Document:

hmbzogenixshivelyemploymentagreement1213749_2_SD

Exhibit 10.33
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this “Agreement”) is entered into by and between Zogenix, Inc., a Delaware corporation (the “Company”), and Richard Scott Shively (“Executive”), and shall be effective as of the date on which Executive commences employment with the Company, which date shall be no later than November 26, 2012 (the “Effective Date”).
WHEREAS, the Company desires to continue to employ Executive, and Executive desires to commence employment with the Company, on the terms and conditions set forth in this Agreement. 
NOW, THEREFORE, in consideration of the mutual promises herein contained, the parties agree as follows:
1.Definitions.  As used in this Agreement, the following terms shall have the following meanings:
(a)Board.  “Board” means the Board of Directors of the Company.
(b)Bonus.  “Bonus” means an amount equal to the average of the bonuses awarded to Executive for each of the three (3) fiscal years prior to the date of Executive’s termination of employment, or such lesser number of years as may be applicable if Executive has not been employed for three (3) full years on the date of Executive’s termination of employment.  For purposes of determining Executive’s “Bonus,” to the extent Executive received no bonus in a year due to a failure to meet the applicable performance objectives, such year will still be taken into account (using zero (0) as the applicable bonus) in determining Executive’s “Bonus” for purposes of Section 4.  Further, for any year in which the Executive received less than the Executive’s maximum potential bonus because the Executive’s employment with the Company began after January 1 of that year, the bonus for that year shall be annualized as part of the Bonus calculation hereunder. If any portion of the bonuses awarded to Executive consisted of securities or other property, the fair market value thereof shall be determined in good faith by the Board.  In no event will Executive’s signing bonus pursuant to Section 3(c) below constitute a “Bonus” for purposes of this definition.
(c)California WARN Act.  “California WARN Act” means California Labor Code Sections 1400 et seq.
(d)Cause.  “Cause” means any of the following:
(i)the commission of an act of fraud, embezzlement or dishonesty by Executive, or the commission of some other illegal act by Executive (other than traffic violations or other offenses or violations outside of the course of Executive’s employment), that has a demonstrable material adverse impact on the Company or any successor or affiliate thereof; 
(ii)a conviction of, or plea of “guilty” or “no contest” to, a felony by Executive; 

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(iii)any unauthorized use or disclosure by Executive of confidential information or trade secrets of the Company or any successor or affiliate thereof that has, or may reasonably be expected to have, a material adverse impact on any such entity; 
(iv)Executive’s gross negligence, insubordination or material violation of any duty of loyalty to the Company or any successor or affiliate thereof, or any other demonstrable material misconduct on the part of Executive; 
(v)Executive’s ongoing and repeated failure or refusal to perform or neglect of Executive’s duties as required by this Agreement, which failure, refusal or neglect continues for thirty (30) days following Executive’s receipt of written notice from the Board or the Company’s Chief Executive Officer (the “CEO”) stating with specificity the nature of such failure, refusal or neglect; or 
(vi)Executive’s breach of any Company policy or any material provision of this Agreement;
provided, however, that prior to the determination that “Cause” under this Section 1(d) has occurred, the Company shall (A) provide to Executive in writing, in reasonable detail, the reasons for the determination that such “Cause” exists, (B) other than with respect to clause (v) above which specifies the applicable period of time for Executive to remedy his or her breach, afford Executive a reasonable opportunity to remedy any such breach, (C) provide the Executive an opportunity to be heard prior to the final decision to terminate the Executive’s employment hereunder for such “Cause” and (D) make any decision that such “Cause” exists in good faith.
The foregoing definition shall not in any way preclude or restrict the right of the Company or any successor or affiliate thereof to discharge or dismiss Executive for any other acts or omissions, but such other acts or omissions shall not be deemed, for purposes of this Agreement, to constitute grounds for termination for Cause.
(e)Change in Control.  “Change in Control” means and includes each of the following:
(i)a transaction or series of transactions (other than an offering of the Company’s common stock to the general public through a registration statement filed with the Securities and Exchange Commission) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (other than the Company, any of its subsidiaries, an employee benefit plan maintained by the Company or any of its subsidiaries or a “person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act), of securities of the Company possessing more than fifty percent (50%) of the total combined voting power of the Company’s securities outstanding immediately after such acquisition; or
(ii)the consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (A) a merger, consolidation, reorganization, or business combination or (B) a sale or other disposition 

        
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of all or substantially all of the Company’s assets in any single transaction or series of related transactions or (C) the acquisition of assets or stock of another entity, in each case other than a transaction:
(1)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 a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and 
(2)after which no person or group beneficially owns voting securities representing fifty percent (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 clause (2) as beneficially owning fifty percent (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.
     Notwithstanding the foregoing, a transaction shall not constitute a “Change in 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 Board in its discretion and without regard to whether such transaction is effectuated by a merger, equity financing or otherwise).  The Board shall have full and final authority, which shall be exercised in its 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 thereto.
(f)Code.  “Code” means the Internal Revenue Code of 1986, as amended from time to time, and the Treasury Regulations and other interpretive guidance issued thereunder.
(g)Good Reason.  “Good Reason” means the occurrence of any of the following events or conditions without Executive’s written consent:
(i)a material diminution in Executive’s authority, duties or responsibilities;
(ii)a material diminution in Executive’s base compensation, unless such a reduction is imposed across-the-board to senior management of the Company; 
(iii)a material change in the geographic location at which Executive must perform his or her duties (and the parties acknowledge that a relocation of the Company’s principal executive offices to a location more than fifty (50) miles from the Company’s then-current offices (excepting reasonable travel on the Company’s business) shall constitute a material change for purposes of this clause (iii)); or

        
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(iv)any other action or inaction that constitutes a material breach by the Company or any successor or affiliate of its obligations to Executive under this Agreement.
Executive must provide written notice to the Company of the occurrence of any of the foregoing events or conditions without Executive’s written consent within ninety (90) days of the occurrence of such event.  The Company or any successor or affiliate shall have a period of thirty (30) days to cure such event or condition after receipt of written notice of such event from Executive.  
(h)Involuntary Termination.  “Involuntary Termination” means (i) the Executive’s Separation from Service by reason of Executive’s discharge by the Company other than for Cause, or (ii) the Executive’s Separation from Service by reason of Executive’s resignation of employment with the Company for Good Reason.  Executive’s Separation from Service by reason of Executive’s death or discharge by the Company following Executive’s Permanent Disability shall not constitute an Involuntary Termination.  The Executive’s Separation from Service by reason of resignation from employment with the Company for Good Reason shall be an “Involuntary Termination” only if such Separation from Service occurs within two (2) years following the initial existence of the act or failure to act constituting Good Reason.  The Executive’s Separation from Service by reason of resignation from employment with the Company for Good Reason shall be treated as involuntary.  
(i)Permanent Disability.  Executive’s “Permanent Disability” shall be deemed to have occurred if Executive shall become physically or mentally incapacitated or disabled or otherwise unable fully to discharge his or her duties hereunder for a period of ninety (90) consecutive calendar days or for one hundred twenty (120) calendar days in any one hundred eighty (180) calendar-day period.  The existence of Executive’s Permanent Disability shall be determined by the Company on the advice of a physician chosen by the Company and the Company reserves the right to have the Executive examined by a physician chosen by the Company at the Company’s expense.
(j)Separation from Service.  “Separation from Service,” with respect to the Executive, means the Executive’s “separation from service,” as defined in Treasury Regulation Section 1.409A-1(h).    
(k)Stock Awards.  “Stock Awards” means all stock options, restricted stock and such other awards granted pursuant to the Company’s stock option and equity incentive award plans or agreements and any shares of stock issued upon exercise thereof. 
(l)WARN Act.  “WARN Act” shall mean the Worker Adjustment and Retraining Notification Act, 29 U.S.C. Sections 2101 et seq., and the Department of Labor regulations thereunder.
		
	2.
	Services to Be Rendered.  

(a)Duties and Responsibilities.  Executive shall serve as Executive Vice President and Chief Commercial Officer of the Company.  In the performance of such duties, Executive shall report directly to the CEO and shall be subject to the direction of the CEO and to such limits upon Executive’s authority as the CEO may from time to time impose.  In the event 

        
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of the CEO’s incapacity or unavailability, Executive shall be subject to the direction of the Board.  Executive hereby consents to serve as an officer and/or director of the Company or any subsidiary or affiliate thereof without any additional salary or compensation, if so requested by the CEO.  Executive shall be employed by the Company on a full time basis.  Executive’s primary place of work shall be the Company’s facility in San Diego, California, or such other location within San Diego County as may be designated by the CEO from time to time.  Executive shall also render services at such other places within or outside the United States as the CEO may direct from time to time.  Executive shall be subject to and comply with the policies and procedures generally applicable to senior executives of the Company to the extent the same are not inconsistent with any term of this Agreement.
(b)Exclusive Services.  Executive shall at all times faithfully, industriously and to the best of his or her ability, experience and talent perform to the satisfaction of the Board and the CEO all of the duties that may be assigned to Executive hereunder and shall devote substantially all of his or her productive time and efforts to the performance of such duties.  Subject to the terms of the Proprietary Information and Inventions Agreement referred to in Section 5(b), this shall not preclude Executive from devoting time to personal and family investments or serving on community and civic boards, or participating in industry associations, provided such activities do not interfere with his or her duties to the Company, as determined in good faith by the CEO.  Executive agrees that he or she will not join any boards, other than community and civic boards (which do not interfere with his or her duties to the Company), without the prior approval of the CEO.  
3.Compensation and Benefits.  The Company shall pay or provide, as the case may be, to Executive the compensation and other benefits and rights set forth in this Section 3.
(a)Base Salary.  The Company shall pay to Executive a base salary of $335,000 per year, payable in accordance with the Company’s usual pay practices (and in any event no less frequently than monthly).  Executive’s base salary shall be subject to review annually by and at the sole discretion of the Compensation Committee of the Board or its designee.
(b)Annual Bonus.  Executive shall participate in any bonus plan that the Board or its designee may approve for the senior executives of the Company.  For 2012 and 2013, Executive’s target bonus under the Company’s annual bonus plan shall be forty-five percent (45%) of Executive’s base salary; provided, however, that Executive’s annual bonus for 2012 shall be pro-rated based on the number of days elapsed during 2012 following the Effective Date.  
(c)Signing Bonus.  Executive shall be entitled to a one-time cash signing bonus in the amount of $130,000, payable on the first regularly scheduled payroll date of the Company that is at least ten (10) days following the Effective Date.  If Executive voluntarily terminates his employment without Good Reason prior to August 31, 2013, Executive shall repay to the Company a pro rata portion of the foregoing signing bonus based on the number of days elapsed during the period commencing on the Effective Date and ending on August 31, 2013.  The Company will have the right to offset such amounts against any compensation otherwise payable to Executive on the date of Executive’s termination of employment.
(d)Relocation.  

        
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(i)The Company expects Executive to relocate his principal place of residence from New Jersey to the San Diego, California metropolitan area on or before August 31, 2013.  In furtherance of Executive’s relocation, the Company shall pay for or reimburse Executive in accordance with the Company’s written expense reimbursement policies and procedures for (i) the movement of Executive’s reasonable household goods, which includes two automobiles (excluding extraordinary or unusual moving costs such as boat, recreational vehicle, playground equipment), (ii) reimbursement for up to two (2) house hunting trips to San Diego for Executive, his spouse and his dependent children, (iii) reimbursement for transportation for Executive, his spouse and his dependent children from New Jersey to San Diego, California, and (iv) reasonable and customary realtor costs incurred by Executive in connection with the purchase of Executive’s residence in San Diego California and the sale of Executive’s residence in New Jersey (collectively, the “Relocation Reimbursement”). 
(ii)In addition, the Company shall pay to Executive a tax gross-up (the “Tax Gross-Up”) for any federal and state income and employment taxes Executive is required to pay resulting from the Relocation Reimbursement and from the Tax Gross-Up, which Tax Gross-Up shall be paid in accordance with Treasury Regulation Section 1.409A-3(i)(1)(v).  The Relocation Reimbursement and any Tax Gross-Up shall be subject to an aggregate cap of $100,000.  All amounts eligible for the Relocation Reimbursement must be incurred by and paid to Executive during the term of his employment with the Company.  The Relocation Reimbursement and the Tax Gross-Up shall be paid to Executive within thirty (30) days following the Company’s receipt of a written request for such reimbursement, but subject to receipt by the Company of supporting receipts and/or documentation and/or receipts in form and substance reasonably acceptable to the Company.  If Executive voluntarily terminates his employment without Good Reason prior to the first anniversary of the Effective Date, Executive shall repay to the Company a pro rata portion of the Relocation Reimbursement and any Tax Gross-Up based on the number of days elapsed in the one-year period ending on the first anniversary of the Effective Date.  The Company will have the right to offset such amounts against any compensation otherwise payable to Executive on the date of Executive’s termination of employment. 
(iii)In addition to the foregoing, during the period commencing on the Effective Date and ending on the earlier of (A) the date Executive relocates his primary residence to the San Diego, California area or (B) August 31, 2013, the Company will pay for or reimburse Executive for temporary housing in the San Diego, California area, subject to the Company’s prior approval of Executive’s temporary housing arrangements.
(e)Benefits.  Executive shall be entitled to participate in benefits under the Company’s benefit plans and arrangements, including, without limitation, any employee benefit plan or arrangement made available in the future by the Company to its senior executives, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements. The Company shall have the right to amend or delete any such benefit plan or arrangement made available by the Company to its senior executives and not otherwise specifically provided for herein; provided, that any reduction of Executive’s benefits such that Executive’s benefits are, in the aggregate, materially less favorable to Executive than those benefits offered to Executive as of the Effective Date shall be considered a material breach of this Agreement by the Company.  

        
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(f)Expenses.  The Company shall reimburse Executive for reasonable out-of-pocket business expenses incurred in connection with the performance of his or her duties hereunder, subject to (i) such policies as the Company may from time to time establish, (ii) Executive furnishing the Company with evidence in the form of receipts satisfactory to the Company substantiating the claimed expenditures, (iii) Executive receiving advance approval from the CEO in the case of expenses for travel outside of North America, and (iv) Executive receiving advance approval from the CEO in the case of expenses (or a series of related expenses) in excess of $5,000.  
(g)Paid Time Off.  Executive shall be entitled to such periods of paid time off (“PTO”) each year as provided from time to time under the Company’s PTO policy and as otherwise provided for senior executive officers.
(h)Equity Awards.  
(i)As soon as practicable following the Effective Date, and subject to the approval of the Compensation Committee of the Board, Executive shall receive stock options to purchase 400,000 shares of the Company’s common stock pursuant to the Company’s 2010 Equity Incentive Award Plan (the “2010 Plan”).  Such stock options shall have an exercise price equal to the then current fair market value per share of the Company’s common stock (as determined pursuant to the 2010 Plan) on the date of grant.  Such stock options shall be incentive stock options to the extent permitted under Section 422 of the Code.  The shares subject to such stock options shall vest as follows:  one-fourth (1/4th) of the shares subject to the option shall vest on the first anniversary of the Effective Date, and the remaining shares subject to the option shall vest in thirty-six (36) equal monthly installment over the three-year period thereafter, subject to Executive’s continued employment or service with the Company on each such date.  Such stock options shall have a ten (10) year term and shall be subject to the terms and conditions of the 2010 Plan and the stock option agreement pursuant to which such stock options are granted.
(ii)Executive shall be entitled to participate in any equity or other employee benefit plan that is generally available to senior executive officers, as distinguished from general management, of the Company.  Except as otherwise provided in this Agreement, Executive’s participation in and benefits under any such plan shall be on the terms and subject to the conditions specified in the governing document of the particular plan.
(i)Stock Award Acceleration.  
(i)In the event of a Change in Control, the vesting and exercisability of fifty percent (50%) of Executive’s outstanding unvested Stock Awards shall be automatically accelerated effective immediately prior to the consummation of such Change in Control. 
(ii)In the event of Executive’s Involuntary Termination or Executive’s Separation from Service by reason of Executive’s death or discharge by the Company following Executive’s Permanent Disability, the vesting and/or exercisability of each of Executive’s outstanding unvested Stock Awards shall be automatically accelerated on the date of Executive’s Separation from Service as to the number of Stock Awards that would vest over the twelve (12) month period following the date of Executive’s Separation from Service had Executive remained 

        
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continuously employed by the Company during such period.
(iii)In the event of Executive’s Involuntary Termination within three (3) months prior to or twelve (12) months following a Change in Control, the vesting and/or exercisability of any outstanding unvested portions of such Stock Awards shall be automatically accelerated on the later of (A) the date of Executive’s Separation from Service and (B) the date of the Change in Control.  In addition, with respect to Stock Awards granted to Executive on or after the Effective Date, such Stock Awards may be exercised by Executive (or Executive’s legal guardian or legal representative) until the latest of (A) three (3) months after the date of Executive’s Separation from Service, (B) with respect to any portion of the Stock Awards that become exercisable on the date of a Change in Control pursuant to this Section 3(g)(iii), three (3) months after the date of the Change in Control, or (C) such longer period as may be specified in the applicable Stock Award agreement; provided, however, that in no event shall any Stock Award remain exercisable beyond the original outside expiration date of such Stock Award.
(iv)The vesting pursuant to clauses (i), (ii) and (iii) of this Section 3(g) shall be cumulative.  The foregoing provisions are hereby deemed to be a part of each Stock Award and to supersede any less favorable provision in any agreement or plan regarding such Stock Award.
4.Severance.  Executive shall be entitled to receive benefits upon a Separation from Service only as set forth in this Section 4:
(a)At-Will Employment; Termination.  The Company and Executive acknowledge that Executive’s employment is and shall continue to be at-will, as defined under applicable law, and that Executive’s employment with the Company may be terminated by either party at any time for any or no reason, with or without notice.  If Executive’s employment terminates for any reason, Executive shall not be entitled to any payments, benefits, damages, awards or compensation other than as provided in this Agreement.  Executive’s employment under this Agreement shall be terminated immediately on the death of Executive.  
(b)Separation from Service by Death or Following Permanent Disability.  Subject to Sections 4(e) and 9(o) and Executive’s continued compliance with Section 5, in the event of Executive’s Separation from Service as a result of Executive’s death or discharge by the Company following Executive’s Permanent Disability, Executive or Executive’s estate, as applicable, shall be entitled to receive, in lieu of any severance benefits to which Executive or Executive’s estate may otherwise be entitled under any severance plan or program of the Company, the benefits provided below, which, with respect to clause (ii) and the last sentence of clause (iii) below, will be payable in a lump sum within ten (10) days following the effective date of Executive’s Release (or, in the event of Executive’s incapacity as a result of his Permanent Disability, the Release executed by Executive’s legal representative) (or, in the event of Executive’s death, within ten (10) days following the date of Executive’s death):
(i)the Company shall pay to Executive or Executive’s estate, as applicable, Executive’s fully earned but unpaid base salary, when due, through the date of Executive’s Separation from Service at the rate then in effect, plus all other benefits, if any, under any Company group retirement plan, nonqualified deferred compensation plan, equity award plan 

        
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or agreement (other than any such plan or agreement pertaining to Stock Awards whose treatment is prescribed by Section 3(g) above), health benefits plan or other Company group benefit plan to which Executive or Executive’s estate may be entitled pursuant to the terms of such plans or agreements at the time of Executive’s Separation from Service;
(ii)Executive or Executive’s estate, as applicable, shall be entitled to receive severance pay in an amount equal to twelve (12) multiplied by Executive’s monthly base salary as in effect immediately prior to the date of Executive’s Separation from Service; and
(iii)for the period beginning on the date of Executive’s Separation from Service and ending on the date which is twelve (12) full months following the date of Executive’s Separation from Service (or, if earlier, the date on which the applicable continuation period under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) expires), the Company shall arrange to provide Executive (in the case of Executive’s Separation of Service as a result of discharge by the Company following Executive’s Permanent Disability) and/or his or her eligible dependents who were covered under the Company’s health insurance plans as of the date of Executive’s Separation from Service with health (including medical and dental) insurance benefits substantially similar to those provided to Executive and his or her dependents immediately prior to the date of such Separation from Service.  If any of the Company’s health benefits are self-funded as of the date of Executive’s Separation from Service, or if the Company cannot provide the foregoing benefits in a manner that is exempt from Section 409A (as defined below) or that is otherwise compliant with applicable law (including, without limitation, Section 2716 of the Public Health Service Act), instead of providing continued health insurance benefits as set forth above, the Company shall instead pay to Executive or Executive’s estate, as applicable, an amount equal to twelve (12) multiplied by the monthly premium Executive or his or her dependents would be required to pay for continuation coverage pursuant to COBRA for Executive (if applicable) and his or her eligible dependents who were covered under the Company’s health plans as of the date of Executive’s Separation from Service (calculated by reference to the premium as of the date of Executive’s Separation from Service), which amount shall be payable in a lump sum within ten (10) days following the effective date of Executive’s Release.
(c)Severance Upon Involuntary Termination.   Subject to Sections 4(e) and 9(o) and Executive’s continued compliance with Section 5, if Executive’s employment is Involuntarily Terminated, Executive shall be entitled to receive, in lieu of any severance benefits to which Executive may otherwise be entitled under any severance plan or program of the Company, the benefits provided below, which, with respect to clause (ii) and the last sentence of clause (iii) (if applicable) will be payable in a lump sum within ten (10) days following the effective date of Executive’s Release:
(i)the Company shall pay to Executive his or her fully earned but unpaid base salary, when due, through the date of Executive’s Involuntary Termination at the rate then in effect, plus all other benefits, if any, under any Company group retirement plan, nonqualified deferred compensation plan, equity award plan or agreement (other than any such plan or agreement pertaining to Stock Awards whose treatment is prescribed by Section 3(g) above), health benefits plan or other Company group benefit plan to which Executive may be entitled pursuant to the terms of such plans or agreements at the time of Executive’s Involuntary Termination;

        
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(ii)Executive shall be entitled to receive severance pay in an amount equal to twelve (12) multiplied by Executive’s monthly base salary as in effect immediately prior to the date of Executive’s Involuntary Termination; and
(iii)for the period beginning on the date of Executive’s Involuntary Termination and ending on the date which is twelve (12) full months following the date of Executive’s Involuntary Termination (or, if earlier, the date on which the applicable continuation period under COBRA expires), the Company shall arrange to provide Executive and his or her eligible dependents who were covered under the Company’s health insurance plans as of the date of Executive’s Involuntary Termination with health (including medical and dental) insurance benefits substantially similar to those provided to Executive and his or her dependents immediately prior to the date of such Involuntary Termination.  If any of the Company’s health benefits are self-funded as of the date of Executive’s Involuntary Termination, or if the Company cannot provide the foregoing benefits in a manner that is exempt from Section 409A (as defined below) or that is otherwise compliant with applicable law (including, without limitation, Section 2716 of the Public Health Service Act), instead of providing continued health insurance benefits as set forth above, the Company shall instead pay to Executive an amount equal to twelve (12) multiplied by the monthly premium Executive would be required to pay for continuation coverage pursuant to COBRA for Executive and his or her eligible dependents who were covered under the Company’s health plans as of the date of Executive’s Involuntary Termination (calculated by reference to the premium as of the date of Involuntary Termination), which amount shall be payable in a lump sum within ten (10) days following the effective date of Executive’s Release.
(iv)Notwithstanding anything to the contrary in this Section 4(c), and subject to Sections 4(e) and 9(o) and Executive's continued compliance with Section 5, in the event of Executive's Involuntary Termination during the period commencing sixty (60) days prior to a Change in Control or twelve (12) months following a Change in Control, Executive shall be entitled to receive, in addition to the severance benefits described in clauses (i), (ii) and (iii) above, an amount equal to Executive’s Bonus for the year in which Executive’s Involuntary Termination occurs, which amount shall be payable in a lump sum within ten (10) days following the later of (A) the effective date of Executive’s Release and (B) the date of the Change in Control.
(d)Termination for Cause or Voluntary Resignation Without Good Reason.  In the event of Executive’s termination of employment as a result of Executive’s discharge by the Company for Cause or Executive’s resignation without Good Reason (other than as a result of Executive’s death or Separation of Service by reason of discharge by the Company following Executive’s Permanent Disability), the Company shall not have any other or further obligations to Executive under this Agreement (including any financial obligations) except that Executive shall be entitled to receive (i) Executive’s fully earned but unpaid base salary, through the date of termination at the rate then in effect, and (ii) all other amounts or benefits to which Executive is entitled under any compensation, retirement or benefit plan or practice of the Company at the time of termination in accordance with the terms of such plans or practices, including, without limitation, any continuation of benefits required by COBRA or applicable law.  In addition, in the event of Executive’s Separation from Service as a result of Executive’s discharge by the Company for Cause or Executive’s resignation without Good Reason (other than as a result of Executive’s death or Separation of Service by reason of discharge by the Company following Executive’s Permanent 

        
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Disability), all vesting of Executive’s unvested Stock Awards previously granted to him or her by the Company shall cease and none of such unvested Stock Awards shall be exercisable following the date of such termination.  The foregoing shall be in addition to, and not in lieu of, any and all other rights and remedies which may be available to the Company under the circumstances, whether at law or in equity.
(e)Release.  As a condition to Executive’s receipt of any post-termination benefits pursuant to Sections 4(b) and (c) above, Executive (or, in the event of Executive’s incapacity as a result of his Permanent Disability, the Executive’s legal representative) shall execute and not revoke a general release of all claims in favor of the Company (the “Release”) in the form attached hereto as Exhibit A.  In the event the Release does not become effective within the fifty-five (55) day period following the date of Executive’s Separation from Service, Executive shall not be entitled to the aforesaid payments and benefits.  
(f)Exclusive Remedy.  Except as otherwise expressly required by law (e.g., COBRA) or as specifically provided herein, all of Executive’s rights to salary, severance, benefits, bonuses and other amounts hereunder (if any) accruing after the termination of Executive’s employment shall cease upon such termination.  In the event of Executive’s termination of employment with the Company, Executive’s sole remedy shall be to receive the payments and benefits described in this Section 4.  In addition, Executive acknowledges and agrees that he or she is not entitled to any reimbursement by the Company for any taxes payable by Executive as a result of the payments and benefits received by Executive pursuant to this Section 4, including, without limitation, any excise tax imposed by Section 4999 of the Code.  Any payments made to Executive under this Section 4 shall be inclusive of any amounts or benefits to which Executive may be entitled pursuant to the WARN Act or the California WARN Act.
(g)No Mitigation.  Except as otherwise provided in Section 4(b)(iii) or 4(c)(iii) above, Executive shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 4 be reduced by any compensation earned by Executive as the result of employment by another employer or self-employment or by retirement benefits; provided, however, that loans, advances or other amounts owed by Executive to the Company may be offset by the Company against amounts payable to Executive under this Section 4.  
(h)Return of the Company’s Property.  In the event of Executive’s termination of employment for any reason, the Company shall have the right, at its option, to require Executive to vacate his or her offices prior to or on the effective date of separation and to cease all activities on the Company’s behalf.  Upon Executive’s termination of employment in any manner, as a condition to the Executive’s receipt of any severance benefits described in this Agreement, Executive shall immediately surrender to the Company all lists, books and records of, or in connection with, the Company’s business, and all other property belonging to the Company, it being distinctly understood that all such lists, books and records, and other documents, are the property of the Company.  Executive shall deliver to the Company a signed statement certifying compliance with this Section 4(h) prior to the receipt of any severance benefits described in this Agreement.
(i)Waiver of the Company’s Liability.  Executive recognizes that his or her 

        
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employment is subject to termination with or without Cause for any reason and therefore Executive agrees that Executive shall hold the Company harmless from and against any and all liabilities, losses, damages, costs and expenses, including but not limited to, court costs and reasonable attorneys’ fees, which Executive may incur as a result of Executive’s termination of employment.  Executive further agrees that Executive shall bring no claim or cause of action against the Company for damages or injunctive relief based on a wrongful termination of employment.  Executive agrees that the sole liability of the Company to Executive upon termination of this Agreement shall be that determined by this Section 4.  In the event this covenant is more restrictive than permitted by laws of the jurisdiction in which the Company seeks enforcement thereof, this covenant shall be limited to the extent permitted by law.
		
	5.
	Certain Covenants.

(a)Noncompetition.  Except as may otherwise be approved by the Board, during the term of Executive’s employment, Executive shall not have any ownership interest (of record or beneficial) in, or have any interest as an employee, salesman, consultant, officer or director in, or otherwise aid or assist in any manner, any firm, corporation, partnership, proprietorship or other business that engages in any county, city or part thereof in the United States and/or any foreign country in a business which competes directly or indirectly (as determined by the Board) with the Company’s business in such county, city or part thereof, so long as the Company, or any successor in interest of the Company to the business and goodwill of the Company, remains engaged in such business in such county, city or part thereof or continues to solicit customers or potential customers therein; provided, however, that Executive may own, directly or indirectly, solely as an investment, securities of any entity which are traded on any national securities exchange if Executive (i) is not a controlling person of, or a member of a group which controls, such entity; or (ii) does not, directly or indirectly, own one percent (1%) or more of any class of securities of any such entity. 
(b)Confidential Information.  Executive and the Company have entered into the Company’s standard employee proprietary information and inventions agreement (the “Employee Proprietary Information and Inventions Agreement”).  Executive agrees to perform each and every obligation of Executive therein contained.
(c)Solicitation of Employees.  Executive shall not during the term of Executive’s employment and for the applicable severance period for which Executive receives severance benefits following any termination hereof pursuant to Section 4(b) or (c) above (regardless of whether Executive receives payment of severance amounts payable thereunder in a lump sum) (the “Restricted Period”), directly or indirectly, solicit or encourage to leave the employment of the Company or any of its affiliates, any employee of the Company or any of its affiliates.
(d)Solicitation of Consultants.  Executive shall not during the term of Executive’s employment and for the Restricted Period, directly or indirectly, hire, solicit or encourage to cease work with the Company or any of its affiliates any consultant then under contract with the Company or any of its affiliates within one year of the termination of such consultant’s engagement by the Company or any of its affiliates.

        
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(e)Rights and Remedies Upon Breach.  If Executive breaches or threatens to commit a breach of any of the provisions of this Section 5 (the “Restrictive Covenants”), the Company shall have the following rights and remedies, each of which rights and remedies shall be independent of the other and severally enforceable, and all of which rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the Company under law or in equity:
(i)Specific Performance.  The right and remedy to have the Restrictive Covenants specifically enforced by any court having equity jurisdiction, all without the need to post a bond or any other security or to prove any amount of actual damage or that money damages would not provide an adequate remedy, it being acknowledged and agreed that any such breach or threatened breach will cause irreparable injury to the Company and that money damages will not provide adequate remedy to the Company; and
(ii)Accounting and Indemnification.  The right and remedy to require Executive (A) to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits derived or received by Executive or any associated party deriving such benefits as a result of any such breach of the Restrictive Covenants; and (B) to indemnify the Company against any other losses, damages (including special and consequential damages), costs and expenses, including actual attorneys’ fees and court costs, which may be incurred by them and which result from or arise out of any such breach or threatened breach of the Restrictive Covenants. 
(f)Severability of Covenants/Blue Pencilling.  If any court determines that any of the Restrictive Covenants, or any part thereof, is invalid or unenforceable, the remainder of the Restrictive Covenants shall not thereby be affected and shall be given full effect, without regard to the invalid portions.  If any court determines that any of the Restrictive Covenants, or any part thereof, are unenforceable because of the duration of such provision or the area covered thereby, such court shall have the power to reduce the duration or area of such provision and, in its reduced form, such provision shall then be enforceable and shall be enforced.  Executive hereby waives any and all right to attack the validity of the Restrictive Covenants on the grounds of the breadth of their geographic scope or the length of their term.
(g)Enforceability in Jurisdictions.  The Company and Executive intend to and do hereby confer jurisdiction to enforce the Restrictive Covenants upon the courts of any jurisdiction within the geographical scope of such covenants.  If the courts of any one or more of such jurisdictions hold the Restrictive Covenants wholly unenforceable by reason of the breadth of such scope or otherwise, it is the intention of the Company and Executive that such determination not bar or in any way affect the right of the Company to the relief provided above in the courts of any other jurisdiction within the geographical scope of such covenants, as to breaches of such covenants in such other respective jurisdictions, such covenants as they relate to each jurisdiction being, for this purpose, severable into diverse and independent covenants.
(h)Definitions.  For purposes of this Section 5, the term “Company” means not only Zogenix, Inc., but also any company, partnership or entity which, directly or indirectly, controls, is controlled by or is under common control with Zogenix, Inc.

        
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	6.
	Insurance; Indemnification.  

(a)Insurance.  The Company shall have the right to take out life, health, accident, “key-man” or other insurance covering Executive, in the name of the Company and at the Company’s expense in any amount deemed appropriate by the Company.  Executive shall assist the Company in obtaining such insurance, including, without limitation, submitting to any required examinations and providing information and data required by insurance companies.
(b)Indemnification.  Executive will be provided with indemnification against third party claims related to his or her work for the Company as required by Delaware law.  The Company shall provide Executive with directors and officers liability insurance coverage at least as favorable as that which the Company may maintain from time to time for members of the Board and other executive officers.
7.Arbitration.  Any dispute, claim or controversy based on, arising out of or relating to Executive’s employment or this Agreement shall be settled by final and binding arbitration in San Diego, California, before a single neutral arbitrator in accordance with the National Rules for the Resolution of Employment Disputes (the “Rules”) of the American Arbitration Association, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction.  Arbitration may be compelled pursuant to the California Arbitration Act (Code of Civil Procedure §§ 1280 et seq.).  If the parties are unable to agree upon an arbitrator, one shall be appointed by the AAA in accordance with its Rules.  Each party shall pay the fees of its own attorneys, the expenses of its witnesses and all other expenses connected with presenting its case; however, Executive and the Company agree that, to the extent permitted by law, the arbitrator may, in his or her discretion, award reasonable attorneys’ fees to the prevailing party; provided, further, that the prevailing party shall be reimbursed for such fees, costs and expenses within forty-five (45) days following any such award, but in no event later than the last day of the Executive’s taxable year following the taxable year in which the fees, costs and expenses were incurred; provided, further, that the parties’ obligations pursuant to this sentence shall terminate on the tenth (10th) anniversary of the date of Executive’s termination of employment.  Other costs of the arbitration, including the cost of any record or transcripts of the arbitration, AAA’s administrative fees, the fee of the arbitrator, and all other fees and costs, shall be borne by the Company.  This Section 7 is intended to be the exclusive method for resolving any and all claims by the parties against each other for payment of damages under this Agreement or relating to Executive’s employment; provided, however, that neither this Agreement nor the submission to arbitration shall limit the parties’ right to seek provisional relief, including without limitation injunctive relief, in any court of competent jurisdiction pursuant to California Code of Civil Procedure § 1281.8 or any similar statute of an applicable jurisdiction.  Seeking any such relief shall not be deemed to be a waiver of such party’s right to compel arbitration.  Both Executive and the Company expressly waive their right to a jury trial.
8.General Relationship.  Executive shall be considered an employee of the Company within the meaning of all federal, state and local laws and regulations including, but not limited to, laws and regulations governing unemployment insurance, workers’ compensation, industrial accident, labor and taxes.
		
	9.
	Miscellaneous.

        
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(a)Modification; Prior Claims.  This Agreement and the Employee Proprietary Information and Inventions Agreement set forth the entire understanding of the parties with respect to the subject matter hereof, supersedes all existing agreements between them concerning such subject matter, including, without limitation, the offer letter between Executive and the Company dated November 5, 2012.  This Agreement may be amended or modified only with the written consent of Executive and an authorized representative of the Company.  No oral waiver, amendment or modification will be effective under any circumstances whatsoever.
(b)Assignment; Assumption by Successor.  The rights of the Company under this Agreement may, without the consent of Executive, be assigned by the Company, in its sole and unfettered discretion, to any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly, acquires all or substantially all of the assets or business of the Company.  The Company will require any successor (whether direct or indirect, by purchase, merger or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and to agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place; provided, however, that no such assumption shall relieve the Company of its obligations hereunder.  As used in this Agreement, the “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law or otherwise.
(c)Survival.  The covenants, agreements, representations and warranties contained in or made in Sections 3(g), 4, 5, 6, 7 and 9 of this Agreement shall survive any Executive’s termination of employment.
(d)Third‐Party Beneficiaries.  This Agreement does not create, and shall not be construed as creating, any rights enforceable by any person not a party to this Agreement.
(e)Waiver.  The failure of either party hereto at any time to enforce performance by the other party of any provision of this Agreement shall in no way affect such party’s rights thereafter to enforce the same, nor shall the waiver by either party of any breach of any provision hereof be deemed to be a waiver by such party of any other breach of the same or any other provision hereof.
(f)Section Headings.  The headings of the several sections in this Agreement are inserted solely for the convenience of the parties and are not a part of and are not intended to govern, limit or aid in the construction of any term or provision hereof.
(g)Notices.  Any notice required or permitted by this Agreement shall be in writing and shall be delivered as follows with notice deemed given as indicated:  (i) by personal delivery when delivered personally; (ii) by overnight courier upon written verification of receipt; (iii) by email, telecopy or facsimile transmission upon acknowledgment of receipt of electronic transmission; or (iv) by certified or registered mail, return receipt requested, upon verification of receipt.  Notice shall be sent to Executive at the address listed on the Company’s personnel records and to the Company at its principal place of business, or such other address as either party may specify in writing.

        
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(h)Severability.  All Sections, clauses and covenants contained in this Agreement are severable, and in the event any of them shall be held to be invalid by any court, this Agreement shall be interpreted as if such invalid Sections, clauses or covenants were not contained herein.
(i)Governing Law and Venue.  This Agreement is to be governed by and construed in accordance with the laws of the State of California applicable to contracts made and to be performed wholly within such State, and without regard to the conflicts of laws principles thereof.  Except as provided in Sections 5 and 7, any suit brought hereon shall be brought in the state or federal courts sitting in San Diego, California, the parties hereto hereby waiving any claim or defense that such forum is not convenient or proper.  Each party hereby agrees that any such court shall have in personam jurisdiction over it and consents to service of process in any manner authorized by California law.
(j)Non-transferability of Interest.  None of the rights of Executive to receive any form of compensation payable pursuant to this Agreement shall be assignable or transferable except through a testamentary disposition or by the laws of descent and distribution upon the death of Executive.  Any attempted assignment, transfer, conveyance, or other disposition (other than as aforesaid) of any interest in the rights of Executive to receive any form of compensation to be made by the Company pursuant to this Agreement shall be void.
(k)Gender.  Where the context so requires, the use of the masculine gender shall include the feminine and/or neuter genders and the singular shall include the plural, and vice versa, and the word “person” shall include any corporation, firm, partnership or other form of association.
(l)Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement.
(m)Construction.  The language in all parts of this Agreement shall in all cases be construed simply, according to its fair meaning, and not strictly for or against any of the parties hereto.  Without limitation, there shall be no presumption against any party on the ground that such party was responsible for drafting this Agreement or any part thereof.
(n)Withholding and other Deductions.  All compensation payable to Executive hereunder shall be subject to such deductions as the Company is from time to time required to make pursuant to law, governmental regulation or order.
(o)Code Section 409A.  
(i)This Agreement is not intended to provide for any deferral of compensation subject to Section 409A of the Code, and, accordingly, the severance payments payable under Sections 4(b)(ii) and (iii) and 4(c)(ii), (iii) and (iv) shall be paid no later than the later of:  (A) the fifteenth (15th) day of the third month following Executive’s first taxable year in which such severance benefit is no longer subject to a substantial risk of forfeiture, and (B) the fifteenth (15th) day of the third month following first taxable year of the Company in which such severance benefit is no longer subject to substantial risk of forfeiture, as determined in accordance 

        
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 SD\1213749.2

with Code Section 409A and any Treasury Regulations and other guidance issued thereunder.  To the extent applicable, this Agreement shall be interpreted in accordance with Code Section 409A and Department of Treasury regulations and other interpretive guidance issued thereunder.  
(ii)If the Executive is a “specified employee” (as defined in Section 409A of the Code), as determined by the Company in accordance with Section 409A of the Code, on the date of the Executive’s Separation from Service, to the extent that the payments or benefits under this Agreement are subject to Section 409A of the Code and the delayed payment or distribution of all or any portion of such amounts to which Executive is entitled under this Agreement is required in order to avoid a  prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, then such portion deferred pursuant to this Section 9(o)(ii) shall be paid or distributed to Executive in a lump sum on the earlier of (A) the date that is six (6)-months following Executive’s Separation from Service, (B) the date of Executive’s death or (C) the earliest date as is permitted under Section 409A of the Code.  Any remaining payments due under the Agreement shall be paid as otherwise provided herein.
(iii)To the extent applicable, this Agreement shall be interpreted in accordance with the applicable exemptions from Section 409A of the Code.  If Executive and the Company determine that any payments or benefits payable under this Agreement intended to comply with Sections 409A(a)(2), (3) and (4) of the Code do not comply with Section 409A of the Code, Executive and the Company agree to amend this Agreement, or take such other actions as Executive and the Company deem reasonably necessary or appropriate, to comply with the requirements of Section 409A of the Code and the Treasury Regulations thereunder (and any applicable transition relief) while preserving the economic agreement of the parties.  To the extent that any provision in this Agreement is ambiguous as to its compliance with Section 409A of the Code, the provision shall be read in such a manner that no payments payable under this Agreement shall be subject to an “additional tax” as defined in Section 409A(a)(1)(B) of the Code.
(iv)Any reimbursement of expenses or in-kind benefits payable under this Agreement shall be made in accordance with Treasury Regulation Section 1.409A-3(i)(1)(iv) and shall be paid on or before the last day of Executive’s taxable year following the taxable year in which Executive incurred the expenses.  The amount of expenses reimbursed or in-kind benefits payable in one year shall not affect the amount eligible for reimbursement or in-kind benefits payable in any other taxable year of Executive’s, and Executive’s right to reimbursement for such amounts shall not be subject to liquidation or exchange for any other benefit.
(v)In the event that the amounts payable under Sections 4(b)(ii) and (iii) and 4(c)(ii), (iii) and (iv) are subject to Section 409A of the Code and the timing of the delivery of Executive’s Release could cause such amounts to be paid in one or another taxable year, then notwithstanding the payment timing set forth in such sections, such amounts shall not be payable until the later of (A) the payment date specified in such Section or (B) the first business day of the taxable year following Executive’s Separation from Service.
(Signature Page Follows)

        
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 SD\1213749.2

        
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 SD\1213749.2

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above.
ZOGENIX, INC.

By:                          
                        Name:                              
                        Title:                         

EXECUTIVE

                           
                        Richard Scott Shively

SIGNATURE PAGE TO EMPLOYMENT AGREEMENT
 SD\1213749.2

EXHIBIT A

GENERAL RELEASE OF CLAIMS

[The language in this Release may change based on legal developments and evolving best practices; this form is provided as an example of what will be included in the final Release document.]

This General Release of Claims (“Release”) is entered into as of this _____ day of ________, ____, between Richard Scott Shively (“Executive”), and Zogenix, Inc., a Delaware corporation (the “Company”) (collectively referred to herein as the “Parties”).

WHEREAS, Executive and the Company are parties to that certain Employment Agreement effective as of November [ l ], 2012 (the “Agreement”);

WHEREAS, the Parties agree that Executive is entitled to certain severance benefits under the Agreement, subject to Executive’s execution of this Release; and

WHEREAS, the Company and Executive now wish to fully and finally to resolve all matters between them.

NOW, THEREFORE, in consideration of, and subject to, the severance benefits payable to Executive pursuant to the Agreement, the adequacy of which is hereby acknowledged by Executive, and which Executive acknowledges that he or she would not otherwise be entitled to receive, Executive and the Company hereby agree as follows:

		
	1.
	General Release of Claims by Executive.  

(a)Executive, on behalf of himself or herself and his or her executors, heirs, administrators, representatives and assigns, hereby agrees to release and forever discharge the Company and all predecessors, successors and their respective parent corporations, affiliates, related, and/or subsidiary entities, and all of their past and present investors, directors, shareholders, officers, general or limited partners, employees, attorneys, agents and representatives, and the employee benefit plans in which Executive is or has been a participant by virtue of his or her employment with or service to the Company (collectively, the “Company Releasees”), from any and all claims, debts, demands, accounts, judgments, rights, causes of action, equitable relief, damages, costs, charges, complaints, obligations, promises, agreements, controversies, suits, expenses, compensation, responsibility and liability of every kind and character whatsoever (including attorneys’ fees and costs), whether in law or equity, known or unknown, asserted or unasserted, suspected or unsuspected (collectively, “Claims”), which Executive has or may have had against such entities based on any events or circumstances arising or occurring on or prior to the date hereof or on or prior to the date hereof, arising directly or indirectly out of, relating to, or in any other way involving in any manner whatsoever Executive’s employment by or service to the Company or the termination thereof, including any and all claims arising under federal, state, or 

 SD\1213749.2

local laws relating to employment, including without limitation claims of wrongful discharge, breach of express or implied contract, fraud, misrepresentation, defamation, or liability in tort, and claims of any kind that may be brought in any court or administrative agency including, without limitation, claims under Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. Section 2000, et seq.; the Americans with Disabilities Act, as amended, 42 U.S.C. § 12101 et seq.; the Rehabilitation Act of 1973, as amended, 29 U.S.C. § 701 et seq.; the Civil Rights Act of 1866, and the Civil Rights Act of 1991; 42 U.S.C. Section 1981, et seq.; the Age Discrimination in Employment Act, as amended, 29 U.S.C. Section 621, et seq. (the “ADEA”); the Equal Pay Act, as amended, 29 U.S.C. Section 206(d); regulations of the Office of Federal Contract Compliance, 41 C.F.R. Section 60, et seq.; the Family and Medical Leave Act, as amended, 29 U.S.C. § 2601 et seq.; the Fair Labor Standards Act of 1938, as amended, 29 U.S.C. § 201 et seq.; the Employee Retirement Income Security Act, as amended, 29 U.S.C. § 1001 et seq.; and the California Fair Employment and Housing Act, California Government Code Section 12940, et seq.

Notwithstanding the generality of the foregoing, Executive does not release the following claims:

(i)    Claims for unemployment compensation or any state disability insurance benefits pursuant to the terms of applicable state law; 

(ii)Claims for workers’ compensation insurance benefits under the terms of any worker’s compensation insurance policy or fund of the Company;

(iii)Claims pursuant to the terms and conditions of the federal law known as COBRA;

(iv)Claims for indemnity under the bylaws of the Company, as provided for by California law or under any applicable insurance policy with respect to Executive’s liability as an employee, director or officer of the Company;

(v)Claims based on any right Executive may have to enforce the Company’s executory obligations under the Agreement; and

(vi)Claims Executive may have to vested or earned compensation and benefits.
    
(b)EXECUTIVE ACKNOWLEDGES THAT HE OR SHE HAS BEEN ADVISED OF AND IS FAMILIAR WITH THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 1542, WHICH PROVIDES AS FOLLOWS:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH, IF KNOWN BY HIM OR HER, MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

2

 SD\1213749.2

BEING AWARE OF SAID CODE SECTION, EXECUTIVE HEREBY EXPRESSLY WAIVES ANY RIGHTS HE OR SHE MAY HAVE THEREUNDER, AS WELL AS UNDER ANY OTHER STATUTES OR COMMON LAW PRINCIPLES OF SIMILAR EFFECT.

(c)Executive acknowledges that this Release was presented to him or her on the date indicated above and that Executive is entitled to have [twenty-one (21)][forty-five (45)] days’ time in which to consider it.  Executive further acknowledges that the Company has advised him or her that he or she is waiving his or her rights under the ADEA, and that Executive should consult with an attorney of his or her choice before signing this Release, and Executive has had sufficient time to consider the terms of this Release.  Executive represents and acknowledges that if Executive executes this Release before [twenty-one (21)][forty-five (45)] days have elapsed, Executive does so knowingly, voluntarily, and upon the advice and with the approval of Executive’s legal counsel (if any), and that Executive voluntarily waives any remaining consideration period.

(d)Executive understands that after executing this Release, Executive has the right to revoke it within seven (7) days after his or her execution of it.  Executive understands that this Release will not become effective and enforceable unless the seven (7) day revocation period passes and Executive does not revoke the Release in writing.  Executive understands that this Release may not be revoked after the seven (7) day revocation period has passed.  Executive also understands that any revocation of this Release must be made in writing and delivered to the Company at its principal place of business within the seven (7) day period.

(e)Executive understands that this Release shall become effective, irrevocable, and binding upon Executive on the eighth (8th) day after his or her execution of it, so long as Executive has not revoked it within the time period and in the manner specified in clause (d) above. 
 
(f)Executive further understands that Executive will not be given any severance benefits under the Agreement unless this Release is effective on or before the date that is fifty-five (55) days following the date of Executive’s termination of employment.

2.No Assignment.  Executive represents and warrants to the Company Releasees that there has been no assignment or other transfer of any interest in any Claim that Executive may have against the Company Releasees.  Executive agrees to indemnify and hold harmless the Company Releasees from any liability, claims, demands, damages, costs, expenses and attorneys’ fees incurred as a result of any such assignment or transfer from Executive.

3

 SD\1213749.2

3.Severability.  In the event any provision of this Release is found to be unenforceable by an arbitrator or court of competent jurisdiction, such provision shall be deemed modified to the extent necessary to allow enforceability of the provision as so limited, it being intended that the parties shall receive the benefit contemplated herein to the fullest extent permitted by law.  If a deemed modification is not satisfactory in the judgment of such arbitrator or court, the unenforceable provision shall be deemed deleted, and the validity and enforceability of the remaining provisions shall not be affected thereby. 

4.Interpretation; Construction.  The headings set forth in this Release are for convenience only and shall not be used in interpreting this Agreement.  This Release has been drafted by legal counsel representing the Company, but Executive has participated in the negotiation of its terms.  Furthermore, Executive acknowledges that Executive has had an opportunity to review and revise the Release and have it reviewed by legal counsel, if desired, and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Release.  Either party’s failure to enforce any provision of this Release shall not in any way be construed as a waiver of any such provision, or prevent that party thereafter from enforcing each and every other provision of this Release.

5.Governing Law and Venue.  This Release will be governed by and construed in accordance with the laws of the United States of America and the State of California applicable to contracts made and to be performed wholly within such State, and without regard to the conflicts of laws principles thereof.  Any suit brought hereon shall be brought in the state or federal courts sitting in San Diego County, California, the Parties hereby waiving any claim or defense that such forum is not convenient or proper.  Each party hereby agrees that any such court shall have in personam jurisdiction over it and consents to service of process in any manner authorized by California law.

6.Entire Agreement.  This Release and the Agreement constitute the entire agreement of the Parties in respect of the subject matter contained herein and therein and supersede all prior or simultaneous representations, discussions, negotiations and agreements, whether written or oral.  This Release may be amended or modified only with the written consent of Executive and an authorized representative of the Company.  No oral waiver, amendment or modification will be effective under any circumstances whatsoever.

7.Counterparts.  This Release may be executed in multiple counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.
(Signature Page Follows) 

4

 SD\1213749.2

IN WITNESS WHEREOF, and intending to be legally bound, the Parties have executed the foregoing Release as of the date first written above.

EXECUTIVE                        ZOGENIX, INC.
            
/s/ Richard Scott Shively                By:      /s/ Roger Hawley                    
Print Name:  Richard Scott Shively            Print Name:      Roger L. Hawley                
Title:     Chief Executive Officer                    

 SD\1213749.2Exhibit 10.1

 

Exhibit 10.1

 

SECURITIES EXCHANGE AGREEMENT

 

THIS SECURITIES EXCHANGE AGREEMENT
(the “Agreement”), is made effective as of this 9th day of March 2013, by and among THE PAWS PET
COMPANY, INC., an Illinois corporation (“PAWS”), having its principal place of business at 455 NE 5th Avenue,
#D264, Delray Beach, 33483, ADVANCED ACCESS PHARMACY SERVICES, LLC, a Nevada limited liability company (“AAPS”),
having its principal place of business at 9530 Happy Canyon Drive, Reno, NV 89521 and the members of AAPS set forth on Exhibit
A hereto (individually, a “Member” and collectively, the “Members”).

 

RECITALS

 

WHEREAS, the Members collectively own one hundred
percent (100%) of the issued and outstanding membership interests of AAPS (the “AAPS Units”) in the amounts
set forth beside their respective names on Exhibit A hereto; and

 

WHEREAS, the Members wish to exchange their AAPS
Units for an aggregate of 80,000 shares of PAWS’ Series B Convertible Preferred Stock having the rights, preferences, privileges
and restrictions which are set forth in the Certificate of Designation attached as Exhibit B hereto (the “PAWS
Shares”) and PAWS wishes to issue and exchange the PAWS Shares for the AAPS Units, whereupon AAPS will become a wholly-owned
subsidiary of PAWS, all on the terms and conditions set forth herein.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the mutual
covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy are hereby acknowledged,
PAWS, AAPS and the Members agree as follows:

 

ARTICLE I

EXCHANGE OF SECURITIES

 

1.1Exchange of Securities.
Subject to the terms and conditions set forth in this Agreement, at Closing (as hereinafter defined), the Members shall assign,
transfer, convey and deliver their respective AAPS Units to PAWS in exchange for which PAWS shall issue and deliver the PAWS Shares
to the Members in the amounts set forth beside their respective names on Exhibit A hereto.

 

1.2Closing Date.
The closing of the transactions contemplated by this Agreement (“Closing”) shall occur, by exchange of executed
documents delivered via facsimile or .pdf transmission contemporaneously with the execution of this Agreement (the “Closing
Date”).

 

1.3Deliveries by AAPS and
the Members. At Closing, AAPS and the Members shall deliver to PAWS:

 

	(a)		Certificates evidencing the AAPS Units, duly endorsed for transfer; and

 

	(b)		such other documents as may be necessary to effect the consummation of the transactions
contemplated by this Agreement.

 

    	1

    	 

    

 

1.4Deliveries by PAWS.
At the Closing, PAWS shall deliver to Members:

 

	(a)		Certificates evidencing the PAWS Shares registered in the respective names of the
Members; and

 

	(b)		such other documents as may be necessary to effect the consummation of the transactions
contemplated by this Agreement.

 

ARTICLE II

REPRESENTATIONS AND WARRANTIES
OF THE PARTIES

 

2.1Representations and
Warranties of PAWS. PAWS hereby represents and warrants to the Members as follows:

 

(a)Organization
and Qualification. PAWS is a corporation, duly incorporated, validly existing and in good standing under the laws of the
State of Illinois, with the requisite corporate power and authority to own and use its properties and assets and to carry on its
business as currently conducted. PAWS is duly qualified to do business as a foreign corporation in each jurisdiction which the
character of its business requires such qualification, except where the failure to be so qualified could not, individually or in
the aggregate reasonably be expected to have or result in a material adverse effect on the business, prospects, operations or condition
(financial or otherwise) of PAWS (a “PAWS Material Adverse Effect”).

 

(b)Authorization;
Enforcement. PAWS has the requisite corporate power and authority to enter into and to consummate the transactions
contemplated by this Agreement and otherwise to carry out its obligations hereunder. The execution and delivery of this
Agreement by PAWS and the consummation by it of the transactions contemplated hereby have been duly authorized by all
necessary action on the part of PAWS and no further action is required by PAWS or its shareholders. This Agreement has been
duly executed by PAWS and, when delivered in accordance with the terms hereof, will constitute the valid and binding
obligation of PAWS enforceable against PAWS in accordance with its terms. PAWS is not in violation of any of the provisions
of its certificate of incorporation or bylaws.

 

(c)Capitalization.
The number of authorized, issued and outstanding shares of capital stock of PAWS is set forth on Schedule 2.1(c). No shares
of capital stock of PAWS are entitled to preemptive or similar rights, nor is any holder of capital stock of PAWS entitled to statutory
preemptive or similar rights arising out of any agreement or understanding with PAWS. Except as set forth in any document filed
by PAWS under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (the “SEC Documents”)
or on Schedule 2.1(c) hereto, there are no outstanding options, warrants, rights to subscribe to, calls or commitments of
any character whatsoever relating to securities, rights or obligations convertible into or exchangeable for, or giving any Person
(as hereinafter defined) any right to subscribe for or acquire any shares of capital stock of PAWS, or contracts, commitments,
understandings, or arrangements by which PAWS is or may become bound to issue additional shares of capital stock of PAWS, or securities
or rights convertible or exchangeable into shares of capital stock of PAWS.

 

(d)Issuance
of the PAWS Shares. The PAWS Shares are duly authorized, and, when issued and paid for in accordance with the terms hereof,
shall be duly and validly issued, fully paid and non-assessable, free and clear of all liens, encumbrances and rights of first
refusal of any kind (collectively, “Liens”).

 

(e)No Conflicts.
The execution, delivery and performance of this Agreement by PAWS and the consummation by PAWS of the transactions contemplated
hereby do not and will not (i) conflict with or violate any provision of PAWS’ certificate of incorporation or bylaws (each
as amended through the date hereof); (ii) conflict with, or constitute a default (or an event which with notice or lapse of time,
or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with
or without notice, lapse of time, or both) of, any agreement, credit facility, indenture or instrument (evidencing a PAWS’
debt or otherwise) to which PAWS is a party or by which any property or asset of PAWS is bound or affected; or (iii) result in
a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental
authority to which PAWS is subject (including federal and state securities laws and regulations), or by which any property or asset
of PAWS is bound or affected, except in the case of each of clauses (ii) and (iii), as could not, individually or in the aggregate,
reasonably be expected to have or result in a PAWS Material Adverse Effect. The business of PAWS is not being conducted in violation
of any law, ordinance or regulation of any governmental authority, except for violations which, individually or in the aggregate,
could reasonably be expected to not have or result in a PAWS Material Adverse Effect.

 

    	2

    	 

    

  

(f)Filings,
Consents and Approvals. PAWS is not required to obtain any consent, waiver, authorization or order of, give any notice
to, or make any filing or registration with, any court or other U.S. or foreign federal, state, local or other governmental authority
or other person in connection with the execution, delivery and performance by PAWS of this Agreement other than filings which may
be required under federal and state securities laws.

 

(g)Litigation;
Proceedings. There is no action, suit, notice of violation, proceeding or investigation pending or, to the knowledge of
PAWS, threatened against or affecting PAWS or any of its properties before or by any court, governmental or administrative agency,
or regulatory authority (U.S. federal, state, county, local or foreign) that (i) adversely affects or challenges the legality,
validity or enforceability of this Agreement or (ii) could, individually or in the aggregate, reasonably be expected to have or
result in a PAWS Material Adverse Effect.

 

(h)No Default
or Violation. Except as set forth in the SEC Documents or on Schedule 2.1(h) hereto, PAWS (i) is not in default
under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would
result in a default by PAWS), nor has PAWS received written notice of a claim that it is in default under or is in violation of
any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its
properties is bound, (ii) is not in violation of any order of any court, arbitrator or governmental body, or (iii) is not in violation
of any statute, rule or regulation of any governmental authority, except as could not, individually or in the aggregate, reasonably
be expected to have or result in a PAWS Material Adverse Effect.

 

(i)Private Offering.
Assuming the accuracy of the representations and warranties of the Members set forth in Section 2.3 of this Agreement, the
offer, issuance and sale of the PAWS Shares to the Members as contemplated hereby is exempt from the registration requirements
of the Securities Act of 1933, as amended (the “Securities Act”). Neither PAWS nor any person acting on PAWS’
behalf has taken any action that could subject the issuance of the PAWS Shares to the registration requirements of the Securities
Act.

 

(j)Brokers Fees.
No fees or commissions will be payable by PAWS to any broker, financial advisor or consultant, finder, placement agent,
investment banker, or bank with respect to the transactions contemplated by this Agreement.

 

(k)Solicitation
Materials. Neither PAWS nor any person acting on PAWS’ behalf has solicited the Members to acquire the PAWS Shares
by means of any form of general solicitation or advertising.

 

(l)Patents and
Trademarks. PAWS owns, or has rights to use, all patents, patent applications, trademarks, trademark applications, service
marks, trade names, copyrights, licenses and rights (collectively, the “PAWS Intellectual Property Rights”)
that are necessary or material for use in connection with its business, except where the failure to own or have the right to use
a PAWS Intellectual Property Right could not reasonably be expected to have or result in a PAWS Material Adverse Effect. To the
best knowledge of PAWS, all such Intellectual Property Rights are enforceable and there is no existing infringement by another
person of any of the PAWS Intellectual Property Rights.

 

(m)Registration
Rights; Rights of Participation. Except as set forth in the SEC Documents, PAWS has not granted or agreed to grant to
any person any rights (including “piggy-back” registration rights) to have any securities of PAWS registered with
the Securities and Exchange Commission (the “SEC”) or any other governmental authority and no person has
any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions
contemplated by this Agreement.

 

    	3

    	 

    

  

(n)Regulatory
Permits. PAWS possesses all certificates, authorizations and permits issued by the appropriate U.S. federal, state or foreign
regulatory authorities necessary to conduct its business, except where the failure to possess such permits, individually or in
the aggregate, could reasonably be expected to have or result in a PAWS Material Adverse Effect (“Material PAWS Permits”),
and PAWS has not received any notice of proceedings relating to the revocation or modification of any Material PAWS Permit.

 

(o)Title. PAWS
does not own any real property. PAWS has good and marketable title to all personal property owned by them that is material to
the business of PAWS, in each case free and clear of all Liens, except for Liens that do not materially affect the value of
such property and do not interfere with the use made and proposed to be made of such property by PAWS. Any real property and
facilities held under lease by PAWS is held under valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such property and buildings by PAWS.

 

2.2Representations and
Warranties of AAPS and the Members. AAPS and the Members, jointly and severally, represent and warrant to PAWS as follows:

 

(a)Organization
and Qualification. AAPS is a limited liability company duly organized, validly existing and in good standing under the
laws of the State of Nevada with the requisite corporate power and authority to own and use its properties and assets and to carry
on its business as currently conducted. AAPS is not qualified to do business as a foreign limited liability company in any jurisdiction,
there being no jurisdiction where the character of its business requires such qualification. AAPS has no subsidiaries.

 

(b)Authorization;
Enforcement. AAPS and the Members each have the requisite power and authority to enter into and to consummate the transactions
contemplated by this Agreement and otherwise to carry out their respective obligations hereunder. The execution and delivery of
the Agreement by AAPS and the Members as the case may be and the consummation by them of the transactions contemplated hereby have
been duly authorized by all necessary action on the part of AAPS and no further action is required by AAPS and the Members. The
Agreement has been duly executed by AAPS and the Members and, when delivered in accordance with the terms thereof, will constitute
the valid and binding obligations of AAPS and the Members enforceable against AAPS and the Members in accordance with its terms.
AAPS is not in violation of any of the provisions of its certificate of incorporation or bylaws.

 

(c)Capitalization.
AAPS has 100,000 AAPS Units authorized, all of which are issued and outstanding and owed by the Members in the amounts
set forth beside their respective names on Exhibit A hereto. AAPS Units are not entitled to preemptive or similar rights,
nor is any holder of AAPS Units entitled to statutory preemptive or similar rights arising out of any agreement or understanding
with AAPS. There are no outstanding options, warrants, rights to subscribe to, calls, or commitments of any character whatsoever
relating to securities, rights or obligations convertible into or exchangeable for, or giving any person any right to subscribe
for or acquire AAPS Units or other membership interests in AAPS or contracts, commitments, understandings, or arrangements by which
AAPS is or may become bound to issue additional AAPS Units or other membership interests in AAPS, or securities or rights convertible
or exchangeable into AAPS Units or other membership interests in AAPS.

 

(d)Title to
Interests. AAPS Units are duly authorized, validly issued, fully paid and non-assessable and are owned of record and beneficially
by the Members, free and clear of all Liens.

 

    	4

    	 

    

  

(e)No Conflicts.
The execution, delivery and performance of this Agreement by AAPS and the Members and the consummation by AAPS and the Members
of the transactions contemplated thereby do not and will not (i) conflict with or violate any provision of AAPS’ formation
or limited liability company operating agreement; (ii) conflict with, or constitute a default (or an event which with notice or
lapse of time, or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time, or both) of, any agreement, credit facility, indenture or instrument (evidencing a debt
or otherwise) to which AAPS and the Members are a party or by which any property or asset of AAPS and the Members are bound or
affected; or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction
of any court or governmental authority to which AAPS and the Members are subject (including federal and state securities laws and
regulations), or by which any property or asset of AAPS and the Members are bound or affected, except in the case of each of clauses
(ii) and (iii), as could not, individually or in the aggregate, reasonably be expected to have or result in a material adverse
effect on the business, prospects, operations or condition (financial or otherwise) of AAPS (an “AAPS Material Adverse
Effect”). The business of AAPS is not being conducted in violation of any law, ordinance or regulation of any governmental
authority, except for violations which, individually or in the aggregate, could not reasonably be expected to have or result in
an AAPS Material Adverse Effect.

 

(f)Filings,
Consents and Approvals. Neither AAPS nor the Members is required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or registration with, any court or other or foreign federal, state, local or other governmental
authority or other person in connection with the execution, delivery and performance by AAPS or the Members of this Agreement.

 

(g)Litigation;
Proceedings. There is no action, suit, notice of violation, proceeding or investigation pending or, to the knowledge of
AAPS or the Members, threatened against or affecting AAPS or the Members or any of their respective properties before or by any
court, governmental or administrative agency, or regulatory authority (U.S. federal, state, county, local or foreign) that (i)
adversely affects or challenges the legality, validity or enforceability of the Agreement or the AAPS Units or (ii) could, individually
or in the aggregate, reasonably be expected to have or result in an AAPS Material Adverse Effect.

 

(h)No Default
or Violation. Neither AAPS nor the Members (i) is in default under or in violation of (and no event has occurred that has
not been waived that, with notice or lapse of time or both, would result in a default by AAPS or the Members), nor has AAPS or
the Members received notice of a claim that it or he is in default under or is in violation of any indenture, loan or credit agreement
or any other agreement or instrument to which it, he or she is a party or by which it, he or she or any of its, his or her properties
is bound, (ii) is in violation of any order of any court, arbitrator or governmental body, or (iii) is in violation of any statute,
rule or regulation of any governmental authority, except as could not, individually or in the aggregate, reasonably be expected
to have or result in an AAPS Material Adverse Effect.

 

(i)Financial
Statements; Books and Records; Accounts Receivable.

 

(i)AAPS has delivered
the financial statements of AAPS attached as Schedule2.2(i) hereto (the “AAPS Financial Statements”).
The AAPS Financial Statements have been prepared in accordance with GAAP during the periods involved, except as may be otherwise
specified in such financial statements or the notes thereto, and fairly present in all material respects the financial position
of AAPS as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial, year-end audit adjustments. The AAPS Financial Statements comply in all material
respects with the applicable accounting requirements of the SEC.

 

(ii)The books and records
of AAPS are complete and correct in all material respects and have been maintained in accordance with sound business practices
consistent with industry standards.

 

    	5

    	 

    

  

(j)Absence of
Certain Changes. Since the date of the latest balance sheet included in the AAPS Financial Statements, AAPS has been operated,
in the ordinary course and consistent with past practice and, in any event, there has not been: (i) any material adverse change
in the business, condition (financial or otherwise), operations, results of operations or prospects of AAPS; (ii) any loss or,
to the knowledge of AAPS and the Members, threatened or contemplated loss, of business of any customers or suppliers of AAPS which,
individually or in the aggregate, could reasonably be expected to have an AAPS Material Adverse Effect; (iii) any loss, damage,
condemnation or destruction to any of the properties of AAPS (whether or not covered by insurance); (iv) any borrowings by AAPS
other than trade payables arising in the ordinary course of the business and consistent with past practice; or (v) any sale, transfer
or other disposition of any of the assets other than in the ordinary course of the business and consistent with past practice.

 

(k)Contracts.
Schedule 2.2(k) hereto sets forth a list of all contracts, agreements, leases, licenses, permits, commitments and
arrangements of AAPS (the “Contracts”). AAPS is not alleged to be in default, nor to the knowledge of AAPS
or the Members is there any basis for AAPS or any other party, under any of the Contracts and no event has occurred and no
condition or state of facts exists which, with the passage of time or the giving of notice or both, would constitute such a
default or breach by AAPS or the Members, or any other party thereto. All of the Contracts are in full force and effect, will
continue in full force and effect after the Closing without breaching the terms thereof or resulting in the forfeiture or
impairment of any rights thereunder and without the consent, approval or act of, or making of any filing with, any third
party. The Contracts are valid and enforceable against AAPS and to the knowledge of AAPS and the Members, the other parties
thereto. Neither AAPS nor the Members has received any notice of the intention of any party to terminate, or substantially
reduce the volume of its purchases, sales, products or advertisements under, any Contract. AAPS is not currently in
discussions regarding any amendment, modification, extension or termination of, and is not currently re-negotiating
Contracts.

 

(l)Employees.
Schedule 2.2(1) hereto sets forth the name of each employee of AAPS and a description of their compensation. AAPS does
not maintain any employee benefit plans.

 

(m)Taxes. AAPS has filed all tax returns of any kind required to be filed and has paid all taxes and other charges due or claimed
to be due with respect to its taxing authorities. There are no Liens for taxes upon any of AAPS’s assets and there are no
claims asserted for taxes against AAPS or the Members with respect to any of AAPS’s assets, except for taxes due but not
yet payable.

 

(n)Brokers’
Fees. No fees or commissions will be payable by AAPS or the Members to any broker, financial advisor or consultant, finder,
placement agent, investment banker, or bank with respect to the transactions contemplated by this Agreement.

 

(o)Patents and
Trademarks. AAPS owns, or has rights to use, all patents, patent applications, trademarks, trademark applications, service
marks, trade names, copyrights, licenses and rights (collectively, the “AAPS Intellectual Property Rights”)
that are necessary or material for use in connection with its business, and the failure to own or have the right to use and any
AAPS Intellectual Property Right, so could not reasonably be expected to have an AAPS Material Adverse Effect. To the best knowledge
of AAPS and the Members, all such AAPS Intellectual Property Rights are enforceable and there is no existing infringement by another
person of any of the AAPS Intellectual Property Rights.

 

(p)Regulatory
Permits. AAPS possesses all certificates, authorizations and permits issued by the appropriate U.S. federal, state or foreign
regulatory authorities necessary to conduct its business except where the failure to possess such permits, individually or in the
aggregate, could reasonably be expected to have or result in an AAPS Material Adverse Effect (“AAPS Material Permits”),
and neither AAPS nor the Members has received any notice of proceedings relating to the revocation or modification of any AAPS
Material Permit.

 

(q)Title.
AAPS does not own any real property and is not a party to any leases. AAPS has good and marketable title to all real personal property
owned by it in each case free and clear of all Liens, except for Liens that do not materially affect the value of such property
and do not interfere with the use made and proposed to be made of such property by AAPS.

 

    	6

    	 

    

  

(r)Disclosure.
No representation or warranty of AAPS or the Members contained in this Agreement and no statement contained in any certificate,
exhibit, schedule or other document furnished to PAWS in connection with this Agreement contains any untrue statement of a material
fact, or omits to state a material fact necessary to make the statements herein or therein not misleading.

 

2.3Investment Representations
and Warranties of the Members. Each Member, severally and not jointly, represents and warrants to PAWS as follows:

 

(a)Investment
Intent. The Member is acquiring PAWS Shares for their own account. The Member is acquiring PAWS Shares for investment purposes
only and not with a view to or for distributing or reselling the PAWS Shares or any part thereof or interest therein, without prejudice,
however, to a Member’s right at all times to sell or otherwise dispose of all or any part of the PAWS Shares pursuant to
an effective registration statement under the Securities Act and in compliance with applicable state securities laws or under an
exemption from such registration.

 

(b)Status.
The Member is an “accredited investor” as defined in Rule 501(a) of Regulation D under the Securities Act.

 

(c)Experience
of the Member. The Member has such knowledge, sophistication and experience in business and financial matters so as to
be capable of evaluating the merits and risks of the prospective investment in the PAWS Shares, and has so evaluated the merits
and risks of such investment.

 

(d)Ability of
Shareholder to Bear Risk of Investment. The Member is able to bear the economic risk of an investment in the PAWS Shares
and, at the present time, is able to afford a complete loss of such investment.

 

(e)Access to
Information. The Member acknowledges that the Member has been afforded (i) the opportunity to ask such questions as he
has deemed necessary of, and to receive answers from, representatives of PAWS concerning the terms and conditions of the issuance
of the PAWS Shares and the merits and risks of investing in the PAWS Shares; (ii) access to public information about PAWS and PAWS’
financial condition, results of operations, business, properties, management and prospects sufficient to enable the Member to evaluate
his investment; and (iii) the opportunity to obtain such additional information that PAWS possesses or can acquire without unreasonable
effort or expense that is necessary to make an informed investment decision with respect to the investment and to verify the accuracy
and completeness of the public information contained herein.

 

(f)General Solicitation.
The Member is not acquiring the PAWS Shares as a result of or subsequent to any advertisement, article, notice or other communication
regarding the PAWS Shares published in any newspaper, magazine or similar media, published or broadcast over television or radio
or presented at any seminar.

 

(g)Reliance.
The Member understands and acknowledges that (i) the PAWS Shares are being offered and sold to the Member without registration
under the Securities Act and applicable state securities laws in a private placement that is exempt from the registration provisions
of the Securities Act and applicable state securities laws and (ii) the availability of such exemption depends in part on, and
PAWS will rely upon the accuracy and truthfulness of, the foregoing representations and the Member hereby consents to such reliance.

 

    	7

    	 

    

  

ARTICLE
III 

 OTHER
AGREEMENTS OF THE PARTIES

 

3.1
Transfer Restrictions.

 

(a)
The PAWS Shares may only be disposed of pursuant to an effective registration statement under the Securities Act, or pursuant
to an available exemption from or in a transaction not subject to the registration requirements of the Securities Act. In connection
with any transfer of the PAWS Shares other than pursuant to an effective registration statement, PAWS may require the transferor
thereof to provide to PAWS an opinion of counsel selected by the transferor, the form and substance of which opinion shall be
reasonably satisfactory to PAWS, to the effect that such transfer does not require registration of such transferred securities
under the Securities Act and applicable state securities laws.

 

(b)
The Members agree to the imprinting, so long as is required under the Securities Act and the rules and regulations thereunder,
of an appropriate restrictive legend on the certificates evidencing their respective Shares.

 

3.2
SEC Reporting Obligations.

 

(a)
Within fifteen (15) days after Closing, PAWS shall file with the SEC, all delinquent reports pursuant to its reporting obligations
under Sections 13 and 15(d) of the Exchange Act (the “Delinquent Reports”).

 

(b)
PAWS shall file its Annual Report on Form 10-K for the year ended December 31, 2012 (the “Form 10-K”) on or
before its due date, as extended as of April 16, 2013. PAWS shall bear all audit and other expenses with respect to filing of
the Form 10-K.

 

3.3
Changes to Board of Directors.

 

(a)
Upon the filing of all the Delinquent Reports pursuant to Section 3.2(a), the two existing members (the “Existing
Members”) of PAWS’ board of directors (the “Board”) shall appoint two additional individuals
designated by the Members (the “Outside Director”), as members of the Board.

 

(b)
Within the nine (9) month period following the filing of PAWS’ Annual Report for the fiscal year ended December 31, 2012
on Form 10-K (the “2012 10-K”) and prior to, if and when, PAWS records a minimum of $450,000 in “Revenues,”
one Existing Member shall resign from the Board.

 

(c)
In the event that PAWS does not have at least $900,000 in “Revenues” for the nine (9) month period following
the filing of the 2012 10-K, as shown on the reports filed by PAWS under Sections 13 or 15(d) of the Exchange Act, then the Existing
Member who resigned from the Board pursuant to Section 3.3(b) shall be reappointed to the Board and the Outside Director
shall resign from the Board, unless the remaining Existing Member on the Board waives such right in writing within thirty (30)
days of such right becoming exercisable.

 

(d)
In the event the Existing Member who resigned from the Board pursuant to Section 3.3(b) shall be unavailable or unwilling
to stand for reappointment pursuant to Section 3.3(c) and the remaining Existing Member on the Board does not waive the
reappointment right pursuant to Section 3.3(c), the Board shall appoint a mutually agreed replacement within thirty (30)
days thereafter.

 

(e)
For the purposes of this Agreement, the term “Revenue” will have the meaning ascribed to it under the Fair
Accounting Standards Board (“FASB”) Statement of Financial Accounting Concepts No. 6 (“CON6”).
FASB CON6 defines revenues as, “inflows or other enhancements of assets of an entity or settlements of its liabilities (or
a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity’s
ongoing major or central operations.”

 

3.4
Convertible Debentures. The parties hereto will utilize commercially reasonable efforts to obtain the consent and agreement
of the holders of all of the outstanding debt of PAWS to exchange their debt for PAWS Series C Convertible Preferred Stock (the
“Series C Shares”), having the rights, preferences, privileges and restrictions set forth in the Certificate
of Designation, the form of which is attached hereto as Exhibit C hereto.

 

    	8

    	 

    

  

3.5
Warrants. The parties hereto will utilize commercially reasonable efforts to obtain the consent and agreement of the
holders of all of the outstanding warrants of PAWS to exchange their warrants for Series C Shares or common stock of PAWS.

 

ARTICLE
IV 

 INDEMNIFICATION

 

4.1
Survival. All of the provisions of this Agreement shall survive the Closing indefinitely, except that the representations
and warranties of AAPS and the Members, on the one hand, and the representations and warranties of PAWS on the other hand, shall
survive until the first anniversary of the Closing Date.

 

4.2 Indemnity
by AAPS and the Members. AAPS and the Members, jointly and severally, shall indemnify PAWS and hold PAWS
and PAWS’ directors, officers and employees harmless against and in respect of any and all damages, losses, claims,
penalties, liabilities, costs and expenses (including, without limitation, all fines, interest, reasonable and actual legal
fees and expenses and amounts paid in settlement), that arise from or relate or are attributable to (and without giving
effect to any tax benefit to the indemnified party) (a) any misrepresentation by AAPS or the Members or breach of any
warranty by AAPS or the Members in the Agreement or (b) any breach of any covenant or agreement on the part of AAPS or the
Members in the Agreement.

 

4.3
Indemnity by PAWS. PAWS shall indemnify AAPS and the Members and hold AAPS and the Members harmless against and in
respect of any and all damages, losses, claims, penalties, liabilities, costs and expenses (including, without limitation, all
fines, interest, reasonable and actual legal fees and expenses and amounts paid in settlement), that arise from or relate or are
attributable to (and without giving effect to any tax benefit to the indemnified party) (a) any misrepresentation by PAWS or breach
of any warranty by PAWS in the Agreements or (b) any breach of any covenant or agreement on the part of PAWS in the Agreement.

 

4.4
Notice to Indemnitor; Right of Parties to Defend. Promptly after the assertion of any claim by a third party or occurrence
of any event which may give rise to a claim for indemnification from an indemnifying party (“Indemnitor”) under
this Article IV, an indemnified party (“Indemnitee”) shall notify the Indemnitor in writing of such
claim. The Indemnitor shall have the right to assume the control and defense of any such action (including, but without limitation,
tax audits), provided that the Indemnitee may participate in the defense of such action subject to the Indemnitor’s reasonable
direction and at Indemnitee’s sole cost and expense. The party contesting any such claim shall be furnished all reasonable
assistance in connection therewith by the other party and be given full access to all information relevant thereto. In no event
shall any such claim be settled without the Indemnitor’s consent.

 

ARTICLE
V 

 MISCELLANEOUS

 

5.1
Fees and Expenses. Each party to this Agreement shall pay the fees and expenses of its or its advisers, counsel, accountants
and other experts, if any, and all other expenses incurred by such party incident to the negotiations, preparation, execution,
delivery and performance of this Agreement.

 

5.2
Entire Agreement; Amendments. This Agreement, together with the exhibits and schedules hereto, contains the entire
understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings,
oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and
schedules.

 

    	9

    	 

    

 

5.3
Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall
be in writing and shall be delivered (a) by hand; (b) by recognized overnight courier; or (c) by certified mail, return receipt
requested, postage-prepaid. All of the foregoing shall be deemed given and effective on (x) receipt, if delivered by hand; (y)
the next business day after deposit, if sent by nationally recognized overnight courier; or (c) the third (3rd) business day after
deposit, if mailed. The address for such notices and communications shall be as follows:

 

 

	 	If
    to PAWS: 	455
    N.E. 5th Avenue, #D464
	 	 	 
	 	 	Delray
Beach, Florida 33483
	 	 	 
	 	 	Attn:
CEO
	 	 	 
	 	If
    to AAPS: 	9530
    Happy Canyon Drive
	 	 	 
	 	 	Reno,
    Nevada 89521
	 	 	 
	 	 	Attn:
Managing Member
	 	 	 
	 	If
    to the Members: 	9530
    Happy Canyon Drive
	 	 	 
	 	 	Reno,
Nevada 89521

 

or
such other address as maybe designated by party in writing hereafter, by notice (given in the same manner).

 

5.4
Amendments; Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed,
in the case of an amendment, by all the parties; or, in the case of a waiver, by the party against whom enforcement of any such
waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall
any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing
to it thereafter.

 

5.5
Headings. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be
deemed to limit or affect ay of the provisions hereof.

 

5.6
Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors
and permitted assigns. Neither party may assign this Agreement or any of the rights or obligations hereunder without the written
consent of the other party, which consent shall not unreasonably be withheld.

 

5.7
No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective
successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

 

    	10

    	 

    

  

5.8
Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the internal laws
of Florida without regard to the principles of conflicts of law thereof. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in Palm Beach County, Florida, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the interpretation
or enforcement of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper.
Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action
or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any manner permitted by law.

 

5.9
Attorneys’ Fees. In any suit, action or proceeding brought with respect to interpretation or enforcement of this
Agreement, the prevailing party shall be entitled to recover attorneys’ fees and costs from the non-prevailing party at
both the trial and appellate levels.

 

5.10
Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered
one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other
party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered
by facsimile or .pdf transmission, such signature shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original
thereof.

 

5.11
Severability. In case any one or more of the provisions of this Agreement shall be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affecting
or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that shall be a reasonable substitute
therefore, and upon so agreeing, shall incorporate such substitute provision in this Agreement.

 

IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized signatories
as of the date first indicated above.

 

	 	THE
    PAWS PET COMPANY, INC.
	 	 
	 	By:
    	/s/
    Daniel Wiesel
	 	Name:
    	Daniel
    Wiesel
	 	Title:
    	Chairman
    & CEO
	 	 	 
	 	ADVANCED
    ACCESS PHARMACY SYSTEMS, LLC
	 	 
	 	By:
    	/s/
    Kevin E. Twaddell
	 	Name:	Kevin
E. Twaddell
	 	Title:
    	Managing
    Member
	 	 	 
	 	THE
    MEMBERS:
	 	 
	 	RUBICON
    PEAK CAPITAL LLC 
	 	 
	 	By:	/s/
    Kevin E. Twaddell
	 	Name:	Kevin E. Twaddell
	 	Title:	Manager

  

    	11

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