exv10w2






Exhibit 10.2




Execution Version

***Text Omitted and Filed Separately

with the Securities and Exchange Commission.

Confidential Treatment Requested

Under 17 C.F.R. Sections 200.80(b)(4)

and 240.24b-2.




LICENSE & DEVELOPMENT AGREEMENT




     This License & Development Agreement (the “Agreement”) is entered into as of August
25, 2010 (the “Effective Date”) by and between Alexza Pharmaceuticals, Inc., a Delaware
corporation with a principal place of business at 2091 Stierlin Court, Mountain View, CA 94043
(“Alexza”), and Cypress Bioscience, Inc., a Delaware corporation with a principal place of
business at 4350 Executive Drive, Suite 325, San Diego, CA 92121 (“Cypress”). Alexza and Cypress
are sometimes referred to herein individually as a “Party” and collectively as the “Parties”.



RECITALS




     A. Alexza is a pharmaceutical company that is developing products based on its proprietary
Staccato® system, a drug delivery system that provides rapid systemic delivery of drugs
through inhalation.



     B. Cypress desires to obtain from Alexza certain exclusive, worldwide rights and licenses to
develop, manufacture and commercialize products consisting of the Staccato® system
solely for use in delivery of nicotine, and Alexza is willing to grant to Cypress such rights and
licenses, all on the terms and conditions set forth in this Agreement.



     C. Cypress and Alexza desire that Alexza conduct certain development activities for Cypress
with respect to licensed products for a limited time period.



     NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein
contained, and for other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Alexza and Cypress hereby agree as follows:



ARTICLE 1




DEFINITIONS



     As used in this Agreement, the following initially capitalized terms, whether used in the
singular or plural form, shall have the meanings set forth in this Article 1. In addition, the
terms “includes,” “including,” “include” and derivative forms of them shall be deemed followed by
the phrase “without limitation” (without implication from the actual inclusion of such phrase in
some instances after such terms, but not in other instances).



     1.1 “Affiliate” means, with respect to a particular Party, a person, corporation, partnership,
or other entity that controls, is controlled by or is under common control with such Party. For
the purposes of this definition, the word “control” (including, with correlative meaning, the terms
“controlled by” or “under the common control with”) means the actual power, either directly or
indirectly through one or more intermediaries, to direct or cause the



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direction of the management and policies of such entity, whether by the ownership of more than
fifty percent (50%) of the voting stock of such entity, or by contract or otherwise.




     1.2 “Aggregate Development Expenses” shall mean the Alexza Development Expenses and the
Cypress Development Expenses.



     1.3 “Alexza” shall have the meaning described in the first paragraph of this Agreement and
shall include its successors and assigns as contemplated by Section 13.7.



     1.4 “Alexza Background Patents” means all Patents that: (a) are necessary or reasonably useful
for the research, development, importation, use, manufacture, sale or offering for sale of any
Product worldwide, (b) are Controlled by Alexza or its Affiliates as of the Effective Date or
during the Term, and (c) cover or claim the Device or its manufacture or use and/or Staccato
Technology generally, but excluding the Alexza Product Patents, the [...***...]
Patents and the Joint Patents.



     1.5 “Alexza Development Expenses” has the meaning set forth in Section 5.4(a).



     1.6 “Alexza Development Plan” shall mean the plan and budget for development of the Product,
including the Device, by Alexza under this Agreement, as such plan may be amended in accordance
with Section 3.2.



     1.7 “Alexza Funded Incremental Development Expenses” shall have the meaning set forth in
Section 5.4(d).



     1.8 “Alexza Indemnitees” has the meaning set forth in Section 10.1.



     1.9 “Alexza Know-How” means all Know-How (other than Joint Inventions) Controlled by Alexza or
its Affiliates as of the Effective Date or during the Term that is necessary or reasonably useful
for the research, development, importation, use, manufacture, having manufactured, sale or offering
for sale of any Product.



     1.10 “Alexza Nicotine Product Patents” means any of the Alexza Product Patents that are
directed solely and specifically toward a Product or its manufacture or use (which shall include,
without limitation, any Patent claims that have been separated into distinct divisional (or
equivalent) patent applications pursuant to Section 7.2(a)(ii)). Without limiting the foregoing,
the patent application set forth on Exhibit A entitled [...***...] is included in Alexza Nicotine
Product Patents.



     1.11 “Alexza Patents” means the Alexza Product Patents and Alexza Background Patents. A list
of the Alexza Patents existing as of the Effective Date is set forth on Exhibit A.



     1.12 “Alexza Product License” has the meaning set forth in Section 11.3(b)(iii)(1).





 




			
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     1.13 “Alexza Product Patents” means all Patents (other than Joint Patents) that: (a) are
necessary or reasonably useful for the research, development, importation, use, manufacture, sale
or offering for sale of any Product worldwide, (b) are Controlled by Alexza or its Affiliates as of
the Effective Date or during the Term, and (c) specifically claim (i) any Product or its
manufacture or use or (ii) any combination product consisting of Nicotine and any API(s) other than
Nicotine and a Device that delivers such APIs or its manufacture or use.



     1.14 “Alexza Product Sale” has the meaning set forth in Section 11.3(b)(iii)(1).



     1.15 “Alexza Sublicense Agreement” has the meaning set forth in Section 2.4.



     1.16 “Alexza Technology” means the Alexza Know-How, Alexza Patents and Alexza’s interest in
the Joint Inventions and Joint Patents.



     1.17 “Alexza Trademarks” means the Trademarks owned by Alexza set forth on Exhibit B,
individually and/or collectively.



     1.18 “API” means an active pharmaceutical ingredient. For clarity, API does not include any
agent that does not independently provide pharmacological activity or other effect in the
diagnosis, cure, mitigation, treatment or prevention of disease, and that does not affect structure
or function of the body of a human or other animal, and whose primary effect or purpose is to
facilitate the delivery or mask the taste or other effect associated with the Product.



     1.19 “Applicable Laws” means the applicable provisions of any and all national, supranational,
regional, state and local laws, treaties, statutes, rules, regulations, administrative codes,
guidance, ordinances, judgments, decrees, directives, injunctions, orders, permits (including
Marketing Approvals) of or from any court, arbitrator, Regulatory Authority or governmental agency
or authority having jurisdiction over or related to the subject item.



     1.20 “Asset Commercialization Date” shall mean the earlier of: (a) the date, if ever, on
which Cypress notifies Alexza in writing that Cypress has affirmatively determined to commercialize
any Product in any country; or (b) the date of NDA approval in any given country in which Cypress
has not entered into a Cypress Sublicense Agreement or otherwise entered into an Asset License or
Asset Sale.



     1.21 “Asset License” shall mean any transaction (including licensing and collaboration
transactions and joint ventures involving a license or sublicense, but excluding any Change of
Control of Cypress) pursuant to which rights under the Cypress Technology, Cypress Product
Invention Technology and/or Alexza Technology to commercialize any Product are licensed or
sublicensed by Cypress or any of its Affiliates to any Third Party; provided, however, that any
such license or sublicense solely to manufacture or develop any Product for Cypress or its
Affiliate where Cypress or its Affiliate commercializes such Product shall not be an Asset License.



     1.22 “Asset License Consideration” shall mean the net monetary and non-monetary consideration
actually received by Cypress or any of its Affiliates in connection with any Asset License, after
deducting any investment banking, broker, accounting, tax and legal fees paid by Cypress directly
related to such Asset License, including net licensing fees, royalties, milestones



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or similar amounts to the extent actually paid to Cypress or any of its Affiliates (but
excluding (a) amounts paid to Cypress by the licensee or any of its Affiliates for research and
development activities (at actual fully burdened cost) conducted by Cypress or any of its
Affiliates during the term of the Asset License, for the supply of goods (at actual fully burdened
cost) by Cypress or any of its Affiliates in connection with any such Asset License or for
promotion activities with respect to the Product of sales representatives of Cypress or any of its
Affiliates, (b) any bona fide loan made to Cypress or any of its Affiliates in connection with any
such Asset License (except to the extent forgiven without being paid), (c) amounts paid for debt or
equity securities of Cypress or its Affiliates to the extent of fair market value of such debt or
equity securities and (d) in the event that an Asset License includes the right for Cypress or any
of its Affiliates to incur expenses related to the commercialization of a Product (including
expenses related to the launch and preparation for launch of such Product), amounts paid to Cypress
or any of its Affiliates by the licensee or any of its Affiliates to reimburse any such expenses
incurred by Cypress or any of its Affiliates).




     1.23 “Asset Sale” shall mean any transaction (including a sale of assets, merger, sale of
stock or other equity interests), other than an Asset License or a Change of Control of Cypress,
pursuant to which Cypress or any of its Affiliates sells, transfers or otherwise disposes of all or
a substantial portion of the Cypress Technology, the Cypress Product Invention Technology and/or
the rights to the Alexza Technology to a Third Party. Any license or sublicense under Cypress
Technology or Alexza Technology solely to manufacture or develop any Product for Cypress or its
Affiliate where Cypress or its Affiliate commercializes such Product shall not be an Asset Sale.



     1.24 “Asset Sale Consideration” shall mean the net monetary and non-monetary consideration
actually received by Cypress or any of its Affiliates in connection with an Asset Sale, after
deduction of any investment banking, broker, accounting, tax and legal fees and expenses paid by
Cypress or any of its Affiliates in connection with such Asset Sale, including milestone, escrow,
holdback and other contingent payments payable in connection with such Asset Sale to the extent
actually paid to Cypress or any of its Affiliates.



     1.25 “Asset Sale/License Payment” has the meaning set forth in Section 5.5.



     1.26 “Buy-Out” shall mean Cypress’ buying out of its obligations to Alexza pursuant to Section
6.5 by paying to Alexza, in cash, an amount equal to the then-current fair market value of the
Payment Rights.



     1.27 “Buy-Out Option Notice” shall have the meaning set forth in Section 6.3.



     1.28 “Calendar Half” shall mean (a) with respect to the first Calendar Half, the period
beginning on the Effective Date and ending on December 31, 2010, (b) with respect to each
subsequent Calendar Half (other than the last Calendar Half), the six-month period beginning on the
day following the end of the first Calendar Half and each succeeding six-month period thereafter,
and (c) with respect to the last Calendar Half, the period from the day following the end of the
immediately preceding Calendar Half to the date of expiration or termination of this Agreement.



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     1.29 “Calendar Half Development Expenses” has the meaning set forth in Section 5.4(c).



     1.30 “Carry Credit Applicable Percentage” shall be determined as follows:



          (a) prior to the date of receipt by Alexza of the Technology Transfer Payment, 50%; or




          (b) on or after the date of receipt by Alexza of the Technology Transfer Payment, either (i)
10%, if Alexza has funded the full amount of its Offered Incremental Development Expenses, if any;
or (ii) if Alexza has funded less than the full amount of its Offered Incremental Development
Expenses as provided in Section 5.4(c), [...***...].




     1.31 “Change of Control” means, with respect to a Party, (a) a sale or other disposition
of all or substantially all of the assets of such Party on a consolidated basis (other than to any
Affiliate (direct or indirect) of such Party), (b) a merger or consolidation in which such Party is
not the surviving entity and in which the stockholders of such Party immediately prior to such
consolidation or merger own less than 50% of the surviving entity’s voting power immediately after
the transaction, and (c) a reverse merger in which such Party is the surviving entity but the
shares of such Party’s common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities, cash or otherwise, and
in which the stockholders of such Party immediately prior to such reverse merger own less than 50%
of the voting power of such Party (or its parent entity) immediately after the transaction.



     1.32 “Change of Control Notice” has the meaning set forth in Section 6.4.



     1.33 “Commercially Reasonable Efforts” means, with respect to the Parties’ obligations under
this Agreement to research, develop or commercialize the Product, that level of efforts and
resources that is consistent with the commercially reasonable practices of the pharmaceutical
industry for the research, development or commercialization of a similarly situated pharmaceutical
product as such Product at a similar stage of research, development or commercialization, taking
into account measures of patent coverage, relative safety and efficacy, product profile, the
competitiveness of the marketplace, the proprietary position of such product, the regulatory
structure involved, the market potential of such product, the availability and level of
reimbursement for such product by Third Party payors or health insurance plans, the potential total
profitability of such product and other relevant factors, including comparative technical, legal,
scientific, and/or medical factors. [...***...].



     1.34 “Confidential Information” has the meaning set forth in Section 8.1.



     1.35 “Control” (including any variations such as “Controlled”), in the context of intellectual
property rights, Know-How and Confidential Information, means possession (whether by ownership or
license, other than pursuant to licenses granted by the other Party under this Agreement) by a
Party of the ability to grant the applicable license or other rights under this Agreement, without
violating the terms of an agreement with a Third Party.





 




			
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     1.36 “Cumulative Aggregate Development Expenses” has the meaning set forth in Section 5.4(c).



     1.37 “Cypress” shall have the meaning described in the first paragraph of this Agreement and
shall include its successors and assigns as contemplated by Section 13.7.



     1.38 “Cypress Development Expenses” shall mean the sum of (a) all of Cypress’ and its
Affiliates’ expenses of FTEs for the performance of development activities with respect to
Products, at a rate of $[...***...] per FTE for
non-administrative personnel, (b) all amounts paid as compensation (including, without limitation,
salary and benefits, severance payments and/or consulting fees) by Cypress to [...***...], and (c) all
other reasonable costs and expenses incurred by Cypress or any of its Affiliates in the performance
of Product development activities (which may include reasonable costs and expenses for
administrative personnel). For clarity, the Cypress Development Expenses does not include the
Alexza Development Expenses, the Technology Transfer Payment or the upfront payment under Section
5.1.



     1.39 “Cypress Indemnitees” has the meaning set forth in Section 10.2.



     1.40 “Cypress Know-How” means all Inventions (other than Joint Inventions) Controlled by
Cypress or its Affiliates during the Term related to the Device or Staccato Technology, but
excluding any Cypress Product Inventions.



     1.41 “Cypress Patents” means all Patents (other than Joint Patents) Controlled by Cypress or
its Affiliates during the Term that claim any Invention related to the Device or Staccato
Technology, but excluding any Cypress Product Invention Patents.



     1.42 “Cypress Product Inventions” means all Inventions (other than Joint Inventions) that
(a) are made, created, discovered, conceived or reduced to practice by or on behalf of Cypress or
its Affiliates during the Term in the course of development activities conducted with respect to
any Product, and (b) relate specifically to any Product or its manufacture or use and are not
usable with any product that delivers or administers any API other than Nicotine using the Staccato
Technology.



     1.43 “Cypress Product Invention Patents” means all Patents (other than Joint Patents)
Controlled by Cypress or its Affiliates during the Term that claim specifically a Cypress Product
Invention and do not claim Inventions that are usable with any product that delivers or administers
any API other than Nicotine using the Staccato Technology.



     1.44 “Cypress Product Invention Technology” means the Cypress Product Inventions and the
Cypress Product Invention Patents.



     1.45 “Cypress Sublicense Agreement” has the meaning set forth in Section 2.4.



     1.46 “Cypress Technology” means the Cypress Know-How, Cypress Patents and Cypress’ interest in
the Joint Inventions and Joint Patents.





 




			
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     1.47 “Determined Fair Market Value” shall have the meaning set forth in Section 6.4.



     1.48 “Development Committee” shall have the meaning set forth in Section 3.3(a).



     1.49 “Development Expense Summary” has the meaning set forth in Section 5.4(c).



     1.50 “Device” means a hand-held, multi-dose, electric device for the administration of API(s),
which device relies on, incorporates or uses Staccato Technology and may or may not be referred to
as the Staccato® system.



     1.51 “Disclosing Party” has the meaning set forth in Section 8.1.



     1.52 “FDA” means the United States Food and Drug Administration and its successor.



     1.53 “FTE” shall mean the equivalent of the work time of a full-time employee of Cypress or
its Affiliate actually spent on the performance of development or regulatory activities (including
clinical supply activities) with respect to Products over a 12-month period (including normal
vacations, sick days and holidays) based on 1,800 hours worked per 12-month period.



     1.54 “GAAP” shall mean United States generally accepted accounting principles, consistently
applied, and will mean the international financial reporting standards (IFRS) at such time as IFRS
becomes the generally accepted accounting standard in the United States and applicable securities
laws in the United States require use of IFRS.



     1.55 “Indemnitee” has the meaning set forth in Section 10.3.



     1.56 “Indemnitor” has the meaning set forth in Section 10.3.



     1.57 “Inventions” means any and all Know-How (including all inventions, discoveries,
improvements, processes and techniques) that are (a) made, created, discovered, conceived or
reduced to practice by or on behalf of Alexza or its Affiliates and/or Cypress or its Affiliates
during the Term in the course of development activities conducted with respect to any Product,
including activities under the Alexza Development Plan and (b) relate to the Alexza Technology,
Device, Product or Staccato Technology (including the manufacture or use thereof), whether or not
patentable or included in any claim of a patent or patent application, together with all
intellectual property rights therein.



     1.58 “Joint Inventions” means any and all Inventions made jointly by or on behalf of Cypress
or its Affiliates, on the one hand, and by or on behalf of Alexza or its Affiliates, on the other
hand.



     1.59 “Joint Patents” means all Patents claiming any Joint Inventions.



     1.60 “Know-How” means all tangible and intangible scientific, technical, clinical, regulatory,
trade, marketing, commercial, financial or business information and materials, including compounds,
solid state forms, compositions of matter, formulations, devices, techniques, processes, methods,
trade secrets, formulae, procedures, tests, data, results, analyses,



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documentation, reports, information (including pharmacological, toxicological, non-clinical
(including chemistry, manufacturing and control)), and clinical test design, methods, protocols,
data, results, analyses, and conclusions, quality assurance and quality control information,
regulatory documentation, information and submissions pertaining to, or made in association with,
filings with any Regulatory Authority, knowledge, know-how, skill and experience.




     1.61 “License Consideration” has the meaning set forth in Section 11.3(b)(iii)(2).



     1.62 “Marketing Approval” of a Product means all approvals, licenses, registrations or
authorizations of Regulatory Authorities in a country necessary for the manufacture, use, storage,
import, export, distribution, promotion, marketing, offer for sale and sale of such Product in such
country.



     1.63 “NDA” of a Product means a New Drug Application, as defined in the United States Federal
Food, Drug and Cosmetic Act, as amended, and applicable regulations promulgated thereunder by the
FDA, or the equivalent application filed with a Regulatory Authority in any other regulatory
jurisdiction, including all documents, data, and other information concerning such Product thus
filed that are necessary for gaining Marketing Approval for such Product.



     1.64 “Nicotine” means nicotine and any free base form, salt, solvate, clathrate, metal
coordination complex, prodrug, and/or metabolite of nicotine, as well as any amorphous,
crystalline, polymorphic form, of any of the foregoing.



     1.65 “Offered Incremental Development Expenses” shall have the meaning set forth in Section
5.4(c).



     1.66 “Option Triggering Event” shall mean any of (a) [...***...], (b) [...***...], or (c) [...***...].



     1.67 “Option Triggering Event Window” has the meaning set forth in Section 6.3.



     1.68 “Orange Book Alexza Background Patents” has the meaning set forth in Section 7.2(b)(i).



     1.69 “Patent(s)” means (a) all patents, including, without limitation, design patents,
certificates of invention, applications for certificates of invention, priority patent filings and
patent applications, including, without limitation, provisional patent applications and design
patent applications, and (b) any renewal, divisional, continuation, continuation-in-part, or
request for continued examination of any of such patents, certificates of invention and patent
applications, and any and all patents or certificates of invention issuing thereon, and any and all
reissues, reexaminations, extensions, certificates of correction, divisions, renewals,
substitutions, confirmations, registrations, revalidations, revisions, and additions of or to any
of the foregoing.





 




			
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     1.70 “Patent Term Extension” means any term extensions, supplementary protection certificates,
regulatory exclusivity and equivalents thereof offering patent protection beyond the initial term
with respect to any issued Patents.



     1.71 “Payment Rights” has the meaning set forth in Section 6.3.



     1.72 [...***...]



     1.73 [...***...].



     1.74 [...***...]



     1.75 “Product(s)” means (a) a product consisting of a Device that delivers or administers
Nicotine (as the sole API), (b) a container, cartridge and/or carrier that delivers Nicotine (as
the sole API) using the Staccato Technology, which container, cartridge and/or carrier is designed
for use with a Device or (c) a composition including Nicotine as the sole API and suitable to be
delivered by or used in a Device. For clarity, a Product may include any agent that does not
independently provide pharmacological activity or other effect in the diagnosis, cure, mitigation,
treatment or prevention of disease, and that does not affect structure or function of the body of a
human or other animal.



     1.76 “Put Option Notice” shall have the meaning set forth in Section 6.4.



     1.77 “Regulatory Authority” means any national, regional, state or local regulatory agency,
department, bureau, commission, council or other governmental entity whose review and/or approval
is necessary for the manufacture, packaging, use, storage, import, export, distribution, promotion,
marketing, offer for sale and sale of a Product.



     1.78 “Regulatory Filings” means all applications, approvals, licenses, registrations,
notifications, registrations, submissions and authorizations made to or received from a Regulatory
Authority in a country necessary for the development, manufacture and/or commercialization of a
pharmaceutical product, including any INDs, NDAs and Marketing Approvals.



     1.79 “Regulatory Requirements” means (a) with respect to Product supplied by Alexza under the
Alexza Development Plan [...***...]; and (b) with respect to Product supplied by Alexza under the
Alexza Development Plan [...***...].



     1.80 “Sale Consideration” has the meaning set forth in Section 11.3(b)(iii)(2).



     1.81 “SEC” has the meaning set forth in Section 8.5(a).



     1.82 “Senior Executives” means the Chief Executive Officer of Alexza and the Chief Executive
Officer of Cypress or their respective designees.





 




			
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     1.83 [...***...]



     1.84 “[...***...] Patents” means all Patents that (a) are Controlled by Alexza or its Affiliates
as of the Effective Date or during the Term, and (b) are directed solely toward [...***...]. For
clarity, the [...***...] Patents are not within the Alexza Patents.



     1.85 “Staccato Technology” means technology Controlled by Alexza or its Affiliates for the
vaporization of a pharmaceutical composition via rapid heating to form a condensation aerosol that
allows rapid systemic drug delivery to humans through deep lung inhalation.



     1.86 “Sublicensee” means an Affiliate or Third Party to whom Cypress grants a sublicense under
the Alexza Technology or to whom Alexza grants a sublicense under the Cypress Technology as
permitted under Section 2.4.



     1.87 “Technology Transfer Payment” has the meaning set forth in Section 5.2.



     1.88 “Term” has the meaning set forth in Section 11.1.



     1.89 “Third Party” means any entity other than Alexza or Cypress or their respective
Affiliates.



     1.90 “Third Party Claim” has the meaning set forth in Section 10.1.



     1.91 “Trademarks” means trademarks, trade names, trade dress, domain names, logos and
brandings.



     1.92 “Valuation Firm” shall have the meaning set forth in Section 6.5.



     1.93 “Valuation Notice” shall have the meaning set forth in Section 6.5.



ARTICLE 2




LICENSES



     2.1 License to Cypress Under Alexza Technology.



          (a) Subject to the terms and conditions of this Agreement, Alexza hereby grants Cypress an
exclusive (even as to Alexza), worldwide, royalty-free license, with the right to grant multiple
tiers of sublicenses pursuant to Section 2.4, under the Alexza Technology to research, develop,
make, have made, use, sell, offer for sale and import Products for any and all purposes.




          (b) Alexza further covenants that during the Term, to the extent that any Patents Controlled
by Alexza or any of its Affiliates, including [...***...] Patents, cover or claim the Product or its manufacture or use (other than Patents Controlled by a
Third Party that becomes an Affiliate of Alexza as a result of an acquisition of Alexza, whether by
merger, sale






 




			
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of stock, sale of assets or other form of acquisition), then Alexza shall, without further
consideration or action by Cypress, take such actions as may be reasonably necessary to confirm
such Patents shall be included as “Alexza Patents” hereunder.




     2.2 Trademark License to Cypress. Subject to the terms and conditions of this Agreement,
Alexza hereby grants Cypress an exclusive, worldwide, royalty-free license, with the right to grant
multiple tiers of sublicenses pursuant to Section 2.4, to use the Alexza Trademarks solely in
connection with the use, marketing, distribution, offer for sale and sale of Products.



     2.3 Alexza License under Cypress Technology. Subject to the terms and conditions of this
Agreement, Cypress hereby grants to Alexza (a) a non-exclusive, non-sublicensable (except to
subcontractors as permitted under Section 3.4(c), solely to permit such subcontractors to perform
Alexza’s assigned responsibilities under the Alexza Development Plan), royalty-free, fully-paid
license, under the Cypress Technology to conduct any and all activities assigned to Alexza under
the Alexza Development Plan during the term of the Alexza Development Plan and (b) an exclusive,
worldwide, [...***...] license, with the right to grant multiple tiers of sublicenses pursuant to
Section 2.4, under the Cypress Technology to research, develop, make, have made, use, sell, offer
for sale and import any and all products that deliver or administer any API other than Nicotine
using the Staccato Technology, including, without limitation, a Device that delivers any API other
than Nicotine, for any and all purposes. [...***...]



     2.4 Sublicenses. The licenses granted by Alexza to Cypress in Sections 2.1 and 2.2 may
be sublicensed by Cypress to its Affiliates and to Third Parties, and may be further sublicensed by
a Sublicensee [...***...]. Each agreement under which Cypress grants a sublicense under the licenses
set forth in Sections 2.1 and 2.2 (each, a “Cypress Sublicense Agreement”) shall be consistent
with, and subject to the applicable terms and conditions of, this Agreement. With respect to any
vendors or subcontractors who receive a sublicense pursuant to this Section 2.4 (it being
understood that a strategic partner, collaborator or commercial licensee shall not be considered a
vendor or subcontractor), such Sublicensee shall be required to assign or exclusively license (with
the right to grant a sublicense to Alexza) to Cypress all Patents and Know-How made by such
Sublicensee related to the Device or Staccato Technology, to the extent useful for products other
than the Product; provided that if such Sublicensee shall not agree to such obligation, Cypress
shall notify Alexza and Alexza shall have the right to negotiate for such rights with respect to
such other products other than Product as part of such Cypress negotiations for a period of 45
days; provided further, that Cypress shall not otherwise be limited in entering into an agreement
with such Sublicensee with respect to the Product. Promptly after the execution thereof, Cypress
shall provide a copy of each Cypress Sublicense Agreement to Alexza, provided that Cypress may
redact from such copy financial and other terms not relevant for purposes of confirming the Cypress
Sublicense Agreement’s compliance with the terms of this Agreement. For clarity, a material breach
of this Agreement by the acts or omissions of a Sublicensee under a Cypress Sublicense Agreement
shall be deemed a material breach of this Agreement and shall require Cypress to cure such breach
or terminate such Cypress Sublicense Agreement. The license granted by Cypress to Alexza in
Section 2.3(b) may be sublicensed by Alexza to its Affiliates and to Third Parties, and may be
further sublicensed by a Sublicensee





 




			
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[...***...]. Each agreement under which Alexza
grants a sublicense under the license set forth in Section 2.3(b) (each, an “Alexza Sublicense
Agreement”) shall be consistent with, and subject to the applicable terms and conditions of, this
Agreement. With respect to any vendors or subcontractors who receive a sublicense pursuant to this
Section 2.4 (it being understood that a strategic partner, collaborator or commercial licensee
shall not be considered a vendor or subcontractor), such Sublicensee shall be required to assign or
exclusively license (with the right to grant a sublicense to Alexza) to Alexza all Patents and
Know-How made by such Sublicensee related to the Product, to the extent useful for Product;
provided that if such Sublicensee shall not agree to such obligation, Alexza shall notify Cypress
and Cypress shall have the right to negotiate for such rights with respect to the Product as part
of such Alexza negotiations for a period of 45 days; provided further, that Alexza shall not
otherwise be limited in entering into an agreement with such Sublicensee with respect to the
Product. Promptly after the execution thereof, Alexza shall provide a copy of each Alexza
Sublicense Agreement to Cypress, provided that Alexza may redact from such copy financial and other
terms not relevant for purposes of confirming the Alexza Sublicense Agreement’s compliance with the
terms of this Agreement. For clarity, a material breach of this Agreement by the acts or omissions
of a sublicensee under an Alexza Sublicense Agreement shall be deemed a material breach of this
Agreement by Alexza and shall require Alexza to cure such breach or terminate such Alexza
Sublicense Agreement.




     2.5 Alexza Retained Rights. Notwithstanding anything to the contrary in Section 2.1, Alexza
retains the right under the Alexza Technology to conduct any and all activities assigned to it
under the Alexza Development Plan.



     2.6 Rights Reserved. Except for the rights and licenses expressly granted in this Agreement,
and subject to Section 2.7, Alexza retains all rights under its intellectual property, including
the Alexza Technology, and Cypress retains all rights under its intellectual property, including
the Cypress Technology and Cypress Product Invention Technology, and no rights shall be deemed
granted by one Party to the other Party by implication, estoppel or otherwise. For the avoidance
of doubt, the licenses granted to Cypress under Sections 2.1 and 2.2 do not confer any rights to
Cypress with respect to any product other than Products, and the license granted to Alexza under
Section 2.3 does not confer any rights to Alexza with respect to any product other than products
that deliver or administer any API other than Nicotine using the Staccato Technology.



     2.7 Negative Covenant. Alexza covenants that, except pursuant to the Alexza Development Plan,
it will not, itself or through a Third Party, research, develop, make, have made, use, sell, offer
for sale or import any product using the Staccato Technology, [...***...]Patents, Alexza Patents or
Joint Patents (a) that delivers Nicotine (alone or in combination with one or more other API(s)) or
(b) that delivers any other API(s) and that is indicated as an aid to smoking cessation treatment.



     2.8 Covenant Not to Sue. Alexza hereby covenants that it, its Affiliates and licensees and
all successors-in-interest thereto will not sue, bring an action against, or otherwise assert any
claim against Cypress or any of its Sublicensees (and all successors of any of the





 




			
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foregoing) for infringement of any [...***...] Patent by Cypress’ or any of its Sublicensees’
development, manufacture, or commercialization of Products.




ARTICLE 3




DEVELOPMENT



     3.1 Overview. The Parties agree that Alexza will conduct certain development activities and
will supply certain clinical trial materials and other test materials to Cypress [...***...], as and to
the extent set forth in the Alexza Development Plan. Cypress shall be solely responsible for all
regulatory and clinical activities for Products, and shall conduct [...***...] using Product supplied
by Alexza pursuant to the Alexza Development Plan.



     3.2 Alexza Development Plan. All activities conducted by Alexza under this Agreement for the
development of the Product will be conducted pursuant to the Alexza Development Plan. The Parties
have agreed to the Alexza Development Plan attached hereto as Exhibit C as of the Effective Date,
which describes the plan for development of the Product, including the Device, by Alexza from the
Effective Date through completion by Cypress of [...***...]. All amendments to the Alexza Development
Plan shall be subject to the prior written approval of the Development Committee. At least 30 days
prior to the beginning of each calendar quarter in which Alexza will conduct activities under the
Alexza Development Plan, the Development Committee shall review Alexza’s progress under the Alexza
Development Plan and determine whether to amend the Alexza Development Plan, including the payment
to Alexza under Section 5.4(a) for the subsequent calendar quarter.



     3.3 Development Committee.



          (a) Establishment; Members. Within 30 days following the Effective Date, Cypress and Alexza
shall establish a joint development committee (“Development Committee”) to oversee, review and
coordinate the activities of the Parties under the Alexza Development Plan. The Development
Committee shall be composed of an equal number of representatives of each of Cypress and Alexza.
In addition, [...***...] shall be entitled to attend
meetings of the Development Committee as a non-voting member for so long as he remains an employee
or contractor of Cypress and is performing development activities with respect to Products on
behalf of Cypress. A representative of Cypress shall act as the chairperson of the Development
Committee.




          (b) Duties. The Development Committee shall:




               (i) review the Alexza Development Plan and review and approve amendments to the Alexza
Development Plan;



               (ii) provide a forum for the Parties to exchange information and coordinate their respective
activities under the Alexza Development Plan; and





 




			
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               (iii) perform such other duties as are specifically assigned to the Development Committee
pursuant to this Agreement.



          (c) Meetings; Minutes. All Development Committee meetings shall be held as often as the
members may determine, but in any event Development Committee meetings shall occur not less than
once per calendar quarter. Such meetings may be held in person, or by any means of
telecommunications or video conference, as the members deem necessary or appropriate. A quorum for
Development Committee meetings shall be 4 members (not including any non-voting member), with at
least 2 members from each Party. Within 30 days after each meeting, the chairperson of the
Development Committee will provide the Parties with a written report describing, in reasonable
detail, the issues requiring resolution and the agreed resolution of previously reported issues.
The Development Committee shall disband upon Alexza’s receipt of the Technology Transfer Payment.




          (d) Decisions of the Development Committee. All actions of the Development Committee
(including, without limitation, any action to amend the Alexza Development Plan) shall be made
following a unanimous vote, with the representatives of Cypress on the Development Committee having
one vote, collectively, and the representatives of Alexza on the Development Committee having one
vote, collectively. If the Development Committee fails to reach unanimous agreement on a matter
before it, then (a) with respect to matters regarding Alexza’s activities under the Alexza
Development Plan, the Senior Executives shall negotiate in good faith to resolve the dispute within
30 days, and (b) with respect to matters regarding Cypress’ development activities for the Product,
the vote of the representatives of Cypress on the Development Committee shall be the deciding vote.




     3.4 Conduct of Development Activities under the Alexza Development Plan.



          (a) Compliance with Alexza Development Plan and Applicable Laws. All development activities
conducted by Alexza with respect to the Product will be conducted in accordance with the Alexza
Development Plan and the other provisions of this Agreement. Each Party shall conduct those
Product development activities for which it is responsible under this Agreement in compliance in
all material respects with all Applicable Laws and in accordance with good scientific and clinical
practices, applicable under the Applicable Laws of the country in which such activities are
conducted. Without limiting the foregoing, all Products and other clinical trial and test
materials supplied by Alexza pursuant to this Agreement shall be manufactured in accordance with
the specifications therefor, as agreed upon by the Parties, and applicable Regulatory Requirements.




          (b) Diligence. Alexza shall use Commercially Reasonable Efforts to conduct and complete the
activities assigned to it in the Alexza Development Plan in order to achieve the goals of the
Alexza Development Plan. Alexza shall proceed diligently and in a timely manner with the studies
and activities for which it is responsible with respect to the development of the Product under the
Alexza Development Plan by using its good faith efforts to allocate sufficient time, effort,
equipment and facilities to such development activities and to use personnel with sufficient skills
and experience as are required to accomplish such studies and activities in accordance with the
terms of this Agreement. Alexza’s performance is in part dependent and






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conditioned upon Cypress’ timely and effective completion of the activities and obligations
assigned to it under this Agreement. To the extent that Alexza’s inability to perform or complete
the activities assigned to it pursuant to the Alexza Development Plan is caused by Cypress’ failure
to carry out its activities and responsibilities with respect to the development of the Product,
such failure by Alexza to perform or complete such activities shall be excused. For clarity, the
failure of Alexza to achieve any scientific or technical result contemplated under the Alexza
Development Plan, or to conduct any activity or provide any deliverable set forth in the Alexza
Development Plan that depends on the successful achievement of any such result that is not
achieved, shall not be a breach of the foregoing so long as Alexza uses Commercially Reasonable
Efforts to achieve such result in accordance with the first sentence of this Section 3.4(a).




          (c) Use of Subcontractors. Alexza may perform some or all of its obligations under the Alexza
Development Plan through one or more subcontractors, provided that (i) none of the rights of either
Party hereunder are diminished or otherwise adversely affected as a result of such subcontracting
and (ii) the subcontractor undertakes in writing obligations of confidentiality and non-use
regarding Confidential Information which are substantially the same as those undertaken by the
Parties pursuant to Article 8 hereof. In the event Alexza performs any of its obligations under
the Alexza Development Plan through a subcontractor, then Alexza will at all times be responsible
for the performance and payment of such subcontractor, except as otherwise agreed in writing by the
Parties.




          (d) Materials Transfer. In order to facilitate the development activities contemplated by
this Agreement, either Party may provide to the other Party certain biological materials or
chemical compounds controlled by the supplying Party (collectively, “Materials”) for use by the
other Party in furtherance of such development activities. Except as otherwise provided for under
this Agreement, to the extent that either Party provides Materials to the other Party, all such
Materials shall be the sole property of Cypress (regardless of which Party supplies such
Materials), subject to Alexza’s intellectual property rights in such Materials, will be used by the
Parties only in furtherance of the development activities with respect to the Product, will not be
used or delivered by Alexza to or for the benefit of any Third Party, except for subcontractors
pursuant to Section 3.4(c), without the prior written consent of Cypress, and will be used by each
Party in compliance with all Applicable Laws. The Materials supplied under this Agreement must be
used by each Party with prudence and appropriate caution in any experimental work because not all
of their characteristics may be known. Except as expressly set forth in this Agreement, ALL
MATERIALS ARE PROVIDED “AS IS” AND WITHOUT ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY
PARTICULAR PURPOSE OR ANY WARRANTY THAT THE USE OF THE MATERIALS WILL NOT INFRINGE OR VIOLATE ANY
PATENT OR OTHER PROPRIETARY RIGHTS OF ANY THIRD PARTY.




          (e) Information Regarding Development Activities. Each Party shall maintain records, in
sufficient detail and in good scientific manner appropriate for patent and regulatory purposes,
which shall fully and properly reflect all work done and results achieved by or on behalf of such
Party in the performance of its development activities with respect to the Product. Each Party
shall keep the other appropriately informed of the status of Product






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development activities conducted by it or on its behalf. Within 30 days following the end of
each calendar quarter prior to completion of activities under the Alexza Development Plan, without
limiting the foregoing, each Party shall promptly provide the Development Committee with summaries
in reasonable detail of all data and results generated or obtained in the course of such Party’s
performance of development activities under this Agreement.




          (f) Termination of Alexza Development Plan. Cypress may terminate the Alexza Development Plan
and its obligations under Section 3.4(b) and Section 4.2 in the event of any material breach by
Alexza of its obligations under this Section 3.4 or Section 3.5 of this Agreement, which breach is
not cured within [...***...] after notice from Cypress
requesting cure of the breach, provided that such breach was not caused by Cypress’ breach of its
obligation under Section 3.4(b) or Section 5.4(a) of this Agreement. Termination of the Alexza
Development Plan shall not relieve the Parties of any rights or obligation under this Article 3
accruing prior to such termination.




     3.5 Regulatory Filings and Marketing Approvals. Alexza shall conduct those regulatory support
activities, including assisting Cypress in preparing Regulatory Filings, for the Product as set
forth in the Alexza Development Plan. Cypress shall be responsible for all other regulatory
activities with respect to Products, including preparing and filing regulatory filings, including
INDs, in the name of Cypress, seeking all Marketing Approvals, communicating with Regulatory
Authorities, and holding all Marketing Approvals for Products.



ARTICLE 4




FURTHER DEVELOPMENT; COMMERCIALIZATION



     4.1 Product Development. As between the Parties, Cypress shall have sole control, authority,
and discretion over the research, development and commercialization of Products throughout the
world, subject to Article 3.



     4.2 Diligence. Cypress shall use Commercially Reasonable Efforts to research, develop and
commercialize Products, whether alone or with or through one or more Sublicensees, including using
Commercially Reasonable Efforts to provide to Alexza those deliverables necessary for Alexza to
conduct its activities under the Alexza Development Plan; provided that, to the extent that
Cypress’ inability to perform or complete Product research or development activities is caused by
Alexza’s failure to carry out its activities and responsibilities assigned to it pursuant to the
Alexza Development Plan, Cypress’ failure to perform or complete such Product research or
development activities shall be excused; provided further that Cypress may discontinue development
of Products, subject to compliance with Section 11.2. For clarity, the failure of Cypress to
achieve any scientific or technical result in the research or development of Products, or to
conduct any activity or provide any deliverable that depends on the successful achievement of any
such result that is not achieved, shall not be a breach of the foregoing so long as Cypress uses
Commercially Reasonable Efforts to achieve such result in accordance with the first sentence of
this Section 4.2. No later than each anniversary of the Effective Date, until the





 




			
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first commercial sale of the Product, Cypress shall submit to Alexza a written annual progress
report summarizing Cypress’ and its Sublicensees’ research and development of Products and efforts
toward commercialization of the Product in the previous year. Each such report shall be the
Confidential Information of Cypress.




     4.3 Compliance with Applicable Laws. Cypress shall comply in all material respects with all
Applicable Laws in performing its obligations under this Agreement and with respect to its use,
sale and disposition of Products.



ARTICLE 5




PAYMENTS; TECHNOLOGY TRANSFER; ROYALTIES



     5.1 Upfront Payment. In consideration for the licenses and rights granted to Cypress under
this Agreement, Cypress shall pay to Alexza on the Effective Date a non-refundable, non-creditable
payment of $5,000,000.



     5.2 Technology Transfer Payment. Within [...***...]
days after [...***...], Cypress shall notify Alexza in writing of its decision either (a) to continue
development of Products or (b) to discontinue development of Products. If Cypress decides to
continue development of Products, Cypress shall pay Alexza a non-refundable, non-creditable payment
of $1,000,000 (the “Technology Transfer Payment”) within [...***...] days after [...***...].



     5.3 Technology Transfer. As soon as reasonably practicable after receipt by Alexza of the
Technology Transfer Payment, Alexza shall work with Cypress, at no cost to Cypress, to facilitate
the timely transfer to Cypress of all Know-How and materials relating specifically to the Product
that are then in Alexza’s possession and Control, in a format to be agreed between the Parties.
Such Product-specific Know-How and materials shall include data and reports, retained clinical
trial toxicology study materials, analytical methods, process development methods and stability
reports and samples. Such transfer shall occur in a manner and following a reasonable schedule to
be established by the Parties and shall be completed within [...***...] days after Alexza’s receipt of
the Technology Transfer Payment. Subject to Alexza’s intellectual property rights in the Alexza
Technology, Cypress shall own all materials transferred to Cypress under this Section 5.3,
including those items specifically included as deliverables in the Alexza Development Plan.



     5.4 Funding Obligations. The funding of Product development expenses shall be as follows:



          (a) Funding of Alexza Development Expenses. On the Effective Date and on the first day of
each of the 3 calendar quarters thereafter, Cypress shall make a payment to Alexza in the amount
specified in the budget in the then-current Alexza Development Plan (the “Alexza Development
Expenses”), which amount is intended to reimburse Alexza’s internal and external costs and expenses
to conduct its activities under the Alexza Development Plan in such calendar






 




			
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quarter, including, as applicable, the costs of all clinical trial materials provided by
Alexza to Cypress. Except for such payments, Alexza shall be solely responsible for all expenses
it incurs to conduct its activities under the Alexza Development Plan, including any amounts Alexza
incurs to conduct activities under the Alexza Development Plan in excess of the amount set forth in
the budget in the then-current Alexza Development Plan for such activities, subject to adjustment
as a result of any amendments to the Alexza Development Plan pursuant to Section 3.2.




          (b) Funding of Development Expenses. Cypress shall fund 100% of Aggregate Development
Expenses, provided that in no event shall Cypress be obligated to fund more than a total of
$22,000,000 in Aggregate Development Expenses, including all Alexza Development Expenses funded
under Section 5.4(a). Cypress may, in its sole discretion, invest additional amounts to develop
the Products, subject to Alexza’s funding option set forth in Section 5.4(c) and 5.4(d), which
funding option shall terminate on the first Marketing Approval of a Product.




          (c) Reporting of Development Expenses. Within [...***...] days following the end of each Calendar
Half prior to or containing the date of first Marketing Approval of a Product, Cypress shall
deliver to Alexza a written summary (a “Development Expenses Summary”) that indicates (i) the
Aggregate Development Expenses incurred during that Calendar Half (such amount, the “Calendar Half
Development Expenses”) and (ii) the Aggregate Development Expenses incurred from the Effective Date
to the end of that Calendar Half (such amount, the “Cumulative Aggregate Development Expenses”),
and includes reasonable detail describing the related development efforts and related Aggregate
Development Expenses incurred in the applicable Calendar Half to permit their identification as
such. The Development Expenses Summary delivered by Cypress to Alexza for the Calendar Half in
which the Cumulative Aggregate Development Expenses exceed a total of $22,000,000 shall also
indicate the amount that is 10% of such excess, and all subsequent Development Expenses Summaries
delivered by Cypress to Alexza pursuant to this Section 5.4(c) shall also indicate the amount that
is 10% of the Calendar Half Development Expenses for such Calendar Half (in each case, the “Offered
Incremental Development Expenses”).




          (d) Alexza Funding Option. Alexza may, at its option, within [...***...] days of receiving any
Development Expenses Summary that includes any Offered Incremental Development Expenses, reimburse
Cypress for all or any portion of any Offered Incremental Development Expenses indicated on such
Development Expenses Summary by paying all or any portion of such amount by United States Federal
Reserve electronic wire transfer in immediately available funds to the following bank account:




     [...***...]


To the extent Alexza reimburses Cypress for all or any portion of the Offered Incremental
Development Expenses indicated on any Development Expenses Written Summary prior to the expiration
of such [...***...]-day period, the amount reimbursed by Alexza shall be “Alexza Funded Incremental
Development Expenses” for all purposes of this Agreement from and after






 




			
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the expiration of such [...***...]-day period. If Alexza fails to reimburse Cypress any Offered
Incremental Development Expenses, the Carry Credit Applicable Percentage shall be reduced for any
unfunded Offered Incremental Development Expenses as provided in the definition of Carry Credit
Applicable Percentage. For clarity, this Section 5.4(d), Alexza’s option to fund any Offered
Incremental Development Expenses, and the accrual of unfunded Offered Incremental Development
Expenses shall apply only with respect to development expenses incurred prior to the first
Marketing Approval of a Product.




     5.5 Reports. In connection with any payment made by Cypress to Alexza under Section 6.1 or
6.2, Cypress shall also deliver with payments to Alexza a written report (the “Asset Sale/License
Payment Report”) containing reasonable detail so as to permit Alexza to confirm the amounts paid
and the form of consideration received, as applicable.



     5.6 Alexza Account Information. All payments due from Cypress to Alexza under this Agreement
shall be made by United States Federal Reserve electronic wire transfer in immediately available
funds to the following bank account:



     [...***...]



     5.7 Withholding of Taxes. A Party receiving payments under this Agreement will pay any
and all taxes levied on account of such payment. If any taxes are required to be withheld by the
paying Party, it will (a) deduct such taxes from the remitting payment, (b) timely pay the taxes to
the proper taxing authority, and (c) send proof of payment to the other Party and certify its
receipt by the taxing authority within 60 days following such payment.



     5.8 Audits. Cypress shall keep complete and accurate records of the Cypress Development
Expenses, Asset Sale Consideration and Asset License Consideration data relating to the
calculations of payments required by this Agreement in sufficient detail to permit Alexza to
confirm the accuracy of the calculations with respect to payments by the respective Parties under
this Agreement. Cypress shall retain and maintain such records for the minimum period required by
applicable laws, rules and regulations but in any event at least 3 years from the end of the
calendar year to which they pertain. Alexza shall have the right to have an independent, certified
public accountant, selected by Alexza and reasonably acceptable to Cypress, review any such records
of Cypress in the location(s) where such records are maintained by Cypress upon not less than 4
weeks prior notice and during regular business hours and under obligations of confidentiality
hereunder, for the sole purpose of verifying the basis and accuracy of payments made or due under
this Agreement. If the review of such records reveals that Cypress has failed to accurately
calculate any payment to or from Alexza due under this Agreement, then Cypress shall promptly pay
to Alexza any resulting amounts due hereunder, or Cypress or Alexza shall promptly refund
overpayments made by the other Party, together with interest calculated in the manner provided in
Section 5.9. If any such audit reveals an underpayment or error by Cypress in any calendar year in
an amount greater than 5% of the amounts actually presented or due for a calendar year, then
Cypress shall reimburse Alexza for the cost of the audit. Such audit shall be conducted no more
than once per calendar year.





 




			
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     5.9 Late Payments. In the event that any payment due hereunder is not made when due, the
payment shall accrue interest from the date due at the rate of 1.5% per month; provided, however,
that in no event shall such rate exceed the maximum legal annual interest rate; provided further
that no such interest shall accrue until the other Party has provided written notice of such late
payment or during any period that any dispute with respect to a payment is being diligently pursued
in good faith by the Party from whom such payment is claimed. The payment of such interest shall
not limit a Party from exercising any other rights it may have as a consequence of the lateness of
any payment.



ARTICLE 6




PAYMENT TO ALEXZA FOR ASSET LICENSE OR ASSET SALE; CYPRESS BUY-OUT

OPTION; ALEXZA PUT OPTION



     6.1 Payment to Alexza for Asset License or Asset Sale. If Cypress completes an Asset License
or Asset Sale, then Cypress shall make payments to Alexza as provided in this Section 6.1. The
amount of consideration payable to Alexza with respect to the Asset License or Asset Sale shall be
calculated as follows:



          (a) Asset Sale. In the event that Cypress or any of its Affiliates completes an Asset Sale,
Cypress shall pay to Alexza, within [...***...] days of
Cypress or any of its Affiliates receiving any Asset Sale Consideration for such Asset Sale, an
amount equal to the product of (i) the Asset Sale Consideration so received multiplied by (ii) the
Carry Credit Applicable Percentage at such time. For purposes of clarity, the Parties acknowledge
and agree that Cypress and its Affiliates may receive Asset Sale Consideration in the form of
payments made at more than one time, and that Cypress’ obligation to pay Alexza any Asset Sale
Consideration at each time Asset Sale Consideration is received, as determined by application of
the formula set forth in this Section 6.1(a), shall only apply with respect to the Asset Sale
Consideration amounts actually received by Cypress or any of its Affiliates at that time. For
purposes of calculating any Asset Sale Consideration received by Cypress or any of its Affiliates,
to the extent the consideration received consists of property other than cash, such non-cash
consideration shall be valued at the fair value of that property, as determined in good faith by
the Board of Directors of Cypress, as of the date on which Cypress or any of its Affiliates, as
applicable, is obligated to value such non-cash consideration pursuant to the definitive agreements
executed in connection with the applicable Asset Sale, or if no such date is stated therein, the
date on which Cypress or any of its Affiliates receives such non-cash consideration.




          (b) Asset License. In the event that Cypress or any of its Affiliates, completes an Asset
License, Cypress shall pay to Alexza, within [...***...]days of it or any of its Affiliates receiving
any Asset License Consideration for such Asset License, an amount equal to the product of (i) the
Asset License Consideration so received multiplied by (ii) the Carry Credit Applicable Percentage
at such time. For purposes of clarity, the Parties acknowledge and agree that Cypress and its
Affiliates may receive Asset License Consideration in the form of payments made at more than one
time, and that Cypress’s obligation to pay Alexza any Asset License






 




			
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Consideration at each time Asset License Consideration is received, as determined by
application of the formula in this Section 6.1(b), shall only apply with respect to the Asset
License Consideration actually received by Cypress or any of its Affiliates at that time. For
purposes of calculating any Asset License Consideration received by Cypress or any of its
Affiliates, to the extent the consideration received consists of property other than cash, such
non-cash consideration shall be valued at the fair value of that property, as determined in good
faith by the Board of Directors of Cypress, as of the date on which Cypress or any of its
Affiliates receives such non-cash consideration.




     6.2 Form of Consideration. All non-cash consideration payable by Cypress to Alexza pursuant
to Section 6.1 shall be paid by Cypress to Alexza in the same form as the non-cash consideration
received by Cypress or any of its Affiliates in connection with the applicable Asset Sale or Asset
License in an amount that, on a proportional basis, equals the percentage of non-cash consideration
received by Cypress or any of its Affiliates in connection with such applicable Asset Sale or Asset
License. In the event that Cypress makes any payments to Alexza pursuant to Section 6.1 using
non-cash consideration, Cypress shall use its good faith efforts to limit any restrictions
applicable to Cypress or any of its Affiliates, as applicable, or Alexza on selling, assigning or
otherwise transferring such non-cash consideration to commercially reasonable restrictions,
appropriate to the circumstances of the applicable Asset Sale or Asset License. Notwithstanding
anything to the contrary set forth in this paragraph, in the event that Cypress determines,
following consultation with its outside legal counsel, that payment to Alexza of non-cash
consideration would result in a violation of federal or state securities laws or a similar legal
requirement, then Cypress shall be entitled to pay such amount to Alexza in cash.



     6.3 Cypress Buy-Out Option. Within [...***...] days
after each Option Triggering Event (each, an “Option Triggering Event Window”), Cypress shall have
the option, in its sole and absolute discretion and without obligation, to deliver written notice
(the “Buy-Out Option Notice”) to Alexza of Cypress’ irrevocable election to buy out all of its
obligations to Alexza under this Agreement pursuant to this Article 6 by paying to Alexza, in cash,
an amount equal to the product of (a) the then-current fair market value of the future Asset
License Consideration and/or Asset Sale Consideration and (b) the Carry Credit Applicable
Percentage then in effect (the “Payment Rights”). In addition, Cypress shall have the option, in
its sole and absolute discretion and without obligation, to deliver a Buy-Out Option Notice to
Alexza of Cypress’ irrevocable election to buy out Alexza’s Payment Rights in cash at any time
other than during an Option Triggering Event Window, provided that if Cypress delivers such Buy-Out
Option Notice to Alexza other than during an Option Triggering Event Window then [...***...], solely
for purposes of calculating the Payment Rights pursuant to this paragraph. If Cypress completes the
Buy-Out as described in Section 6.5 below, this Agreement (together with all of Cypress’s
obligations hereunder) shall expire under Section 11.1, subject to the terms of Section 11.4 hereof
and provided that Article 7 would survive any expiration of this Agreement triggered by the
completion of the Buy-Out.



     6.4 Alexza Put Option. Cypress shall notify Alexza in writing promptly upon [...***...] a Change
of Control of Cypress (a “Change of Control Notice”). Provided that as of





 




			
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the date that such Change of Control Notice is delivered by Cypress both (a) Cypress has made
the Technology Transfer Payment and (b) the Carry Credit Applicable Percentage has not been reduced
pursuant to Section 5.4(c), then Alexza shall have the option, in its sole and absolute discretion
but without obligation, to deliver, within [...***...] days following receipt of the Change of Control
Notice, irrevocable written notice (the “Put Option Notice”) to Cypress requiring Cypress to buy
out its Payment Rights in cash immediately prior to the closing of the Change of Control of
Cypress. If Cypress completes the Buy-Out as described in Section 6.5 below, this Agreement
(together with all of Cypress’s obligations hereunder) shall expire under Section 11.1, subject to
the terms of Section 11.4 hereof and provided that Article 7 would survive any expiration of this
Agreement triggered by the completion of the Buy-Out.




     6.5 Valuation. Following receipt of the Buy-Out Option Notice or Put Option Notice,
authorized representatives of Cypress and Alexza shall promptly meet, at a time and place mutually
agreeable to both Cypress and Alexza, for the purpose of negotiating in good faith to determine the
fair market value of the Payment Rights. In the event that the authorized representatives of
Cypress and Alexza are able to agree on a fair market value for the Payment Rights within [...***...]
days following the date the Buy-Out Option Notice is delivered by Cypress to Alexza or the Put
Option Notice is delivered by Alexza to Cypress, as the case may be, Cypress shall complete the
Buy-Out by paying such agreed-upon fair market value in cash to Alexza within [...***...] days of the
date on which the Cypress and Alexza authorized representatives are so able to reach agreement. In
the event that the authorized representatives of Cypress and Alexza are unable to agree upon the
fair market value of the Payment Rights within [...***...] days following the date the Buy-Out Option Notice is delivered by Cypress to Alexza
or the Put Option Notice is delivered by Alexza to Cypress, as the case may be, the Parties shall
engage a mutually agreeable independent third party valuation expert (a “Valuation Firm”). In the
event that Cypress and Alexza are unable to select a mutually agreeable Valuation Firm within
[...***...] days, then promptly following such date each Party shall select a Valuation Firm, and such
Valuation Firms shall select a mutually agreeable Valuation Firm. The engagement of the Valuation
Firm selected shall be limited to the determination of the fair market value of the Payment Rights.
The Valuation Firm selected to conduct the valuation shall agree to complete the terms of its
engagement within [...***...] days following its formal engagement as Valuation Firm, subject in all
respects to the compliance by Cypress and Alexza of the terms of this paragraph. In determining
such fair market value, the Valuation Firm selected shall be entitled to apply discounted cash flow
models and such other valuation models as it determines are appropriate under the circumstances,
together with any other valuation models as may be mutually agreed upon by both Cypress and Alexza.
Each of Cypress and Alexza shall provide reasonable access to its information and personnel at
reasonable times and on a reasonable number of occasions to the Valuation Firm as may be reasonably
necessary for the Valuation Firm to determine such fair market value upon such Valuation Firm
entering into a confidentiality agreement on terms satisfactory to the applicable Party. Following
its determination, the Valuation Firm shall deliver to each of Cypress and Alexza a valuation
notice (the “Valuation Notice”), setting forth the fair market value of the Payment Rights (the
“Determined Fair Market Value”). Within [...***...] days following receipt by Cypress of the





 




			
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Valuation Notice, Cypress shall complete the Buy-Out by paying an amount in cash to Alexza
equal to the Determined Fair Market Value.




ARTICLE 7




INTELLECTUAL PROPERTY



     7.1 Ownership of Intellectual Property.



          (a) Alexza Technology and Cypress Technology. Alexza has and shall retain all right, title
and interest in and to the Alexza Technology and [...***...] Patents. Cypress has and shall retain all right, title and interest in and to the
Cypress Technology and Cypress Product Invention Technology.




          (b) Inventions. Each Party shall have and retain all right, title and interest in and to all
Inventions that are made solely by one or more employees or agents of such Party or its Affiliates.
Inventorship shall be determined in accordance with U.S. patent law. The Parties shall jointly
own all right, title and interest in and to all Joint Inventions, and Joint Patents resulting
therefrom, in accordance with joint ownership interests of co-inventors under U.S. patent laws
(that is, each Party shall have full rights to license, assign and exploit such Joint Inventions
and Joint Patents anywhere in the world, without any requirement of gaining the consent of, or
accounting to, the other Party), subject to the licenses granted herein and subject to any other
intellectual property held by the other Party.




          (c) Disclosure. Each Party shall promptly disclose to the other all Inventions, including any
invention disclosures or other similar documents, submitted to it by its or its Affiliates’
employees, agents or independent contractors describing such Inventions, and all information
relating to such inventions to the extent necessary for the preparation, filing and maintenance of
any Patent with respect to such Invention.




     7.2 Patent Prosecution and Maintenance.



          (a) Alexza Patents.




               (i) Alexza Background Patents. Except as otherwise provided in this Section 7.2(a)(i), Alexza
shall have the first right to prepare, file, prosecute (including any interferences, reissue
proceedings and reexaminations) and maintain the Alexza Background Patents in any jurisdiction in
the world, at its sole expense. Alexza shall keep Cypress reasonably informed of its prosecution
activities with respect to the Alexza Background Patents. If, in accordance with Section 7.8, the
Parties agree that a particular Alexza Background Patent will be listed or would reasonably be
expected to be listed in the Orange Book (an “Orange Book Alexza Background Patent”), then Alexza
shall provide Cypress with a copy of material communications from any patent authority regarding
such Orange Book Alexza Background Patent, and shall provide drafts of any material filings or
responses to be made to such patent authorities regarding the Orange Book Alexza Background Patent
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advance of submitting such filings or responses so that Cypress may have an opportunity to
review and comment thereon. Alexza shall discuss and reasonably consider any comments received
from Cypress. If Alexza abandons, ceases prosecution or does not maintain any Orange Book Alexza
Background Patent anywhere in the world, then Alexza shall provide Cypress written notice thereof
at least [...***...] days before any deadline for taking
action to avoid abandonment (or other loss of rights) and, subject to any rights granted by Alexza
to a Third Party as of the Effective Date, Cypress (or its Sublicensee) shall have the right, in
its sole discretion, to file for or continue prosecution and/or maintenance of such Orange Book
Alexza Background Patent at Cypress’ own expense.




               (ii) Alexza Product Patents other than Alexza Nicotine Product Patents. Except as otherwise
provided in this Section 7.2(a)(ii), Alexza shall have the first right to prepare, file, prosecute
(including any interferences, reissue proceedings and reexaminations) and maintain the Alexza
Product Patents, excluding the Alexza Nicotine Product Patents which are addressed in Section
7.2(a)(iii), in any jurisdiction in the world, at its sole expense. Alexza shall keep Cypress
reasonably informed of its prosecution activities with respect to such Alexza Product Patents.
Alexza shall provide Cypress with a copy of material communications from any patent authority
regarding such Alexza Product Patents, and shall provide drafts of any material filings or
responses to be made to such patent authorities regarding such Alexza Product Patent a reasonable
amount of time in advance of submitting such filings or responses so that Cypress may have an
opportunity to review and comment thereon. Alexza shall use commercially reasonable efforts to
separate any Alexza Patent claims directed primarily toward a Product into distinct divisional (or
equivalent) patent applications, to the extent feasible and permitted under Applicable Laws, and to
the extent Alexza does not reasonably believe that such separation would materially adversely
affect the claim scope or likelihood or timing of patent issuance of any Alexza Patent, and such
distinct divisional (or equivalent) patent applications shall be Alexza Nicotine Product Patents.
If Alexza abandons, ceases prosecution or does not maintain any Alexza Product Patent (other than
any Alexza Nicotine Product Patent) anywhere in the world, then Alexza shall provide Cypress
written notice thereof at least [...***...]days before any deadline for taking action to avoid
abandonment (or other loss of rights) and Cypress (or its Sublicensee) shall have the right, in its
sole discretion, to file for or continue prosecution and/or maintenance of such Alexza Product
Patent at Cypress’ own expense, in which event Alexza shall assign all of its right, title and
interest in and to such Alexza Product Patent to Cypress and such Alexza Product Patent shall
thereafter be a Cypress Patent.



               (iii) Alexza Nicotine Product Patents. Except as otherwise provided in this Section
7.2(a)(iii), Cypress shall have the first right to prepare, file, prosecute (including any
interferences, reissue proceedings and reexaminations) and maintain the Alexza Nicotine Product
Patents in any jurisdiction in the world, at its sole expense. Cypress shall keep Alexza
reasonably informed of its prosecution activities with respect to the Alexza Nicotine Product
Patents. Cypress shall provide Alexza with a copy of material communications from any patent
authority regarding the Alexza Nicotine Product Patents, and shall provide drafts of any material
filings or responses to be made to such patent authorities regarding the Alexza Nicotine Product
Patents a reasonable amount of time in advance of submitting such filings or responses so that





 




			
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Alexza may have an opportunity to review and comment thereon; provided that with respect to
the patent application entitled [...***...]. If Cypress
abandons, ceases prosecution or does not maintain any Alexza Nicotine Product Patent anywhere in
the world, then Cypress shall provide Alexza written notice thereof at least [...***...] days before
any deadline for taking action to avoid abandonment (or other loss of rights) and Alexza (or its
Affiliates or Third Party licensees) shall have the right, in Alexza’s sole discretion, to file for
or continue prosecution and/or maintenance of such Alexza Nicotine Product Patent at Alexza’s own
expense.




          (b) Cypress Patents. Except as otherwise provided in this Section 7.2(b), Cypress shall have
the first right (but not the obligation) and authority to prepare, file, prosecute (including any
interferences, reissue proceedings and reexaminations) and maintain the Cypress Patents in any
jurisdiction in the world, at its sole expense. Cypress shall keep Alexza reasonably informed of
its prosecution activities with respect to the Cypress Patents. Cypress shall provide Alexza with
a copy of material communications from any patent authority regarding the Cypress Patents, and
shall provide drafts of any material filings or responses to be made to such patent authorities
regarding the Cypress Patents a reasonable amount of time in advance of submitting such filings or
responses so that Alexza may have an opportunity to review and comment thereon. If Cypress
abandons, ceases prosecution or does not maintain any Cypress Patent anywhere in the world, then
Cypress shall provide Alexza written notice thereof at least [...***...] days before any deadline for
taking action to avoid abandonment (or other loss of rights) and Alexza (or its Affiliates or their
respective Third Party licensees) shall have the right, in Alexza’s sole discretion, to file for or
continue prosecution and/or maintenance of such Cypress Patent at Alexza’s own expense.




          (c) Joint Patents.




               (i) Except as otherwise provided in this Section 7.2(c), as between the Parties, Cypress shall
have the first right and authority to prepare, file, prosecute (including any interferences,
reissue proceedings and reexaminations) and maintain the Joint Patents in any jurisdiction in the
world, and the Parties shall share equally all reasonable Third Party expenses incurred in
connection with the preparation, prosecution and maintenance of the Joint Patents. Cypress shall
provide Alexza reasonable opportunity to review and comment on its filing and prosecution efforts
regarding the Joint Patents reasonably prior to any submissions with applicable patent authorities.
Cypress shall provide Alexza with a copy of material communications from any patent authority
regarding the Joint Patents, and shall provide drafts of any material filings or responses to be
made to such patent authorities regarding the Joint Patents a reasonable amount of time in advance
of submitting such filings or responses so that Cypress may have an opportunity to review and
comment thereon. If Cypress abandons, ceases prosecution or does not maintain any Joint Patent
anywhere in the world, then Cypress shall provide Alexza written notice thereof at least
[...***...]days before any deadline for taking action to avoid abandonment (or other loss of rights)
and Alexza (or its Affiliates or their respective Third Party licensees) shall have the right, in
Alexza’s sole discretion, to file for or continue prosecution and/or maintenance of such Joint
Patent on behalf of the Parties.





 




			
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               (ii) Either Party may determine that it is no longer interested in supporting the continued
prosecution or maintenance of a particular Joint Patent in a country or jurisdiction, in which
case: (A) the disclaiming Party shall, if requested in writing by the other Party, assign its
ownership interest in such Joint Patent in such country or jurisdiction to the other Party for no
additional consideration; (B) if such assignment is effected, the other Party shall be solely
responsible for the prosecution and maintenance of such Joint Patent, at its sole expense; (C) such
Joint Patent shall thereafter no longer be deemed a Joint Patent; and (D) such Joint Patent shall
not be included in the licenses granted under this Agreement in the applicable jurisdiction.



     7.3 Infringement by Third Parties.



          (a) Notice. If either Party becomes aware of any infringement or threatened infringement of
any Alexza Patent, Cypress Patent or Joint Patent, such Party shall promptly notify the other Party
in writing to that effect. Any such notice shall include evidence to support an allegation of such
infringement by such Third Party.




          (b) Alexza Patents.




               (i) Alexza Background Patents. Subject to this Section 7.3(b)(i), Alexza shall have the first
right, as between the Parties, to bring and control any action or proceeding with respect to
infringement by a Third Party of any Alexza Background Patent worldwide as a result of the
research, development, manufacture, use, distribution, handling, storage, offer for sale, sale,
import or any other disposition of any Products, at its own expense and by counsel of its own
choice. Cypress shall have the right, at its own expense, to be represented in any such action
with respect to the Orange Book Alexza Background Patents by counsel of its own choice, and Alexza
and its counsel shall reasonably cooperate with, and take into account the view of, Cypress and its
counsel in strategizing, preparing and presenting any such action or proceeding. If Alexza fails
to bring an action or proceeding with respect to such infringement of any such Orange Book Alexza
Background Patent within (i) [...***...] days following
notice of alleged infringement under Section 7.3(a) or (ii) [...***...] days before the time limit, if
any, under Applicable Laws for the filing of such action, whichever comes first, and Cypress
believes that the failure to bring such an action or proceeding may result in a material diminution
in value of any Product, then subject to any rights granted by Alexza to a Third Party as of the
Effective Date, Cypress shall have the right, but not the obligation, to bring and control any such
action at its own expense and by counsel of its own choice. If required under Applicable Laws,
Alexza shall timely join as party plaintiff in any such litigation and shall cooperate with Cypress
in connection with such infringement action, at Cypress’ expense. Except as otherwise agreed by
the Parties, any recovery or damages realized as a result of any action or proceeding under this
Section 7.3(b)(i) [...***...].



               (ii) Alexza Product Patents other than Alexza Nicotine Product Patents. Subject to this
Section 7.3(b)(ii), Alexza shall have the first right, as between the Parties, to bring and control
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Party of any Alexza Product Patent excluding an Alexza Nicotine Product Patent, which is
handled in Section 7.3(b)(iii), worldwide as a result of the research, development, manufacture,
use, distribution, handling, storage, offer for sale, sale, import or any other disposition of any
Products, at its own expense and by counsel of its own choice. Cypress shall have the right, at
its own expense, to be represented in any such action by counsel of its own choice, and Alexza and
its counsel shall reasonably cooperate with, and take into account the reasonable view of, Cypress
and its counsel in strategizing, preparing and presenting any such action or proceeding. If Alexza
fails to bring an action or proceeding with respect to such infringement of any such Alexza Product
Patent within (i) [...***...] days following notice of alleged infringement under Section 7.3(a) or
(ii) [...***...] days before the time limit, if any, under Applicable Laws for the filing of such
action, whichever comes first, Cypress shall have the right, but not the obligation, to bring and
control any such action at its own expense and by counsel of its own choice. If required under
Applicable Laws, Alexza shall timely join as party plaintiff in any such litigation and shall
cooperate with Cypress in connection with such infringement action, at Cypress’ expense. Except as
otherwise agreed by the Parties, any recovery or damages realized as a result of any action or
proceeding under this Section 7.3(b)(ii) [...***...].




               (iii) Alexza Nicotine Product Patents. Subject to this Section 7.3(b)(iii), Cypress
shall have the first right, as between the Parties, to bring and control any action or proceeding
with respect to infringement by a Third Party of any Alexza Nicotine Product Patent worldwide as a
result of the research, development, manufacture, use, distribution, handling, storage, offer for
sale, sale, import or any other disposition of any Products, at its own expense and by counsel of
its own choice. Alexza shall have the right, at its own expense, to be represented in any such
action by counsel of its own choice, and Cypress and its counsel shall reasonably cooperate with,
and take into account the reasonable view of, Alexza and its counsel in strategizing, preparing and
presenting any such action or proceeding. If Cypress fails to bring an action or proceeding with
respect to such infringement of any such Alexza Nicotine Product Patent within (i) [...***...] days
following notice of alleged infringement under Section 7.3(a) or (ii) [...***...] days before the time
limit, if any, under Applicable Laws for the filing of such action, whichever comes first, Alexza
shall have the right, but not the obligation, to bring and control any such action at its own
expense and by counsel of its own choice. If required under Applicable Laws, Cypress shall timely
join as party plaintiff in any such litigation and shall cooperate with Alexza in connection with
such infringement action, at Alexza’s expense. Except as otherwise agreed by the Parties, any
recovery or damages realized as a result of any action or proceeding under this Section 7.3(b)(iii)
[...***...].



          (c) Cypress Patents.




               (i) Cypress shall have the sole right, as between the Parties, to bring and control any action
or proceeding with respect to infringement by a Third Party of any Cypress Patent worldwide as a
result of the research, development, manufacture, use, distribution, handling, storage, offer for
sale, sale, import or any other disposition of any Product, at its own expense and by counsel of
its own choice, and any recovery or damages realized as a result of any action or proceeding shall
be retained by Cypress.




 




			
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               (ii) Subject to this Section 7.3(c)(ii), Cypress shall have the first right, as between the
Parties, to bring and control any action or proceeding with respect to infringement by a Third
Party of any Cypress Patent worldwide as a result of the research, development, manufacture, use,
distribution, handling, storage, offer for sale, sale, import or any other disposition of any
product that delivers or administers any API using the Staccato Technology, other than the Product,
at its own expense and by counsel of its own choice. Alexza shall have the right, at its own
expense, to be represented in any such action by counsel of its own choice, and Cypress and its
counsel shall reasonably cooperate with, and take into account the reasonable view of, Alexza and
its counsel in strategizing, preparing and presenting any such action or proceeding. If Cypress
fails to bring an action or proceeding with respect to such infringement of any such Cypress Patent
within (A) [...***...] days following notice of alleged infringement under Section 7.3(a) or
(B) [...***...] days before the time limit, if any, under Applicable Laws for the filing of such
action, whichever comes first, Alexza shall have the right, but not the obligation, to bring and
control any such action at its own expense and by counsel of its own choice. If required under
Applicable Laws, Cypress shall timely join as party plaintiff in any such litigation and shall
cooperate with Alexza in connection with such infringement action, at Alexza’s expense. Except as
otherwise agreed by the Parties, any recovery or damages realized as a result of any action or
proceeding under this Section 7.3(c)(ii) [...***...].



          (d) Joint Patents.




               (i) Subject to this Section 7.3(d)(i), Cypress shall have the first right, as between the
Parties, to bring and control any action or proceeding with respect to infringement by a Third
Party of any Alexza Nicotine Product Patent worldwide as a result of the research, development,
manufacture, use, distribution, handling, storage, offer for sale, sale, import or any other
disposition of any Products, at its own expense and by counsel of its own choice. Alexza shall
have the right, at its own expense, to be represented in any such action by counsel of its own
choice, and Cypress and its counsel shall reasonably cooperate with, and take into account the
reasonable view of, Alexza and its counsel in strategizing, preparing and presenting any such
action or proceeding. If required under Applicable Laws, Alexza shall timely join as party
plaintiff in any such litigation and shall cooperate with Cypress in connection with such
infringement action, at Cypress’ expense. If Cypress fails to bring an action or proceeding with
respect to such infringement of any such Joint Patent within (i) [...***...] days following notice of
alleged infringement under Section 7.3(a) or (ii) [...***...] days before the time limit, if any, under
Applicable Laws for the filing of such action, whichever comes first, Alexza shall have the right,
but not the obligation, to bring and control any such action at its own expense and by counsel of
its own choice. If required under Applicable Laws, Cypress shall timely join as party plaintiff in
any such litigation and shall cooperate with Alexza in connection with such infringement action, at
Alexza’s expense. Except as otherwise agreed by the Parties, any recovery or damages realized as a
result of any action or proceeding under this Section 7.3(d)(i) [...***...].



               (ii) Subject to this Section 7.3(d)(ii), Alexza shall have the first right, as between the
Parties, to bring and control any action or proceeding with respect to infringement by a Third
Party of any Joint Patent worldwide as a result of the research, development,





 




			
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manufacture, use, distribution, handling, storage, offer for sale, sale, import or any other
disposition of any product that delivers or administers any API using the Device, other than the
Product, at its own expense and by counsel of its own choice. Cypress shall have the right, at its
own expense, to be represented in any such action by counsel of its own choice, and Alexza and its
counsel shall reasonably cooperate with, and take into account the reasonable view of, Cypress and
its counsel in strategizing, preparing and presenting any such action or proceeding. If required
under Applicable Laws, Cypress shall timely join as party plaintiff in any such litigation and
shall cooperate with Alexza in connection with such infringement action, at Alexza’s expense. If
Alexza fails to bring an action or proceeding with respect to such infringement of any such Joint
Patent within (A) [...***...] days following notice of alleged infringement under Section 7.3(a) or
(B) [...***...] days before the time limit, if any, under Applicable Laws for the filing of such
action, whichever comes first, Cypress shall have the right, but not the obligation, to bring and
control any such action at its own expense and by counsel of its own choice. If required under
Applicable Laws, Alexza shall timely join as party plaintiff in any such litigation and shall
cooperate with Cypress in connection with such infringement action, at Cypress’ expense. Except as
otherwise agreed by the Parties, any recovery or damages realized as a result of any action or
proceeding under this Section 7.3(d)(ii) [...***...].




          (e) Cooperation. In the event a Party brings an infringement action in accordance with
this Section 7.3, the other Party shall cooperate fully, including, if required to bring such
action, the furnishing of a power of attorney or being named as a Party to such action.




     7.4 Patent Oppositions and Other Proceedings. If an Alexza Patent other than an Alexza
Nicotine Product Patent becomes the subject of any proceeding commenced by a Third Party in
connection with an opposition, action for declaratory judgment, nullity action, interference or
other attack upon the validity, title or enforceability thereof, then as between the Parties,
Alexza shall have the first right, but not the obligation, to control such defense at its own
expense using counsel of its own choice. If Alexza decides that it does not wish to defend against
such action with respect to such Alexza Patent, it shall notify Cypress reasonably in advance of
all applicable deadlines, and Cypress (or its Sublicensee) shall thereafter have the right, but not
the obligation, to assume defense of such action at its own expense. If an Alexza Nicotine Product
Patent or Joint Patent becomes the subject of any proceeding commenced by a Third Party in
connection with an opposition, action for declaratory judgment, nullity action, interference or
other attack upon the validity, title or enforceability thereof, then as between the Parties,
Cypress shall have the first right, but not the obligation, to control such defense at its own
expense using counsel of its own choice. If Cypress decides that it does not wish to defend
against such action with respect to an Alexza Nicotine Product Patent or Joint Patent, it shall
notify Alexza reasonably in advance of all applicable deadlines, and Alexza shall thereafter have
the right, but not the obligation, to assume defense of such action at its own expense. The Party
controlling any defense under this Section 7.4 shall permit the non-controlling Party to
participate in the proceedings to the extent permissible under Applicable Laws and to be
represented by its own counsel at the non-controlling Party’s expense. Notwithstanding any of the
foregoing, the Party controlling any infringement action with respect to any Alexza Patent or Joint
Patent pursuant to Section 7.3 shall also have the sole right to control the response to any





 




			
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attack on the validity, title, or enforceability of such Patent that is asserted by the
alleged infringer(s) as a counterclaim or affirmative defense in such action.




     7.5 Infringement of Third Party Rights. If any product that delivers or administers API using
the Staccato Technology is manufactured, used or sold by either Party or its Affiliates or their
respective Third Party licensees (in the case of Alexza) or its Sublicensees (in the case of
Cypress) becomes the subject of a Third Party’s claim or assertion of infringement of a Patent
owned by such Third Party, the Party first having notice of the claim or assertion shall promptly
notify the other Party, and the Parties shall promptly meet to consider the claim or assertion and
the appropriate course of action. Unless they otherwise mutually agree in writing, the Party
against which such claim or assertion is made shall have the sole right to defend itself in such
action.



     7.6 Consent for Settlement. Neither Party shall enter into any settlement or compromise of
any action or proceeding under this Article 6 that would impose any material non-monetary
obligations or any restrictions on the substantive rights of other Party without the prior written
consent of such other Party, which consent shall not be unreasonably withheld.



     7.7 Patent Term Extensions. The Parties shall discuss which, if any, of the Patents within
the Alexza Patents and Joint Patents the Parties should seek Patent Term Extensions with respect to
any Product. Alexza, in the case of the Alexza Patents other than the Alexza Nicotine Product
Patents, and Cypress, in the case of the Alexza Nicotine Product Patents and Joint Patents, shall
have the final decision-making authority with respect to applying for any such Patent Term
Extensions, and shall act with reasonable promptness in light of the development stage of the
Product to apply for any such Patent Term Extensions, where it so elects; provided, however, that
if in a particular country or jurisdiction only one such Patent can obtain a Patent Term Extension,
then the Parties shall consult in good faith to determine which such Patent should be the subject
of efforts to obtain a Patent Term Extension. The Party that does not apply for an extension
hereunder shall cooperate fully with the other Party in making such filings or actions. All
expenses incurred in connection with activities of a Party with respect to the Patent(s) for which
such Party seeks Patent Term Extensions pursuant to this Section 7.7 shall be borne solely by such
Party.



     7.8 Orange Book Listing. Alexza and Cypress shall use good faith efforts to agree as to which
of the Alexza Patents and Joint Patents shall be listed in the Orange Book for a Product. Alexza
shall notify Cypress of the issuance of any Alexza Patent within 10 days after issuance. Cypress
shall be responsible for any listings of Alexza Patents, Cypress Patents and Joint Patents in the
Orange Book for a Product; provided, that Cypress shall provide Alexza with written notice of its
intent to list appropriate Alexza Patents in the Orange Book, and shall provide Alexza with a copy
of all draft submissions 5 days before the deadline for such listing and, with respect to Alexza
Background Patents only, obtain Alexza’s approval (which approval shall not be unreasonably
withheld, conditioned or delayed) of such listing. Cypress shall be responsible for all such
listings of any Alexza Patents or other Patents for Products in the Orange Book, and shall comply
with all Applicable Laws with respect to such listings.



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     7.9 Paragraph IV Notices. Each Party shall inform the other of any certification regarding
any Alexza Patent it receives pursuant to either 21 U.S.C. §§ 355(b)(2)(A)(iv) or
(j)(2)(A)(vii)(IV) or its successor provisions or any similar provisions in a country other than
the United States, and shall provide the other Party with a copy of such certification within five
days after receipt. The Parties’ rights with respect to the initiation and prosecution of any
legal action as a result of such certification or any recovery obtained as a result of such legal
action shall be as provided in Section 7.3.



     7.10 Personnel Obligations. Prior to beginning work under this Agreement relating to any
research, development or commercialization of a Product, each employee, agent or independent
contractor of each Party or its respective Affiliates shall be bound by non-disclosure and
invention assignment obligations which are consistent with the obligations of the Parties under
this Agreement, including without limitation: (a) promptly reporting any invention, discovery,
process or other intellectual property right; (b) assigning to the applicable Party all of his or
her right, title and interest in and to any invention, discovery, process or other intellectual
property right; (c) cooperating in the preparation, filing, prosecution, maintenance and
enforcement of any patent and patent application; (d) performing all acts and signing, executing,
acknowledging and delivering any and all documents required for effecting the obligations and
purposes of this Agreement; and (e) abiding by the obligations of confidentiality and non-use at
least as stringent as those set forth in Article 8.



     7.11 Trademarks.



          (a) Quality Control. Cypress shall use the Alexza Trademarks in connection with the marketing
and sale of the Product and in compliance with all Applicable Laws and market practices in the
applicable country. Cypress shall provide Alexza with samples of any materials that incorporate
the Alexza Trademarks prior to distributing such materials for use. Cypress shall comply with
reasonable policies provided by Alexza from time to time to maintain the goodwill and value of the
Alexza Trademarks. Cypress agrees that it will not at any time during or after the Term assert or
claim any interest in or do anything to adversely affect the validity or enforceability of any
Alexza Trademark.




          (b) Ownership. Cypress acknowledges Alexza’s exclusive ownership of the Alexza Trademarks and
agrees not to take any action inconsistent with such ownership and that any goodwill arising
through use of the Alexza Trademarks by Cypress shall inure to the benefit of Alexza.




          (c) Confusing or Similar Marks. Cypress covenants that it shall not use any trademark
confusingly similar to any Alexza Trademark in connection with any products (including the
Product), provided that, however, Cypress may use the Alexza Trademarks with other marks or names
if such other marks or names are sufficiently separated from the Alexza Trademarks and sufficiently
distinctive to avoid the consumer impression that such other marks or their owners are associated
with Alexza.







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ARTICLE 8




CONFIDENTIALITY



     8.1 Confidential Information. Except to the extent expressly authorized by this Agreement or
otherwise agreed in writing by the Parties, the receiving Party (the “Receiving Party”) shall keep
confidential and shall not publish or otherwise disclose or use for any purpose other than as
provided for in this Agreement any confidential or proprietary information and materials,
patentable or otherwise, in any form (written, oral, photographic, electronic, visual or
otherwise), that is disclosed to it by the other Party (the “Disclosing Party”), including all
information concerning the Device and/or Product and any other technical or business information of
whatever nature (collectively, “Confidential Information”).



     8.2 Exceptions. Notwithstanding Section 8.1, the obligations of confidentiality and non-use
shall not apply to any specific portion of Confidential Information that, in each case as
demonstrated by competent evidence:



          (a) was already known to the Receiving Party or any of its Affiliates, other than under an
obligation of confidentiality, at the time of disclosure by the Disclosing Party;




          (b) was generally available to the public or was otherwise part of the public domain at the
time of its disclosure to the Receiving Party;




          (c) became generally available to the public or otherwise part of the public domain after its
disclosure by the Disclosing Party and other than through any act or omission of the Receiving
Party or any of its Affiliates in breach of this Agreement;




          (d) was subsequently lawfully disclosed to the Receiving Party or any of its Affiliates by a
Third Party who, to the best knowledge of the Receiving Party, did not directly or indirectly
receive such information from the Disclosing Party under an obligation of confidence; or




          (e) was developed by the Receiving Party or its Affiliate without use of or reference to any
Confidential Information of the Disclosing Party.




     8.3 Permitted Disclosures. Notwithstanding Section 8.1, each Party may disclose Confidential
Information belonging to the other Party as expressly permitted by this Agreement or if and to the
extent such disclosure is reasonably necessary in the following instances:



          (a) filing or prosecuting Patents as permitted by this Agreement;




          (b) prosecuting or defending litigation as permitted by this Agreement;




          (c) complying with applicable court orders or governmental regulations; and




          (d) disclosure to its Affiliates and sublicensees and its and their respective employees,
agents, and independent contractors only on a need-to-know basis and solely in connection with the
exercise of its rights or performance of its obligations under this Agreement,




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provided that each disclosee must be bound by obligations of confidentiality and non-use at
least as stringent as those set forth in this Article 7 prior to any such disclosure;




          (e) disclosure to Third Parties in connection with due diligence or similar investigations by
or on behalf of a Third Party in connection with a potential license to or collaboration with such
Third Party (including entry into any such agreement), or a potential merger or acquisition by such
Third Party, and disclosure to potential Third Party investors in confidential financing documents,
provided, in each case, that any such Third Party agrees to be bound by similar terms of
confidentiality and non-use at least as stringent as those set forth in this Article 7.



Notwithstanding the foregoing, in the event a Party is required to make a disclosure of the other
Party’s Confidential Information pursuant to Section 8.3(b) or 8.3(c), it shall, except where
impracticable, give reasonable advance notice to the other Party of such disclosure and use efforts
to secure confidential treatment of such information at least as diligent as such Party would use
to protect its own confidential information, but in no event less than reasonable efforts; provided
that any Confidential Information so disclosed shall still be subject to the restrictions on use
set forth in this Article 7. In any event, the Parties agree to take all reasonable action to
avoid disclosure of Confidential Information hereunder.




     8.4 Terms of this Agreement. Except as otherwise provided in this Article 7, each Party
agrees not to disclose the terms of this Agreement to any Third Party without the prior written
consent of the other Party, except that each Party may disclose the terms of this Agreement as
contemplated by Section 8.5 and as permitted under Section 8.3.



     8.5 Public Announcements.



          (a) Except as required by Applicable Laws (including disclosure requirements of the U.S.
Securities and Exchange Commission (“SEC”), the NASDAQ stock exchange or any other stock exchange
on which securities issued by a Party or its Affiliates are traded), neither Party shall make any
public announcement concerning this Agreement or the subject matter hereof without the prior
written consent of the other, which shall not be unreasonably withheld or delayed; provided that it
shall not be unreasonable for a Party to withhold consent with respect to any public announcement
containing any of such Party’s Confidential Information. In the event of a required public
announcement, to the extent practicable under the circumstances, the Party making such announcement
shall provide the other Party with a copy of the proposed text of such announcement sufficiently in
advance of the scheduled release to afford such other Party a reasonable opportunity to review and
comment upon the proposed text.




          (b) The Parties acknowledge that each Party may be obligated to file a copy of this Agreement
with the SEC or other government authorities. Each Party shall be entitled to make such a required
filing, provided that it requests confidential treatment of at least the commercial terms and
sensitive technical terms hereof and thereof to the extent such confidential treatment is
reasonably available. In the event of any such filing, each Party shall provide the other Party
with a copy of the Agreement marked to show provisions for which it intends to seek confidential
treatment and shall reasonably consider and incorporate the other Party’s comments






33









 







thereon to the extent consistent with the legal requirements governing redaction of
information from material agreements that must be publicly filed.




ARTICLE 9




REPRESENTATIONS, WARRANTIES AND COVENANTS



     9.1 Mutual Representations and Warranties. Each Party hereby represents and warrants to the
other Party that, as of the Effective Date:



          (a) it is duly organized and validly existing under the laws of its state of incorporation,
and has full corporate power and authority to enter into this Agreement and to carry out the
provisions hereof;




          (b) it is has taken all corporate action necessary to authorize the execution and delivery of
this Agreement and the performance its obligations under this Agreement;




          (c) this Agreement is legally binding upon it and enforceable in accordance with its terms;




          (d) its execution, delivery and performance of this Agreement does not conflict with,
constitute a breach of, or in any material way violate any arrangement, understanding or agreement
to which it is a party or by which it is bound; and




          (e) it is not debarred under the United States Federal Food, Drug and Cosmetic Act and does
not employ or use the services of any person who is debarred.




     9.2 By Alexza. Alexza hereby represents and warrants that, as of the Effective Date:



          (a) it has the full right to grant to Cypress the licenses it purports to grant as provided in
this Agreement;




          (b) Exhibit A lists all Patents Controlled by Alexza or its Affiliates that are necessary or
reasonably useful for the research, development, importation, use, manufacture, sale and offer for
sale of Products;




          (c) except as expressly set forth in Section 9.2(d), it is the exclusive owner of the Alexza
Technology, including the Staccato Technology, and Alexza Trademarks;




          (d) it is co-owner with [...***...] of U.S. Patent No. [...***...];




          (e) there exist no outstanding liens, encumbrances, agreements or understandings of any
kind, either written, oral or implied, with respect to the Alexza Technology that are inconsistent
with any provision of this Agreement, and Alexza covenants





 




			
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that it will not grant (or purport to grant) during the Term any right to any Affiliate or
Third Party that conflicts with the rights granted to Cypress hereunder;




          (f) to Alexza’s knowledge, there are no activities by Third Parties that would constitute
infringement of the Alexza Patents or Alexza Trademarks or misappropriation of the Alexza Know-How;




          (g) to Alexza’s knowledge, the research, development, importation, use, manufacture, sale and
offer for sale of the Device or Products as contemplated by the Parties as of the Effective Date
will not infringe or misappropriate any Patent or other intellectual property rights of a Third
Party;




          (h) neither Alexza nor any of its Affiliates has received any written notice from any entity,
or has knowledge, of any actual or threatened claim or assertion that the use or practice of the
Alexza Patents, Alexza Trademarks or Alexza Know-How infringes or misappropriates the intellectual
property rights of a Third Party; and




          (i) there are no actual, pending, or to Alexza’s knowledge, alleged or threatened adverse
actions, suits, claims, interferences or formal governmental investigations (i) involving any
Alexza Technology (to the extent related to any Product), the Device or any Product, including in
connection with the conduct of any clinical trials or manufacturing activities, or (ii) questioning
the validity of this Agreement or any action taken by Alexza in connection with the execution of
this Agreement, in each case, by or against Alexza or any of its Affiliates in or before any court,
Regulatory Authority or other governmental authority, and there are no material unsatisfied
judgments or outstanding orders, injunctions, decrees, stipulations or awards (whether rendered by
a court, an administrative agency or an arbitrator) against Alexza with respect to any Alexza
Technology, the Device or any Product.




     9.3 Covenants.



          (a) Each Party covenants that (i) it will not grant (or purport to grant) during the Term any
right to any Affiliate or Third Party that conflicts with the rights granted to the other Party
hereunder, (ii) to the extent it subcontracts to any Third Party to perform its development
activities under this Agreement, such Party will use Commercially Reasonable Efforts to cause such
Third Party subcontractor to assign to such Party all Inventions made, created, discovered,
conceived or reduced to practice by such subcontractor that are subject to licenses granted by such
Party under this Agreement, and (iii) it will not, during the Term, employ or use the services of
any person who is debarred in connection with the activities for which it is responsible under this
Agreement. In the event that a Party becomes aware of the debarment or threatened debarment of any
person providing services to such Party that directly or indirectly relate to activities for which
it is responsible under Agreement, such Party shall immediately notify the other Party in writing.




          (b) Cypress covenants that during the Term it will not take any action to materially adversely
affect the scope of rights licensed to Alexza under this Agreement.







35









 








          (c) Alexza covenants that during the Term (i) all Products and other clinical trial and test
materials supplied by Alexza pursuant to this Agreement will be manufactured in accordance with
specifications therefor, as agreed upon by the Parties, and the applicable Regulatory Requirements,
and will not be adulterated or misbranded within the meaning of the U.S. Federal Food, Drug and
Cosmetic Act, as amended from time to time, (ii) it will not take any action to materially
adversely affect the scope of rights licensed to Cypress under this Agreement, and (iii) it will
not assign any of its right, title and interest in and to any Alexza Patents encumbered by a
terminal disclaimer or any Patents over which a terminal disclaimer has been or will be filed in
connection with an Alexza Patent, except in accordance with Section 13.7.




     9.4 Disclaimer. EXCEPT AS EXPRESSLY STATED IN THIS ARTICLE 9, NO REPRESENTATIONS OR
WARRANTIES WHATSOEVER, WHETHER EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT, OR NON-MISAPPROPRIATION OF THIRD PARTY INTELLECTUAL
PROPERTY RIGHTS, ARE MADE OR GIVEN BY OR ON BEHALF OF A PARTY. EXCEPT AS EXPRESSLY STATED IN THIS
AGREEMENT, ALL REPRESENTATIONS AND WARRANTIES, WHETHER ARISING BY OPERATION OF LAW OR OTHERWISE,
ARE HEREBY EXPRESSLY EXCLUDED.



ARTICLE 10




INDEMNIFICATION



     10.1 Indemnification of Alexza. Cypress shall indemnify and hold harmless each of Alexza and
its Affiliates and their respective directors, officers, employees and agents, and the successors
and assigns of any of the foregoing, (the “Alexza Indemnitees”) from and against any and all
losses, liabilities, damages, penalties, fines, costs and expenses (including reasonable attorneys’
fees and other expenses of litigation) (“Losses”) from any claims, actions, suits or proceedings
brought by a Third Party (a “Third Party Claim”) incurred by any Alexza Indemnitee, arising from or
occurring as a result of (a) the gross negligence or willful misconduct of Cypress or its
Affiliates or Sublicensees, (b) any material breach of any representations, warranties or covenants
by Cypress under this Agreement, or (c) the research, development, manufacture, use, distribution,
handling, storage, offer for sale, sale, import or any other disposition of a Product by Cypress or
its Sublicensees, except in each case (a)-(c) to the extent any such Third Party Claim falls within
the scope of the indemnification obligations of Alexza set forth in Section 10.2(a), (b) or (c).



     10.2 Indemnification of Cypress. Alexza shall indemnify and hold harmless each of Cypress and
its Affiliates and their respective directors, officers, employees and agents, and the successors
and assigns of any of the foregoing, (the “Cypress Indemnitees”), from and against any and all
Losses from any Third Party Claims incurred by any Cypress Indemnitee, arising from or occurring as
a result of (a) the gross negligence or willful misconduct of Alexza or its Affiliates, (b) any
material breach of any representations, warranties or covenants by Alexza under this Agreement, or
(c) the research, development, manufacture, use, distribution, handling, storage, offer for sale,
sale, import or any other disposition of products that deliver or administer



36









 




API using the Staccato Technology by Alexza or its Affiliates or Sublicensees, except in each
case (a)-(c) to the extent any such Third Party Claim falls within the scope of the indemnification
obligations of Cypress set forth in Section 10.1(a), (b) or (c).




     10.3 Procedure. A Party that intends to claim indemnification (the “Indemnitee”) under this
Article 10 shall promptly notify the indemnifying Party (the “Indemnitor”) in writing of any Third
Party Claim in respect of which the Indemnitee intends to claim such indemnification. The
Indemnitee shall provide the Indemnitor with reasonable assistance, at the Indemnifying Party’s
expense, in connection with the defense of the Third Party Claim for which indemnity is being
sought. The Indemnitee may participate in and monitor such defense with counsel of its own
choosing at its sole expense; provided, however, the Indemnitor shall have the right to assume and
conduct the defense of the Third Party Claim with counsel of its choice. The Indemnitor shall not
settle any Third Party Claim without the prior written consent of the Indemnitee, not to be
unreasonably withheld, unless the settlement involves only the payment of money. So long as the
Indemnitor is actively defending the Third Party Claim in good faith, the Indemnitee shall not
settle any such Third Party Claim without the prior written consent of the Indemnitor. If the
Indemnitor does not assume and conduct the defense of the Third Party Claim as provided above, (a)
the Indemnitee may defend against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim in any manner the Indemnitee may deem reasonably
appropriate (and the Indemnitee need not consult with, or obtain any consent from, the Indemnitor
in connection therewith), and (b) the Indemnitor will remain responsible to indemnify the
Indemnitee as provided in this Article 10. The failure to deliver written notice to the Indemnitor
within a reasonable time after the commencement of any action with respect to a Third Party Claim
shall only relieve the Indemnitor of its indemnification obligations under this Article 9 if and to
the extent the Indemnitor is actually prejudiced thereby.



     10.4 Limitation of Liability. EXCEPT FOR LIABILITY FOR BREACH OF ARTICLE 8 AND
INDEMNIFICATION OBLIGATIONS UNDER THIS ARTICLE 10, NEITHER PARTY SHALL BE ENTITLED TO RECOVER FROM
THE OTHER PARTY ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES IN CONNECTION WITH THIS
AGREEMENT.



ARTICLE 11




TERM; REMEDIES



     11.1 Term. This Agreement shall commence on the Effective Date and, unless terminated earlier
as provided in this Article 11, shall continue in full force and effect until the expiration of all
of Cypress’ payment obligations to Alexza under this Agreement (the “Term”). Upon the expiration
of this Agreement, the licenses granted under Section 2.1 and Section 2.2 and rights granted under
Sections 2.7 and 2.8 shall become perpetual and irrevocable.



     11.2 Termination.



          (a) Upon the occurrence of any event set forth below in this Section 11.2(a), Cypress shall
use Commercially Reasonable Efforts to complete an Asset Sale or Asset License






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[...***...]. This Agreement shall terminate automatically if Cypress does not complete an Asset
Sale or Asset License [...***...] after the occurrence of any such event. If Cypress completes an
Asset Sale or Asset License [...***...] after the occurrence of any such event, Alexza shall no longer
have any right to terminate this Agreement under this Section 11.2(a).




               (i) Cypress’ failure to pay the Technology Transfer Payment within the applicable
[...***...] time period;



               (ii) the discontinuation by Cypress of development of the Products for any reason other than
the material breach by Alexza of any of its obligations under Section 3.4, 3.5 or 5.3 of this
Agreement (which breach is not cured within [...***...] days after notice from Cypress requesting cure
of the breach), including pursuant to notice under Section 5.2(b); provided that this
subsection (ii) will no longer be applicable upon first Marketing Approval in the United States; or



               (iii) the material breach by Cypress of this Agreement (other than a failure to pay the
Technology Transfer Payment), which breach is not cured within [...***...]days after notice from Alexza
requesting cure of the breach; provided, that such material breach was not caused by the material
breach by Alexza of any of its obligations under Section 3.4, 3.5 or 5.3 of this Agreement (which
breach is not cured within [...***...] days after notice from Cypress requesting cure of the breach);
provided further, that if Cypress in good faith disputes such material breach on or before the end
of the cure period therefor and either Party requests resolution of such matter pursuant to
Article 12, then the [...***...] period described above in this Section 11.2(a) shall not commence
unless and until such matter is resolved pursuant to Section 12.1 or, if applicable, Section 12.2.



          (b) Cypress shall have the right to terminate this Agreement upon the material breach by
Alexza of any of its obligations under Section 3.4, 3.5 or 5.3 of this Agreement, which breach is
not cured within [...***...] days after notice from Cypress requesting cure of the breach.




     11.3 Effects of Termination.



          (a) Upon any termination of this Agreement under Section 11.2(a) or 11.2(b), the following
shall apply:




               (i) Licenses; Technology. All licenses from Alexza to Cypress shall immediately terminate,
provided that each Cypress Sublicense Agreement shall remain in full force and effect as a direct
agreement between Alexza and the applicable Sublicensee, provided that the applicable Sublicensee
is not in breach of its Cypress Sublicense Agreement. All licenses from Cypress to Alexza shall
immediately terminate [...***...].



               (ii) Return of Confidential Information. Except to the extent necessary or reasonably useful
for a Party to exercise its rights under any license surviving such termination or expiration, each
Party shall promptly return to the other Party, or delete or


 
 




			
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destroy, all relevant records and materials in such Party’s possession or control containing
Confidential Information of the other Party [...***...].




               (iii) Marks. Cypress shall assign to Alexza all right, title and interest in and to all
trademarks used by Cypress in connection with the Products (excluding any such trademarks that
include, in whole or part, any corporate name or logo of Cypress or its Affiliate or Sublicensee).



               (iv) Transition Assistance. Cypress shall [...***...] provide reasonable consultation and
assistance for a period of no more than [...***...] days for the purpose of transferring or
transitioning to Alexza, [...***...] relating specifically to Products hereunder that Cypress is able,
using reasonable commercial efforts to, transfer or transition to Alexza. [...***...]



          (b) In addition to the effects set forth in Section 11.3(a), upon any termination of this
Agreement under Section 11.2(a), the following shall apply:




               (i) Regulatory Filings. Cypress shall transfer and assign to Alexza all Regulatory Filings
and Regulatory Approvals for Products that are owned by Cypress or its Affiliates.



               (ii) Remaining Inventories. Cypress shall have the right to sell, for a period not to exceed
[...***...] after the effective date of termination, all inventory of Products in Cypress’ or its
Affiliates’ possession as of the effective date of termination.



               (iii) Payment Obligations.



                    (1) If the applicable event under Section 11.2(a) occurs on or after the 1st
anniversary of the Effective Date, and if Alexza subsequently completes any transaction pursuant to
which (A) rights under Alexza Technology to commercialize any Product [...***...] are licensed or
sublicensed or otherwise granted to any Third Party (including licensing and collaboration
transaction and joint ventures involving a license, but excluding a Change of Control of Alexza)
(an “Alexza Product License”) or (B) Alexza or any of its Affiliates sells, transfers or disposes
of all or a substantial portion of the [...***...] Alexza Technology related to Products to a Person
other than Alexza or an Affiliate of Alexza (including a sale of assets, merger, sale of stock or
other equity interests, including a Change of Control of Alexza) (an “Alexza Product Sale”), then
Alexza shall pay to Cypress, out of the License Consideration or Sale Consideration, as applicable,
an amount not to exceed [...***...]% of the following total: [...***...]. Such amount shall be paid within
[...***...] days after Alexza’s receipt of the applicable License Consideration or Sale Consideration,
as applicable, and shall be accompanied by a reasonably detailed statement summarizing the
calculation of the amount paid. For purposes of clarification, (y) the payment obligations of
Alexza to Cypress set forth in this Section 11.3(b)(iii) shall apply to each Alexza Product License
or Alexza Product Sale completed by Alexza on a cumulative basis, subject to the





 




			
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maximum total payment obligations of Alexza to Cypress set forth in this paragraph, and (z) a
license or sublicense solely to manufacture or develop any Product for Alexza or its Affiliate
where Alexza or its Affiliate retains rights to commercialize such Product shall not be an Alexza
Product License or Alexza Product Sale.




                    (2) As used herein, “License Consideration” means the net monetary and non-monetary
consideration actually received by Alexza or any of its Affiliates in connection with any Alexza
Product License, after deducting any investment banking, broker, accounting, tax and legal fees
paid by Alexza or any of its Affiliates in connection with an Alexza Product License, including net
licensing fees, royalties, milestones or similar amounts to the extent actually paid to Alexza or
any of its Affiliates. “Sale Consideration” means the net monetary and non-monetary consideration
actually received by Alexza or any of its Affiliates in connection with an Alexza Product Sale,
after deduction of any investment banking, broker, accounting, tax and legal fees and expenses paid
by Alexza or any of its Affiliates in connection with such Alexza Product Sale, including
milestone, escrow, holdback and other contingent payments payable in connection with such Alexza
Asset Sale to the extent actually paid to Alexza or any of its Affiliates. In each case,
non-monetary consideration received by Alexza or any of its Affiliates shall be valued by Alexza in
the same manner as non-cash consideration is valued by Cypress pursuant to Section 6.2.



          (c) In addition to the effects set forth in Section 11.3(a), immediately upon any termination
of this Agreement under Section 11.2(b), Alexza shall pay to Cypress an amount equal to the Alexza
Development Expenses previously paid by Cypress to Alexza under Section 5.4(a).




     11.4 Survival. Expiration or termination of this Agreement shall not relieve the Parties of
any rights or obligation accruing prior to such expiration or termination. In addition, upon
expiration or termination of this Agreement, the following provisions shall survive and apply after
expiration or termination of this Agreement: Sections 2.6, 7.1, 9.4, 11.1 (including the provisions
referenced therein only after expiration of this Agreement), 11.3 (only after a termination of this
Agreement), 11.4 and 11.5 and Articles 8, 10, 12 and 13.



     11.5 Rights in Bankruptcy. All rights and licenses granted under or pursuant to this
Agreement by Alexza and Cypress are, and shall otherwise be deemed to be, for purposes of Section
365(n) of the U.S. Bankruptcy Code, licenses of rights to “intellectual property” as defined under
Section 101 of the U.S. Bankruptcy Code. The Parties agree that each Party, as licensee of certain
rights under this Agreement, shall retain and may fully exercise all of its rights and elections
under the U.S. Bankruptcy Code. The Parties further agree that, in the event of the commencement a
bankruptcy proceeding by or against a Party (such Party, the “Bankrupt Party”) under the U.S.
Bankruptcy Code, the other Party shall be entitled to a complete duplicate of (or complete access
to, as appropriate) any intellectual property licensed to such other Party and all embodiments of
such intellectual property, which, if not already in such other Party’s possession, shall be
promptly delivered to it (a) upon any such commencement of a bankruptcy proceeding upon such other
Party’s written request therefor, unless the Bankrupt Party elects to continue to perform all of
its obligations under this Agreement or (b) if not delivered under



40









 




clause (a), following the rejection of this Agreement by the Bankrupt Party upon written
request therefor by the other Party.




ARTICLE 12




DISPUTE RESOLUTION AND GOVERNING LAW



     12.1 Dispute Resolution Process. The Parties recognize that disputes as to certain matters
may from time to time arise during the Term that relate to interpretation of a Party’s rights
and/or obligations hereunder or any alleged breach of this Agreement. If the Parties cannot
resolve any such dispute within [...***...] days after written notice of a dispute from one Party to
another, either Party may, by written notice to the other Party, have such dispute referred to the
Senior Executives. The Senior Executives shall negotiate in good faith to resolve the dispute
within [...***...] days. During such period of
negotiations, any applicable time periods under this Agreement shall be tolled. If the Senior
Executives are unable to resolve the dispute within such time period, either Party may then invoke
the provisions of Section 12.2. For clarification, any disputes of the Development Committee shall
not be subject to the provisions of this Article 12, and may only be resolved in accordance with
Section 3.3(d).



     12.2 Arbitration.



          (a) General. Any dispute, controversy, difference or claim that may arise between the Parties
out of or in relation to or in connection with this Agreement (including arising out of or relating
to the validity, construction, interpretation, enforceability, breach, performance, application or
termination of this Agreement), excluding any disputes of the Development Committee, which may only
be resolved in accordance with Section 3.3(d), that is not resolved pursuant to Section 12.1,
except for a dispute, claim or controversy under Section 12.3, shall be settled by binding
arbitration administered by JAMS pursuant to its Comprehensive Arbitration Rules and Procedures of
JAMS then in effect (the “JAMS Rules”), except as otherwise provided herein. The arbitration shall
be governed by the U.S. Federal Arbitration Act, 9 U.S.C. §§ 1-16 (the “Federal Arbitration Act”),
to the exclusion of any inconsistent state laws. The U.S. Federal Rules of Civil Procedure shall
govern discovery and the rules of evidence for the arbitration. The arbitration will be conducted
in [...***...]. Any situation not expressly covered by this Agreement shall be decided in accordance
with the JAMS Rules.




          (b) Arbitrator. The arbitrator shall be one neutral, independent and impartial arbitrator
selected from a pool of retired federal judges to be presented to the Parties by JAMS. If the
Parties fail to agree on an arbitrator within [...***...] days, the arbitrator shall be appointed by
JAMS in accordance with the JAMS Rules.




          (c) Decision; Award. The power of the arbitrator to fashion procedures and remedies within
the scope of this Agreement is recognized by the Parties as essential to the success of the
arbitration process. The arbitrator shall not have the authority to fashion remedies that would
not be available to a state or federal judge hearing the same dispute. The arbitrator is






 




			
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encouraged to operate on this premise in an effort to reach a fair and just decision. Reasons
for the arbitrator’s decisions should be complete and explicit, including reasonable determinations
of law and fact. The written reasons should also include the basis for any damages awarded and a
statement of how the damages were calculated. Such a written decision shall be rendered by the
arbitrator following a full comprehensive hearing, no later than [...***...]
days following the selection of the arbitrator as provided for in Section
12.2(b). Any award shall be promptly paid in U.S. dollars free of any tax, deduction or offset;
and any costs, fees or taxes incident to enforcing the award shall, to the maximum extent permitted
by Applicable Laws, be charged against the Party resisting enforcement. Each Party agrees to abide
by the award rendered in any arbitration conducted pursuant to this Article 12 and agrees that,
subject to the Federal Arbitration Act, judgment may be entered upon the final award in any court
of competent jurisdiction.




          (d) Costs. Each Party shall bear its own legal fees in connection with the arbitration. The
arbitrator shall assess his or her costs, fees and expenses against the Party losing the
arbitration unless he or she believes that neither Party is the clear loser, in which case the
arbitrator shall divide his or her fees, costs and expenses according to his or her sole
discretion.




          (e) Injunctive Relief. Provided a Party has made a sufficient showing under the rules and
standards set forth in the Federal Rules of Civil Procedure and applicable case law, the arbitrator
shall have the freedom to invoke, and the Parties agree to abide by, injunctive measures after
either Party submits in writing for arbitration claims requiring immediate relief. Additionally,
nothing in this Article 12 will preclude either Party from seeking equitable relief or interim or
provisional relief from a court of competent jurisdiction, including a temporary restraining order,
preliminary injunction or other interim equitable relief, concerning a dispute either prior to or
during any arbitration if necessary to protect the interests of such Party or to preserve the
status quo pending the arbitration proceeding.




          (f) Confidentiality. The arbitration proceeding shall be confidential and the arbitrator
shall issue appropriate protective orders to safeguard each Party’s Confidential Information.
Except as required by law, no Party shall make (or instruct the arbitrator to make) any public
announcement with respect to the proceedings or decision of the arbitrator without prior written
consent of the other Party. The existence of any dispute submitted to arbitration, and the award,
shall be kept in confidence by the Parties and the arbitrator, except as required in connection
with the enforcement of such award or as otherwise required by Applicable Laws.




     12.3 Patent and Trademark Disputes. Any dispute, controversy or claim relating to the scope,
validity, enforceability or infringement of any Patents covering or Trademarks used in connection
with the manufacture, use, importation, offer for sale, marketing, distribution or sale of the
Product shall be submitted to a court of competent jurisdiction in the country in which such patent
or trademark rights were granted or arose.



     12.4 Governing Law. This Agreement and all questions regarding the existence, validity,
interpretation, breach or performance of this Agreement, shall be governed by, and





 




			
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construed and enforced in accordance with, the laws of the State of California, without
reference to its conflicts of law principles.




ARTICLE 13




GENERAL PROVISIONS



     13.1 Waiver of Breach. No delay or waiver by either Party of any condition or term in any one
or more instances shall be construed as a further or continuing waiver of such condition or term or
of another condition or term.



     13.2 Further Actions. Each Party agrees to execute, acknowledge and deliver such further
instruments, and to perform all such other acts, as may be necessary or appropriate in order to
carry out the purposes and intent of this Agreement.



     13.3 Modification. No amendment or modification of any provision of this Agreement shall be
effective unless in a writing signed by both Parties hereto. No provision of this Agreement shall
be varied, contradicted or explained by any oral agreement, course of dealing or performance or any
other matter not set forth in an agreement in writing and signed by both Parties hereto.



     13.4 Severability. In the event any provision of this Agreement should be held invalid,
illegal or unenforceable in any jurisdiction, the Parties shall negotiate in good faith and enter
into a valid, legal and enforceable substitute provision that most nearly reflects the original
intent of the Parties. All other provisions of this Agreement shall remain in full force and effect
in such jurisdiction. Such invalidity, illegality or unenforceability shall not affect the
validity, legality or enforceability of such provision in any other jurisdiction.



     13.5 Entire Agreement. This Agreement, including its exhibits, constitute the entire
agreement between the Parties relating to the subject matter hereof and supersede and cancel all
previous express or implied agreements and understandings, negotiations, writings and commitments,
either oral or written, in respect of the subject matter hereof.



     13.6 Notices. Any notice or communication required or permitted under this Agreement shall be
in writing, delivered personally, sent by facsimile (and promptly confirmed by personal delivery,
registered or certified mail or overnight courier), sent by nationally-recognized overnight courier
or sent by registered or certified mail, postage prepaid, to the following addresses of the Parties
(or such other address for a Party as may be at any time thereafter specified by like notice):



43









 





	 	 	 

	To Alexza:

	 	To Cypress:
	 
	 	 
	Alexza Pharmaceuticals, Inc.

	 	Cypress Bioscience, Inc.
	2091 Stierlin Court

	 	4350 Executive Drive, Suite 325
	Mountain View, CA 94043

	 	San Diego, CA 92121
	Facsimile: (650) 944-7988

	 	Facsimile: (858) 452-1222
	Attention: Chief Executive Officer

	 	Attention: Chief Executive Officer
	 
	 	 
	with a copy to:

	 	with a copy to:
	 
	 	 
	Cooley LLP

	 	Cooley LLP
	3175 Hanover St.

	 	4401 Eastgate Mall
	Palo Alto, CA 94304

	 	San Diego, CA 92121
	Facsimile: (650) 849-7400

	 	Telephone: (858) 550-6000
	Attention: Glen Y. Sato

	 	Facsimile: (858) 550-6420
	 

	 	Attention: Frederick T. Muto






     Any such notice shall be deemed to have been given (a) when delivered if personally delivered;
(b) on the next business day after dispatch if sent by confirmed facsimile or by
nationally-recognized overnight courier; or (c) on the fifth business day following the date of
mailing if sent by mail.



     13.7 Assignment. This Agreement shall be binding upon the successors and assigns of the
Parties and the name of a Party appearing herein shall be deemed to include the names of its
successors and assigns. Neither Party may assign its interest under this Agreement without the
prior written consent of the other Party; provided however, each Party may assign its interest
under this Agreement, without the prior written consent of the other Party: (a) to any of its
Affiliates, or (b) to a Third Party successor of the assigning Party’s business to which this
Agreement relates (which, in the case of Cypress, shall mean Cypress’ business relating to
Products, and in the case of Alexza, shall mean Alexza’s business relating to the Staccato
Technology, including the Alexza Technology), whether alone or together with any other portions of
the assigning Party’s business, by reason of merger, sale of stock or sale of all or substantially
all of its assets or other form of acquisition; provided that intellectual property rights that are
controlled by such Third Party acquirer (other than Alexza Technology) shall not be included in the
technology licensed hereunder. Any purported assignment without a required consent shall be null
and void. No assignment shall relieve either Party of responsibility for the performance of any
obligation that accrued prior to the effective date of such assignment.



     13.8 No Partnership or Joint Venture. Nothing in this Agreement or any action which may be
taken pursuant to its terms is intended, or shall be deemed, to establish a joint venture or
partnership between Cypress and Alexza. Neither Party to this Agreement shall have any express or
implied right or authority to assume or create any obligations on behalf of, or in the name of, the
other Party, or to bind the other Party to any contract, agreement or undertaking with any Third
Party.



44









 





     13.9 Counterparts. This Agreement may be executed in any number of counterparts each of which
shall be deemed an original, and all of which together shall constitute one and the same
instrument. Signatures provided by facsimile transmission or in AdobeTM Portable Document Format
(PDF) sent by electronic mail shall be deemed to be original signatures.



[Signature Page Follows]






45









 







     
IN WITNESS WHEREOF, the Parties have executed this License & Development Agreement as of the
Effective Date.




	 	 	 	 	 	 	 	 	 

	ALEXZA PHARMACEUTICALS, INC.	 	CYPRESS BIOSCIENCE, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	By: 

Name:

	 	/s/ Thomas B. King
 

Thomas B. King
	 	By:

Name:
	 	/s/ Jay Kranzler
 

Jay D. Kranzler, M.D., PhD
	 	 
	Title:

	 	President, Chief Executive Officer
	 	Title:
	 	Chief Executive Officer	 	 






Signature Page to License & Development Agreement









 









 








Exhibit A




Alexza Patents



[...***...]





 




			
	***	 	Confidential Treatment Requested





A-1









 





Exhibit B




Alexza Trademarks



[...***...]





 




			
	***	 	Confidential Treatment Requested





B-1









 





Exhibit C




Alexza Development Plan


[...***...]




[...***...]



[...***...]




[...***...]



[...***...]






 




			
	***	 	Confidential Treatment Requested






C-1