EXHIBIT 10.2

 

 

 

AMENDED AND RESTATED

PURCHASE OPTION AGREEMENT

by and among

ALEXZA PHARMACEUTICALS, INC.,

SYMPHONY ALLEGRO HOLDINGS LLC

and

SYMPHONY ALLEGRO, INC.

 

 

Dated as of June 15, 2009

 

 

 

 

 

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TABLE OF CONTENTS

 

          Page  

Section 1.

   Grant of Purchase Option      2   

Section 2.

   Exercise of Purchase Option      3   

Section 3.

   Alexza Representations, Warranties and Covenants      6   

Section 4.

   Holdings Representations, Warranties and Covenants      9   

Section 5.

   Symphony Allegro Representations, Warranties and Covenants      13   

Section 6.

   Notice of Material Event      21   

Section 7.

   Assignment; Transfers; Legend      21   

Section 8.

   Costs and Expenses; Payments      23   

Section 9.

   Expiration; Termination of Agreement      23   

Section 10.

   Survival; Indemnification      23   

Section 11.

   No Petition      26   

Section 12.

   Third-Party Beneficiary      26   

Section 13.

   Notices      26   

Section 14.

   Governing Law; Consent to Jurisdiction and Service of Process      28   

Section 15.

   WAIVER OF JURY TRIAL      29   

Section 16.

   Entire Agreement      29   

Section 17.

   Amendment; Successors; Counterparts      29   

Section 18.

   Specific Performance      30   

Section 19.

   Severability      30   

Section 20.

   Tax Reporting      30   

Section 21.

   Original Agreement      31   

 

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Annex A      Certain Definitions   

Exhibit 1

     Purchase Exercise Notice   

Exhibit 2

     Form of Opinion of Cooley Godward Kronish LLP   

 

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AMENDED AND RESTATED PURCHASE OPTION AGREEMENT

This AMENDED AND RESTATED PURCHASE OPTION AGREEMENT (this “Agreement”) is
entered into as of June 15, 2009, 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, Holdings and Symphony Allegro are parties to that certain
Purchase Option Agreement dated as of December 1, 2006 (the “Original
Agreement”), pursuant to which Holdings granted 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 thereafter acquired, by Holdings on the terms described therein;

WHEREAS, institutional investors have invested $50,000,000 in Holdings (the
“Financing”) in exchange for membership interests in Holdings and for warrants
to purchase up to a total of 2 million shares of Alexza Common Stock, which were
initially issued to Holdings, and Holdings contributed the proceeds of the
Financing to Symphony Allegro;

WHEREAS, the parties to the Original Agreement desire to amend and restate the
Original Agreement and accept the rights and covenants hereof in lieu of their
rights and covenants under the Original Agreement;

WHEREAS, contemporaneously with the execution of this Agreement, Alexza has
exercised the Purchase Option (as defined below) by delivering the Purchase
Option Exercise Notice (as defined below) to Holdings and Symphony Allegro;

WHEREAS, on the Purchase Option Closing Date, Alexza will issue to Holdings,
subject to the satisfaction of certain conditions (including, without
limitation, the Stockholder Approval (as defined below) and cancellation of the
warrants previously issued by Alexza to Holdings and its Affiliates), the Alexza
Closing Shares (as defined below) and warrants (the “Alexza Closing Warrants”)
to purchase up to 5 million shares of Alexza Common Stock, to be initially
issued to Holdings (the “Alexza Closing Warrant Shares”); 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.

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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 hereafter 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; and

(iii) 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 December 1, 2010 (the
“Final Termination Date”).

 

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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 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). Such notice and election shall be irrevocable once delivered.
All cash and cash equivalents on Symphony Allegro’s balance sheet on the date of
the Purchase Option Closing (the “Purchase Option Closing Date”) are to remain
with Symphony Allegro. The Purchase Option Closing Date shall be the date that
is the later of:

(i) five (5) Business Days 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 five (5) Business Days following the Purchase
Option Exercise Date and shall promptly and diligently pursue the related
regulatory process; and

(ii) five (5) Business Days following the date that Alexza receives the
necessary stockholder approvals for purposes of NASDAQ Marketplace Rule 5635 in
connection with the issuance of the Alexza Closing Shares (as defined below) and
the Alexza Closing Warrant Shares (the “Stockholder Approval”).

(b) Purchase Price.

(i) As 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), on the Purchase Option Closing Date, Alexza shall issue to Holdings an
aggregate of (A) ten million (10,000,000) shares of Alexza Common Stock (the
“Alexza Closing Shares”) and (B) the Alexza Closing Warrants. If, after the date
hereof and prior to the Purchase Option Closing, the number of outstanding
shares of Alexza Common Stock has been increased, decreased, changed into or
exchanged for a different number or kind of shares or securities as a result of
a reorganization, recapitalization, stock dividend, stock split, reverse stock
split or other similar change in capitalization, an appropriate and
proportionate adjustment shall be made to the number of Alexza Closing Shares to
be issued on the Purchase Option Closing.

(ii) As further 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), if Alexza enters into any agreement or arrangement with any third
party with respect to the development and/or

 

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commercialization of an AZ-004 Product or an AZ-002 Product (a “Symphony Allegro
Product Agreement”), Alexza shall be obligated to make the following payments to
Holdings within 10 Business Days of Alexza’s receipt of any Tier 1 Payment, Tier
2 Payment or Tier 3 Payment (each as defined below):

(A) with respect to any upfront, milestone, royalty, profit sharing, or similar
payment received by Alexza under such Symphony Allegro Product Agreement that,
when combined with any other such payments previously received by Alexza under
any Symphony Allegro Product Agreement, is in excess of $25,000,000 in the
aggregate but less than or equal to $50,000,000 in the aggregate (a “Tier 1
Payment”), an amount equal to 50% of such Tier 1 Payment;

(B) with respect to any upfront, milestone, royalty, profit sharing, or similar
payment received by Alexza under such Symphony Allegro Product Agreement that,
when combined with any other such payments previously received by Alexza under
any Symphony Allegro Product Agreement, is in excess of $50,000,000 in the
aggregate but less than or equal to $100,000,000 in the aggregate (a “Tier 2
Payment”), an amount equal to 25% of such Tier 2 Payment; and

(C) with respect to any upfront, milestone, royalty, profit sharing, or similar
payment received by Alexza under such Symphony Allegro Product Agreement that,
when combined with any other such payments previously received by Alexza under
any Symphony Allegro Product Agreement, is in excess of $100,000,000 in the
aggregate (a “Tier 3 Payment”), an amount equal to 10% of such Tier 3 Payment.

For the avoidance of doubt, payments from a third party to Alexza for
reimbursement of employee costs, out-of-pocket expenses, costs of clinical trial
materials, toxicology studies and clinical trials shall not be considered a Tier
1 Payment, Tier 2 Payment or Tier 3 Payment for purposes of this Agreement.

(iii) The Alexza Closing Shares, the Alexza Closing Warrants and the payments to
be made to Holdings set forth in Section 2(b)(ii) shall constitute the “Purchase
Price”.

(c) [Reserved.]

(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

 

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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) Corporate Governance Letter Agreement. Subject to the terms and conditions
of this Agreement, on the Purchase Option Closing Date, Holdings and Alexza
shall enter into a letter agreement substantially in the form attached hereto as
Exhibit 3 (the “Corporate Governance Letter Agreement”).

(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 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 issuance by Alexza on such date of the
portion of the Purchase Price comprised of the Alexza Closing Shares and the
Alexza Closing Warrants 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. 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.

 

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(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 (including, without limitation,
the Stockholder Approval); 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 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, other than the Stockholder
Approval, no other proceedings on the part of Alexza are necessary to authorize
this Agreement or for Alexza to perform its obligations under this 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) 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

 

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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
such HSR Filings are required pursuant to Section 2(a) 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, 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.
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, Alexza shall have
sufficient authorized but unissued, freely transferable and nonassessable Alexza
Common Stock available to satisfy the Alexza Closing Shares and Alexza Closing
Warrant Shares. 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 substantially in the form attached hereto as Exhibit 2.

(ii) Alexza, on the Purchase Option Closing Date, shall convey good and
marketable title to the Alexza Closing Shares, free from any Encumbrances and
any and all other restrictions that any issuance, sale, assignment or other
transfer of such Alexza Closing Shares be consented to or approved by any
Person.

 

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(iii) Upon 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 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) Alexza shall maintain the separate corporate existence of Symphony Allegro
for a minimum of one (1) year following the Purchase Option Closing Date, unless
such maintenance would have a Material Adverse Effect on Alexza or any of its
Affiliates.

(v) Alexza agrees to use its commercially reasonable efforts to obtain the
Stockholder Approval. In connection with the foregoing, Alexza shall call and
hold a meeting of its stockholders to seek Stockholder Approval prior to
October 1, 2009, and file with the SEC a proxy statement and shall use its
commercially reasonable efforts to solicit proxies in favor of the Stockholder
Approval, and shall use its commercially reasonable efforts to respond to any
comments of the SEC or its staff and to cause a definitive proxy statement
related to such stockholders’ meeting to be mailed to Alexza’s stockholders. The
Alexza Board shall unanimously recommend Stockholder Approval and such unanimous
recommendation shall be included in each proxy statement filed with the SEC and
disseminated to the Alexza stockholders in connection with such stockholder
meeting (such recommendations, the “Alexza Board Recommendation”). Alexza shall
notify Holdings promptly of the receipt of any comments from the SEC or its
staff and of any request by the SEC or its staff for amendments or supplements
to such proxy statement or for additional information and will supply Holdings
with copies of all correspondence between Alexza or any of its representatives,
on the one hand, and the SEC or its staff, on the other hand, with respect to
such proxy statement. If at any time prior to such stockholders’ meeting there
shall occur any event that is required to be set forth in an amendment or
supplement to the proxy statement, Alexza shall as promptly as practicable
prepare and mail to its stockholders such an amendment or supplement. Each of
Holdings and Alexza agrees promptly to correct any information provided by it or
on its behalf for use in the proxy statement if and to the extent that such
information shall have become false or misleading in any material respect, and
Alexza shall as promptly as practicable prepare and mail to its stockholders an
amendment or supplement to correct such information to the extent required by
applicable laws and regulations. Alexza shall provide Holdings with drafts of
each such proxy statement, or amendment or supplement thereto, and consult with
Holdings regarding the same, in each case, prior to filing or mailing the same.
Without limiting the generality of the foregoing, Alexza’s obligations pursuant
to the first two sentences of this Section 3(b)(v) shall not be affected by the
withdrawal or modification by the Alexza Board or any committee thereof of the
Alexza Board Recommendation. In the event that Stockholder Approval is not
obtained at the first meeting of stockholders at which Stockholder Approval is
sought, at the written request of Holdings, the Company shall call and convene a
subsequent meeting of

 

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stockholders for the purpose of obtaining Stockholder Approval (and the Alexza
Board will unanimously recommend Stockholder Approval), which meeting may not be
unreasonably delayed by Alexza, and all covenants between the parties set forth
in this Section 3(b)(v) shall apply equally with respect to any subsequent
meeting of stockholders. Unless otherwise required by applicable law, Alexza
shall not call or convene a meeting of its stockholders prior to the meeting of
stockholders at which Stockholder Approval is sought.

(vi) Prior to the Purchase Option Closing Date, the Alexza Board shall have
adopted resolutions, reasonably satisfactory to Holdings, approving the issuance
of the Alexza Closing Shares, the Alexza Closing Warrants and the Alexza Closing
Warrant Shares to Holdings for purposes of Section 203(a)(1) of the Delaware
General Corporation Law (the “DGCL”), such that the restrictions on “business
combinations” set forth in Section 203 of the DGCL shall not apply to Alexza and
Holdings as a result of such issuances.

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

 

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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, 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.

 

 

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(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 the Alexza Closing Shares 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 diligence with respect to the
Products, the Programs, Symphony Allegro, Alexza and the transactions
contemplated by the Operative Documents.

(C) Holdings has been advised and understands that the offer and sale of the
Alexza Closing Shares has not been registered under the Securities Act. Holdings
is able to bear the economic risk of such investment for an indefinite period
and to afford a complete loss thereof.

(D) Holdings is acquiring the Alexza Closing Shares solely for Holdings’ own
account for investment purposes as a principal and not with a view to the resale
of all or any part thereof. Holdings agrees that the Alexza Closing Shares may
not be resold (x) without registration thereof under the Securities Act (unless
an exemption from such registration is available), or (y) in violation of any
law. Holdings is not and will not be an underwriter within the meaning of
Section 2(11) of the Securities Act with respect to the Alexza Closing Shares.

(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.

(F) Holdings acknowledges that all certificates evidencing the Alexza Closing
Shares may bear the following legend:

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE,
AND THE SAME HAVE BEEN ISSUED IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF SAID ACT AND SUCH LAWS. SUCH SHARES MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT AS PERMITTED
UNDER SUCH SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM”.

 

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(b) Holdings hereby covenants and agrees with Alexza as follows:

(i) [Reserved.]

(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(b)(i) or (ii) (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 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.

 

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(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.

(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.

 

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(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 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.

 

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(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.

(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

 

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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).

(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

 

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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 $250,000 in the aggregate principal amount at any one time outstanding
(unless the Development Committee shall authorize the existence of ordinary
course liens securing obligations valued at greater than $250,000), 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 $1,000,000 at any time;

 

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(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

(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,

 

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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 date hereof:

(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 fifteen
(15) Business Days 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
fifteen (15) Business Days 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 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

 

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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 five (5) Business Days 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 five (5) Business Days 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 ten (10) days 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 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

 

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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.

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

 

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other Parties; provided, however, that Alexza, without the prior approval of
each of the other Parties, 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 AN AMENDED AND RESTATED PURCHASE OPTION
AGREEMENT (THE “PURCHASE OPTION AGREEMENT”) DATED AS OF JUNE 15, 2009, 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.

 

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Section 8. Costs and Expenses; Payments. Except as otherwise specified in
Section 2(f) hereof, each Party shall pay its own costs and expenses incurred in
connection with the negotiation and preparation of this Agreement and related
documentation, the exercise of the Purchase Option and all actions reasonably
required to complete the Purchase Option Closing; provided, however, that Alexza
shall pay any filing fees incurred in connection with any HSR Filings made
pursuant to the Purchase Option Closing.

Section 9. Expiration; Termination of Agreement.

(a) Termination.

(i) This Agreement shall terminate upon the mutual written consent of all of the
Parties.

(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.

(iii) If the Purchase Option Closing shall not have occurred by October 15,
2009, this Agreement shall terminate and become null and void ab initio and the
Original Agreement shall simultaneously be reinstated in its entirety and
supersede this Agreement in its entirety.

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.

 

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(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.

(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

 

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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, 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

 

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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 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

 

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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.

2091 Stierlin Court

Mountain View, CA 94043

Attn: August J. Moretti

Facsimile: (650) 944-7999

with a copy to:

Cooley Godward Kronish LLP

380 Interlocken Crescent

Suite 900

Broomfield, CO 80021

Attn: Brent D. Fassett, Esq.

Facsimile: (720) 566-4099

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

 

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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
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

 

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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.

(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.

 

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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 Alexza Closing Warrants shall be
treated as option premium payable in respect of the grant and exercise 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.

 

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Section 21. Original Agreement.

(a) The Original Agreement is hereby amended and superseded in its entirety and
restated herein. Such amendment and restatement is effective upon execution of
this Agreement by the Parties. Upon such execution, all provisions of, rights
granted and covenants made in the Original Agreement are hereby superseded in
their entirety by the provisions hereof and shall have no further force or
effect; provided, however, that, if the Purchase Option Closing shall not have
occurred by October 15, 2009, this Agreement shall terminate and become null and
void ab initio and the Original Agreement shall simultaneously be reinstated in
its entirety and supersede this Agreement in its entirety.

(b) Defined terms in the Operative Documents (other than this Agreement and the
Warrant Purchase Agreement) that refer to definitions in this Agreement shall be
deemed to refer to the definitions in the Original Agreement, except where the
context requires otherwise.

[SIGNATURES FOLLOW ON NEXT PAGE]

 

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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/ Thomas B. King

  Name: Thomas B. King   Title:   President and Chief Executive Officer SYMPHONY
ALLEGRO HOLDINGS LLC

By:

 

Symphony Capital Partners, L.P.,

its Manager

By:

 

Symphony Capital GP, L.P.,

its General Partner

By:

 

Symphony GP, LLC,

its General Partner

By:

 

/s/ Mark Kessel

  Name: Mark Kessel   Title:   Managing Member SYMPHONY ALLEGRO, INC. By:  

/s/ Andrew L. Busser

  Name: Andrew L. Busser   Title:   Chairman of the Board

Signature Page to Amended and Restated Purchase Option Agreement

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ANNEX A

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 Board” means the board of directors of Alexza.

“Alexza Closing Shares” has the meaning set forth in Section 2(b) of the
Purchase Option Agreement.

 

A-1

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“Alexza Closing Warrant Shares” has the meaning set forth in Recitals of this
Agreement.

“Alexza Closing Warrants” has the meaning set forth in the Recitals of this
Agreement.

“Alexza Common Stock” means the common stock, par value $0.0001 per share, of
Alexza.

“Alexza Obligations” has the meaning set forth in Section 6.1(a) of the Amended
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 Original 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.

 

A-2

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“AZ-004 Program” means the development, manufacture and/or use of any AZ-004
Product in accordance with the Development Plan.

“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.

“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.

“Class B Membership Interest” means a Class B Membership Interest in Holdings.

“Class C Member” means a holder of a Class C Membership Interest.

 

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“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.

“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
Original 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.

“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.

 

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“Corporate Governance Letter Agreement” has the meaning set forth in
Section 2(e) of the Purchase Option Agreement.

“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 the 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,

(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,

 

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(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 Original 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
Original 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 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.

 

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“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 thereof).

“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.

“Effective Registration Date” has the meaning set forth in Section 1(b) of the
Registration Rights Agreement.

“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

 

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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 Original 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. “FDA Sponsor” has the meaning set forth in
Section 5.1 of the Amended and Restated Research and Development 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.

 

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“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.

“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.

“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 Original 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.

 

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“Indemnification Agreement” means the Indemnification Agreement among Symphony
Allegro and the Directors named therein, dated as of the Original 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 Original 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 Original 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.

“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.

 

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“Investors LLC Agreement” means the Amended and Restated Agreement of Limited
Liability Company of Investors dated as of the Original 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.

“Licensed Know-How” means any and all Know-How that is Controlled by Licensor on
or after the Original 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;

 

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(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.

“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.

 

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“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.

“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 Original Closing Date,
among Alexza, Symphony Allegro and Holdings.

 

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“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, the Corporate
Governance Letter 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.

“Original Agreement” has the meaning set forth in the Preliminary Statement of
the Purchase Option Agreement.

“Original Closing Date” means December 1, 2006.

“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.

“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.

 

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“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 Amended and Restated Purchase Option
Agreement dated as of the date hereof, 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.

“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

 

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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.

“Registration Rights Agreement” means the Amended and Restated Registration
Rights Agreement dated as of the date hereof, 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.

“Research Cost Sharing and Extension Agreement” means the Research Cost Sharing
and Extension Agreement dated as of the Original Closing Date, among Alexza,
Holdings and Symphony Allegro.

“Research and Development Agreement” means the Research and Development
Agreement dated as of the Original 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.

 

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“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 Original 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.

“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.

“Stockholder Approval” has the meaning set forth in Section 3(b)(v) of the
Purchase Option Agreement.

“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.

 

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“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 Original 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 Original Closing Date.

“Symphony Allegro Charter” means the Amended and Restated Certificate of
Incorporation of Symphony Allegro, dated as of the Original 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.

 

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“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
Original 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 Original 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.

“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.

 

A-19

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

“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 date hereof, between Alexza and Holdings.

“Warrant Surrender Price” has the meaning set forth in Section 7.08 of the
Warrant Purchase Agreement.

 

A-20

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

EXHIBIT 1

PURCHASE OPTION EXERCISE NOTICE

            , 20    

Attention:                     

Ladies and Gentlemen:

Reference is hereby made to that certain Amended and Restated Purchase Option
Agreement dated as of June 15, 2009 (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             .

 

Very truly yours, ALEXZA PHARMACEUTICALS, INC.

By:

 

 

 

Name: Thomas B. King

Title:   President and Chief Executive Officer

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

EXHIBIT 2

FORM OF OPINION OF COOLEY GODWARD KRONISH LLP

[See attached.]

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

                    , 2009

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 amendment of certain terms of the Financing, the Company has entered
into the agreements listed on Schedule I hereto (collectively, the “Transaction
Agreements”). We are rendering this opinion pursuant to Section 3(b)(i) of the
Purchase Option Agreement (as defined in Schedule I hereto).

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 independently to 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 currently 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; 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.

Our opinion is expressed only with respect to the federal laws of the United
States of America, the laws of the State of California for the purposes of
paragraphs 4 and 5 below, 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.

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                    , 2009

Page Two

 

We express no opinion as to any provisions of the Transaction Agreements that:
(a) relate to the subject matter jurisdiction of any federal court of the United
States of America or any federal appellate court to adjudicate any controversy
related to the Transaction Agreements, (b) contains a waiver of an inconvenient
forum, or (c) relates to advance waivers of claims, defenses, rights granted by
law, or notice, opportunity for hearing, evidentiary requirements, statutes of
limitations, trial by jury, or procedural rights.

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 the Investment Company Act of 1940, as amended, except as expressly set
forth in paragraph 9 below; 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. We have made no further investigation.

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, and (iv) a review of the
Delaware General Corporation Law. We have made no further investigation.

With regard to our opinion in 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 (as defined on Schedule I hereto)) to exceed
the number of shares of Common Stock that then remain authorized but unissued.

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                    , 2009

Page Three

 

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 Alexza Closing Shares (as defined in the Purchase Option Agreement), the
Warrant (as defined in the Warrant Purchase Agreement) 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 qualifications
set forth herein, 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 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 Alexza Closing
Shares and the Warrant have been duly authorized by the Company.

 

4. The issuance of the Alexza Closing Shares and the Warrant pursuant to the
Transaction Agreements and the Warrant Shares pursuant to the Warrant (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 sale and issuance of the Alexza
Closing Shares and 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 terms.

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

                    , 2009

Page Four

 

7. The Alexza Closing Shares and the Warrant Shares, when sold and issued in
accordance with the terms of the Purchase Option Agreement or the Warrant, as
applicable, will be validly issued, fully paid and non-assessable, and the
issuance of the Alexza Closing Shares and the Warrant Shares is not 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 Alexza Closing Shares, the Warrant and the 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.

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                    , 2009

Page Five

 

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.

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                    , 2009

Page Six

 

This opinion is limited to the matters expressly set forth herein, and no
opinion, express or implied, is given beyond the matters expressly stated. This
opinion speaks only as to the laws and facts in effect or existing as of the
date hereof, and we have no obligation to update or supplement this opinion to
reflect any facts or circumstances that may hereafter come to our attention or
any changes in law that may hereafter occur.

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:  

 

          Brent D. Fassett

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

SCHEDULE I

LIST OF TRANSACTION AGREEMENTS

 

1. Warrant Purchase Agreement, dated as of June 15, 2009 between the Company and
Symphony Allegro Holdings LLC (the “Warrant Purchase Agreement”).

 

2. Amended and Restated Purchase Option Agreement, dated as of June 15, 2009, by
and among the Company, Symphony Allegro Holdings LLC and Symphony Allegro, Inc.
(the “Purchase Option Agreement”).

 

3. Registration Rights Agreement, dated as of June 15, 2009, between the Company
and Symphony Allegro Holdings LLC.

 

4. Letter Agreement, dated as of                     , 2009, between the Company
and Symphony Allegro Holdings LLC, in respect of various corporate governance
matters.

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

SCHEDULE II

LIST OF MATERIAL AGREEMENTS

 

1. Lease between the Company and Brittania, LLC dated August 25, 2006.

 

2. First Amendment to Lease between the Company and Britannia Hacienda VIII LLC
dated May 4, 2007.

 

3. Second Amendment to Lease between the Company and Britannia Hacienda VIII LLC
dated August 28, 2007.

 

4. 2009-2010 Performance Based Incentive Program.

 

5. Second Amended and Restated Investors’ Rights Agreement between the Company
and certain holders of Preferred Stock dated November 5, 2004.

 

6. 2005 Equity Incentive Plan.

 

7. 2005 Non-Employee Directors’ Stock Option Plan.

 

8. 2005 Employee Stock Purchase Plan. 9. Development Agreement between the
Company and Autoliv ASP, Inc. dated October 3, 2005.

 

10. Manufacturing and Supply Agreement between the Company and Autoliv ASP dated
November 2, 2007.11. Master Security Agreement between the Company and General
Electric Capital Corporation dated May 17, 2005, as amended on May 18, 2005.

 

12. Promissory Note between the Company and General Electric Capital Corporation
dated June 15, 2005.

 

13. Promissory Note between the Company and General Electric Capital Corporation
dated August 24, 2005.

 

14. Warrant to Purchase shares of Series B Preferred Stock issued to Silicon
Valley Bank dated March 20, 2002.

 

15. Warrant to Purchase shares of Series C Preferred Stock issued to Silicon
Valley Bank dated January 30, 2003, as amended on March 4, 2003.

 

16. Warrant to Purchase shares of Series C Preferred Stock issued to Silicon
Valley Bank dated September 19, 2003.

 

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

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

18. Stock and Warrant Purchase Agreement between the Company and Biomedical
Investment Fund Pte Ltd. dated March 26, 2008.

 

19. Warrant to Purchase shares of Common Stock issued to Biomedical Investment
Fund Pte Ltd. dated March 27, 2008.

 

20. Common Stock Purchase Agreement between the Company and Azimuth Opportunity
Ltd. dated March 31, 2009.

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

EXHIBIT 3

FORM OF CORPORATE GOVERNANCE LETTER AGREEMENT

[See attached.]

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

Symphony Allegro Holdings LLC

7361 Calhoun Place, Suite 325

Rockville, MD 20855

                    , 2009

Alexza Pharmaceuticals, Inc.

2091 Stierlin Court

Mountain View, CA 94043

Attention: Chief Executive Officer

Ladies and Gentlemen:

In connection with the acquisition of shares of Common Stock, par value $0.0001
per share (the “Common Stock”), of Alexza Pharmaceuticals, Inc., a Delaware
corporation (the “Company”), by Symphony Allegro Holdings LLC, a Delaware
limited liability company (together with its permitted successors, assigns and
transferees, the “Purchaser”), pursuant to the terms of that certain Amended and
Restated Purchase Option Agreement, dated as of June 15, 2009, among the
Company, the Purchaser and Symphony Allegro, Inc. (the “Amended and Restated
Purchase Option Agreement”), the Company and the Purchaser agree as follows:

Section 1. Definitions. For purposes of this letter agreement, the following
terms have the respective meanings set forth below:

“Affiliate” shall mean, 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.

“Beneficially Owns” (including the terms “Beneficial Ownership” or “Beneficially
Owned”) shall mean beneficial ownership within the meaning of Rule 13d-3 under
the Exchange Act.

“Board” shall mean the Board of Directors of the Company.

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

“Exchange Act” shall mean the U.S. Securities Exchange Act of 1934, as amended.

“Person” shall mean any individual, partnership (whether general or limited),
limited liability company, corporation, trust, estate, association, nominee or
other entity.

Section 2. Standstill. Except for the exercise of the Alexza Closing Warrants
(as defined in the Amended and Restated Purchase Option Agreement) and the
acquisition of Alexza Closing Warrant Shares (as defined in the Amended and
Restated Purchase Option Agreement), for so long as the Purchaser and its
Affiliates Beneficially Own more than 10% of the Company’s outstanding Common
Stock, neither the Purchaser nor any of its Affiliates shall, without the prior
written consent of a majority of the independent members of the Board who are
not Affiliated with the Purchaser, in any manner, whether directly or
indirectly:

(a) make, effect, initiate, cause or participate in (i) any acquisition of
Beneficial Ownership of any securities of the Company or any securities of any
subsidiary or other Affiliate of the Company, (ii) any acquisition of any assets
of the Company or any assets of any subsidiary or other Affiliate of the
Company, (iii) any tender offer, exchange offer, merger, business combination,
recapitalization, restructuring, liquidation, dissolution or extraordinary
transaction involving the Company or any subsidiary or other Affiliate of the
Company, or involving any securities or assets of the Company or any securities
or assets of any subsidiary or other Affiliate of the Company, or (iv) any
“solicitation” of “proxies” (as those terms are used in the proxy rules of the
Securities and Exchange Commission (“SEC”)) or consents with respect to any
securities of the Company;

(b) form, join or participate in a “group” (as defined in the Securities
Exchange Act and the rules promulgated thereunder) with respect to the
Beneficial Ownership of any securities of the Company;

(c) without limiting any rights of the Purchaser pursuant to Section 5 hereof,
act, alone or in concert with others, to seek to control or influence the
management, board of directors or policies of the Company;

(d) take any action that might require the Company to make a public announcement
regarding any of the types of matters set forth in clause “(a)” of this
sentence;

(e) agree or offer to take, or encourage or propose (publicly or otherwise) the
taking of, any action prohibited by clause “(a)”, “(b)”, “(c)” or “(d)” of this
sentence;

(f) assist, induce or encourage any other Person to take any action of the type
prohibited by clause “(a)”, “(b)”, “(c)”, “(d)” or “(e)” of this sentence;

(g) enter into any discussions, negotiations, arrangement or agreement with any
other Person relating to any of the foregoing; or

 

2

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

(h) request or propose that the Company or any of the Company’s Affiliates
amend, waive or consider the amendment or waiver of any provision set forth in
this Section 2.

Section 3. No Effect on Directors. Notwithstanding any of the foregoing, the
provisions set forth in Section 2 shall in no way limit the ability of any
individual who is serving as a director of the Company to take any actions (or
to refrain from taking any actions) in his or her capacity as a director of the
Company.

Section 4. Voting Agreement. In the event the Purchaser and its Affiliates
Beneficially Own more than 33% of the Company’s outstanding Common Stock, any
shares of Common Stock entitled to vote for the election of directors
Beneficially Owned by the Purchaser and its Affiliates in excess of 33% of the
shares of Common Stock then outstanding, with respect to the election or removal
of directors only, shall be voted either, solely at the Purchaser’s election
(a) as recommended by the Board or (b)(i) in an election, in the same proportion
with the votes of shares of Common Stock voted in such election (excluding
shares with respect to which the votes were withheld, abstained or otherwise not
cast) and not Beneficially Owned by the Purchaser (excluding withheld shares and
abstentions) or (ii) in a removal vote, in the same proportions as all
outstanding shares of Common Stock not Beneficially Owned by the Purchaser
(including shares with respect to which the votes were withheld, abstained or
otherwise not cast), whether at an annual or special meeting of stockholders of
the Company, by written consent or otherwise. The Purchaser shall retain its
right to vote (or to withhold its vote) all of its shares on all other matters.

Section 5. Member of the Board. For so long as the Purchaser and its Affiliates
Beneficially Own more than 10% of the Company’s outstanding Common Stock, then,
subject to applicable law and the rules and regulations of the SEC and the
NASDAQ Stock Market, the Company will nominate and use its commercially
reasonable efforts to cause to be elected and cause to remain as a director on
the Board one (1) individual designated by the Purchaser.

Section 6. Representations. Each party represents to the other that: (a) this
letter agreement has been duly authorized by all necessary corporate or
partnership action, as the case may be; and (b) this letter agreement is a valid
and binding agreement of such party, enforceable against it in accordance with
its terms.

Section 7. Specific Enforcement; Legal Effect. The parties hereto agree that any
breach of this letter agreement would result in irreparable injury to the other
party and that money damages would not be an adequate remedy for such breach.
Accordingly, without prejudice to the rights and remedies otherwise available
under applicable law, either party shall be entitled to specific performance and
equitable relief by way of injunction or otherwise if the other party breaches
or threatens to breach any of the provisions of this letter agreement. It is
further understood and agreed that no failure or delay by either party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any right,

 

3

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

power or privilege hereunder. If any term, provision, covenant or restriction in
this letter agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this letter agreement shall remain in full force
and effect and shall in no way be affected, impaired or invalidated, provided
that the parties hereto shall negotiate in good faith to attempt to place the
parties in the same position as they would have been in had such provision not
been held to be invalid, void or unenforceable. This letter agreement contains
the entire agreement between the parties hereto concerning the matters addressed
herein. No modification of this letter agreement or waiver of the terms and
conditions hereof shall be binding upon either party hereto, unless approved in
writing by each such party; provided, however, that no waiver or amendment shall
be effective as against the Company unless such waiver or amendment is approved
in writing by the vote of a majority of the independent members of the Board who
are not Affiliated with the Purchaser. This Agreement shall be governed by and
construed in accordance with the law of the State of New York.

Section 8. Termination. This agreement shall continue in full force and effect
from the date hereof until such time as the Purchaser and its Affiliates
Beneficially Own less than 10% of the Company’s outstanding Common Stock.

Section 9. Counterparts. This letter agreement may be executed in counterpart
(including by facsimile), each of which shall be deemed an original.

[Remainder of page left blank intentionally]

 

4

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If you are in agreement with the terms set forth above, please sign this letter
agreement in the space provided below and return an executed copy to the
undersigned.

 

Very truly yours, SYMPHONY ALLEGRO HOLDINGS LLC

By:

 

Symphony Capital Partners, L.P.,

its Manager

By:

 

Symphony Capital GP, L.P.,

its General Partner

By:

 

Symphony GP, LLC,

its General Partner

  By:  

 

  Name:   Mark Kessel   Title:   Managing Member

 

Confirmed and Agreed: ALEXZA PHARMACEUTICALS, INC.

By:

 

 

  Name:   August J. Moretti   Title:   Senior Vice President and Chief Financial
Officer