  	
   

  	
   

  
	
  SJ2 THERAPEUTICS, INC.

  	
   

  	
  ARADIGM CORPORATION

  
	
   

  	
   

  	
   

  
	
  By:

  	
   /s/

  	
   

  	
  By:

  	
   /s/ 

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   Stephen J. Farr

  	
   

  	
  Name:

  	
    T.C. Chesterman

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   President

  	
   

  	
  Title:

  	
    SVP & CFO

  
									

 

 

IN WITNESS WHEREOF,
Aradigm and Purchaser have caused this Bill of Sale and Assignment Agreement to
be duly executed as of the day and year first above written.

 

	
  PURCHASER:

  	
   

  	
  ARADIGM:

  
	
   

  	
   

  	
   

  
	
  SJ2
  THERAPEUTICS, INC.

  	
   

  	
  ARADIGM
  CORPORATION

  
	
   

  	
   

  	
   

  
	
  By:

  	
   /s/

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   Stephen J. Farr

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   President

  	
   

  	
  Title:

  	
   

  
									

 

 

EXHIBIT F

 

Assumed
Liabilities

 

1.             All
obligations under Assumed Contracts, other than obligations due and owing as of
the date of the Agreement to Third Parties that are parties to such Assumed
Contracts.

 

2.             Liabilities
(other than Excluded Liabilities) incurred in the use of the Assigned Assets
following the Closing Date.

 

3.             See
attached list for additional items.

 

[***]

 

Twenty-two (22) pages have been omitted pursuant to a request for
confidential treatment.

 

*** Certain information on this page has been omitted
and filed separately with the Commission. 
Confidential treatment has been requested with respect to the omitted
portions.

 

 

EXHIBIT G

 

Transfer
Plan

 

[***]

 

Six (6) pages have been
omitted pursuant to a request for confidential treatment.

 

*** Certain information on this page has been omitted
and filed separately with the Commission. 
Confidential treatment has been requested with respect to the omitted
portions.

 

 

EXHIBIT H

 

Transitional
Services Agreement

 

[Attached]

 

 

[ARADIGM
LETTERHEAD]

 

August 25, 
2006

 

SJ2 Therapeutics, Inc.

 

 

Re:          Transition
Services

 

Ladies and Gentlemen:

 

SJ2
Therapeutics, Inc. (“SJ2”) and Aradigm Corporation (“Aradigm”) are
entering into an Asset Purchase Agreement (the “APA”) dated as of the date of
this letter (the “Effective Date”), which, among other things, provides for the
sale to SJ2 of certain Aradigm assets related to the development, manufacture,
and commercialization of Aradigm’s Intraject Delivery System.

 

1.             Services.  On the terms and subject to the conditions
contained herein, Aradigm shall provide, or shall cause third parties
designated or hired by it (such designated third parties, together with
Aradigm, the “Service Providers”) to provide to SJ2 the following services
(collectively, the “Services”) for the time period through December 31,
2006 (“Expiration Date”):

 

(a)           General
information technology services and support (e.g., e-mail access, computer equipment
and software support, network access and support to SJ2’s server only, and
other general computer technologies support) within Aradigm’s current systems
and procedures until SJ2 vacates Aradigm’s facilities or the Expiration date,
which ever is earlier,

 

(b)           Telephone
and fax services and support,

 

(c)           Aradigm
will provide SJ2 with document control support for the activities documented in
Aradigm’s current document control processes, using Aradigm’s Document Control
System (DCS) database.  Aradigm has
assumed that SJ2 will purchase the DCS on or shortly after the Effective Date.  It is Aradigm’s intention to hire a temporary
senior level Document Control Specialist, on or shortly after the Effective
Date, who will be fully funded by SJ2, to allow Aradigm’s current document
control personnel to provide document control support to SJ2 consistent with
Aradigm’s current Document Control processes.  If Aradigm is unable to hire a temporary
senior level Document Control Specialist, or should the temporary employee
hired leave Aradigm for any reason, Aradigm will not be able to provide the
services described in this section 1(c).

 

(d)           Human
resources services and support for Aradigm consultants transferring to SJ2,

 

(e)           Payment
for individual Aradigm consultants transferring to SJ2,

 

1

 

(f)                                    Technical
consulting as available and approved in writing by both parties,

 

(g)                                 Office
facilities, furnishings, and services (e.g., utilities, maintenance, mail,
etc.), and

 

(h)                                 Such
other services as Aradigm and SJ2 may agree to as set forth in paragraph 4.

 

2.             Current
Invoices.  Exhibit A to this
letter contains an invoice for transitional services provided by Aradigm to SJ2
through the months of July and August 2006.  The parties acknowledge that a secondary
invoice will be provided to SJ2 relating to transitional service provided at
the time of closing Aradigm’s August accounting records.  As Aradigm’s August accounting records
have not been closed as of the Effective Date,

 

3.             Term of
Agreement.  Except for the services
performed prior to the Effective Date as referenced in paragraph 2, all
services to be provided under this Agreement shall begin as of the Effective
Date and shall terminate on the Expiration Date.  Aradigm and SJ2 will negotiate in good faith
if SJ2 needs to extend the term of this letter and/or any provision of any
Service beyond the Expiration Date (and the parties hereby acknowledge that the
negotiation of any such extension may involve a renegotiation of the charges
with respect to any such Services).  This
letter may be extended upon the mutual agreement of the parties hereto in
writing, either in whole or with respect to one or more of the Services;
provided that, such extension shall only apply to the specific Services for
which this letter was extended.  Services
shall be provided up to and including the applicable Expiration Date, subject
to earlier termination as provided in this letter.

 

4.             Additional
Services.  From time to time after
the Effective Date, Aradigm and SJ2 may identify and mutually agree upon
additional services to be provided to SJ2 in accordance with the terms of this
letter (the “Additional Services”).  At
such times, the parties shall execute an addendum to this Agreement setting
forth a description of any Additional Service, the time period during which
such Additional Service will be provided, the charge for such Additional
Service and any other terms applicable.  Aradigm
and SJ2 acknowledge that charges for Additional Services will include a profit
margin consistent with industry standards for the provision of similar services.  Additional Services may include, but shall
not be limited to, regulatory consulting for the Intraject Sumatriptan NDA,
clinical training of the CRO selected to conduct the Intraject bioequivalence
study, submission of the Intraject Sumatriptan IND on behalf of SJ2 and
assistance with R&D efforts.

 

5.             Provision
of Services.  Aradigm will use
commercially reasonable efforts to ensure that employees and Service Providers
are available to perform its obligations hereunder.  Aradigm shall provide the Services in
accordance with the policies, procedures and practices in effect as of
immediately prior to the Effective Date. 
Aradigm and SJ2 will use their commercially reasonable efforts to
promote a smooth and efficient transition of operations.

 

2

 

6.             No
Warranties.  ARADIGM WILL USE
COMMERCIALLY REASONABLE EFFORTS TO CAUSE THE SERVICES TO BE PERFORMED IN A
PROFESSIONAL AND COMPETENT MANNER; HOWEVER, ARADIGM DOES NOT MAKE ANY
WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, INCLUDING BUT NOT LIMITED TO THE
IMPLIED WARRANTIES OF MERCHANTABILITY, BUSINESS CONTINUITY OR FITNESS FOR A
PARTICULAR PURPOSE, WITH RESPECT TO THE SERVICES, MATERIALS OR OTHER
DELIVERABLES PROVIDED, OR CAUSED TO BE PROVIDED, BY IT UNDER THIS LETTER.

 

7.             Transition
to SJ2 Systems and Personnel.  During
the term of this letter, Aradigm will use reasonable efforts to provide to SJ2,
at SJ2’s expense, consultation, assistance and information as reasonably
requested by SJ2, and will otherwise perform the Services, so as to effect a
smooth transition from SJ2’s utilization of Aradigm’s systems and personnel to
SJ2’s utilization of its own systems and personnel in connection with the
development of the Intraject Delivery System prior to the termination or expiration
of this letter.

 

8.             Payments.  SJ2 shall pay Aradigm on a monthly basis for
documented actual charges for the performance of the Services.  Aradigm will invoice SJ2 for its
representatives’ activities using an hourly rate based on salary, benefits and
overhead of the Aradigm representatives performing the Services.  Aradigm will not apply a profit to its
representatives’ hourly rates through the Expiration Date.

 

9.             Discontinuation
of Services.  If SJ2 chooses to
discontinue any Service prior to the Expiration Date, SJ2 shall give at least
30 days prior written notice, of its intent to terminate this letter as to that
particular Service, which termination as to that particular service shall be
effective on the last day of the month on which the 30 days prior written
notice lapses.  SJ2 will pay Aradigm
hereto the fees and costs of any terminated Service up until the effective date
of termination of such Service.

 

10.          Termination.  Notwithstanding anything to the contrary
contained in this letter, this letter may be terminated, in whole or in part,
at any time:  (a) by the mutual
consent of SJ2 and Aradigm; or (b) by either SJ2 or Aradigm in the event
of any material breach or default by the other party of any of its obligations
under this letter and the failure of such defaulting party to cure, or to take
substantial steps towards the curing of, such breach or default within 14 days
after receipt of written notice from the non-defaulting party requesting such
breach or default to be cured.

 

11.          No Implied
Responsibilities or Obligations.  NO
PARTY HERETO ASSUMES ANY RESPONSIBILITY OR OBLIGATIONS WHATSOEVER, OTHER THAN
THE RESPONSIBILITIES AND OBLIGATIONS EXPRESSLY SET FORTH IN THIS LETTER OR A
SEPARATE WRITTEN AGREEMENT BETWEEN THE PARTIES. 
NOTWITHSTANDING ANYTHING CONTAINED IN THIS LETTER TO THE CONTRARY, IN NO
EVENT SHALL ANY PARTY BE LIABLE TO ANY OTHER PARTY FOR ANY LOST PROFITS, LOSS
OF DATA, LOSS OF USE,

 

3

 

BUSINESS
INTERRUPTION OR OTHER SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES.

 

12.          Independent
Contractors.  The relationship
between SJ2 and Aradigm established under this letter is that of independent
contractors and no party shall be deemed an employee, agent, partner, or joint
venturer of or with the other.  Each
Service Provider will be solely responsible for any employment-related taxes,
insurance premiums or other employment benefits respecting its personnel’s
performance of any Services.  SJ2 agrees
to grant to any applicable Service Provider’s personnel reasonable access to
sites, systems and information as necessary for the Service Provider to perform
its obligations under this letter.  The
personnel of SJ2 and Aradigm shall agree to obey any and all security
regulations and other published policies of the other party relevant to the
provision or receipt of any Services.

 

13.          Confidentiality.  Any information from time to time
communicated or delivered by SJ2 or Aradigm to the other party, including
without limitation trade secrets, business methods, and cost, supplier,
manufacturing and customer information, shall be treated by SJ2 and Aradigm,
respectively, as confidential information of the other party, and shall not be
disclosed or revealed to any third party whatsoever or used in any manner
except as expressly provided for in this letter; provided, however that such
confidential information shall not be subject to the restrictions and
prohibitions set forth in this paragraph 13 to the extent that such
confidential information:  (a) is
available to the public in public literature or otherwise, or after disclosure
by one party to the other becomes public knowledge through no default of the
party receiving such confidential information; or (b) was known to the
party (as demonstrated by the written records of such party) receiving such
confidential information with no obligation to maintain confidentiality prior
to the receipt of such confidential information by such party, whether received
before or after the date of this letter; or (c) is obtained by the party
receiving such confidential information from a third party not subject to a
requirement of confidentiality with respect to such confidential information.  For the avoidance of doubt, information will
not be considered to be available to the public, in the public literature, or
in the prior possession of the receiving party merely because individual
elements thereof are available to the public, in the public literature, or in
the prior possession of the receiving party, unless the combination of such
elements is available to the public, in the public literature, or in the prior
possession of the receiving party.  SJ2
and Aradigm shall take all such precautions as it normally takes with its own
confidential information to prevent any improper disclosure of such
confidential information to any third party; provided that, such
confidential information may be disclosed: 
(x) pursuant to any order of a court or government entity having
jurisdiction and power to order such information to be released or made public;
(y) within the limits required to obtain any authorization from any
governmental or regulatory agency; or (z) with the prior written consent
of the other party, which shall not be unreasonably withheld, as may otherwise
be required in connection with the purposes of this letter.

 

14.          Access to
Aradigm Computer Systems.  If SJ2 is
given access to any computer equipment, computer, software, network, electronic
files, or electronic data storage system owned or controlled by Aradigm (“Aradigm
Computer Systems”), then

 

4

 

SJ2 shall limit
access and use of such Aradigm Computer Systems solely to receive Services
under this letter and shall not access, attempt to access or use any Aradigm
Computer Systems, other than those specifically required to receive the
Services.  All user identification
numbers and passwords disclosed to SJ2 and any of Aradigm’s confidential
information obtained by SJ2 as a result of its access to and use of any such
Aradigm Computer Systems shall be deemed to be, and shall be treated as,
Aradigm’s confidential information under applicable provisions of this letter.  SJ2 agrees to cooperate with Aradigm in the
investigation of any apparent unauthorized access by SJ2 or its representatives
to any Aradigm Computer Systems, or any apparent unauthorized release of
Aradigm’s confidential information by the employees, contractors or advisers of
SJ2.

 

15.          Indemnification.  SJ2 indemnifies Aradigm and its affiliates
against, and agrees to hold each of them harmless from, any and all damage,
loss, liability and expense (including reasonable expenses of investigation and
reasonable attorneys’ fees and any incidental, indirect or consequential
damages, losses, liabilities or expenses) (“Damages”) incurred or suffered by
Aradigm or any of its affiliates (other than Damages incurred or suffered by
Aradigm or any of its affiliates arising from any claims made by employees of
Aradigm) that arise from any third-party claim for personal injury or damage to
property based upon the performance of the Services by any of Aradigm’s
employees, except to the extent such third-party claim arises out of such
employee’s negligence, willful misconduct or breach of obligations under this
letter.  Aradigm indemnifies SJ2 and its
affiliates against, and agrees to hold each of them harmless from, any and all
Damages incurred or suffered by SJ2 or any of its affiliates (other than
Damages incurred or suffered by SJ2 or any of its affiliates arising from any claims
made by employees of SJ2) that arise from any third-party claim for personal
injury or damage to property based upon actions by any of SJ2’s employees under
the terms of this letter, except to the extent such third-party claim arises
out of such employee’s negligence, willful misconduct or breach of obligations
under this letter.

 

16.          Existing
Ownership Rights Unaffected.  Neither
SJ2 nor Aradigm will gain, by virtue of this letter, any rights or ownership of
copyrights, patents, know-how, trade secrets, trademarks or any other
intellectual property rights owned by the other party.

 

17.          Dispute
Resolution.  All disputes arising out
of this letter shall be settled as far as possible by negotiations between SJ2
and Aradigm.  If SJ2 and Aradigm cannot
agree on an amicable settlement within 30 days from written submission of the
matter by one party to the other, the matter shall be shall be settled by
binding arbitration in the County of Hayward in the State of California in
accordance with the Commercial Arbitration Rules then in effect of
JAMS/Endispute.  Arbitration will be
conducted by one arbitrator, mutually selected by SJ2 and Aradigm.  If Aradigm and SJ2 fail to mutually select an
arbitrator within 15 days following the submission of the matter to JAMS/Endispute,
then arbitration will be conducted by three arbitrators:  one selected by Aradigm; one selected by SJ2;
and the third selected by the first two arbitrators.  If SJ2 or Aradigm fails to select an
arbitrator within ten days following the expiration of the initial 15 day
period, then the other shall be entitled to select the second arbitrator.  SJ2 and 

 

5

 

Aradigm agree to
use all reasonable efforts to cause the arbitration hearing to be conducted within
75 days after the appointment of the mutually selected arbitrator or the last
of the three arbitrators, as the case may be, and to use all reasonable efforts
to cause the decision of the arbitrators to be furnished within 95 days after
the appointment of the mutually selected arbitrator or the last of the three
arbitrators, as the case may be.  SJ2 and
Aradigm further agree that discovery shall be completed at least 10 days prior
to the date of the arbitration hearing.  The
final decision of the arbitrators shall be furnished to SJ2 and Aradigm in
writing and shall constitute a conclusive determination of the issues in
question, binding upon SJ2 and Aradigm and shall not be contested by any of
them.  The non-prevailing party in any
arbitration shall pay the reasonable expenses (including attorneys’ fees) of
the prevailing party and the fees and expenses associated with the arbitration
(including the arbitrators’ fees and expenses). 
For purposes of this paragraph 17, the non-prevailing party shall be determined
solely by the arbitrators.

 

18.          No Third
Party Beneficiaries.  This letter
shall not confer any rights or remedies upon any person or entity other than
SJ2 or Aradigm and their respective successors and permitted assigns.

 

19.          Counterparts
and Facsimile Signature.  This letter
may be executed in counterparts, each of which shall be deemed an original but
all of which together shall constitute one and the same instrument.  This letter may be executed by facsimile
signature.

 

20.          Notices.  All notices and other communications under
this letter will be in writing and deemed to have been duly given if given in
accordance with Section 6.11 of the APA.

 

21.          Successors
and Assigns.  The provisions of this
letter shall be binding upon and inure to the benefit of SJ2 and Aradigm and
their respective successors and assigns; provided, however, that except as
expressly provided in this letter, no party may assign, delegate or otherwise
transfer any of its rights or obligations under this letter without the consent
of each other party.

 

[The remainder of this page is
left intentionally blank; signature page follows]

 

6

 

If you are in agreement with the terms of this letter, please execute
this letter where indicated below and return a copy of the signed letter to Aradigm.

 

 

	
   

  	
  ARADIGM CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
    /s/

  
	
   

  	
  Name:

  	
  T.C. Chesterman

  
	
   

  	
  Title:

  	
  SVP & CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ACCEPTED AND AGREED TO:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SJ2 THERAPEUTICS, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
    /s/

  	
   

  	
   

  	
   

  
	
  Name:

  	
  Stephen J. Farr

  	
   

  	
   

  
	
  Title:

  	
  President

  	
   

  	
   

  
							

 

7

 

CERTAIN MATERIAL (INDICATED BY AN ASTERISK) HAS BEEN OMITTED
FROM THIS DOCUMENT PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.  THE OMITTED MATERIAL HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

EXHIBIT I

Intraject Delivery System

 

 

EXHIBIT I 

Technical Description of the Intraject System

 

Intraject is a pre-filled, disposable, sterile delivery device, which
is designed to deliver up to 0.5mL into the subcutaneous tissue.  Intraject demonstrably delivers the injectate
into the subcutaneous tissue similar to needle injection.  Intraject works by using a small canister of
nitrogen gas, under pressure, to accelerate a metal rod towards a modified-PTFE
piston.  This piston is in contact with
the liquid drug formulation, and the impact of the metal rod generates pressure
in the drug formulation.  The other end
of the drug container has a small orifice, which is held in contact with the
skin.  The initial high pressure is
sufficient to cause the liquid to be ejected through the orifice and to pierce
the skin.  The bulk of the liquid is
subsequently delivered at a lower pressure into the subcutaneous tissue where
it is available for systemic absorption.

 

 

The Intraject System consists of the following components:

 

1.             The Capsule sub-assembly,
which stores the pre-filled sterile injection solution.

 

2.             The Actuator sub-assembly,
which is the mechanism that expels the injection solution when actuated.

 

3.             The Setting Mechanism,
which provides a convenient means for the user to set the actuator triggering
mechanism

 

Appropriate materials that are compatible with the formulation, device
capabilities and sterilization methods have been chosen as a result of the
development program for the Intraject System.

 

2

 

Components of the Capsule sub-assembly

 

The primary packaging component of the Intraject® sumatriptan drug
product is the Capsule sub-assembly.  The
formulation contact materials of the capsule sub-assembly are typical of those
used in the manufacture of pharmaceutical products.

 

The Capsule sub-assembly has five components (Figure P.2-1).

 

The material, function and design rationale for use of each primary
packaging component is described below:

 

I.              Glass
capsule:  The glass capsule material is a
USP Type 1 borosilicate glass capsule, strengthened via an ion exchange surface
treatment process, which stores the injection solution.  The material was chosen for its known compatibility
with drug formulations, for its clear appearance which allows observation of
the formulation solution, and because it is resistant to chemical degradation,
impermeable to solvent transport, and easy to sterilize.  This material is widely used within the
pharmaceutical industry as a formulation contact material.

 

II.            Piston:  Modified PTFE piston ([***]):  The piston seals one end of the capsule and
expels the injection solution when the device is actuated.  The material was chosen to ensure appropriate
amounts of friction between the piston and capsule during actuation, to provide
sufficient transfer of energy between the ram and formulation solution during
actuation, to ensure limited solvent transport out of the capsule, to ensure
acceptable seal integrity across an appropriate temperature range, and to be
easy to sterilize.  The material was also
chosen for its non-reactivity and compatibility with drug formulations.  This material is used in medical implants and
pharmaceutical processing.

 

III.           Stopper:  Chlorobutyl rubber stopper, which seals the
other end of the capsule.  The material
was chosen because of its known compatibility with drug formulations, its
elasticity which provides acceptable seal integrity across an appropriate
temperature range, because it has low solvent transport properties, and is easy
to sterilize.  It is one of the most
widely used elastomeric container-closure materials in the pharmaceutical
industry.

 

IV.           Interface
seal:  Chlorobutyl rubber interface seal
that allows sterile filling under vacuum. 
The material is the same as that used for the stopper, and was chosen
for the same reasons.

 

V.            Capsule
sleeve:  Polyurethane capsule sleeve,
which protects the capsule and couples the capsule sub-assembly to the
actuator.  The material was chosen to be
sterilizable, to provide visibility into the glass capsule, and to enable
removal of the “snap-off’ end of the capsule sleeve by the user with an
appropriate force.  This material is
medical-grade, and has very limited exposure to the formulation solution.

 

3

 

Figure 2-1: 
Schematic of Capsule Sub-Assembly Components

 

 

Components of Actuator Sub-Assembly

 

As shown in Figure P.2-2,
the Actuator sub-assembly has twelve functional components.  The actuator components have no drug
formulation contact.

 

	
  I.

  	
   

  	
  An actuator
  sleeve that restrains the latch until the device is actuated.

  
	
   

  	
   

  	
   

  
	
  II.

  	
   

  	
  A chamber
  that stores the pressurized gas for expelling the injection solution.

  
	
   

  	
   

  	
   

  
	
  III.

  	
   

  	
  Two-O-rings that seal between the ram and the chamber to
  prevent gas loss.

  
	
   

  	
   

  	
   

  
	
  IV.

  	
   

  	
  A ram
  that drives the piston down the capsule when the device is actuated, thus
  expelling the injection solution through the drilled orifice.

  
	
   

  	
   

  	
   

  
	
  V.

  	
   

  	
  A latch,
  which restrains the ram from moving until the time of injection.

  
	
   

  	
   

  	
   

  
	
  VI.

  	
   

  	
  A coupling
  to join the actuator to the capsule sub-assembly.

  
	
   

  	
   

  	
   

  
	
  VII.

  	
   

  	
  An outer ring
  to strengthen the actuator sleeve where the latch pushes against it.

  
	
   

  	
   

  	
   

  
	
  VIII.

  	
   

  	
  A coupling
  clip to join the chamber to the coupling.

  
	
   

  	
   

  	
   

  
	
  IX.

  	
   

  	
  A shock
  absorber that controls the rise of pressure in the fluid and
  prevents shock waves.

  
	
   

  	
   

  	
   

  
	
  X.

  	
   

  	
  [***]

  

 

*** Certain information on
this page has been omitted and filed separately with the Commission.  Confidential treatment has been requested
with respect to the omitted portions.

 

4

 

	
  XI.

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  
	
  XII.

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  
	
  XIII.

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  
	
  XIV.

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  
	
  XV.

  	
   

  	
  [***]

  

 

Figure P.2-2: 
Schematic of Actuator Sub-Assembly Components

 

[***]

 

Table P.2-1 provides information
on the materials used to manufacture the individual actuator components.

 

[***]

 

*** Certain information on
this page has been omitted and filed separately with the Commission.  Confidential treatment has been requested
with respect to the omitted portions.

 

5

 

Components of Setting Mechanism

 

The presentation of the Intraject System consists of a Setting
Mechanism, which encases the filled and assembled Actuator and Capsule
sub-assemblies for the convenience of the user. 
The Setting Mechanism does not alter the drug delivery from the device
and the components have no drug formulation contact.

 

The Setting Mechanism has been developed as a result of risk analysis
and human factors evaluations and addresses issues identified during these
assessments.  The specific patient-device
factors the Setting Mechanism addresses are:

 

·      It provides a convenient
means for the user to set the actuator triggering mechanism.

 

·      It improves the
intuitiveness of use of the device by providing visual cues to the preparation
steps and also forces the user to prepare the Intraject System for injection in
the correct order.

 

·      It improves the ergonomics
of the device by aiding removal of the capsule snap-off tip and provides the
user with a grip to hold the device during snap-off, priming and injection.

 

The Setting Mechanism consists of three functional parts as shown in Figure P.2-3:

 

Figure P.2-3: 
Setting Mechanism

 

 

	
  I.

  	
   

  	
  A snap-off cap, made up
  of two identical halves, which encloses the snap-off portion of the capsule
  sleeve. It provides an extended lever-arm to assist the user in breaking the
  snap-off while also releasing the setting lever (thereby forcing the correct
  sequence during use).

  
	
   

  	
   

  	
   

  
	
  II.

  	
   

  	
  A setting lever that
  can only be operated when the snap-off cap is removed. When rotated and
  placed into the groove in the cover, the setting lever both sets the actuator
  triggering mechanism whilst also removing a block from between the actuator
  and

  

 

6

 

	
   

  	
   

  	
  capsule sub-assemblies
  (to facilitate subsequent actuation, only when pressed against the skin).

  
	
   

  	
   

  	
   

  
	
  III.

  	
   

  	
  A grip, made up of the
  collar and cover components.  The grip
  supports the actuator sub-assembly and the lever and is held by the patient
  during use.  A pin on the collar
  component drives into and sets the actuator triggering mechanism as the user
  rotates the lever into the cover.  At
  the same time, a block on the cover component is removed from between the two
  Intraject sub-assemblies to facilitate subsequent injection when pressed
  against the skin by the user.

  

 

Table P.2-8 provides information
on the materials used to manufacture the setting mechanism.

 

Table P.2-8:  Components of the
Setting Mechanism

 

[***]

 

Table P.2-9 provides information
on the actuator and setting mechanism materials, and rationale for their
selection.

 

[***]

 

Figure P.2-4 shows the three
basic steps to using the Intraject® System with Setting Mechanism.

 

*** Certain information on this page has been omitted and filed
separately with the Commission. 
Confidential treatment has been requested with respect to the omitted
portions.

 

7

 

Figure P.2-4: 
Three Basic Steps for Using the Intraject System

 

 

8

 

EXHIBIT J

 

Nontransferable
Assets

 

None.

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