Exhibit 10.26
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
 
PURCHASE OPTION AGREEMENT
by and among
ALEXZA PHARMACEUTICALS, INC.,
SYMPHONY ALLEGRO HOLDINGS LLC
and
SYMPHONY ALLEGRO, INC.
 
Dated as of December 1, 2006
 
 

 

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TABLE OF CONTENTS

                      Page
Section 1.
  Grant of Purchase Option     2  
 
           
Section 2.
  Exercise of Purchase Option     3  
 
           
Section 2A.
  Change of Control Put Option; Obligations     7  
 
           
Section 2B.
  Related Product Payments     8  
 
           
Section 3.
  Alexza Representations, Warranties and Covenants     9  
 
           
Section 4.
  Holdings Representations, Warranties and Covenants     12  
 
           
Section 5.
  Symphony Allegro Representations, Warranties and Covenants     15  
 
           
Section 6.
  Notice of Material Event     24  
 
           
Section 7.
  Assignment; Transfers; Legend     24  
 
           
Section 8.
  Costs and Expenses; Payments     25  
 
           
Section 9.
  Expiration; Termination of Agreement     25  
 
           
Section 10.
  Survival; Indemnification     26  
 
           
Section 11.
  No Petition     29  
 
           
Section 12.
  Third-Party Beneficiary     29  
 
           
Section 13.
  Notices     29  
 
           
Section 14.
  Governing Law; Consent to Jurisdiction and Service of Process     30  
 
           
Section 15.
  WAIVER OF JURY TRIAL     31  
 
           
Section 16.
  Entire Agreement     31  
 
           
Section 17.
  Amendment; Successors; Counterparts     31  
 
           
Section 18.
  Specific Performance     32  
 
           
Section 19.
  Severability     32  
 
           
Section 20.
  Tax Reporting     32  

 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

i

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Annex A
  Certain Definitions        
 
           
Exhibit 1
  Purchase Exercise Notice        
Exhibit 2
  Form of Opinion of Cooley Godward Kronish LLP        

 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

ii

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PURCHASE OPTION AGREEMENT
     This PURCHASE OPTION AGREEMENT (this “Agreement”) is entered into as of
December 1, 2006 (the “Closing Date”), by and among ALEXZA PHARMACEUTICALS,
INC., a Delaware corporation (“Alexza”), SYMPHONY ALLEGRO HOLDINGS LLC, a
Delaware limited liability company (“Holdings”), and SYMPHONY ALLEGRO, INC., a
Delaware corporation (“Symphony Allegro”). Capitalized terms used herein and not
defined herein shall have the meanings assigned to such terms in Annex A
attached hereto.
PRELIMINARY STATEMENT
     WHEREAS, Alexza and Holdings have entered into a Technology License
Agreement pursuant to which Alexza has granted Holdings an exclusive license
(the “License”) to the use of certain intellectual property related to the
Programs owned or controlled by Alexza;
     WHEREAS, contemporaneously with the execution of this Agreement, Alexza,
Holdings and Symphony Allegro are entering into a Novated and Restated
Technology License Agreement, pursuant to which, among other things, Holdings
will assign by way of novation the License to Symphony Allegro;
     WHEREAS, Alexza and Holdings have entered into a Research and Development
Agreement pursuant to which Alexza has agreed, among other things, to perform,
on behalf of Holdings, research and development of the Programs;
     WHEREAS, contemporaneously with the execution of this Agreement, Alexza,
Holdings and Symphony Allegro are entering into an Amended and Restated Research
and Development Agreement, pursuant to which, among other things, Holdings will
assign its rights and obligations under the Research and Development Agreement
to Symphony Allegro;
     WHEREAS, contemporaneously with the execution of this Agreement, in order
to fund such research and development, institutional investors are committing to
invest $50,000,000 in Holdings (the “Financing”) in exchange for membership
interests in Holdings and for warrants (the “Warrants”) to purchase up to a
total of 2 million shares of Alexza Common Stock, to be initially issued to
Holdings, and Holdings will agree to contribute the proceeds of the Financing to
Symphony Allegro;
     WHEREAS, Holdings desires, in consideration for the Warrants, to grant
Alexza an option to purchase all of the Common Stock of Symphony Allegro and any
other Equity Securities issued by Symphony Allegro (together, the “Symphony
Allegro Equity Securities”) owned, or hereinafter acquired, by Holdings on the
terms described in this Agreement; and
     WHEREAS, Symphony Allegro and Holdings have determined that it is in each
of its best interest to perform and comply with certain agreements and covenants
relating to each of its ongoing operations contained in this Agreement;
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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     NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto (the “Parties”) agree as follows:
          Section 1. Grant of Purchase Option
               (a) Holdings hereby grants to Alexza an exclusive option (the
“Purchase Option”) to purchase all, but not less than all, of the outstanding
Symphony Allegro Equity Securities owned or hereinafter acquired by Holdings, in
accordance with the terms of this Agreement.
               (b) Symphony Allegro hereby covenants and agrees that all
Symphony Allegro Equity Securities issued by Symphony Allegro at any time prior
to the expiration of the Term (including to Holdings on, prior to, or after the
date hereof or to any other Person at any time whatsoever, in all cases prior to
the expiration of the Term) shall be subject to a purchase option on the same
terms as the Purchase Option (except as provided by the immediately following
sentence) and all of the other terms and conditions of this Agreement without
any additional action on the part of Alexza or Holdings. Further, to the extent
Symphony Allegro shall issue any Symphony Allegro Equity Securities (including
any issuance in respect of a transfer of Symphony Allegro Equity Securities by
any holder thereof, including Holdings) after the date hereof to any Person
(including Holdings) (any issuance of such Symphony Allegro Equity Securities
being subject to the prior written consent of Alexza as set forth in
Sections 5(c) and 7(b) hereof, as applicable), Symphony Allegro hereby covenants
and agrees that it shall cause such Symphony Allegro Equity Securities to be
subject to the Purchase Option without the payment of, or any obligation to pay,
any additional consideration in respect of such Symphony Allegro Equity
Securities by Alexza, Symphony Allegro or any Symphony Allegro Subsidiary to the
Person(s) acquiring such subsequently issued Symphony Allegro Equity Securities,
the Parties acknowledging and agreeing that the sole consideration payable by
Alexza pursuant to this Agreement for all of the outstanding Symphony Allegro
Equity Securities now or hereinafter owned by any Person shall be the Purchase
Price (as defined in Section 2(b) hereof).
               (c) Alexza’s right to exercise the Purchase Option granted hereby
is subject to the following conditions:
                    (i) The Purchase Option may only be exercised for the
purchase of all, and not less than all, of the Symphony Allegro Equity
Securities;
                    (ii) The Purchase Option may only be exercised a single
time;
                    (iii) Except as expressly provided in Sections 1(c)(iv) and
(v), the Purchase Option may be exercised only during the period (the “Purchase
Option Period”) commencing on and including December 1, 2007 (the “Purchase
Option Commencement Date”) and ending on and including the earlier of
(x) December 1, 2010 (the “Final Termination Date”), and (y) the [ * ] calendar
day (such [ * ] calendar day, the
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

2

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“Funds Termination Date”) immediately following the first date (each, a “Balance
Sheet Deficiency Date”) on which a notice of an impending Funds Termination Date
(a “Funds Termination Notice”) is delivered to Alexza by Holdings or Symphony
Allegro in accordance with Section 13 hereof, accompanied by an internally
prepared, unaudited, balance sheet of Symphony Allegro (prepared in accordance
with GAAP) stating that the working capital of Symphony Allegro is less than the
Balance Sheet Deficiency Threshold at such time (any such event, a “Balance
Sheet Deficiency”);
                    (iv) In the event that Alexza has agreed to share the costs
of additional research pursuant to the Research Cost Sharing and Extension
Agreement, the Purchase Option Period shall be determined in accordance with the
Research Cost Sharing and Extension Agreement (for the avoidance of doubt,
amounts transferred by Alexza pursuant to the Research Cost Sharing and
Extension Agreement shall not be included in any calculation of the Purchase
Price hereunder); and
                    (v) In the event that Symphony Allegro terminates the
Amended and Restated Research and Development Agreement pursuant to Section 17.2
thereof, Alexza shall have [ * ] to notify Holdings of its exercise of the
Purchase Option under the terms of this Agreement. Such exercise of the Purchase
Option by Alexza may occur prior to the Purchase Option Commencement Date (an
“Early Purchase Option Exercise”).
          Section 2. Exercise of Purchase Option
               (a) Exercise Notice. Alexza may exercise the Purchase Option only
by delivery of a notice in the form attached hereto as Exhibit 1 (the “Purchase
Option Exercise Notice”) during the Purchase Option Period. The Purchase Option
Exercise Notice shall be delivered on a Business Day to Holdings and Symphony
Allegro and shall be irrevocable once delivered. The date on which the Purchase
Option Exercise Notice is first delivered to Holdings and Symphony Allegro is
referred to as the “Purchase Option Exercise Date.” The Purchase Option Exercise
Notice shall contain (1) an estimated date for the settlement of the Purchase
Option (the “Purchase Option Closing”), which date shall be estimated in
accordance with this Section 2(a), (2) the Purchase Price, determined in
accordance with Section 2(b) hereof, and (3) if Alexza intends to pay part of
the Purchase Price in Alexza Common Stock, notice of such intent, the number of
shares to be transferred at such purchase price, the valuation thereof and the
percentage such portion bears to (A) the Purchase Price, and (B) the total
amount of Alexza Common Stock then issued and outstanding (which shall be no
greater percentages than are permitted under Section 2(c)). Such notice and
election shall be irrevocable once delivered. If, during the period following
the delivery of the Purchase Option Exercise Notice, the working capital held by
Symphony Allegro is less than or equal to the Balance Sheet Deficiency
Threshold, then Symphony Allegro shall cease payment of any amounts owed to
Alexza in respect of its activities pursuant to the Amended and Restated
Research and Development Agreement, but shall continue to pay amounts owed to
all other Persons. All cash and cash equivalents on Symphony Allegro’s balance
sheet on the date of the Purchase Option Closing (the “Purchase Option
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

3

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Closing Date”) are to remain with Symphony Allegro. The Purchase Option Closing
Date shall be determined as follows:
                    (i) If Alexza elects to pay the entire Purchase Price in
cash, the Purchase Option Closing Date shall be the date that is the later of:
(A) [ * ] following the Purchase Option Exercise Date; and (B) [ * ] following
the date that Alexza receives all necessary Government Approvals related to its
HSR Filings; provided, however that unless Holdings receives from Alexza an
opinion from nationally recognized anti-trust counsel (which opinion is
acceptable in form and substance to Holdings) to the effect that no HSR Filings
are required, Alexza and Holdings shall make all necessary HSR Filings within [
* ] following the Purchase Option Exercise Date and shall promptly and
diligently pursue the related regulatory process, including without limitation,
responding to any second request from the Federal Trade Commission or the
Department of Justice, as applicable; and provided, further that (1) if there is
no second request from the Federal Trade Commission or the Department of
Justice, as applicable, with respect to Alexza’s or Holdings’ HSR Filings, then
in no event shall the Purchase Option Closing Date be more than [ * ] following
the Purchase Option Exercise Date, and (2) if there is a second request from the
Federal Trade Commission or the Department of Justice, as applicable, with
respect to Alexza’s or Holdings’ HSR Filings, then in no event shall the
Purchase Option Closing Date be more than [ * ] following the date upon which
the later of Alexza or Holdings delivers documents pursuant to such second
request. If Alexza shall fail to make such cash payment on the Purchase Option
Closing Date within the applicable time period set forth above, then in addition
to any other rights that Holdings shall have hereunder, this Agreement shall
terminate and Alexza shall relinquish all rights hereunder to purchase the
Symphony Allegro Equity Securities; or
                    (ii) If Alexza elects to pay a portion of the Purchase Price
in Alexza Common Stock (subject to the limitations set forth herein and in the
Registration Rights Agreement), the Purchase Option Closing Date shall be the
date that is the later of:
               (A) [ * ] following the Purchase Option Exercise Date;
               (B) [ * ] following the Effective Registration Date of such
Alexza Common Stock; provided, that Alexza shall file the Registration Statement
contemplated by Section 3(b)(i) within (x) [ * ] after the Purchase Option
Exercise Date if Alexza is eligible to use Form S-3 under the Securities Act (or
any successor form), or (y) [ * ] after the Purchase Option Exercise Date if
Alexza is not eligible to use Form S-3 under the Securities Act (or any
successor form); and
               (C) [ * ] following the date that Alexza receives the necessary
Government Approvals related to its HSR Filings (if any) related to the exercise
of the Purchase Option; provided, however, that Alexza and Holdings shall make
all necessary HSR Filings within [ * ] following the Purchase Option
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

4

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Exercise Date and shall promptly and diligently pursue the related regulatory
process consistent with the provisos in clause (i) above;
provided, further, that Alexza shall use commercially reasonable efforts to have
such Registration Statement declared effective by the SEC as promptly as
possible following the filing of the Registration Statement. Alexza shall use
commercially reasonable efforts to maintain the effectiveness of any such
Registration Statement for a period of two (2) years following the SEC’s
declaration. In the event that such Registration Statement is not declared
effective within [ * ] of the Purchase Option Exercise Date, Alexza shall
immediately pay the full Purchase Price in cash with such Purchase Price
determination based on the Purchase Price effective in the applicable quarter in
which such immediate cash payment is required to be made by Alexza (in which
event the Purchase Option Closing Date shall be the date upon which such cash
payment is made by Alexza). If Alexza shall fail to make such immediate cash
payment, then in addition to any other rights or remedies that Holdings shall
have arising from such breach, this Agreement shall terminate and Alexza shall
relinquish all rights hereunder to purchase the Symphony Allegro Equity
Securities.
               (b) Purchase Price Upon Option Exercise. Upon exercise of the
Purchase Option and as complete and full consideration for the sale to Alexza by
Holdings of its Symphony Allegro Equity Securities (and for the Symphony Allegro
Equity Securities of any other Person), Alexza shall pay the “Quarterly Price”
set forth on Schedule I hereto for the applicable quarter following the Closing
Date in which the Purchase Option Closing Date actually occurs, [ * ], (ii) any
amount paid by Alexza for the Symphony Allegro Equity Securities of any other
Person and (iii) [ * ]. In the event of the Early Purchase Option Exercise,
pursuant to Section 1(c)(v) hereof, the “Purchase Price” shall be an amount
equal to the amount set forth on Schedule I applicable to the Quarterly Price
for the 5th Quarter, [ * ]; (B) any amount paid by Alexza for the Symphony
Allegro Equity Securities of any other Person; [ * ].
               (c) Form of Payment. Subject to Sections 2(a) and 2(e), the
Purchase Price may be paid in cash or in a combination of cash and Alexza Common
Stock, at the sole discretion of Alexza; provided, that in no event may the
value of Alexza Common Stock (determined in accordance with Section 2(e) hereof)
delivered in connection with the exercise of the Purchase Option constitute more
than either (x) [ * ] of the total consideration to be tendered for payment of
the Purchase Option Exercise Price, calculated using the Alexza Common Stock
Valuation (as defined herein) procedure, or (y) [ * ] of all the Alexza Common
Stock issued and outstanding immediately preceding the Purchase Option Closing
Date.
               (d) Surrender of Symphony Allegro Equity Securities; Symphony
Allegro Board. Subject to the terms and conditions of this Agreement, on the
Purchase Option Closing Date, Holdings shall surrender to Alexza its
certificates representing its Symphony Allegro Equity Securities, and shall
convey good title to such Symphony Allegro Equity Securities, free from any
Encumbrances and from any and all restrictions that any sale, assignment or
other transfer of such Symphony Allegro Equity Securities be consented to or
approved by any Person. On or prior to the Purchase
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

5

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Option Closing Date, Holdings shall remove all directors serving on the Symphony
Allegro Board, other than the Alexza Director (as defined in Section 4(b)(iv)
hereof), as of the Purchase Option Closing Date. Furthermore, Holdings shall use
commercially reasonable efforts to deliver to Alexza, promptly after the
Purchase Option Closing Date, any certificates representing Symphony Allegro
Equity Securities which were not surrendered to Alexza on the Purchase Option
Closing Date.
               (e) Valuation of Alexza Stock. In the event that Alexza elects to
pay part of the Purchase Price through the delivery to Holdings of Alexza Common
Stock, the value per share thereof (the “Alexza Common Stock Valuation”) shall
equal the average closing price of Alexza Common Stock, as reported by the
NASDAQ Global Market, or other national exchange that is the primary exchange on
which Alexza Common Stock is listed, for the [ * ] immediately preceding (but
not including) the second trading day prior to the Purchase Option Exercise
Date. If Alexza Common Stock is not traded on a national exchange or the NASDAQ
Global Market, then Alexza shall be obligated to pay the Purchase Price solely
in cash on the Purchase Option Closing Date. Alexza shall calculate the Alexza
Common Stock Valuation in accordance with this Section 2(e), subject to review
and confirmation by Holdings.
               (f) Government Approvals. On or prior to the Purchase Option
Closing Date, each of Alexza, Symphony Allegro and Holdings shall have taken all
necessary action to cause all Governmental Approvals with respect to such Party
(including, without limitation, the preparing and filing of any pre-merger
notification and report forms required under the HSR Filings required to be in
effect in connection with the transactions contemplated by this Agreement to be
in effect; provided, however, that with respect to Government Approvals required
by a Governmental Authority other than the United States federal government and
its various branches and agencies, the Parties’ obligations under this
Section 2(f) shall be limited to causing to be in effect only those Government
Approvals, the failure of which to be in effect would, either individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on any
of the Parties. Each of Symphony Allegro and Alexza shall pay its own costs
associated with taking such action. Symphony Allegro shall pay any costs of
Holdings associated with obtaining Government Approvals required in connection
with the exercise of the Purchase Option. All other costs and expenses of
Holdings shall be paid by Holdings pursuant to Section 8(b) hereof, including
any costs arising from any error in Holdings’ initial valuation of its
investment in Symphony Allegro.
               (g) Transfer of Title. Transfer of title to Alexza of all of the
Symphony Allegro Equity Securities shall be deemed to occur automatically on the
Purchase Option Closing Date, subject to the payment by Alexza on such date of
the Purchase Price and its performance of its other obligations herein required
to be performed under Sections 2(e) and (f), and under the Registration Rights
Agreement, as applicable, on or prior to the Purchase Option Closing Date to the
reasonable satisfaction of Holdings, and thereafter Symphony Allegro shall treat
Alexza as the sole holder of all Symphony Allegro Equity Securities,
notwithstanding the failure of Holdings to tender certificates representing such
shares to Alexza in accordance with Section 2(d) hereof.
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

6

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After the Purchase Option Closing Date, Holdings shall have no rights in
connection with such Symphony Allegro Equity Securities other than the right to
receive the Purchase Price; provided, however, that nothing in this Section 2(g)
shall affect the survivability of any indemnification provision in this
Agreement upon termination of this Agreement.
               (h) Consents and Authorizations. On or prior to the Purchase
Option Closing Date, Alexza shall have obtained all consents and authorizations
necessary from stockholders and/or its board of directors for the consummation
of the exercise and closing of the Purchase Option, as may be required under the
organizational documents of Alexza, any prior stockholders or board resolution,
any stock exchange or similar rules or any applicable law; provided, however,
that with respect to consents or authorizations required by a Governmental
Authority other than the United States federal government and its various
branches and agencies, the Parties’ obligations under this Section 2(h) shall be
limited to obtaining only those consents and authorizations, the failure of
which to be obtained would, either individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on any of the Parties.
          Section 2A. Change of Control Put Option; Obligations
               (i) Holdings has an exclusive option (the “Change of Control Put
Option”) to put 100% of the Symphony Allegro Equity Securities to Alexza, an
acquiror or the Surviving Entity, as applicable, which may be exercised if,
following a Change of Control with respect to Alexza, the Surviving Entity
breaches a material obligation of any Operative Document or any other document
delivered by the Surviving Entity in connection with such Change of Control and
such breach continues unremedied for a period of [ * ] after Holdings has
delivered written notice thereof to such successor entity. Alexza shall, and if
and as applicable, cause the Surviving Entity to, (i) subject to the terms of
the Confidentiality Agreement and any confidentiality agreement entered into in
connection with a Change of Control, provide notice to Holdings of a Change of
Control no less than [ * ] prior to the execution of a definitive agreement
committing Alexza to a Change of Control, (ii) subject to the terms of the
Confidentiality Agreement and any confidentiality agreement entered into in
connection with a Change of Control, use commercially reasonable efforts to
provide Holdings reasonable access to the senior executive officers, as
available, who have responsibility for commercial or research and development
activities of the acquiror or the Surviving Entity, as applicable, prior to the
Change of Control to discuss in good faith and reasonable detail the Surviving
Entity’s ongoing operations, (iii) execute and deliver to Symphony Allegro and
Holdings instruments, in form and substance reasonably acceptable to Symphony
Allegro and Holdings, whereby the Surviving Entity expressly assumes all of the
obligations of Alexza hereunder and under each other Operative Document to which
Alexza is a party, (iv) provide to Symphony Allegro and Holdings an opinion of
nationally recognized outside counsel (in customary form and subject to
customary assumptions and qualifications) to the effect that (A) the instruments
referred to in clause (iii) above are valid and binding obligations of such
Surviving Entity, enforceable in accordance with their terms, except as the same
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors’ rights
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

7

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generally or general equitable principles regardless of whether such
enforceability is considered in a proceeding at law or in equity, and (B) such
Change of Control does not violate any material term of the Operative Documents,
and (v) ensure that all material applications and filings have been made to, and
all material consents have been received from, the FDA, and any applicable
foreign equivalent thereof, necessary for the Surviving Entity to satisfy all of
its material obligations under the Operative Documents, except to the extent
that failure to make such applications or filings or receive such consents would
not reasonably be expected to have a material adverse effect on the Programs or
Symphony Allegro’s rights under the Operative Documents.
               (j) Holdings may exercise the Change of Control Put Option only
by delivery of written notice (the “Change of Control Put Option Exercise
Notice”) during the Purchase Option Period. The Change of Control Put Option
Exercise Notice shall be delivered on a Business Day to the successor entity to
Alexza and Symphony Allegro, and shall thereafter be deemed for all purposes
under the terms of this Agreement to be a Purchase Option Exercise Notice by
Alexza (in accordance with the provisions of Section 2 hereof) as of the date
such notice is delivered (such date to be deemed for all purposes under the
terms of this Agreement as the Purchase Option Exercise Date). The Purchase
Price with respect to such an exercise of the Change of Control Put Option shall
be the Purchase Price otherwise applicable (under Section 2(b) hereof) to the
Purchase Option Closing Date selected by Alexza following Alexza’s receipt of
the Change of Control Put Option Exercise Notice. In the event Holdings
exercises the Change of Control Put Option and such sale is consummated,
Holdings shall have no further rights or claims against the successor entity in
respect of such breach; provided, that notwithstanding the foregoing, Holdings
shall maintain and does not release any rights or claims against the Surviving
Entity that are unrelated to such breach, including rights or claims whereby
Holdings is otherwise entitled to reimbursement or indemnification under any of
the Operative Documents or any other document delivered by the Surviving Entity
in connection with such Change of Control.
          Section 2B. Related Product Payments
               (a) AZ-004 Related Products. If Alexza does not exercise the
Purchase Option prior to its expiration or termination under the terms of this
Agreement and (i) Alexza enters into any agreement or arrangement with any third
party with respect to the development and/or commercialization of an AZ-004
Related Product (defined below) (an “AZ-004 Related Product Agreement”), and
(ii) if the AZ-004 Program has not been discontinued and (iii) if the AZ-004
Related Product has commenced IND-Enabling GLP Inhalation Toxicology Studies for
the same, or substantially the same, indication or indications that are being
pursued at such time for AZ-004: then, Alexza shall be obligated to make the
following payments to Symphony Allegro: (x) on the date of the expiration or
termination of the Purchase Option (“Termination Date”), an amount equal to 50%
of any upfront, milestone, royalty, profit sharing, or similar payments received
by
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

8

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Alexza under any such AZ-004 Related Product Agreement prior to the Termination
Date and (y) at any time and from time to time thereafter, an amount equal to
50% of any upfront, milestone, royalty, profit sharing or similar payments
received by Alexza under any such AZ-004 Related Product Agreement within ten
(10) Business Days of receipt by Alexza of such payment. For the purposes of
this Section 2B, “AZ-004 Related Product” means a therapeutic product comprised
of an active ingredient which is an antipsychotic drug, other than
prochlorperazine ,(typical or atypical) delivered by means of the Staccato
Technology.
               (b) AZ-002 Related Products. If Alexza does not exercise the
Purchase Option prior to its expiration or termination under the terms of this
Agreement and (i) Alexza enters into any agreement or arrangement with any third
party with respect to the development and/or commercialization of an AZ-002
Related Product (defined below) (an “AZ-002 Related Product Agreement”), and
(ii) if the AZ-002 Program has not been discontinued and (iii) if the AZ-002
Related Product has commenced IND-Enabling GLP Inhalation Toxicology Studies for
the same, or substantially the same, indication or indications that are being
pursued at such time for AZ-002: then, Alexza shall be obligated to make the
following payments to Symphony Allegro: (x) on the Termination Date, an amount
equal to 50% of any upfront, milestone, royalty, profit sharing or similar
payments received by Alexza under any such AZ-002 Related Product Agreement
prior to the Termination Date and (y) at any time and from time to time
thereafter, an amount equal to 50% of any upfront, milestone, royalty, profit
sharing or similar payments received by Alexza under any such AZ-002 Related
Product Agreement within ten (10) Business Days of receipt by Alexza of such
payment. For purposes of this Section 2B, “AZ-002 Related Product” means a
therapeutic product comprised of an active ingredient which is a benzodiazepine
delivered by means of the Staccato Technology.
               (c) The aggregate of all payments pursuant to this Section 2B is
not to exceed the Quarterly Price in effect during the 16th quarter following
the Closing Date as set forth on Schedule 1.
          Section 3. Alexza Representations, Warranties and Covenants
               (a) As of the date hereof, Alexza hereby represents and warrants,
and, except to the extent that any of the following representations and
warranties are limited to the date of this Agreement or otherwise limited, on
the Purchase Option Closing Date, shall be deemed to have represented and
warranted, to Holdings and Symphony Allegro that:
                    (i) Organization. Alexza is a corporation, duly organized,
validly existing and in good standing under the laws of the State of Delaware.
                    (ii) Authority and Validity. Alexza has all requisite
corporate power and authority to execute, deliver and perform its obligations
under this Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance by Alexza of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary action required on the part of Alexza, and no other
proceedings on the part of Alexza are necessary to authorize this Agreement or
for Alexza to perform its obligations under this
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

9

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Agreement. This Agreement constitutes the lawful, valid and legally binding
obligation of Alexza, enforceable in accordance with its terms, except as the
same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors’ rights
generally and general equitable principles regardless of whether such
enforceability is considered in a proceeding at law or in equity.
                    (iii) No Violation or Conflict. The execution, delivery and
performance of this Agreement and the transactions contemplated hereby do not
(A) violate, conflict with or result in the breach of any provision of the
Organizational Documents of Alexza, (B) as of the date of this Agreement, and as
of the Purchase Option Closing Date if Alexza elects to pay part of the Purchase
Price through the delivery of Alexza Common Stock (a “Partial Stock Payment”),
conflict with or violate any law or Governmental Order applicable to Alexza or
any of its assets, properties or businesses, or (C) conflict with, result in any
breach of, constitute a default (or event that with the giving of notice or
lapse of time, or both, would become a default) under, require any consent
under, or give to others any rights of termination, amendment, acceleration,
suspension, revocation or cancellation of, or result in the creation of any
Encumbrance on any of the assets or properties of Alexza, pursuant to, any note,
bond, mortgage or indenture, contract, agreement, lease, sublease, license,
permit, franchise or other instrument or arrangement to which Alexza is a party
except, in the case of clauses (B) and (C), to the extent that such conflicts,
breaches, defaults or other matters would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Alexza.
                    (iv) Governmental Consents and Approvals. Other than any HSR
Filings which, if the Purchase Option is exercised by Alexza and if such HSR
Filings are required pursuant to Section 2(a)(i) hereof, will be obtained on or
prior to the Purchase Option Closing Date, the execution, delivery and
performance of this Agreement by Alexza do not, and the consummation of the
transactions contemplated hereby do not and will not, require any Governmental
Approval which has not already been obtained, effected or provided, except with
respect to which the failure to so obtain, effect or provide would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Alexza.
                    (v) Litigation. As of (A) the date of this Agreement, except
as disclosed in any Alexza Public Filings available as of the date hereof, and
(B) the Purchase Option Closing Date if Alexza elects to make a Partial Stock
Payment, there are no actions by or against Alexza pending before any
Governmental Authority or, to the knowledge of Alexza, threatened to be brought
by or before any Governmental Authority, that would, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on Alexza.
There are no pending or, to the knowledge of Alexza, threatened actions, to
which Alexza is a party (or is threatened to be named as a party) to set aside,
restrain, enjoin or prevent the execution, delivery or performance of this
Agreement or the Operative Documents or the consummation of the transactions
contemplated hereby or thereby by any party hereto or thereto. As of the date of
this
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

10

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Agreement, and as of the Purchase Option Closing Date if Alexza elects to make a
Partial Stock Payment, Alexza is not subject to any Governmental Order (nor, to
the knowledge of Alexza, is there any such Governmental Order threatened to be
imposed by any Governmental Authority) that would, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on Alexza.
               (b) Alexza hereby covenants and agrees with Holdings as follows:
                    (i) Immediately prior to the Purchase Option Closing Date,
Alexza shall have sufficient amounts of cash and, if applicable, sufficient
authorized but unissued, freely transferable and nonassessable Alexza Common
Stock available, to satisfy the portion of the Purchase Price to be paid in cash
or Alexza Common Stock pursuant to Sections 2(b) and 2(c); provided, that if the
Purchase Option Closing Date does not occur within (A) [ * ] if no HSR Filings
are required or (B) [ * ] if HSR Filings are required, in each case following
the Purchase Option Exercise Date and pursuant to Section 2(a) hereof, Alexza
shall provide Holdings with evidence of firm commitments from third parties with
the wherewithal to pay, or other guaranty of payment, which is reasonably
acceptable to Holdings, for that portion of the Purchase Price to be paid in
cash. In the event that Alexza elects to satisfy any portion of the Purchase
Price in Alexza Common Stock (A) Alexza shall have, not later than the Purchase
Option Closing Date, a Registration Statement declared effective by the
Securities and Exchange Commission for the resale of any such shares of Alexza
Common Stock to be delivered in partial satisfaction of the Purchase Price,
accompanied by evidence reasonably acceptable to Holdings that such Alexza
Common Stock has been approved for listing on the NASDAQ Global Market or such
other national market on which the Alexza Common Stock is then listed, and
(B) Alexza shall deliver to Holdings on or before the Purchase Option Closing
Date, a legal opinion from Cooley Godward Kronish LLP, counsel to Alexza, or
such other counsel as Alexza and Holdings shall mutually agree, which opinion
shall be, in form and substance, reasonably acceptable to Holdings and shall
contain, with respect to the Alexza Common Stock to be used as partial payment
of the Purchase Price, substantially the same opinions rendered by counsel to
Alexza in paragraphs 5, 7 and 8 of the opinion delivered to Holdings on the
Closing Date, along with customary assumptions and limitations.
                    (ii) If Alexza elects to satisfy any portion of the Purchase
Price in Alexza Common Stock, Alexza, on the Purchase Option Closing Date, shall
convey good and marketable title to such Alexza Common Stock, free from any
Encumbrances and any and all other restrictions that any issuance, sale,
assignment or other transfer of such Alexza Common Stock be consented to or
approved by any Person.
                    (iii) Upon the expiration of the Purchase Option or the
termination of this Agreement pursuant to Section 9 hereof, or as soon
thereafter as is practical, Alexza shall (A) in accordance with and pursuant to
Sections 2.7 and 2.8 of the Novated and Restated Technology License Agreement,
deliver to Symphony Allegro all Regulatory Files and Tangible Materials, and (B)
in accordance with and pursuant to
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

11

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Section 2.11 of the Novated and Restated Technology License Agreement, provide
and supply, or cause to be provided and supplied, finished dosage form of
Products.
                    (iv) In the event that Alexza exercises the Purchase Option,
then Alexza shall maintain the separate corporate existence of Symphony Allegro
for a minimum of one (1) year following such exercise, unless such maintenance
would have a Material Adverse Effect on Alexza or any of its Affiliates.
          Section 4. Holdings Representations, Warranties and Covenants
               (a) As of the date hereof, Holdings hereby represents and
warrants, and, except to the extent that any of the following representations
and warranties are limited to the date of this Agreement or otherwise limited,
on the Purchase Option Closing Date, shall be deemed to have represented and
warranted, to Alexza and Symphony Allegro that:
                    (i) Organization. Holdings is a limited liability company,
duly formed, validly existing and in good standing under the laws of the State
of Delaware.
                    (ii) Authority and Validity. Holdings has all requisite
limited liability company power and authority to execute, deliver and perform
its obligations under this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by Holdings of this
Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary action required on the part of
Holdings, and no other proceedings on the part of Holdings are necessary to
authorize this Agreement or for Holdings to perform its obligations under this
Agreement. This Agreement constitutes the lawful, valid and legally binding
obligation of Holdings, enforceable in accordance with its terms, except as the
same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors’ rights
generally and general equitable principles regardless of whether such
enforceability is considered in a proceeding at law or in equity.
                    (iii) No Violation or Conflict. The execution, delivery and
performance of this Agreement and the transactions contemplated hereby do not
(A) violate, conflict with or result in the breach of any provision of the
Organizational Documents of Holdings, (B) as of the date of this Agreement,
conflict with or violate any law or Governmental Order applicable to Holdings or
any of its assets, properties or businesses, or (C) as of the date of this
Agreement, conflict with, result in any breach of, constitute a default (or
event that with the giving of notice or lapse of time, or both, would become a
default) under, require any consent under, or give to others any rights of
termination, amendment, acceleration, suspension, revocation or cancellation of,
or result in the creation of any Encumbrance on any of the assets or properties
of Holdings, pursuant to, any note, bond, mortgage or indenture, contract,
agreement, lease, sublease, license, permit, franchise or other instrument or
arrangement to which Holdings is a party except, in the case of clauses (B) and
(C), to the extent that such conflicts, breaches,
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

12

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defaults or other matters would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Holdings.
                    (iv) Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement by Holdings do not, and the
consummation of the transactions contemplated hereby do not and will not,
require any Governmental Approval which has not already been obtained, effected
or provided, except with respect to which the failure to so obtain, effect or
provide would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on Holdings.
                    (v) Litigation. As of the date of this Agreement, there are
no actions by or against Holdings pending before any Governmental Authority or,
to the knowledge of Holdings, threatened to be brought by or before any
Governmental Authority, that would, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on Holdings. There are no pending
or, to the knowledge of Holdings, threatened actions to which Holdings is a
party (or is threatened to be named as a party) to set aside, restrain, enjoin
or prevent the execution, delivery or performance of this Agreement or the
Operative Documents or the consummation of the transactions contemplated hereby
or thereby by any party hereto or thereto. As of the date of this Agreement,
Holdings is not subject to any Governmental Order (nor, to the knowledge of
Holdings, is there any such Governmental Order threatened to be imposed by any
Governmental Authority) that would, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on Holdings.
                    (vi) Stock Ownership. All of Symphony Allegro’s issued and
outstanding Symphony Allegro Equity Securities are owned beneficially and of
record by Holdings, free and clear of any and all encumbrances.
                    (vii) Interim Operations. Holdings was formed solely for the
purpose of engaging in the transactions contemplated by the Operative Documents,
has engaged in no other business activities and has conducted its operations
only as contemplated by the Operative Documents.
                    (viii) Accredited Investor.
                    (A) Holdings is and will remain at all relevant times an
Accredited Investor.
                    (B) Holdings has relied completely on the advice of, or has
consulted with or has had the opportunity to consult with, its own personal tax,
investment, legal or other advisors and has not relied on Alexza or any of its
Affiliates for advice related to any offer and sale of Alexza Common Stock in
connection with the Purchase Option. Holdings has reviewed the Investment
Overview and is aware of the risks disclosed therein. Holdings acknowledges that
it has had a reasonable opportunity to conduct its own due
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

13

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diligence with respect to the Products, the Programs, Symphony Allegro, Alexza
and the transactions contemplated by the Operative Documents.
                    (C) Holdings is able to bear the economic risk of such
investment for an indefinite period and to afford a complete loss thereof.
                    (D) Holdings agrees that the Alexza Common Stock may not be
resold (A) without registration thereof under the Securities Act (unless an
exemption from such registration is available), or (B) in violation of any law.
                    (E) No person or entity acting on behalf of, or under the
authority of, Holdings is or will be entitled to any broker’s, finder’s, or
similar fees or commission payable by Alexza or any of its Affiliates.
               (b) Holdings hereby covenants and agrees with Alexza as follows:
                    (i) Contribution to Symphony Allegro. On or prior to the
Stock Payment Date, Holdings shall, pursuant to the Subscription Agreement,
contribute proceeds from the Financing of $50,000,000 to Symphony Allegro, Inc.
                    (ii) Encumbrance. Holdings will not, and will not permit any
of its Subsidiaries to, create, assume or suffer to exist any Encumbrance on any
of its Symphony Allegro Equity Securities except with the prior written consent
of Alexza.
                    (iii) Transfer and Amendment. Commencing upon the date
hereof and ending upon the earlier to occur of (x) the Purchase Option Closing
Date, (y) the unexercised expiration of the Purchase Option Period, and (z) the
termination of this Agreement pursuant to Section 9 (such period, the “Term”),
the manager of Holdings shall not (A) transfer, or permit the transfer of, any
Membership Interest without the prior written consent of Alexza or (B) amend, or
permit the amendment of, any provisions relating to the transfer of Membership
Interests, as set forth in Section 7.02 of the Holdings LLC Agreement, to the
extent such amendment would adversely affect Alexza’s right of consent set forth
in Sections 7.02(b)(i) and 7.02(c) of the Holdings LLC Agreement.
                    (iv) Symphony Allegro Directors. During the Term, Holdings
agrees to vote all of its Symphony Allegro Equity Securities (or to exercise its
right with respect to such Symphony Allegro Equity Securities to consent to
action in writing without a meeting) in favor of, as applicable, the election,
removal and replacement of one director of the Symphony Allegro Board, and any
successor thereto, designated by Alexza (the “Alexza Director”) as directed by
Alexza. In furtherance and not in limitation of the foregoing, Holdings hereby
grants to Alexza an irrevocable proxy, with respect to all Symphony Allegro
Equity Securities now owned or hereafter acquired by Holdings, to vote such
Symphony Allegro Equity Securities or to exercise the right to
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

14

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consent to action in writing without a meeting with respect to such Symphony
Allegro Equity Securities, such irrevocable proxy to be exercised solely for the
limited purpose of electing, removing and replacing the Alexza Director in the
event of the failure or refusal of Holdings to elect, remove or replace such
Alexza Director, as directed by Alexza. Additionally, Holdings agrees, during
the Term, to elect two (2) independent directors (of the four (4) directors of
Symphony Allegro not chosen by Holdings at the direction of Alexza), and any
successors thereto, as shall be selected by mutual agreement of Alexza and
Holdings.
                    (v) Symphony Allegro Board. During the Term, Holdings shall
not vote any of its Symphony Allegro Equity Securities (or exercise its rights
with respect to such Symphony Allegro Equity Securities by written consent
without a meeting) to increase the size of the Symphony Allegro Board to more
than five (5) members without the prior written consent of Alexza.
                    (vi) Symphony Allegro Charter. During the Term, Holdings
shall not approve or permit any amendment to Article IV, Paragraphs (1) and (3);
Article VI; Article VII; Article X; Article XI or Article XIII of the Symphony
Allegro Charter without the prior written consent of Alexza.
          Section 5. Symphony Allegro Representations, Warranties and Covenants
               (a) As of the date hereof, Symphony Allegro hereby represents and
warrants, and, except to the extent that any of the following representations
and warranties are limited to the date of this Agreement or otherwise limited,
on the Purchase Option Closing Date, shall be deemed to have represented and
warranted, to Alexza and Holdings that:
                    (i) Organization. Symphony Allegro is a corporation, duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
                    (ii) Authority and Validity. Symphony Allegro has all
requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance by Symphony Allegro of this
Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary action required on the part of
Symphony Allegro, and no other proceedings on the part of Symphony Allegro are
necessary to authorize this Agreement or for Symphony Allegro to perform its
obligations under this Agreement. This Agreement constitutes the lawful, valid
and legally binding obligation of Symphony Allegro, enforceable in accordance
with its terms, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors’ rights generally and general equitable principles regardless of
whether such enforceability is considered in a proceeding at law or in equity.
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

15

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                    (iii) No Violation or Conflict. The execution, delivery and
performance of this Agreement and the transactions contemplated hereby do not
(A) violate, conflict with or result in the breach of any provision of the
Organizational Documents of Symphony Allegro, (B) conflict with or violate any
law or Governmental Order applicable to Symphony Allegro or any of its assets,
properties or businesses, or (C) conflict with, result in any breach of,
constitute a default (or event that with the giving of notice or lapse of time,
or both, would become a default) under, require any consent under, or give to
others any rights of termination, amendment, acceleration, suspension,
revocation or cancellation of, or result in the creation of any Encumbrance on
any of the assets or properties of Symphony Allegro, pursuant to, any note,
bond, mortgage or indenture, contract, agreement, lease, sublease, license,
permit, franchise or other instrument or arrangement to which Symphony Allegro
is a party except, in the case of clauses (B) and (C), to the extent that such
conflicts, breaches, defaults or other matters would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on Symphony
Allegro.
                    (iv) Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement by Symphony Allegro do not, and the
consummation of the transactions contemplated hereby do not and will not,
require any Governmental Approval which has not already been obtained, effected
or provided, except with respect to which the failure to so obtain, effect or
provide would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on Symphony Allegro.
                    (v) Litigation. There are no actions by or against Symphony
Allegro pending before any Governmental Authority or, to the knowledge of
Symphony Allegro, threatened to be brought by or before any Governmental
Authority that would, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect on Symphony Allegro. There are no pending or,
to the knowledge of Symphony Allegro, threatened actions to which Symphony
Allegro is a party (or is threatened to be named as a party) to set aside,
restrain, enjoin or prevent the execution, delivery or performance of this
Agreement or the Operative Documents or the consummation of the transactions
contemplated hereby or thereby by any party hereto or thereto. Symphony Allegro
is not subject to any Governmental Order (nor, to the knowledge of Symphony
Allegro, is there any such Governmental Order threatened to be imposed by any
Governmental Authority) that would, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on Symphony Allegro.
                    (vi) Capitalization. Holdings is the beneficial and record
owner of all issued and outstanding Symphony Allegro Equity Securities. No
shares of Symphony Allegro capital stock are held in treasury by Symphony
Allegro or any Symphony Allegro Subsidiary. All of the issued and outstanding
Symphony Allegro Equity Securities (A) have been duly authorized and validly
issued and are fully paid and nonassessable, (B) were issued in compliance with
all applicable state and federal securities laws, and (C) were not issued in
violation of any preemptive rights or rights of first refusal. No preemptive
rights or rights of first refusal exist with respect to any
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

16

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Symphony Allegro Equity Securities and no such rights will arise by virtue of or
in connection with the transactions contemplated hereby (other than for the
Purchase Option). Other than the Purchase Option, there are no outstanding
options, warrants, call rights, commitments or agreements of any character to
acquire any Symphony Allegro Equity Securities. There are no outstanding stock
appreciation, phantom stock, profit participation or other similar rights with
respect to Symphony Allegro. Symphony Allegro is not obligated to redeem or
otherwise acquire any of its outstanding Symphony Allegro Equity Securities.
                    (vii) Interim Operations. Symphony Allegro was formed solely
for the purpose of engaging in the transactions contemplated by the Operative
Documents, has engaged in no other business activities and has conducted its
operations only as contemplated by the Operative Documents.
                    (viii) Investment Company. Symphony Allegro is not, and
after giving effect to the transactions contemplated by the Operative Documents
will not be, required to register as an “investment company” as such term is
defined in the Investment Company Act of 1940, as amended.
               (b) Symphony Allegro covenants and agrees that:
                    (i) Symphony Allegro will comply with all laws, ordinances
or governmental rules or regulations to which it is subject and will obtain and
maintain in effect all licenses, certificates, permits, franchises and other
Governmental Approvals necessary to the ownership of its properties or to the
conduct of its business, in each case to the extent necessary to ensure that
non-compliance with such laws, ordinances or governmental rules or regulations
or failures to obtain or maintain in effect such licenses, certificates,
permits, franchises and other Governmental Approvals would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect on
Symphony Allegro.
                    (ii) Symphony Allegro will file (or cause to be filed) all
material tax returns required to be filed by it and pay all taxes shown to be
due and payable on such returns and all other taxes imposed on it or its assets
to the extent such taxes have become due and payable and before they have become
delinquent and shall pay all claims for which sums have become due and payable
that have or might become attached to the assets of Symphony Allegro; provided,
that Symphony Allegro need not file any such tax returns or pay any such tax or
claims if (A) the amount, applicability or validity thereof is contested by
Symphony Allegro on a timely basis in good faith and in appropriate proceedings,
and Symphony Allegro has established adequate reserves therefor in accordance
with GAAP on the books of Symphony Allegro or (B) the failure to file such tax
returns or the nonpayment of such taxes and assessments, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect on
Symphony Allegro.
                    (iii) Symphony Allegro will at all times preserve and keep
in full force and effect its corporate existence.
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

17

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                    (iv) Symphony Allegro will keep complete, proper and
separate books of record and account, including a record of all costs and
expenses incurred, all charges made, all credits made and received, and all
income derived in connection with the operation of the business of Symphony
Allegro, all in accordance with GAAP (which GAAP shall be conformed to those
used by Alexza to the extent practicable), in each case to the extent necessary
to enable Symphony Allegro to comply with the periodic reporting requirements of
this Agreement, and will promptly notify Alexza if it adopts or changes any
accounting principle pursuant to a change in GAAP or applicable Law.
                    (v) Symphony Allegro will perform and observe in all
material respects all of the terms and provisions of each Operative Document to
be performed or observed by it, maintain each such Operative Document to which
it is a party, promptly enforce in all material respects each such Operative
Document in accordance with its terms, take all such action to such end as may
be from time to time reasonably requested by Holdings or Alexza and make to each
other party to each such Operative Document such demands and requests for
information and reports or for action as Symphony Allegro is entitled to make
under such Operative Document.
                    (vi) Symphony Allegro shall permit the representatives of
Holdings (including Holdings’ members and their respective representatives),
each Symphony Fund and Alexza, at each of their own expense and upon reasonable
prior notice to Symphony Allegro, to visit the principal executive office of
Symphony Allegro, to discuss the affairs, finances and accounts of Symphony
Allegro with Symphony Allegro’s officers and (with the consent of Symphony
Allegro, which consent will not be unreasonably withheld) its Auditors, all at
such reasonable times and as often as may be reasonably requested in writing.
                    (vii) Symphony Allegro shall permit each Symphony Fund, at
its own expense and upon reasonable prior notice to Symphony Allegro, to inspect
and copy Symphony Allegro’s books and records and inspect Symphony Allegro’s
properties at reasonable times.
                    (viii) Symphony Allegro shall allow Alexza or its designated
representatives to have reasonable visitation and inspection rights with regard
to the Programs and materials, documents and other information relating thereto.
                    (ix) Symphony Allegro shall permit each Symphony Fund to
consult with and advise the management of Symphony Allegro on matters relating
to the research and development of the Programs in order to develop the Product
in accordance with the terms or provisions of the Amended and Restated Research
and Development Agreement.
                    (x) On the Purchase Option Closing Date, or as soon
thereafter as is practical, Symphony Allegro shall deliver to Alexza all
materials, documents, files and other information relating to the Programs (or,
where necessary, copies thereof).
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

18

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                    (xi) During the Term, Alexza shall have the right to consent
to any increase in the size of the Symphony Allegro Board to more than five
(5) directors.
                    (xii) During the Term, Alexza shall have the right to
designate, remove and replace one (1) director of the Symphony Allegro Board,
including any successor thereto, as contemplated by Section 4(b)(iv).
                    (xiii) Symphony Allegro shall indemnify the directors and
officers of Symphony Allegro against liability incurred by reason of the fact
that such Person is or was a director or officer of Symphony Allegro, as
permitted by Article VII of the Symphony Allegro Charter and Section 9.01 of the
Symphony Allegro By-laws, as set forth in, and on the terms of, the
Indemnification Agreement and the RRD Services Agreement, respectively.
                    (xiv) During the Term, Symphony Allegro shall comply with,
and cause any Persons acting for it to comply with, the terms of the Investment
Policy with respect to the investment of any funds held by it.
                    (xv) On or prior to the Purchase Option Closing Date,
Symphony Allegro shall pay for a non-cancelable run-off insurance policy, for a
period of six (6) years after the Purchase Option Closing Date to provide
insurance coverage for events, acts or omissions occurring on or prior to the
Purchase Option Closing Date for all persons who were directors or officers of
Symphony Allegro on or prior to the Purchase Option Closing Date.
               (c) Symphony Allegro covenants and agrees that, until the
expiration of the Term, it shall not, and shall cause its Subsidiaries (if any)
not to, without Alexza’s prior written consent (such consent, in the case of
clause (x) below, not to be unreasonably withheld):
                    (i) issue any Symphony Allegro Equity Securities or any
Equity Securities of any Subsidiary thereof (other than any issuances of Equity
Securities by Symphony Allegro made in accordance with Section 1(b) hereof to
Holdings so long as Symphony Allegro is a wholly owned subsidiary of Holdings,
or by a Subsidiary of Symphony Allegro to Symphony Allegro or to another wholly
owned Subsidiary of Symphony Allegro); provided, however, that in any event any
such Symphony Allegro Equity Securities shall be issued subject to the Purchase
Option;
                    (ii) redeem, repurchase or otherwise acquire, directly or
indirectly, any Symphony Allegro Equity Securities or the Equity Securities of
any Subsidiary of Symphony Allegro;
                    (iii) create, incur, assume or permit to exist (A) any
Encumbrance over or on any of its assets, other than (x) statutory liens or
(y) liens created in the ordinary course of Symphony Allegro’s business securing
obligations valued at less than [ * ] in the aggregate principal amount at any
one time outstanding
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

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(unless the Development Committee shall authorize the existence of ordinary
course liens securing obligations valued at greater than [ * ]), or (B) Debt
other than any Debt incurred pursuant to the Operative Documents and the
Development Budget (including payables incurred in the ordinary course of
business) (“Excepted Debt”); provided, however, that the aggregate outstanding
principal amount of all Excepted Debt for borrowed money (including the amount
of Debt secured by any Encumbrances permitted pursuant to clause (A)) shall not
exceed [ * ] at any time;
                    (iv) declare or pay dividends or other distributions on any
Symphony Allegro Equity Securities other than any dividend declared from the
proceeds of (x) the exercise of a Discontinuation Option, or (y) a sale or
license of a discontinued Program to a third party, in each case in respect of
which Symphony Allegro shall be entitled to pay (subject to the existence of
lawfully available funds) a dividend equal to the net amount (such net amount
calculated as the gross proceeds received less amounts required to be paid in
respect of any and all corporate taxes owed by Symphony Allegro as a result of
the receipt of such gross amounts) of such Discontinuation Price or the amounts
received from such third party, as the case may be;
                    (v) enter into any transaction of merger or consolidation,
or liquidate, wind up or dissolve itself, or convey, transfer, license, lease or
otherwise dispose of all, or a material portion of, its properties, assets or
business;
                    (vi) other than in respect of the Programs, engage in the
development of products for any other company or engage or participate in the
development of products or engage in any other material line of business;
                    (vii) other than entering into, and performing its
obligations under, the Operative Documents and participating in the Programs,
engage in any action that negates or is inconsistent with any rights of Alexza
set forth herein;
                    (viii) (A) other than as contemplated by the RRD Services
Agreement and Section 6.2 of the Amended and Restated Research and Development
Agreement, hire, retain or contract for the services of, any employees until the
termination of such agreements, or (B) appoint, dismiss or change any RRD
Investment Personnel;
                    (ix) incur any financial commitments in respect of the
development of the Programs other than those set forth in the Development Plan
and the Development Budget, or those approved by the Development Committee and,
if so required by the terms of Paragraph 11 of the Development Committee
Charter, the Symphony Allegro Board in accordance with the Operative Documents;
                    (x) other than any transaction contemplated by the Operative
Documents, enter into or engage in any Conflict Transactions without the prior
approval of a majority of the Disinterested Directors of the Symphony Allegro
Board; or
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

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                    (xi) waive, alter, modify, amend or supplement in any manner
whatsoever any material terms and conditions of the RRD Services Agreement, the
Subscription Agreement, the Research Cost Sharing and Extension Agreement, or
Articles 4 and 6 of the Amended and Restated Research and Development Agreement,
except in compliance with the terms of the Operative Documents.
               (d) Symphony Allegro covenants and agrees to deliver, cause to be
delivered, and provide access thereto, to each other Party, each Symphony Fund,
and such Auditors as Alexza may designate, so long as such Auditors shall (x) be
subject to confidentiality requirements at least as stringent as the
Confidentiality Agreement or (y) be an Alexza Accounting Advisor retained
pursuant to an agreement which incorporates confidentiality provisions
substantially the same as the ones incorporated in the agreements in effect
between Alexza and such Accounting Advisors as of the Closing Date:
                    (i) upon request, copies of the then current Development
Plan for each quarter, on or before March 31, June 30, September 30, and
December 31 of each year;
                    (ii) upon request, copies of the then current Development
Budget for each quarter, including a report setting forth in reasonable detail
the projected expenditures by Symphony Allegro pursuant to the Development
Budget, on or before March 31, June 30, September 30, and December 31 of each
year;
                    (iii) prior to the close of each fiscal year, Symphony
Allegro shall cause the Manager to seek to obtain from the Symphony Allegro
Auditors schedules of certain financial information to be provided to Alexza’s
Auditors in connection with the Symphony Allegro Auditors’ audit of Symphony
Allegro. Within [ * ] after the close of each fiscal year, Symphony Allegro (or
the Manager acting on its behalf) will provide Alexza’s Auditors with the Client
Schedules. If the Symphony Allegro Auditors deliver the Client Schedules after
the end of the fiscal year, Symphony Allegro (or the Manager acting on its
behalf) will provide the completed Client Schedules to Alexza’s Auditors within
[ * ] of such receipt. Following Alexza’s Auditors’ review of the Client
Schedules, Symphony Allegro, or RRD on behalf of Symphony Allegro, will promptly
provide Alexza’s Auditors with any reasonably requested back-up information
related to the Client Schedules.
                    (iv) prior to the close of each fiscal year, Alexza’s Chief
Financial Officer, the Symphony Allegro Auditors, Alexza’s Auditors and Symphony
Allegro (or the Manager acting on its behalf) shall agree to a completion
schedule that will include (A) the provision by Symphony Allegro to Alexza of
the financial information reasonably necessary for Alexza to consolidate the
financial results of Symphony Allegro and (B) the following financial
statements, including the related notes thereto, audited and certified by the
Symphony Allegro Auditors: (1) a balance sheet of Symphony Allegro as of the
close of such fiscal year, (2) a statement of net income for such fiscal year,
and (3) a statement of cash flows for such fiscal year. Such audited annual
financial statements shall set forth in comparative form the figures for the
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

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previous fiscal year, all in reasonable detail, prepared in accordance with
GAAP, and Symphony Allegro (or the Manager acting on its behalf) shall, to the
extent that Symphony Allegro (or the Manager acting on its behalf), using
commercially reasonable means, can procure such an opinion, be accompanied by an
opinion thereon of the Symphony Allegro Auditors to the effect that such
financial statements present fairly, in all material respects, the financial
position of Symphony Allegro and its results of operations and cash flows and
have been prepared in conformity with GAAP, and that the examination of such
accountants in connection with such financial statements has been made in
accordance with generally accepted auditing standards, and that such audit
provides a reasonable basis for such opinion in the circumstances;
                    (v) within [ * ] following each calendar month and upon
receipt from Alexza of its monthly invoice to Symphony Allegro, current accrued
monthly vendor expenses and prepaid expenses, Symphony Allegro (or the Manager
acting on its behalf) will provide to Alexza: (A) the unaudited balance sheet of
Symphony Allegro for the previous calendar month; (B) the unaudited statement of
net income for such previous calendar month; (C) the trial balance schedule for
such previous calendar month; and (D) related account reconciliations for such
previous calendar month (collectively, “Unaudited Financial Information”);
                    (vi) within [ * ] following its filing, a copy of each
income tax return so filed by Symphony Allegro with any foreign, federal, state
or local taxing authority (including all supporting schedules thereto);
                    (vii) any other documents, materials or other information
pertaining to the Programs or Symphony Allegro as Alexza may reasonably request,
including preliminary financial information;
                    (viii) promptly, and in any event within [ * ] of receipt
thereof, copies of any notice to Symphony Allegro from any federal or state
Governmental Authority relating to any order, ruling, statute or other law or
regulation that would reasonably be expected to have a Material Adverse Effect
on Symphony Allegro;
                    (ix) promptly upon receipt thereof, notice of all actions,
suits, investigations, litigation and proceedings before any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, affecting Symphony Allegro;
                    (x) promptly upon receipt thereof, copies of any other
notices, requests, reports, financial statements and other information and
documents received by Symphony Allegro under or pursuant to any other Operative
Document, including, without limitation, any notices of breach or termination of
any subcontracts or licenses entered into or permitted pursuant to the Operative
Documents; and
                    (xi) with reasonable promptness, such other data and
information relating to the business, operations, affairs, financial condition,
assets or
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

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properties of Symphony Allegro or relating to the ability of Symphony Allegro to
perform its obligations hereunder and under the Operative Documents as from time
to time may be reasonably requested by Alexza and/or Holdings;
provided, that neither Symphony Allegro, nor the Manager acting on behalf of
Symphony Allegro, shall have any liability to Alexza for the failure to deliver
financial documents or other materials hereunder, if such failure was caused by
a failure of Alexza to provide, in a timely manner, data required to prepare
such financial documents or other materials to Symphony Alexza in a timely
manner.
               (e) Symphony Allegro will use commercially reasonable efforts, at
its own expense (as set forth in the Management Budget), to cooperate with
Alexza in meeting Alexza’s government compliance, disclosure, and financial
reporting obligations, including without limitation under the Sarbanes-Oxley Act
of 2002, as amended, and any rules and regulations promulgated thereunder, and
under FASB Interpretation No. 46 (Revised). Without limiting the foregoing,
Symphony Allegro further covenants, until the completion of all the reporting,
accounting and other obligations set forth therein with respect to the fiscal
year in which this Agreement shall terminate, expire and end, that (w) the
principal executive officer and the principal financial officer of Symphony
Allegro, or persons performing similar functions, shall provide certifications
to Alexza corresponding to those required with respect to public companies for
which a class of securities is registered under the Securities Exchange Act
(“Public Companies”) under Sections 302 and 906 of the Sarbanes-Oxley Act of
2002, as amended; (x) Symphony Allegro shall maintain a system of disclosure
controls and internal controls (as defined under the Exchange Act) and conduct
quarterly and annual evaluations of the effectiveness of such controls as
required under the Exchange Act for Public Companies; (y) Symphony Allegro shall
provide to Alexza an attestation report of its Auditors with respect to Symphony
Allegro management’s assessment of Symphony Allegro’s internal controls as
required under the Exchange Act for Public Companies; and (z) Symphony Allegro
will maintain, or cause to have maintained, such sufficient evidentiary support
for management’s assessment of the effectiveness of Symphony Allegro’s internal
controls as required under the Exchange Act for Public Companies.
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

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          Section 6. Notice of Material Event. Each Party covenants and agrees
that, upon its acquiring Knowledge of any breach by it of any representation,
warranty, covenant or any other term or condition of this Agreement or acquiring
Knowledge of a material event or development that is, or is reasonably expected
to be, adverse to the other Party with respect to any Program or the
transactions contemplated hereby, such Party shall promptly notify the other
Party in writing within three (3) Business Days of acquiring such Knowledge;
provided, that the failure to provide such notice shall not impair or otherwise
be deemed a waiver of any rights any Party may have arising from such breach,
material event or development and that notice under this Section 6 shall not in
itself constitute notice of any breach of any of the Operative Documents, unless
explicitly stated in such notice.
          Section 7. Assignment; Transfers; Legend
               (a) Assignment by Alexza and Symphony Allegro. Neither Alexza nor
Symphony Allegro may assign, delegate, transfer, sell or otherwise dispose of
(collectively, “Transfer”), in whole or in part, any or all of their rights or
obligations hereunder to any Person (a “Transferee”) without the prior written
approval of each of the other Parties; provided, however, that Alexza, without
the prior approval of each of the other Parties, acting in accordance with
Section 2A of this Agreement, may make such Transfer to any Person which
acquires all or substantially all of Alexza’s assets or business (or assets or
business related to the Programs) or which is the surviving or resulting Person
in a merger, consolidation or other reorganization with Alexza. In no event
shall such assignment alter the definition of “Alexza Common Stock” except as a
result of the surviving or resulting “parent” entity in a merger being other
than Alexza, in which case any reference to Alexza Common Stock shall be deemed
to instead reference the common stock, if any, of the surviving or resulting
entity.
               (b) Assignment and Transfers by Holdings. Prior to the expiration
of the Term, Holdings may not Transfer, in whole or in part, any or all of its
Symphony Allegro Equity Securities or any or all of its rights or obligations
hereunder to any Person (other than Alexza) without the prior written consent of
Alexza. In addition, any Transfer of Symphony Allegro Equity Securities by
Holdings or any other Person to any Person other than Alexza shall be
conditioned upon, and no effect shall be given to any such Transfer unless such
transferee shall agree in writing in form and substance satisfactory to Alexza
to be bound by all of the terms and conditions hereunder, including the Purchase
Option, as if such transferee were originally designated as “Holdings”
hereunder.
               (c) Legend. Any certificates evidencing Symphony Allegro Equity
Securities shall bear a legend in substantially the following form:
THE SECURITIES OF SYMPHONY ALLEGRO, INC., EVIDENCED HEREBY ARE SUBJECT TO AN
OPTION, HELD BY ALEXZA, AS DESCRIBED IN A PURCHASE OPTION AGREEMENT (THE
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

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“PURCHASE OPTION AGREEMENT”) DATED AS OF DECEMBER 1, 2006, BY AND AMONG ALEXZA
PHARMACEUTICALS, INC., AND THE OTHER PARTIES THERETO, TO PURCHASE SUCH
SECURITIES AT A PURCHASE PRICE DETERMINED PURSUANT TO SECTION 2 OF THE PURCHASE
OPTION AGREEMENT, EXERCISABLE BY WRITTEN NOTICE AT ANY TIME DURING THE PERIOD
SET FORTH THEREIN. COPIES OF THE PURCHASE OPTION AGREEMENT ARE AVAILABLE AT THE
PRINCIPAL PLACE OF BUSINESS OF SYMPHONY ALLEGRO, INC. AT 7361 CALHOUN PLACE,
SUITE 325, ROCKVILLE, MARYLAND 20855, AND WILL BE FURNISHED TO THE HOLDER HEREOF
UPON WRITTEN REQUEST WITHOUT COST.
          Section 8. Costs and Expenses; Payments.
                (a)        Symphony Allegro Costs and Expenses. Symphony Allegro
shall pay any of its ongoing legal expenses with respect to the transactions
described in the Operative Documents from the funds allocated for such purpose
in the Management Budget.
                (b)        Costs and Expenses of the Purchase Option. Except as
otherwise specified in Section 2(f) hereof, each Party shall pay its own costs
and expenses incurred in connection with the exercise of the Purchase Option.
                (c)        Payments to Holdings. Payment of the Purchase Price,
plus any costs and expenses payable by Symphony Allegro under Section 2(f)
hereof, shall be made to the account of Holdings contemporaneously with or prior
to the payout of the Purchase Price on the Purchase Option Closing Date no later
than 1:00 pm (New York time).
          Section 9.  Expiration; Termination of Agreement.
                (a)     Termination.
                     (i) This Agreement shall terminate upon the mutual written
consent of all of the Parties.
                    (ii) Subject to Sections 1(c)(v) and 2A hereof, which shall
survive termination of this Agreement under this Section 9(a)(ii), each of
Holdings and Symphony Allegro may terminate this Agreement in the event that
Symphony Allegro terminates the Amended and Restated Research and Development
Agreement in accordance with its terms.
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

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          Section 10. Survival; Indemnification.
               (a) Survival of Representations and Warranties; Expiration of
Certain Covenants.
                    (i) The representations and warranties of the Parties
contained in this Agreement shall survive for a period of one year from the
making of such representations, except for representations and warranties
contained in Sections 3(a)(i) and (ii), 4(a)(i) and (ii) and 5(a)(i) and (ii)
hereof which shall survive indefinitely. The liability of the Parties related to
their respective representations and warranties hereunder shall not be reduced
by any investigation made at any time by or on behalf of Holdings, Symphony
Allegro or Alexza, as applicable.
                    (ii) For the avoidance of doubt, the covenants and
agreements set forth in Sections 4(b), 5(b)(i), 5(b)(v), 5(b)(vii)-(ix),
5(b)(xi)-(xiv), 5(c), 5(d)(i), 5(d)(ii) and 5(d)(viii)-(xi) shall, upon the
expiration of the Term, expire and end without any further obligation by
Symphony Allegro or Holdings thereunder.
                    (iii) For the avoidance of doubt, the covenants and
agreements set forth in Sections 5(b)(ii)-(iv), 5(b)(vi), 5(b)(x),
5(d)(iii)-(vii) and 5(e) shall, upon the completion of all the reporting,
accounting and other obligations set forth therein with respect to the fiscal
year in which this Agreement shall terminate, expire and end without any further
obligation by Symphony Allegro or Holdings thereunder.
               (b) Indemnification. To the greatest extent permitted by
applicable law, Alexza shall indemnify and hold harmless Holdings and Symphony
Allegro and Holdings shall indemnify and hold harmless Alexza, and each of their
respective Affiliates, officers, directors, employees, agents, partners,
members, successors, assigns, representatives of, and each Person, if any
(including any officers, directors, employees, agents, partners, members of such
Person) who controls Holdings, Symphony Allegro and Alexza, as applicable,
within the meaning of the Securities Act or the Exchange Act, (each, an
“Indemnified Party”), from and against any and all actions, causes of action,
suits, claims, losses, costs, interest, fees, liabilities and damages, and
expenses in connection therewith (irrespective of whether any such Indemnified
Party is a party to the action for which indemnification hereunder is sought),
and including reasonable attorneys’ fees and disbursements (hereinafter, a
“Loss”), incurred by any Indemnified Party to the extent resulting from, arising
out of, or relating to: (i) in the case of Alexza being the Indemnifying Party,
(A) any breach of any representation or warranty made by Alexza herein or in
Section 5.1 of the Novated and Restated Technology License Agreement, or (B) any
breach of any covenant, agreement or obligation of Alexza contained herein, and
(ii) in the case of Holdings being the Indemnifying Party, (A) any breach of any
representation or warranty made by Holdings or Symphony Allegro herein, or
(B) any breach of any covenant, agreement or obligation of Holdings or Symphony
Allegro contained herein. To the extent that the foregoing undertaking by Alexza
or Holdings may be unenforceable for any reason, such Party shall make the
maximum contribution to the payment and satisfaction of any Loss that is
permissible under applicable law.
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

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               (c) Notice of Claims. Any Indemnified Party that proposes to
assert a right to be indemnified under this Section 10 shall notify Alexza or
Holdings, as applicable (the “Indemnifying Party”), promptly after receipt of
notice of commencement of any action, suit or proceeding against such
Indemnified Party (an “Indemnified Proceeding”) in respect of which a claim is
to be made under this Section 10, or the incurrence or realization of any Loss
in respect of which a claim is to be made under this Section 10, of the
commencement of such Indemnified Proceeding or of such incurrence or
realization, enclosing a copy of all relevant documents, including all papers
served and claims made, but the omission to so notify the applicable
Indemnifying Party promptly of any such Indemnified Proceeding or incurrence or
realization shall not relieve (x) such Indemnifying Party from any liability
that it may have to such Indemnified Party under this Section 10 or otherwise,
except, as to such Indemnifying Party’s liability under this Section 10, to the
extent, but only to the extent, that such Indemnifying Party shall have been
prejudiced by such omission, or (y) any other indemnitor from liability that it
may have to any Indemnified Party under the Operative Documents.
               (d) Defense of Proceedings. In case any Indemnified Proceeding
shall be brought against any Indemnified Party, it shall notify the applicable
Indemnifying Party of the commencement thereof as provided in Section 10(c), and
such Indemnifying Party shall be entitled to participate in, and provided such
Indemnified Proceeding involves a claim solely for money damages and does not
seek an injunction or other equitable relief against the Indemnified Party and
is not a criminal or regulatory action, to assume the defense of, such
Indemnified Proceeding with counsel reasonably satisfactory to such Indemnified
Party. After notice from such Indemnifying Party to such Indemnified Party of
such Indemnifying Party’s election so to assume the defense thereof and the
failure by such Indemnified Party to object to such counsel within ten (10)
Business Days following its receipt of such notice, such Indemnifying Party
shall not be liable to such Indemnified Party for legal or other expenses
related to such Indemnified Proceedings incurred after such notice of election
to assume such defense except as provided below and except for the reasonable
costs of investigating, monitoring or cooperating in such defense subsequently
incurred by such Indemnified Party reasonably necessary in connection with the
defense thereof. Such Indemnified Party shall have the right to employ its
counsel in any such Indemnified Proceeding, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Party unless:
                    (i) the employment of counsel by such Indemnified Party at
the expense of the applicable Indemnifying Party has been authorized in writing
by such Indemnifying Party;
                    (ii) such Indemnified Party shall have reasonably concluded
in its good faith (which conclusion shall be determinative unless a court
determines that such conclusion was not reached reasonably and in good faith)
that there is or may be a conflict of interest between the applicable
Indemnifying Party and such Indemnified Party in the conduct of the defense of
such Indemnified Proceeding or that there are or may be one or more different or
additional defenses, claims, counterclaims,
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

27

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or causes of action available to such Indemnified Party (it being agreed that in
any case referred to in this clause (ii) such Indemnifying Party shall not have
the right to direct the defense of such Indemnified Proceeding on behalf of the
Indemnified Party);
                    (iii) the applicable Indemnifying Party shall not have
employed counsel reasonably acceptable to the Indemnified Party, to assume the
defense of such Indemnified Proceeding within a reasonable time after notice of
the commencement thereof; provided, however, that (A) this clause (iii) shall
not be deemed to constitute a waiver of any conflict of interest that may arise
with respect to any such counsel, and (B) an Indemnified Party may not invoke
this clause (iii) if such Indemnified Party failed to timely object to such
counsel pursuant to the first paragraph of this Section 10(d) above (it being
agreed that in any case referred to in this clause (iii) such Indemnifying Party
shall not have the right to direct the defense of such Indemnified Proceeding on
behalf of the Indemnified Party); or
                    (iv) any counsel employed by the applicable Indemnifying
Party shall fail to timely commence or reasonably conduct the defense of such
Indemnified Proceeding and such failure has prejudiced (or is in immediate
danger of prejudicing) the outcome of such Indemnified Proceeding (it being
agreed that in any case referred to in this clause (iv) such Indemnifying Party
shall not have the right to direct the defense of such Indemnified Proceeding on
behalf of the Indemnified Party);
in each of which cases the fees and expenses of counsel for such Indemnified
Party shall be at the expense of such Indemnifying Party. Only one counsel shall
be retained by all Indemnified Parties with respect to any Indemnified
Proceeding, unless counsel for any Indemnified Party reasonably concludes in
good faith (which conclusion shall be determinative unless a court determines
that such conclusion was not reached reasonably and in good faith) that there is
or may be a conflict of interest between such Indemnified Party and one or more
other Indemnified Parties in the conduct of the defense of such Indemnified
Proceeding or that there are or may be one or more different or additional
defenses, claims, counterclaims, or causes or action available to such
Indemnified Party.
               (e) Settlement. Without the prior written consent of such
Indemnified Party, such Indemnifying Party shall not settle or compromise, or
consent to the entry of any judgment in, any pending or threatened Indemnified
Proceeding, unless such settlement, compromise, consent or related judgment
(i) includes an unconditional release of such Indemnified Party from all
liability for Losses arising out of such claim, action, investigation, suit or
other legal proceeding, (ii) provides for the payment of money damages as the
sole relief for the claimant (whether at law or in equity), (iii) involves no
admission of fact adverse to the Indemnified Party or finding or admission of
any violation of law or the rights of any Person by the Indemnified Party, and
(iv) is not in the nature of a criminal or regulatory action. No Indemnified
Party shall settle or compromise, or consent to the entry of any judgment in,
any pending or threatened Indemnified Proceeding (A) in respect of which any
payment would result hereunder or under any other Operative Document, (B) which
includes an injunction that will adversely affect any Indemnifying Party, (C)
which involves an admission of fact adverse to the Indemnifying Party or a
finding or admission of any violation of law or the
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

28

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rights of any Person by the Indemnifying Party, or (D) which is in the nature of
a criminal or regulatory action, without the prior written consent of the
Indemnifying Party, such consent not to be unreasonably conditioned, withheld or
delayed.
          Section 11. No Petition. Each of Alexza and Holdings covenants and
agrees that, prior to the date which is one year and one day after the
expiration of the Purchase Option Period, it will not institute or join in the
institution of any bankruptcy, insolvency, reorganization or similar proceeding
against Symphony Allegro. The provisions of this Section 11 shall survive the
termination of this Agreement.
          Section 12. Third-Party Beneficiary. Each of the Parties agrees that
each Symphony Fund shall be a third-party beneficiary of this Agreement.
Section 13. Notices. Any notice, request, demand, waiver, consent, approval or
other communication which is required or permitted to be given to any Party
shall be in writing addressed to the Party at its address set forth below and
shall be deemed given (i) when delivered to the Party personally, (ii) if sent
to the Party by facsimile transmission (promptly followed by a hard-copy
delivered in accordance with this Section 13), when the transmitting Party
obtains written proof of transmission and receipt; provided, however, that
notwithstanding the foregoing, any communication sent by facsimile transmission
after 5:00 PM (receiving Party’s time) or not on a Business Day shall not be
deemed received until the next Business Day, (iii) when delivered by next
Business Day delivery by a nationally recognized courier service, or (iv) if
sent by registered or certified mail, when received, provided postage and
registration or certification fees are prepaid and delivery is confirmed by a
return receipt:
          Alexza:
Alexza Pharmaceuticals, Inc.
1020 East Meadow Circle
Palo Alto, CA 94303
Attn:August J. Moretti
Facsimile: (650) 687-3999
          with a copy to:
Cooley Godward Kronish LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Attn: Barbara A. Kosacz, Esq.
Facsimile: (650) 849-7400
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

29

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          Symphony Allegro:
Symphony Allegro, Inc.
7361 Calhoun Place, Suite 325
Rockville, MD 20855
Attn:Frank L. Hurley, Ph.D.
Facsimile: (301) 762-6154
          Holdings:
Symphony Allegro Holdings LLC
7361 Calhoun Place, Suite 325
Rockville, MD 20855
Attn:Robert L. Smith, Jr.
Facsimile: (301) 762-6154
          with copies to:
Symphony Capital Partners, L.P.
875 Third Avenue, 18th Floor
New York, NY 10022
Attn:Mark Kessel
Facsimile: (212) 632-5401
and
Symphony Strategic Partners, LLC
875 Third Avenue, 18th Floor
New York, NY 10022
Attn: Mark Kessel
Facsimile: (212) 632-5401
or to such other address as such Party may from time to time specify by notice
given in the manner provided herein to each other Party entitled to receive
notice hereunder.
          Section 14. Governing Law; Consent to Jurisdiction and Service of
Process.
                    (a) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York; except to the extent that
this Agreement pertains to the internal governance of Symphony Allegro or
Holdings, and to such extent this Agreement shall be governed and construed in
accordance with the laws of the State of Delaware.
                    (b) Each of the Parties hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of any New York State court and Delaware State court or federal
court of the United States of America
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

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sitting in The City of New York, Borough of Manhattan or Wilmington, Delaware,
and any appellate court from any jurisdiction thereof, in any action or
proceeding arising out of or relating to this Agreement, or for recognition or
enforcement of any judgment, and each of the Parties hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in any such New York State court, any
such Delaware State court or, to the fullest extent permitted by law, in such
federal court. Each of the Parties agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that any Party may otherwise
have to bring any action or proceeding relating to this Agreement.
                    (c) Each of the Parties irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement in any New
York State or federal court, or any Delaware State or federal court. Each of the
Parties hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court. Each of the parties hereby consents to service of process by
mail.
          Section 15. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT.
          Section 16. Entire Agreement. This Agreement (including any Annexes,
Schedules, Exhibits or other attachments hereto) constitutes the entire
agreement between the Parties with respect to the matters covered hereby and
supersedes all prior and contemporaneous agreements, correspondence, discussion,
and understanding with respect to such matters between the Parties, excluding
the Operative Documents.
          Section 17. Amendment; Successors; Counterparts.
               (a) The terms of this Agreement shall not be altered, modified,
amended, waived or supplemented in any manner whatsoever except by a written
instrument signed by each of the Parties.
               (b) Except as set forth in Section 12, nothing expressed or
implied herein is intended or shall be construed to confer upon or to give to
any Person, other than the Parties, any right, remedy or claim under or by
reason of this Agreement or of any term, covenant or condition hereof, and all
the terms, covenants, conditions, promises and agreements contained herein shall
be for the sole and exclusive benefit of the Parties and their successors and
permitted assigns.
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

31

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               (c) This Agreement may be executed in one or more counterparts,
each of which, when executed, shall be deemed an original but all of which,
taken together, shall constitute one and the same Agreement.
          Section 18. Specific Performance. The Parties acknowledge that
irreparable damage would result if this Agreement were not specifically
enforced, and they therefore agree that the rights and obligations of the
Parties under this Agreement may be enforced by a decree of specific performance
issued by a court of competent jurisdiction. Such a remedy shall, however, not
be exclusive, and shall be in addition to any other remedies which any Party may
have under this Agreement or otherwise. The Parties further acknowledge and
agree that a decree of specific performance may not be an available remedy in
all circumstances.
          Section 19. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in a manner
materially adverse to either party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to the
extent possible.
          Section 20. Tax Reporting. The Parties acknowledge and agree that, for
all federal and state income tax purposes:
               (a) (i) Holdings shall be treated as the owner of all the Equity
Securities of Symphony Allegro prior to the consummation of the Purchase Option;
(ii) the Purchase Option shall be treated as an option to acquire all the Equity
Securities of Symphony Allegro; (iii) the Warrants shall be treated as option
premium payable in respect of the grant of the Purchase Option; and
(iv) Symphony Allegro shall be treated as the owner of all the Licensed
Intellectual Property and shall be entitled to all deductions claimed under
Section 174 of the Code in respect of the Licensed Intellectual Property to the
extent of the amounts funded by Symphony Allegro (which, for the avoidance of
doubt, shall not preclude Alexza from claiming deductions under Section 174 of
the Code to which Alexza is otherwise entitled); and
               (b) No Party shall take any tax position inconsistent with any
position described in Section 20(a) above, except (i) in the event of a
“determination” (as defined in Section 1313 of the Code) to the contrary, or
(ii) in the event either of the Parties receives an opinion of counsel to the
effect that there is no reasonable basis in law for such a position or that a
tax return cannot be prepared based on such a position without being subject to
substantial understatement penalties; provided, however, that in the case of
Alexza, such counsel shall be reasonably satisfactory to Holdings.
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

32

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{SIGNATURES FOLLOW ON NEXT PAGE}
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

33

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     IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the
day and year first above written.

                  ALEXZA PHARMACEUTICALS, INC.
 
                By:   /s/ August J. Moretti          
 
      Name:   August J. Moretti
 
      Title:   Senior Vice President and Chief Financial Officer
 
                SYMPHONY ALLEGRO HOLDINGS LLC
 
                By:   Symphony Capital Partners, L.P.,         its Manager
 
                By:   Symphony Capital GP, L.P.,         its member
 
                By:   Symphony GP, LLC,         its member
 
                By:   /s/ Mark Kessel          
 
      Name:   Mark Kessel
 
      Title:   Managing Member
 
                SYMPHONY ALLEGRO, INC.
 
                By:   /s/ Neil J. Sandler          
 
      Name:   Neil J. Sandler
 
      Title:   Chairman of the Board

 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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SCHEDULE I
PURCHASE PRICE TABLE

              Quarter Following   First Date of       Quarterly Price (in the
Closing Date   Quarter   Last Date of Quarter   millions)  
[ * ]
           

 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

SCH-1

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ANNEX A
CERTAIN DEFINITIONS
{See attached.}
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

A-1

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CERTAIN DEFINITIONS
     “$” means United States dollars.
     “Accredited Investor” has the meaning set forth in Rule 501(a) of
Regulation D promulgated under the Securities Act of 1933, as amended.
     “Act” means the Delaware Limited Liability Company Act, 6 Del. C. § 18-101
et seq.
     “Ad Hoc Meeting” has the meaning set forth in Paragraph 6 of Annex B of the
Amended and Restated Research and Development Agreement.
     “Additional Party” has the meaning set forth in Section 14 of the
Confidentiality Agreement.
     “Additional Regulatory Filings” means such Governmental Approvals as
required to be made under any law applicable to the purchase of the Symphony
Allegro Equity Securities under the Purchase Option Agreement.
     “Adjusted Capital Account Deficit” has the meaning set forth in
Section 1.01 of the Holdings LLC Agreement.
     “Affected Member” has the meaning set forth in Section 27 of the Investors
LLC Agreement.
     “Affiliate” means, with respect to any Person (i) any Person directly or
indirectly controlling, controlled by or under common control with such Person,
(ii) any officer, director, general partner, member or trustee of such Person,
or (iii) any Person who is an officer, director, general partner, member or
trustee of any Person described in clauses (i) or (ii) of this sentence. For
purposes of this definition, the terms “controlling,” “controlled by” or “under
common control with” shall mean the possession, direct or indirect, of the power
to direct or cause the direction of the management and policies of a Person or
entity, whether through the ownership of voting securities, by contract or
otherwise, or the power to elect at least 50% of the directors, managers,
general partners, or persons exercising similar authority with respect to such
Person or entities.
     “Alexza” means Alexza Pharmaceuticals, Inc., a Delaware corporation.
     “Alexza Accounting Advisor” means Ernst & Young LLP.
     “Alexza Common Stock” means the common stock, par value $0.0001 per share,
of Alexza.
     “Alexza Common Stock Valuation” has the meaning set forth in Section 2(e)
of the Purchase Option Agreement.
     “Alexza Obligations” has the meaning set forth in Section 6.1(a) of the
Amended
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

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and Restated Research and Development Agreement.
     “Alexza Personnel” has the meaning set forth in Section 8.4 of the Amended
and Restated Research and Development Agreement.
     “Alexza Public Filings” means all publicly available filings made by Alexza
with the SEC.
     “Alexza Subcontractor” means a third party that has entered into a
Subcontracting Agreement with Alexza.
     “Allegro Relevant Infringement” means an infringement, misappropriation,
illegal use or misuse of the Licensed Patent Rights or other Licensed
Intellectual Property due to the manufacture, use, sale or importation of a
pharmaceutical product or device that delivers Alprazolam (provided that Alexza
has not exercised a Discontinuation Option for the AZ-002 Program) or Loxapine
(provided that Alexza has not exercised a Discontinuation Option for the AZ-004
Program), as applicable.
     “Alprazolam” means: (a) alprazolam and (b) all salts, metabolites, prodrug
and other physical forms thereof.
     “Amended and Restated Research and Development Agreement” means the Amended
and Restated Research and Development Agreement dated as of the Closing Date,
among Alexza, Holdings and Symphony Allegro.
     “Asset Value” has the meaning set forth in Section 1.01 of the Holdings LLC
Agreement.
     “Auditors” means an independent certified public accounting firm of
recognized national standing.
     “AZ-002 Product” means a pharmaceutical product in which Alprazolam is the
sole active ingredient and it is delivered using Staccato Technology.
     “AZ-002 Program” means the development, manufacture and/or use of any
AZ-002 Product in accordance with the Development Plan.
     “AZ-004 Product” means a pharmaceutical product in which Loxapine is the
sole active ingredient and it is delivered using Staccato Technology.
     “AZ-004 Program” means the development, manufacture and/or use of any
AZ-004 Product in accordance with the Development Plan.
     “Balance Sheet Deficiency” has the meaning set forth in Section 1(c)(iii)
of the Purchase Option Agreement.
     “Balance Sheet Deficiency Date” has the meaning set forth in
Section 1(c)(iii) of the Purchase Option Agreement.
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

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     “Balance Sheet Deficiency Threshold” shall have the meaning set forth in
Section 2(b) of the Research Cost Sharing and Extension Agreement.
     “Bankruptcy Code” means the United States Bankruptcy Code.
     “Business Day” means any day other than Saturday, Sunday or any other day
on which commercial banks in the City of New York or the City of San Francisco
are authorized or required by law to remain closed.
     “Capital Contributions” has the meaning set forth in Section 1.01 of the
Holdings LLC Agreement.
     “Capitalized Leases” means all leases that have been or should be, in
accordance with GAAP, recorded as capitalized leases.
     “Cash Available for Distribution” has the meaning set forth in Section 1.01
of the Holdings LLC Agreement.
     “Chair” has the meaning set forth in Paragraph 4 of Annex B to the Amended
and Restated Research and Development Agreement.
     “Change of Control” means and includes the occurrence of any of the
following events, but specifically excludes (i) acquisitions of capital stock
directly from Alexza for cash, whether in a public or private offering,
(ii) sales of capital stock by stockholders of Alexza, and (iii) acquisitions of
capital stock by or from any employee benefit plan or related trust:
     (a) the merger, reorganization or consolidation of Alexza into or with
another corporation or legal entity in which Alexza’s stockholders holding the
right to vote with respect to matters generally immediately preceding such
merger, reorganization or consolidation, own less than fifty percent (50%) of
the voting securities of the surviving entity; or
     (b) the sale of all or substantially all of Alexza’s assets or business.
     “Change of Control Put Option” has the meaning set forth in Section 2A of
the Purchase Option Agreement.
     “Change of Control Put Option Exercise Notice” has the meaning set forth in
Section 2A of the Purchase Option Agreement.
     “Class A Member” means a holder of a Class A Membership Interest.
     “Class A Membership Interest” means a Class A Membership Interest in
Holdings.
     “Class B Member” means a holder of a Class B Membership Interest.
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

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     “Class B Membership Interest” means a Class B Membership Interest in
Holdings.
     “Class C Member” means a holder of a Class C Membership Interest.
     “Class C Membership Interest” means a Class C Membership Interest in
Holdings.
     “Class D Member” means a holder of a Class D Membership Interest.
     “Class D Membership Interest” means a Class D Membership Interest in
Holdings.
     “Client Schedules” has the meaning set forth in Section 5(b) of the RRD
Services Agreement.
     “Clinical Budget Component” has the meaning set forth in Section 4.1 of the
Amended and Restated Research and Development Agreement.
     “Clinical Trial Material” means Product and placebo for administration to
animals for pre-clinical testing or to humans for clinical testing.
     “Closing Date” means any time after the close of business in New York on
December 1, 2006.
     “CMC” means the chemistry, manufacturing and controls documentation as
required for filings with a Regulatory Authority relating to the manufacturing,
production and testing of drug products.
     “Code” means the Internal Revenue Code of 1986, as amended from time to
time.
     “Committed Capital” means $50,000,000.00.
     “Common Stock” means the common stock, par value $0.01 per share, of
Symphony Allegro.
     “Company Expenses” has the meaning set forth in Section 5.09 of the
Holdings LLC Agreement.
     “Company Property” has the meaning set forth in Section 1.01 of the
Holdings LLC Agreement.
     “Confidential Information” has the meaning set forth in Section 2 of the
Confidentiality Agreement.
     “Confidentiality Agreement” means the Confidentiality Agreement, dated as
of the Closing Date, among Symphony Allegro, Holdings, Alexza, SCP, SSP,
Investors, Symphony Capital and RRD, as such agreement may be amended or amended
and restated from time to time.
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

A-5

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     “Conflict Transaction” has the meaning set forth in Article X of the
Symphony Allegro Charter.
     “Control” means, with respect to any material, information or intellectual
property right, that a Party owns or has a license to such item or right, and
has the ability to grant the other Party access, a license or a sublicense (as
applicable) in or to such item or right as provided in the Operative Documents
without violating the terms of any agreement or other arrangement with any third
party.
     “Cross Program Expenses” are: (i) the Management Fee plus the Development
Fee pursuant to Section 6(a) of the RRD Services Agreement; (ii) actual expenses
associated with RRD carrying out its duties related to creating and maintaining
the books of account, records, financial statements and audit and tax
preparation for Symphony Allegro pursuant to Section 5 of the RRD Services
Agreement; and (iii) actual expenses for insurance procured for Symphony Allegro
pursuant to Section 1(a)(xi) of the RRD Services Agreement, reasonable legal
expenses incurred on behalf of Symphony Allegro, and travel and miscellaneous
out of pocket expenses of the Symphony Allegro Board, all as and to the extent
reimbursable to RRD pursuant to Section 6(b) of the RRD Services Agreement.
     “Current Products” has the meaning set forth in Section 5.1(g) of thef
Novated and Restated Technology License Agreement.
     “Debt” of any Person means, without duplication:
     (a) all indebtedness of such Person for borrowed money,
     (b) all obligations of such Person for the deferred purchase price of
property or services (other than any portion of any trade payable obligation
that shall not have remained unpaid for 91 days or more from the later of
(A) the original due date of such portion and (B) the customary payment date in
the industry and relevant market for such portion),
     (c) all obligations of such Person evidenced by bonds, notes, debentures or
other similar instruments,
     (d) all obligations of such Person created or arising under any conditional
sale or other title retention agreement with respect to property acquired by
such Person (whether or not the rights and remedies of the seller or lender
under such agreement in an event of default are limited to repossession or sale
of such property),
     (e) all Capitalized Leases to which such Person is a party,
     (f) all obligations, contingent or otherwise, of such Person under
acceptance, letter of credit or similar facilities,
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

A-6

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     (g) all obligations of such Person to purchase, redeem, retire, defease or
otherwise acquire for value any Equity Securities of such Person,
     (h) the net amount of all financial obligations of such Person in respect
of Hedge Agreements,
     (i) the net amount of all other financial obligations of such Person under
any contract or other agreement to which such Person is a party,
     (j) all Debt of other Persons of the type described in clauses (a) through
(i) above guaranteed, directly or indirectly, in any manner by such Person, or
in effect guaranteed, directly or indirectly, by such Person through an
agreement (A) to pay or purchase such Debt or to advance or supply funds for the
payment or purchase of such Debt, (B) to purchase, sell or lease (as lessee or
lessor) property, or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such Debt or to assure the holder of such
Debt against loss, (C) to supply funds to or in any other manner invest in the
debtor (including any agreement to pay for property or services irrespective of
whether such property is received or such services are rendered) or
(D) otherwise to assure a creditor against loss, and
     (k) all Debt of the type described in clauses (a) through (i) above secured
by (or for which the holder of such Debt has an existing right, contingent or
otherwise, to be secured by) any Encumbrance on property (including accounts and
contract rights) owned or held or used under lease or license by such Person,
even though such Person has not assumed or become liable for payment of such
Debt.
     “Development Budget” means the budget (comprised of the Management Budget
Component and the Clinical Budget Component) for the implementation of the
Development Plan (the initial form of which was agreed upon by Alexza and
Symphony Allegro as of the Closing Date and attached to the Amended and Restated
Research and Development Agreement as Annex C thereto), as may be further
developed and revised from time to time in accordance with the Development
Committee Charter and the Amended and Restated Research and Development
Agreement.
     “Development Committee” has the meaning set forth in Article 3 of the
Amended and Restated Research and Development Agreement.
     “Development Committee Charter” has the meaning set forth in Article 3 of
the Amended and Restated Research and Development Agreement.
     “Development Committee Member” has the meaning set forth in Paragraph 1 of
Annex B to the Amended and Restated Research and Development Agreement.
     “Development Plan” means the development plan covering all the Programs
(the initial form of which was agreed upon by Alexza and Symphony Allegro as of
the Closing Date and attached to the Amended and Restated Research and
Development Agreement as Annex C thereto), as may be further developed and
revised from time to
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

A-7

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time in accordance with the Development Committee Charter and the Amended and
Restated Research and Development Agreement.
     “Development Product” means an AZ-002 Product or an AZ-004 Product that is
administered in a clinical trial performed pursuant to the Development Plan.
     “Development Services” has the meaning set forth in Section 1(b) of the RRD
Services Agreement.
     “Development Subcontracting Agreement” means a Subcontracting Agreement
that is directly related to one or both of the Programs and is not a
Manufacturing Subcontracting Agreement.
     “Director(s)” means the Persons identified as such in the Preliminary
Statement of the Indemnification Agreement (including such Persons as may become
parties thereto after the date hereof).
     “Disclosing Party” has the meaning set forth in Section 4 of the
Confidentiality Agreement.
     “Discontinuation Option” has the meaning set forth in Section 11(a) of the
Amended and Restated Research and Development Agreement.
     “Discontinuation Option Closing Date” means the date of expiration of the
Discontinuation Option pursuant to Section 11(a) of the Amended and Restated
Research and Development Agreement.
     “Discontinuation Price” has the meaning set forth in Section 11(a) of the
Amended and Restated Research and Development Agreement.
     “Discontinued Program” has the meaning set forth in Section 2.10 of the
Novated and Restated Technology License Agreement.
     “Disinterested Directors” has the meaning set forth in Article IX of the
Symphony Allegro Charter.
     “Distribution” has the meaning set forth in Section 1.01 of the Holdings
LLC Agreement.
     “Drug Master Files” means all Regulatory Files with respect to the
manufacture or design of a Product, including without limitation drug master
files, design history files and similar files.
     “Early Purchase Option Exercise” has the meaning set forth in
Section 1(c)(v) of the Purchase Option Agreement.
     “Effective Registration Date” has the meaning set forth in Section 1(b) of
the Registration Rights Agreement.
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

A-8

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     “Encumbrance” means (i) any security interest, pledge, mortgage, lien
(statutory or other), charge or option to purchase, lease or otherwise acquire
any interest, (ii) any adverse claim, restriction, covenant, title defect,
hypothecation, assignment, deposit arrangement, license or other encumbrance of
any kind, preference or priority, or (iii) any other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement).
     “Equity Securities” means, with respect to any Person, shares of capital
stock of (or other ownership or profit interests in) such Person, warrants,
options or other rights for the purchase or other acquisition from such Person
of shares of capital stock of (or other ownership or profit interests in) such
Person, securities convertible into or exchangeable for shares of capital stock
of (or other ownership or profit interests in) such Person or warrants, rights
or options for the purchase or other acquisition from such Person of such shares
(or such other interests), and other ownership or profit interests in such
Person (including, without limitation, partnership, member or trust interests
therein), whether voting or nonvoting, and whether or not such shares, warrants,
options, rights or other interests are authorized or otherwise existing on any
date of determination.
     “ERISA” means the United States Employee Retirement Income Security Act of
1974, as amended.
     “Excepted Debt” has the meaning set forth in Section 5(c)(iii) of the
Purchase Option Agreement.
     “Exchange Act” means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
     “Existing Confidentiality Agreement” has the meaning set forth in
Section 2(a) of the Confidentiality Agreement.
     “Exiting Product” means, with respect to a particular Program, any
Development Product that was administered in a clinical trial pursuant to the
Development Plan at any time prior to (a) the termination of the Discontinuation
Option with respect to such Program without exercise by Licensor or (b) the
expiration or termination of the Purchase Option without exercise by Licensor,
whichever comes first.
     “Extension Funding” has the meaning set forth in Section 2 of the Research
Cost Sharing and Extension Agreement.
     “External Directors” means, at any time, up to two (2) Persons elected to
the Symphony Allegro Board after the Closing Date (who shall be neither
employees of Symphony Capital nor of Alexza) in accordance with the Symphony
Allegro Charter, the Symphony Allegro By-laws and Section 4(b)(iv) of the
Purchase Option Agreement.
     “FDA” means the United States Food and Drug Administration or its successor
agency in the United States.
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

A-9

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     “FDA Sponsor” has the meaning set forth in Section 5.1 of the Amended and
Restated Research and Development Agreement.
     “Final Termination Date” has the meaning set forth in Section 1(c)(iii) of
the Purchase Option Agreement.
     “Financial Audits” has the meaning set forth in Section 6.7 of the Amended
and Restated Research and Development Agreement.
     “Financing” has the meaning set forth in the Preliminary Statement of the
Purchase Option Agreement.
     “Fiscal Year” has the meaning set forth in each Operative Document in which
it appears.
     “Form S-3” means the Registration Statement on Form S-3 as defined under
the Securities Act.
     “FTE” means the time and effort of one or more qualified scientists working
on the AZ-002 Program or the AZ-004 Program that is equivalent to 1850 hours per
year devoted exclusively to the Programs by one (1) full-time employee. The
portion of an FTE year devoted by any one scientist to the Programs shall be
determined by dividing the number of hours during any twelve (12) month period
devoted by such scientist to one or both Programs by 1850 hours, not to exceed
1.0 in any case.
     “Funds Termination Date” has the meaning set forth in Section 1(c)(iii) of
the Purchase Option Agreement.
     “Funds Termination Notice” has the meaning set forth in Section 1(c)(iii)
of the Purchase Option Agreement.
     “GAAP” means generally accepted accounting principles in effect in the
United States of America from time to time.
     “Governmental Approvals” means authorizations, consents, orders,
declarations or approvals of, or filings with, or terminations or expirations of
waiting periods imposed by any Governmental Authority.
     “Governmental Authority” means any United States or non-United States
federal, national, supranational, state, provincial, local, or similar
government, governmental, regulatory or administrative authority, agency or
commission or any court, tribunal, or judicial or arbitral body.
     “Governmental Order” means any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority.
     “Hedge Agreement” means any interest rate swap, cap or collar agreement,
interest rate future or option contract, currency swap agreement, currency
future or option contract or other similar hedging agreement.
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

A-10

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     “Holdings” means Symphony Allegro Holdings LLC, a Delaware limited
liability company.
     “Holdings Claims” has the meaning set forth in Section 5.01 of the Warrant
Purchase Agreement.
     “Holdings LLC Agreement” means the Amended and Restated Limited Liability
Company Agreement of Holdings dated as of the Closing Date.
     “HSR Filings” means the pre-merger notification and report forms required
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
     “IND” means an Investigational New Drug Application, as described in 21
U.S.C. § 355(i)(1) and 21 C.F.R. § 312 in the regulations promulgated by the
United States Food and Drug Administration, or any foreign equivalent thereof.
     “Indemnification Agreement” means the Indemnification Agreement among
Symphony Allegro and the Directors named therein, dated as of the Closing Date,
as such agreement may be amended or amended and restated from time to time.
     “Indemnified Party” has the meaning set forth in each Operative Document in
which it appears.
     “Indemnified Proceeding” has the meaning set forth in each Operative
Document in which it appears.
     “Indemnifying Party” has the meaning set forth in each Operative Document
in which it appears.
     “IND-Enabling GLP Inhalation Toxicology Studies” means the pharmacokinetic
and toxicology studies required for filing an IND.
     “Initial Development Budget” means the initial development budget prepared
by representatives of Symphony Allegro and Alexza prior to the Closing Date, and
attached to the Amended and Restated Research and Development Agreement as Annex
C thereto.
     “Initial Development Plan” means the initial development plan prepared by
representatives of Symphony Allegro and Alexza prior to the Closing Date, and
attached to the Amended and Restated Research and Development Agreement as Annex
C thereto.
     “Initial Holdings LLC Agreement” means the Agreement of Limited Liability
Company of Holdings, dated October 24, 2006.
     “Initial Investors LLC Agreement” means the Agreement of Limited Liability
Company of Investors, dated October 24, 2006.
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

A-11

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     “Initial LLC Member” has the meaning set forth in Section 1.01 of the
Holdings LLC Agreement.
     “Interest Certificate” has the meaning set forth in Section 1.01 of the
Holdings LLC Agreement.
     “Investment Company Act” means the Investment Company Act of 1940, as
amended.
     “Investment Overview” means the investment overview describing the
transactions entered into pursuant to the Operative Documents.
     “Investment Policy” has the meaning set forth in Section 1(a)(vi) of the
RRD Services Agreement.
     “Investors” means Symphony Allegro Investors LLC.
     “Investors LLC Agreement” means the Amended and Restated Agreement of
Limited Liability Company of Investors dated as of the Closing Date.
     “IRS” means the U.S. Internal Revenue Service.
     “Key Personnel” means those Alexza Personnel listed on Schedule 6.5 to the
Amended and Restated Research and Development Agreement, as such schedule may be
updated from time to time by mutual agreement of the parties to the Amended and
Restated Research and Development Agreement.
     “Know-How” means findings, discoveries, inventions, know-how, information,
results and data of any type whatsoever, including without limitation, technical
information, techniques, results of experimentation and testing, diagnostic and
prognostic assays, specifications, databases, manufacturing processes or
protocols, any and all laboratory, research, pharmacological, toxicological,
analytical, quality control, pre-clinical and clinical data.
     “Knowledge” of Alexza, Symphony Allegro or Holdings, as the case may be,
means the actual (and not imputed) knowledge of the executive officers or
managing member of such Person without the duty of inquiry or investigation.
     “Law” means any law, statute, treaty, constitution, regulation, rule,
ordinance, order or Governmental Approval, or other governmental restriction,
requirement or determination, of or by any Governmental Authority.
     “License” has the meaning set forth in the Preliminary Statement of the
Purchase Option Agreement.
     “Licensed Intellectual Property” means the Licensed Patent Rights and the
Licensed Know-How.
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

A-12

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     “Licensed Know-How” means any and all Know-How that is Controlled by
Licensor on or after the Closing Date and prior to the unexercised expiration or
termination of the Purchase Option that:
     (a) is necessary or useful to practice the inventions claimed in the
Licensed Patent Rights; or
     (b) is a Symphony Allegro Enhancement;
     provided, however, that Licensed Know-How shall not include any Licensed
Patent Rights or any Know-How for the manufacture of a Product, including
Know-How associated with Product quality control or stability testing.
     “Licensed Patent Rights” means any and all patents and patent applications
Controlled by Licensor that:
     (a) are listed on Annex D of the Novated and Restated Technology License
Agreement;
     (b) are reissues, continuations, divisionals, continuations-in-part,
reexaminations, renewals, substitutes, extensions or foreign counterparts of the
patents and patent applications described in (a) and (i) are filed prior to the
unexercised expiration or termination of the Purchase Option or (ii) are filed
after such expiration or termination, but solely to the extent claiming Know-How
conceived and reduced to practice prior to such expiration or termination;
     (c) contain a claim that covers an invention disclosed in an invention
disclosure listed on Annex D of the Novated and Restated Technology License
Agreement and (i) are filed prior to the unexercised expiration or termination
of the Purchase Option or (ii) are filed after such expiration or termination,
but solely to the extent claiming such invention;
     (d) contain a claim that covers a Symphony Allegro Enhancement and (i) are
filed prior to the unexercised expiration or termination of the Purchase Option
or (ii) are filed after such expiration or termination, but solely to the extent
claiming such Symphony Allegro Enhancement; or
     (e) contain a claim that covers a Development Product or the manufacture or
use thereof and (i) are filed prior to the unexercised expiration or termination
of the Purchase Option or (ii) are filed after such expiration or termination,
but solely to the extent claiming Development Product-related Know-How conceived
and reduced to practice prior to such expiration or termination.
     “Licensor” means Alexza.
     “Lien” has the meaning set forth in Section 1.01 of the Holdings LLC
Agreement.
     “Liquidating Event” has the meaning set forth in Section 8.01 of the
Holdings LLC Agreement.
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

A-13

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     “LLC Agreements” means the Initial Holdings LLC Agreement, the Holdings LLC
Agreement, the Initial Investors LLC Agreement and the Investors LLC Agreement.
     “Loss” has the meaning set forth in each Operative Document in which it
appears.
     “Loxapine” means: (a) loxapine and (b) all salts, metabolites, prodrug and
other physical forms thereof.
     “Management Fee” has the meaning set forth in Section 6(a) of the RRD
Services Agreement.
     “Management Services” has the meaning set forth in Section 1(a) of the RRD
Services Agreement.
     “Manager” means (i) for each LLC Agreement in which it appears, the meaning
set forth in such LLC Agreement, and (ii) for each other Operative Document in
which it appears, RRD in its capacity as manager of Symphony Allegro.
     “Manager Event” has the meaning set forth in Section 3.01(g) of the
Holdings LLC Agreement.
     “Manufacturing Subcontracting Agreement” means a Subcontracting Agreement
that is directly related to the manufacture of Product (including procurement of
components and development of improved manufacturing methods) or the improvement
of the Staccato Technology.
     “Material Adverse Effect” means, with respect to any Person, a material
adverse effect on (i) the business, assets, property or condition (financial or
otherwise) of such Person or, (ii) its ability to comply with and satisfy its
respective agreements and obligations under the Operative Documents or,
(iii) the enforceability of the obligations of such Person of any of the
Operative Documents to which it is a party.
     “Material Subsidiary” means, at any time, a Subsidiary of Alexza having
assets in an amount equal to at least 5% of the amount of total consolidated
assets of Alexza and its Subsidiaries (determined as of the last day of the most
recent reported fiscal quarter of Alexza) or revenues or net income in an amount
equal to at least 5% of the amount of total consolidated revenues or net income
of Alexza and its Subsidiaries for the 12-month period ending on the last day of
the most recent reported fiscal quarter of Alexza.
     “Medical Discontinuation Event” means a series of adverse events, side
effects or other undesirable outcomes that, when collected in a Program, would
cause a reasonable FDA Sponsor to discontinue such Program.
     “Membership Interest” means (i) for each LLC Agreement in which it appears,
the meaning set forth in such LLC Agreement, and (ii) for each other Operative
Document in which it appears, the meaning set forth in the Holdings LLC
Agreement.
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

A-14

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     “NASDAQ” means the Nasdaq Stock Market, Inc.
     “NDA” means a New Drug Application, as defined in the regulations
promulgated by the United States Food and Drug Administration, or any foreign
equivalent thereof.
     “Non-Alexza Capital Transaction” means any (i) sale or other disposition of
all or part of the Symphony Allegro Shares or all or substantially all of the
operating assets of Symphony Allegro, to a Person other than Alexza or an
Affiliate of Alexza or (ii) distribution in kind of the Symphony Allegro Shares
following the unexercised expiration or termination of the Purchase Option.
     “Novated and Restated Technology License Agreement” means the Novated and
Restated Technology License Agreement, dated as of the Closing Date, among
Alexza, Symphony Allegro and Holdings.
     “Operative Documents” means, collectively, the Indemnification Agreement,
the Holdings LLC Agreement, the Purchase Option Agreement, the Warrant Purchase
Agreement, the Registration Rights Agreement, the Subscription Agreement, the
Technology License Agreement, the Novated and Restated Technology License
Agreement, the RRD Services Agreement, the Research and Development Agreement,
the Research Cost Sharing and Extension Agreement, the Amended and Restated
Research and Development Agreement, the Confidentiality Agreement, and each
other certificate and agreement executed in connection with any of the foregoing
documents.
     “Organizational Documents” means any certificates or articles of
incorporation or formation, partnership agreements, trust instruments, bylaws or
other governing documents.
     “Partial Stock Payment” has the meaning set forth in Section 3(a)(iii) of
the Purchase Option Agreement.
     “Party(ies)” means, for each Operative Document or other agreement in which
it appears, the parties to such Operative Document or other agreement, as set
forth therein. With respect to any agreement in which a provision is included
therein by reference to a provision in another agreement, the term “Party” shall
be read to refer to the parties to the document at hand, not the agreement that
is referenced.
     “Payment Terms” has the meaning set forth in Section 8.2 of the Amended and
Restated Research and Development Agreement.
     “Percentage” has the meaning set forth in Section 1.01 of the Holdings LLC
Agreement.
     “Permitted Investments” has the meaning set forth in Section 1.01 of the
Holdings LLC Agreement.
     “Permitted Lien” has the meaning set forth in Section 1.01 of the Holdings
LLC Agreement.
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

A-15

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     “Person” means any individual, partnership (whether general or limited),
limited liability company, corporation, trust, estate, association, nominee or
other entity.
     “Personnel” of a Party means such Party, its employees, subcontractors,
consultants, representatives and agents.
     “Prime Rate” means the quoted “Prime Rate” at JPMorgan Chase Bank or, if
such bank ceases to exist or is not quoting a base rate, prime rate reference
rate or similar rate for United States dollar loans, such other major money
center commercial bank in New York City selected by the Manager.
     “Products” means an AZ-002 Product and/or an AZ-004 Product.
     “Profit” has the meaning set forth in Section 1.01 of the Holdings LLC
Agreement.
     “Programs” means the AZ-002 Program and/or the AZ-004 Program.
     “Program-Specific Claim” means any claim in a patent or patent application
in the Licensed Patent Rights that is directed exclusively to AZ-002 Products
and/or AZ-004 Products.
     “Program-Specific Patents” means any and all Licensed Patent Rights that
contain at least one Program-Specific Claim.
     “Protocol” means a written protocol that meets the substantive requirements
of Section 6 of the ICH Guideline for Good Clinical Practice as adopted by the
FDA, effective May 9, 1997, and is included within the Development Plan or later
modified or added to the Development Plan pursuant to the Amended and Restated
Research and Development Agreement.
     “Public Companies” has the meaning set forth in Section 5(e) of the
Purchase Option Agreement.
     “Purchase Option” has the meaning set forth in Section 1(a) of the Purchase
Option Agreement.
     “Purchase Option Agreement” means the Purchase Option Agreement dated as of
the Closing Date, among Alexza, Holdings and Symphony Allegro.
     “Purchase Option Closing” has the meaning set forth in Section 2(a) of the
Purchase Option Agreement.
     “Purchase Option Closing Date” has the meaning set forth in Section 2(a) of
the Purchase Option Agreement.
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

A-16

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     “Purchase Option Commencement Date” has the meaning set forth in Section
1(c)(iii) of the Purchase Option Agreement.
     “Purchase Option Exercise Date” has the meaning set forth in Section 2(a)
of the Purchase Option Agreement.
     “Purchase Option Exercise Notice” has the meaning set forth in Section 2(a)
of the Purchase Option Agreement.
     “Purchase Option Offset Amount” shall mean, following the termination of
the Amended and Restated Research and Development Agreement by Alexza pursuant
to Section 17.3 thereof, those unpaid amounts actually owed to Alexza as a
result of the material breach or default of any payment obligation of Symphony
Allegro to Alexza pursuant to the Amended and Restated Research and Development
Agreement by Symphony Allegro or Holdings that was the basis for such
termination of the Amended and Restated Research and Development Agreement by
Alexza.
     “Purchase Option Period” has the meaning set forth in Section 1(c)(iii) of
the Purchase Option Agreement.
     “Purchase Price” has the meaning set forth in Section 2(b) of the Purchase
Option Agreement.
     “QA Audits” has the meaning set forth in Section 6.6 of the Amended and
Restated Research and Development Agreement.
     “Quarterly Price” has the meaning set forth in Section 2(b)(i) of the
Purchase Option Agreement.
     “Registration Rights Agreement” means the Registration Rights Agreement
dated as of the Closing Date, between Alexza and Holdings.
     “Registration Statement” has the meaning set forth in Section 1(b) of the
Registration Rights Agreement.
     “Regulatory Allocation” has the meaning set forth in Section 3.06 of the
Holdings LLC Agreement.
     “Regulatory Authority” means the United States Food and Drug
Administration, or any successor agency in the United States, or any health
regulatory authority(ies) in any other country that is a counterpart to the FDA
and has responsibility for granting registrations or other regulatory approval
for the marketing, manufacture, storage, sale or use of drugs in such other
country.
     “Regulatory Files” means any IND, NDA or any other filings filed with any
Regulatory Authority with respect to the Programs.
     “Representative” of any Person means such Person’s shareholders,
principals, directors, officers, employees, members, managers and/or partners.
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

A-17

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     “Research Cost Sharing and Extension Agreement” means the Research Cost
Sharing and Extension Agreement dated as of the Closing Date, among Alexza,
Holdings and Symphony Allegro.
     “Research and Development Agreement” means the Research and Development
Agreement dated as of the Closing Date, between Alexza and Holdings.
     “RRD” means RRD International, LLC, a Delaware limited liability company.
     “RRD Indemnified Party” has the meaning set forth in Section 10(a) of the
RRD Services Agreement.
     “RRD Loss” has the meaning set forth in Section 10(a) of the RRD Services
Agreement.
     “RRD Personnel” has the meaning set forth in Section 1(a)(ii) of the RRD
Services Agreement.
     “RRD Services Agreement” means the RRD Services Agreement between Symphony
Allegro and RRD, dated as of the Closing Date.
     “Schedule K-1” has the meaning set forth in Section 9.02(a) of the Holdings
LLC Agreement.
     “Scheduled Meeting” has the meaning set forth in Paragraph 6 of Annex B of
the Amended and Restated Research and Development Agreement.
     “Scientific Discontinuation Event” has the meaning set forth in
Section 4.2(c) of the Amended and Restated Research and Development Agreement.
     “SCP” means Symphony Capital Partners, L.P., a Delaware limited
partnership.
     “SEC” means the United States Securities and Exchange Commission.
     “Securities Act” means the Securities Act of 1933, as amended.
     “Selling Stockholder Questionnaire” has the meaning set forth in
Section 4(a) of the Registration Rights Agreement.
     “Shareholder” means any Person who owns any Symphony Allegro Shares.
     “Solvent” has the meaning set forth in Section 1.01 of the Holdings LLC
Agreement.
     “SSP” means Symphony Strategic Partners, LLC, a Delaware limited liability
company.
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

A-18

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     “Staccato Technology” means Alexza’s proprietary technology for the
vaporization of a pharmaceutical composition via rapid-heating to form a
condensation aerosol that allows rapid systemic drug delivery to humans through
lung inhalation.
     “Stock Payment Date” has the meaning set forth in Section 2 of the
Subscription Agreement.
     “Stock Purchase Price” has the meaning set forth in Section 2 of the
Subscription Agreement.
     “Subcontracting Agreement” means (a) any written agreement between Alexza
and a third party pursuant to which the third party performs any Alexza
Obligations or (b) any work order, change order, purchase order or the like
entered into pursuant to Section 6.2(b) of the Amended and Restated Research and
Development Agreement.
     “Sublicense Obligations” has the meaning set forth in Section 3.2 of the
Novated and Restated Technology License Agreement.
     “Sublicensed Intellectual Property” has the meaning set forth in
Section 3.2 of the Novated and Restated Technology License Agreement.
     “Subscription Agreement” means the Subscription Agreement between Symphony
Allegro and Holdings, dated as the Closing Date.
     “Subsidiary” of any Person means any corporation, partnership, joint
venture, limited liability company, trust or estate of which (or in which) more
than 50% of (a) the issued and outstanding capital stock having ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether at the time capital stock of any other class or classes
of such corporation shall or might have voting power upon the occurrence of any
contingency); (b) the interest in the capital or profits of such partnership,
joint venture or limited liability company; or (c) the beneficial interest in
such trust or estate is at the time directly or indirectly owned or controlled
by such Person, by such Person and one or more of its other Subsidiaries or by
one or more of such Person’s other Subsidiaries.
     “Surviving Entity” means the surviving legal entity which is surviving
entity to Alexza after giving effect to a Change of Control.
     “Symphony Allegro” means Symphony Allegro, Inc., a Delaware corporation.
     “Symphony Allegro Auditors” has the meaning set forth in Section 5(b) of
the RRD Services Agreement.
     “Symphony Allegro Board” means the board of directors of Symphony Allegro.
     “Symphony Allegro By-laws” means the By-laws of Symphony Allegro, as
adopted by resolution of the Symphony Allegro Board on the Closing Date.
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

A-19

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     “Symphony Allegro Charter” means the Amended and Restated Certificate of
Incorporation of Symphony Allegro, dated as of the Closing Date.
     “Symphony Allegro Director Event” has the meaning set forth in Section
3.01(h)(i) of the Holdings LLC Agreement.
     “Symphony Allegro Enhancements” means any and all Know-How, whether or not
patentable, that is made by or on behalf of Symphony Allegro during the Term,
including Know-How generated or derived by RRD and assigned to Symphony Allegro
pursuant to Section 12 of the RRD Services Agreement.
     “Symphony Allegro Equity Securities” means the Common Stock and any other
stock or shares issued by Symphony Allegro.
     “Symphony Allegro Loss” has the meaning set forth in Section 10(b) of the
RRD Services Agreement.
     “Symphony Allegro Shares” has the meaning set forth in Section 2.02 of the
Holdings LLC Agreement.
     “Symphony Capital” means Symphony Capital LLC, a Delaware limited liability
company.
     “Symphony Fund(s)” means Symphony Capital Partners, L.P., a Delaware
limited partnership, and Symphony Strategic Partners, LLC, a Delaware limited
liability company.
     “Tangible Materials” means any tangible technical, medical, regulatory or
marketing documentation, whether written or electronic, existing as of the
Closing Date or made by or on behalf of Symphony Allegro during the Term, that
(a) is Controlled by the Licensor and (b) embodies or relates solely to the
Regulatory Files (other than Drug Master Files), Exiting Products or the
Programs; provided, however, that Tangible Materials shall not include any
manufacturing-related documentation or any documentation related to Licensed
Intellectual Property.
     “Tax Amount” has the meaning set forth in Section 4.02 of the Holdings LLC
Agreement.
     “Technology License Agreement” means the Technology License Agreement,
dated as of the Closing Date, between Alexza and Holdings.
     “Term” has the meaning set forth in Section 4(b)(iii) of the Purchase
Option Agreement, unless otherwise stated in any Operative Document.
     “Territory” means the world.
     “Third Party IP” has the meaning set forth in Section 2.9 of the Novated
and Restated Technology License Agreement.
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

A-20

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     “Third Party Licensor” means a third party from which Alexza has received a
license or sublicense to Licensed Intellectual Property.
     “Transaction Event” has the meaning set forth in Section 6.05 of the
Warrant Purchase Agreement.
     “Transfer” has for each Operative Document in which it appears the meaning
set forth in such Operative Document.
     “Transferee” has, for each Operative Document in which it appears, the
meaning set forth in such Operative Document.
     “Voluntary Bankruptcy” has the meaning set forth in Section 1.01 of the
Holdings LLC Agreement.
     “Warrant Closing” has the meaning set forth in Section 2.03 of the Warrant
Purchase Agreement.
     “Warrant Date” has the meaning set forth in Section 2.02 of the Warrant
Purchase Agreement.
     “Warrant Purchase Agreement” means the Warrant Purchase Agreement, dated as
of the Closing Date, between Alexza and Holdings.
     “Warrant Shares” has the meaning set forth in Section 2.01 of the Warrant
Purchase Agreement.
     “Warrant Surrender Price” has the meaning set forth in Section 7.08 of the
Warrant Purchase Agreement.
     “Warrants” has the meaning set forth in Section 2.01 of the Warrant
Purchase Agreement.
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

A-21

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EXHIBIT 1
PURCHASE OPTION EXERCISE NOTICE
                    , 20  
Attention:                     
Ladies and Gentlemen:
     Reference is hereby made to that certain Purchase Option Agreement dated as
of December 1, 2006 (the “Purchase Option Agreement”), by and among Alexza
Pharmaceuticals, Inc., a Delaware corporation (“Alexza”), Symphony Allegro
Holdings LLC, a Delaware limited liability company, and Symphony Allegro, Inc.,
a Delaware corporation. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned thereto in the Purchase Option
Agreement.
     Pursuant to Section 2(a) of the Purchase Option Agreement, Alexza hereby
irrevocably notifies you that it hereby exercises the Purchase Option.
     Subject to the terms set forth therein, Alexza hereby affirms the
representations and warranties set forth in Section 3(a) of the Purchase Option
Agreement, as of the date hereof.
     Alexza estimates that the Purchase Option Closing Date will be
                    .
     The Purchase Price will be $                    , subject to adjustment if
the Purchase Option Closing Date occurs later than the estimated date set forth
above.
     {Alexza intends to pay                     % of the Purchase Price in
Alexza Common Stock. The number of shares to be transferred at such Purchase
Price will be                     , based on a per share valuation of
$                    . This represents                     % of the total amount
of Alexza Common Stock issued and outstanding as of the Purchase Option Closing
Date.}

                  Very truly yours,
 
                ALEXZA PHARMACEUTICALS, INC.
 
  By:                  
 
      Name:   {August J. Moretti}
 
      Title:   {Senior Vice President and Chief Financial Officer}

 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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EXHIBIT 2
FORM OF OPINION OF COOLEY GODWARD KRONISH LLP
{See attached.}
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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December 1, 2006
Symphony Allegro Holdings LLC
7361 Calhoun Place, Suite 325
Rockville, MD 20855
Dear Ladies and Gentlemen:
We have acted as counsel for Alexza Pharmaceuticals, Inc., a Delaware
corporation (the “Company”), in connection with the financing of certain of the
Company’s research and development programs (the "Financing”). In connection
with the Financing, the Company is entering into the agreements listed on
Schedule I hereto (collectively, the “Transaction Agreements”). We are rendering
this opinion pursuant to Section 3.02(d) of the Warrant Purchase Agreement.
In connection with this opinion, we have examined and relied upon the
representations and warranties as to factual matters contained in and made
pursuant to the Transaction Agreements by the various parties and originals, or
copies certified to our satisfaction, of such records, documents, certificates,
opinions, memoranda and other instruments as in our judgment are necessary or
appropriate to enable us to render the opinion expressed below.
As to certain factual matters, we have relied upon certificates of officers of
the Company and have not sought to independently verify such matters. Where we
render an opinion “to our knowledge” or concerning an item “known to us” or our
opinion otherwise refers to our knowledge, it is based solely upon (i) an
inquiry of attorneys within this firm who have represented the Company in this
transaction, (ii) receipt of a certificate executed by an officer of the Company
covering such matters and (iii) such other investigation, if any, that we
specifically set forth herein.
In rendering this opinion, we have assumed: the authenticity of all documents
submitted to us as originals; the conformity to originals of all documents
submitted to us as copies; the accuracy, completeness and authenticity of
certificates of public officials; the due authorization, execution and delivery
of all documents (except the due authorization, execution and delivery by the
Company of the Transaction Agreements), where authorization, execution and
delivery are prerequisites to the effectiveness of such documents; and the
genuineness and authenticity of all signatures on original documents (except the
signatures on behalf of the Company on the Transaction Agreements). We have also
assumed: that all individuals executing and delivering documents had the legal
capacity to so execute and deliver; that the Transaction Agreements are
obligations binding upon the parties thereto other than the Company; that the
parties to the Transaction Agreements other than the Company have filed any
required California franchise or income tax returns and have paid any required
California franchise or income taxes; and that there are no extrinsic agreements
or understandings among the parties to the Transaction Agreements or to the
Material Agreements (as defined below) that would modify or interpret the terms
of any such agreements or the respective rights or obligations of the parties
thereunder.
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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Our opinion is expressed only with respect to the federal laws of the United
States of America, the laws of the State of California, the laws of the State of
New York and the General Corporation Law of the State of Delaware. We express no
opinion as to whether the laws of any particular jurisdiction apply, and no
opinion to the extent that the laws of any jurisdiction other than those
identified above are applicable to the subject matter hereof.
We are not rendering any opinion as to any statute, rule, regulation, ordinance,
decree or decisional law relating to antitrust, banking, land use,
environmental, pension, employee benefit, tax, usury, laws governing the
legality of investments for regulated entities, regulations T, U or X of the
Board of Governors of the Federal Reserve System or local law. Furthermore, we
express no opinion with respect to compliance with antifraud laws, rules or
regulations relating to securities or the offer and sale thereof; compliance
with fiduciary duties by the Company’s Board of Directors or stockholders;
compliance with safe harbors for disinterested Board of Director or stockholder
approvals; compliance with state securities or blue sky laws except as
specifically set forth below; or compliance with laws that place limitations on
corporate distributions.
With regard to our opinion in paragraph 1 below, we have relied solely upon a
certificate of the Secretary of State of the State of Delaware as of a recent
date.
With regard to our opinion in paragraph 3 below, with respect to the due and
valid authorization of each of the Transaction Documents, we have relied solely
upon (i) a certificate of an officer of the Company, (ii) a review of the
certificate of incorporation and bylaws of the Company, (iii) a review of the
resolutions certified by an officer of the Company, (iv) and a review of the
Delaware General Corporation Law.
With regard to our opinion paragraph 4 below concerning material defaults under
and any material breaches of any agreement identified on Schedule II hereto, we
have relied solely upon (i) a certificate of an officer of the Company, (ii) a
list supplied to us by the Company of material agreements to which the Company
is a party, or by which it is bound, a copy of which is attached hereto as
Schedule II (the “Material Agreements”) and (iii) an examination of the Material
Agreements in the form provided to us by the Company. We have made no further
investigation. Further, with regard to our opinion in paragraph 4 below
concerning Material Agreements, we express no opinion as to (i) financial
covenants or similar provisions therein requiring financial calculations or
determinations to ascertain compliance, (ii) provisions therein relating to the
occurrence of a “material adverse event” or words of similar import or (iii) any
statement or writing that may constitute parol evidence bearing on
interpretation or construction.
With regard to our opinion in paragraph 7 below, we express no opinion to the
extent that, notwithstanding its current reservation of shares of Common Stock,
future issuances of securities of the Company and/or antidilution adjustments to
outstanding securities of the Company may cause the Warrant Shares (as defined
in the Warrant Purchase Agreement)or the Alexza Common Stock (as defined in the
Purchase Option Agreement) to exceed the number of shares of Common Stock that
then remain authorized but unissued.
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

--------------------------------------------------------------------------------

 

With regard to our opinion in paragraph 8 concerning exemption from
registration, our opinion is expressed only with respect to the offer and sale
of the Warrant or the Warrant Shares without regard to any offers or sales of
securities occurring prior to or subsequent to the date hereof.
With regard to our opinion in paragraph 9 below, we have based our opinion, to
the extent we consider appropriate, on Rule 3a-8 under the Investment Company
Act of 1940, as amended, and a certificate of an officer of the Company as to
compliance with each of the requirements necessary to comply with Rule 3a-8. We
have conducted no further investigation.
On the basis of the foregoing, in reliance thereon and with the foregoing
qualifications, we are of the opinion that:

1.   The Company has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of Delaware.

2.   The Company has the corporate power to execute, deliver and perform its
obligations under the Transaction Agreements.

3.   Each of the Transaction Agreements has been duly and validly authorized,
executed and delivered by the Company. The offer and sale of the Warrant (as
defined in the Warrant Purchase Agreement) has been duly authorized by the
Company.

4.   The execution and delivery of the Transaction Agreements by the Company and
the issuance of the Warrant pursuant thereto and the Warrant Shares assuming the
exercise of the Warrant on the date hereof, will not, (a) violate any provision
of the Company’s certificate of incorporation or by-laws, (b) violate any
governmental statute, rule or regulation which in our experience is typically
applicable to transactions of the nature contemplated by the Transaction
Agreements, (c) violate any order, writ, judgment, injunction, decree,
determination or award which has been entered against the Company and of which
we are aware or (d) constitute a material default under or a material breach of
any Material Agreement, in the case of clauses (c) and (d) to the extent such
default or breach would materially and adversely affect the Company.

5.   All consents, approvals, authorizations or orders of, and filings,
registrations and qualifications with any U.S. Federal or California regulatory
authority or governmental body required for the due execution or delivery by the
Company of any Transaction Agreement and the sale and issuance of the Warrant
have been made or obtained, except (a) for the filing of a Form D pursuant to
Securities and Exchange Commission Regulation D and (b) for the filing of the
notice to be filed under California Corporations Code Section 25102.1(d).

6.   Each of the Transaction Agreements constitutes a valid and binding
agreement of the Company, enforceable against the Company in accordance with its
respective terms.

7.   The Warrant Shares (as defined in the Warrant Purchase Agreement) and, the
Alexza Common Stock (as defined in the Purchase Option Agreement), when sold and
issued in accordance with the terms of the Warrant or the Purchase Option
Agreement, as

 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

--------------------------------------------------------------------------------

 

    applicable, will be validly issued, fully paid and non-assessable, and the
issuance of the Warrant Shares is not be subject to preemptive rights pursuant
to the General Corporation Law of the State of Delaware, the certificate of
incorporation or by-laws of the Company or similar rights to subscribe pursuant
to any Material Agreement.

8.   The offer and sale of the Warrant and Warrant Shares (assuming exercise of
the Warrant on the date hereof) are exempt from the registration requirements of
the Securities Act of 1933, as amended, subject to the timely filing of a Form D
pursuant to Securities and Exchange Commission Regulation D.

9.   The Company is not an “investment company” as defined in the Investment
Company Act of 1940, as amended.

Our opinion in paragraph 6 above is specifically subject to the following
limitations, exceptions, qualifications and assumptions:
     A. The opinions expressed above are subject to, and may be limited by,
applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent
conveyance, debtor and creditor, and similar laws which relate to or affect
creditors’ rights generally. This opinion is also subject to, and may be limited
by, general principles of equity and the exercise of judicial discretion
(regardless of whether such validity or enforceability is considered in a
proceeding in equity or at law), including the possible unavailability of
specific performance, injunctive relief or any other equitable remedy and
concepts of materiality, reasonableness, conscionability, good faith and fair
dealing.
     B. We express no opinion as to the effect of court decisions, invoking
statutes or principles of equity, which have held that certain covenants and
provisions of agreements are unenforceable where enforcement of such covenants
or provisions under the circumstances would violate the enforcing party’s
implied covenant of good faith and fair dealing or would be limited by the
principles of course of dealing or course of performance.
     C. We express no opinion as to the effect of any federal or state law or
equitable principle which provides that a court may refuse to enforce, or may
limit the application of, a contract or any clause thereof that the courts find
to be unconscionable at the time it was made or contrary to public policy.
     D. We express no opinion as to the enforceability under certain
circumstances of provisions expressly or by implication waiving broadly or
vaguely stated rights, unknown future rights including without limitation rights
to damages, or defenses to obligations or rights granted by law, when such
waivers are against public policy or prohibited by law.
     E. We express no opinion as to the enforceability under certain
circumstances of provisions to the effect that rights or remedies are not
exclusive, that rights or remedies may be exercised without notice, that every
right or remedy is cumulative and may be exercised in addition to or with any
other right or remedy, that election of a particular remedy or remedies does not
preclude recourse to one or more remedies, or that failure to exercise or delay
in exercising rights or remedies will not operate as a waiver of any such right
or remedy.
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

--------------------------------------------------------------------------------

 

     F. We express no opinion as to the enforceability of any provision of an
applicable agreement requiring that waivers must be in writing; such provision
may not be binding or enforceable if a non-executory oral agreement has been
created modifying any such provision or if an implied agreement by trade
practice or course of conduct has given rise to a waiver.
     G. We express no opinion as to the enforceability of the following rights
and remedies which may be limited by applicable law: (i) any provision which
provides for a rate of interest which exceeds that permissible under applicable
law; (ii) any provision which purports to affect the jurisdiction of a court
(including provisions as to methods of service of process and as to property
which may be subject to such jurisdiction) or may be subject to the discretion
of a court (including provisions as to venue); (iii) any provision which
purports to make available remedies for violations, breaches or defaults that
are determined by a court of competent jurisdiction to be non-material or
unreasonable; (iv) any provision which provides for a choice of law or choice of
forum; (v) any provision relating to contribution to or the indemnification or
exculpation of any party; and (vi) any provision that contains a waiver of the
benefits of statutory, regulatory, or constitutional rights, unless and to the
extent the statute, regulation, or constitution explicitly allows waiver,
including without limitation, any provision which purports to waive trial by
jury.
     H. We express no opinion with respect to the following: (i) any document
referenced in the Transaction Agreements that is not a Transaction Agreement;
and (ii) the enforceability of the Transaction Agreements by or against any
person or entity that is not a party thereto.
     I. We express no opinion as to the enforceability of any provision for
penalties, liquidated damages, acceleration of future amounts due (other than
principal) without appropriate discount to present value, late charges,
prepayment charges, or increased interest rates upon default.
     J. We express no opinion as the enforceability of any provision stating
that the provisions of a contract are severable.
     K. We express no opinion as to the enforceability of any provision that
would permit the other party to require performance without requiring
consideration of the impracticability or impossibility of performance at the
time of attempted enforcement due to unforeseen circumstances not within the
contemplation of the parties.
     L. We express no opinion as to the enforceability of any provision which
purports to assign, grant a lien upon or security interest in or to any
contract, right, agreement or other property right or the proceeds thereof
(other than assignments or security interests in accounts, general intangibles,
chattel paper or promissory notes to the extent provided by Sections 9-406(d),
9-407 and 9-408 of the New York Uniform Commercial Code), which by its terms or
under applicable law, rule or regulation is not so assignable or under which the
grant of such a lien or security interest is prohibited.
     M. We express no opinion as to the Company’s rights in the technology which
is the subject of the Technology License Agreement, the Novated and Restated
Technology License Agreement, the Research and Development Agreement, or the
Amended and Restated Research
 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

--------------------------------------------------------------------------------

 

and Development Agreement (collectively, the “Technology Agreements”). We
further express no opinion to the extent that portions of the Technology
Agreements may be deemed to be agreements to agree, or as to the future
interpretation of these agreements.
     This opinion is intended solely for your benefit and is not to be made
available to or be relied upon by any other person, firm, or entity without our
prior written consent.

          Sincerely,    
 
        Cooley Godward Kronish LLP    
 
       
By:
       
 
 
 
Barbara A. Kosacz    

 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

--------------------------------------------------------------------------------

 

Schedule I
List of Transaction Agreements

1.   Warrant Purchase Agreement, dated as of December 1, 2006 between the
Company and Symphony Allegro Holdings LLC (the “Warrant Purchase Agreement”).

2.   Warrant to purchase 2,000,000 shares of common stock of the Company, dated
as of December 1, 2006 (the “Warrant”).

3.   Purchase Option Agreement, dated as of December 1, 2006, by and among the
Company, Symphony Allegro Holdings LLC and Symphony Allegro, Inc. (the “Purchase
Option Agreement”).

4.   Research and Development Agreement, dated as of December 1, 2006, by and
among the Company, Symphony Allegro Holdings LLC and Symphony Allegro, Inc. (the
“Research and Development Agreement”).

5.   Amended & Restated Research and Development Agreement, dated as of
December 1, 2006, between the Company and Symphony Allegro Holdings LLC (the
“Amended & Restated Research and Development Agreement”).

6.   Technology License Agreement, dated as of December 1, 2006 between the
Company and Symphony Allegro Holdings LLC (the “Technology License Agreement”).

7.   Novated and Restated Technology License Agreement, dated as of December 1,
2006, by and among the Company, Symphony Allegro, Inc. and Symphony Allegro
Holdings LLC (the “Novated and Restated Technology License Agreement”).

8.   Confidentiality Agreement, dated as of December 1, 2006, by and among the
Company, Symphony Allegro Holdings LLC, Symphony Allegro, Inc., Symphony Capital
Partners, L.P., Symphony Strategic Partners, LLC, Symphony Allegro Investors
LLC, Symphony Capital LLC and RRD International, LLC (the “Confidentiality
Agreement”).

9.   Registration Rights Agreement, dated as of December 1, 2006, between the
Company and Symphony Allegro Holdings LLC (the “Registration Rights Agreement”).

10.   Research Cost Sharing and Extension Agreement, dated as of December 1,
2006, by and among the Company, Symphony Allegro Holdings LLC and Symphony
Allegro, Inc. (the “Cost Sharing Agreement”)

 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

--------------------------------------------------------------------------------

 

SCHEDULE II
LIST OF MATERIAL AGREEMENTS

1.   Lease between the Company and Brittania, LLC dated August 25, 2006.   2.  
2006 Performance Bonus Program.   3.   Second Amended and Restated Investors’
Rights Agreement between the Company and certain holders of Preferred Stock
dated November 5, 2004.   4.   2005 Equity Incentive Plan.   5.   2005
Non-Employee Directors’ Stock Option Plan.   6.   2005 Employee Stock Purchase
Plan.   7.   Lease between the Company and California Pacific Commercial
Corporation dated March 20, 2002.   8.   First Amendment to Lease between the
Company and California Pacific Commercial Corporation dated May 8, 2003.   9.  
Second Amendment to Lease between the Company and California Pacific Commercial
Corporation dated February 11, 2005.   10.   Development Agreement between the
Company and Autoliv ASP, Inc. dated October 3, 2005.   11.   Loan and Security
Agreement between the Company and Silicon Valley Bank dated March 20, 2002, as
amended on January 7, 2003, September 3, 2003, March 18, 2004 and May 16, 2005  
12.   Master Security Agreement between the Company and General Electric Capital
Corporation dated May 17, 2005, as amended on May 18, 2005.   13.   Promissory
Note between the Company and General Electric Capital Corporation dated June 15,
2005.   14.   Promissory Note between the Company and General Electric Capital
Corporation dated August 24, 2005.   15.   Warrant to Purchase shares of
Series B Preferred Stock issued to Silicon Valley Bank dated March 20, 2002.  
16.   Warrant to Purchase shares of Series C Preferred Stock issued to Silicon
Valley Bank dated January 30, 2003, as amended on March 4, 2003.

 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

--------------------------------------------------------------------------------

 

17.   Warrant to Purchase shares of Series C Preferred Stock issued to Silicon
Valley Bank dated September 19, 2003.   18.   Warrant to Purchase shares of
Series C Preferred Stock issued to Silicon Valley Bank dated April 7, 2004.

 

[*]  =   Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.