**Exhibit 10.27**EXECUTION COPY**WARRANT PURCHASE AGREEMENT**between**ALEXZA PHARMACEUTICALS, INC.**and**SYMPHONY ALLEGRO HOLDINGS LLC** **Dated as of December 1, 2006** 
 

 
**Table of Contents**       **Page** ARTICLE I DEFINITIONS  1      Section 1.01 Definitions  1      ARTICLE II PURCHASE AND SALE OF WARRANTS  1      Section 2.01 Authorization to Issue Warrants  1 Section 2.02 Purchase and Sale of Warrants  2 Section 2.03 Warrant Date  2      ARTICLE III CONDITIONS OF PURCHASE  2      Section 3.01 Conditions Precedent to Each Party’s Obligations  2 Section 3.02 Conditions Precedent to Holdings’ Obligations  2 Section 3.03 Conditions Precedent to Alexza’s Obligations  4      ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS  5      Section 4.01 Representations, Warranties and Covenants of Holdings  5 Section 4.02 Representations, Warranties and Covenants of Alexza  7      ARTICLE V INDEMNITY  9      Section 5.01 Indemnification  9 Section 5.02 Notice of Claims  10 Section 5.03 Defense of Proceedings  10 Section 5.04 Settlement  11      ARTICLE VI TRANSFER RESTRICTIONS  12      Section 6.01 Transfer Restrictions  12 Section 6.02 Legends  13 Section 6.03 Warrant Legend Removal  13 Section 6.04 Improper Transfer  14 Section 6.05 Limits on Daily Disposition  14      ARTICLE VII MISCELLANEOUS  15      Section 7.01 Notice of Breach  15 Section 7.02 Notices  16 Section 7.03 Governing Law; Consent to Jurisdiction and Service of Process  17 Section 7.04 Waiver of Jury Trial  17 Section 7.05 Entire Agreement  18 Section 7.06 Amendment and Waivers  18 
 

 
       **Page** Section 7.07 Counterparts  18 Section 7.08 Assignment and Successors  18    Annex A Certain DefinitionsExhibit A Form of opinion of Cooley Godward Kronish LLPExhibit B Form of WarrantExhibit C Warrant Conversion Example
 

 
**WARRANT PURCHASE AGREEMENT**     This WARRANT PURCHASE AGREEMENT (this “Agreement”) is dated as of December 1, 2006, byand between Alexza Pharmaceuticals, Inc., a Delaware corporation (“Alexza”), and SYMPHONYALLEGRO HOLDINGS LLC, a Delaware limited liability company (together with its permitted successors,assigns and transferees, “Holdings”).     WHEREAS, contemporaneously with the execution of this Agreement, Holdings, Alexza, andSymphony Allegro, Inc., a Delaware corporation (“Symphony Allegro”) are entering into aPurchase Option Agreement (the “Purchase Option Agreement”) pursuant to which, among otherthings, Holdings is granting to Alexza an option to purchase all of the equity securities ofSymphony Allegro (the “Symphony Allegro Equity Securities”) owned, or hereafter acquired,by Holdings on the terms set forth in the Purchase Option Agreement (the “PurchaseOption”); and     WHEREAS, in consideration for Holdings’ grant of the Purchase Option to Alexza, Alexza desiresto issue and sell to Holdings the Warrants described herein on the terms hereof;     NOW, THEREFORE, in consideration of the foregoing and for other good and valuableconsideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto(the “Parties”) agree as follows:**ARTICLE I****DEFINITIONS**     Section 1.01 Definitions. Capitalized terms used but not defined herein are used asdefined in Annex A hereto.**ARTICLE II****PURCHASE AND SALE OF WARRANTS**     Section 2.01 Authorization to Issue Warrants. Alexza has authorized the issuance ofcertain warrants (the “Warrants”) representing the right to purchase 2,000,000 shares ofAlexza’s common stock (“Alexza Common Stock”), par value $0.0001 per share, at a price pershare that shall be an amount equal to 125% of the average closing price per share of Alexza CommonStock, as reported by the NASDAQ Global Market, or other national exchange that is the primaryexchange on which Alexza Common Stock is listed, over a continuous period of sixty (60) tradingdays immediately preceding (but not including) the second trading day prior to the Closing Date(such shares, the “Warrant Shares”). The Warrants shall have a term of five (5) years andshall be evidenced by certificates issued pursuant to this Agreement in the form set forth inExhibit B hereto, with such appropriate insertions, omissions, substitutions, and othervariations as are required or permitted by this Agreement.Warrant Purchase Agreement
 

 
     Section 2.02 Purchase and Sale of Warrants. Alexza hereby agrees to issue toHoldings, and Holdings hereby agrees to acquire from Alexza, the Warrants on the Closing Date(hereinafter, the “Warrant Date”), subject to the fulfillment of the conditions precedentdescribed in Article III below. The Warrants will be issued to Holdings as considerationfor the execution and delivery by Holdings of the Purchase Option Agreement.     Section 2.03 Warrant Date. Subject to the terms and conditions of this Agreement, theissuance, sale and purchase of the Warrants contemplated by this Agreement shall take place at aclosing on the Warrant Date (the “Warrant Closing”) to be held at the offices of Paul,Weiss, Rifkind, Wharton & Garrison LLP, 1285 Avenue of the Americas, New York, New York 10019, at4:30 P.M., Eastern Time, following the satisfaction or waiver of all other conditions to theobligations of the Parties set forth in Section 2.02 hereof, or at such other place or atsuch other time or such other date as Holdings and Alexza shall mutually agree upon in writing.**ARTICLE III****CONDITIONS OF PURCHASE**     Section 3.01 Conditions Precedent to Each Party’s Obligations. The respectiveobligations of Alexza and Holdings to effect the transactions contemplated hereby shall be subjectto the satisfaction of the conditions precedent contained in this Section 3.01 or thewaiver thereof in writing by Holdings and Alexza prior to or on the Warrant Date.          (a) Approvals. All Governmental Approvals imposed by any Governmental Authority inconnection with the transactions contemplated by this Agreement and the other Operative Documentsrequired to be in effect prior to or on the Warrant Date shall be in effect, the failure of whichto be in effect would, either individually or in the aggregate, reasonably be expected to have aMaterial Adverse Effect on either of the Parties.          (b) Litigation. No Governmental Authority of competent jurisdiction shall haveenacted, issued, promulgated, enforced or entered any law or Governmental Order (whether temporary,preliminary or permanent) that is in effect and restrains, enjoins or otherwise prohibits theconsummation of the transactions contemplated hereby or in the other Operative Documents.     Section 3.02 Conditions Precedent to Holdings’ Obligations. The obligation ofHoldings to effect the transactions contemplated hereby shall be subject to the satisfaction of thefurther conditions precedent contained in this Section 3.02, or the waiver thereof inwriting by Holdings, prior to or on the Warrant Date.          (a) Authorization, Execution and Delivery of Documents. This Agreement and each ofthe other Operative Documents (including all schedules, annexes and exhibits thereto) required tobe entered into on or prior to the Warrant Date shall haveWarrant Purchase Agreement
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been duly authorized, executed and delivered by each of the parties thereto (other thanHoldings) and shall be in full force and effect.          (b) Issuance of Warrants. All actions required by any applicable law, or necessary inthe reasonable opinion of Holdings, to issue the Warrants shall have been duly taken by Alexza (orprovisions therefor shall have been made), including, without limitation, the making of allregistrations and filings required to be made prior to or on the Warrant Date, and all necessaryconsents shall have been received.          (c) Performance of Obligations by Alexza; Representations and Warranties. Alexzashall have performed in all material respects and complied in all material respects with allagreements and conditions contained in this Agreement and the other Operative Documents that arerequired to be performed or complied with by it prior to or on the Warrant Date. Alexza’srepresentations and warranties set forth in Section 4.02 of this Agreement shall be trueand correct in all respects as of the Warrant Date.          (d) Opinion of Counsel. Holdings shall have received an opinion letter from CooleyGodward Kronish LLP, counsel to Alexza, in form and substance acceptable to Holdings.          (e) Closing Certificate. At the Warrant Closing, Holdings shall have received acertificate from Alexza executed by its Chief Financial Officer or other duly authorized executiveofficer, dated as of the Warrant Date, in form and substance reasonably satisfactory to Holdings,certifying:               (i) (A) that the Operative Documents to which Alexza is a party have been duly authorized,executed and delivered by Alexza, and are in full force and effect, and (B) that Alexza hassatisfied all conditions precedent contained in the Operative Documents to which it is a partyrequired to be satisfied by it on or prior to the Warrant Date; and               (ii) as to (A) the accuracy and completeness of the contents of Alexza’s charter documents,(B) the resolutions of Alexza’s board of directors, duly authorizing Alexza’s execution, deliveryand performance of each Operative Document to which it is or is to be a party and each otherdocument required to be executed and delivered by it in accordance with the provisions hereof orthereof, and (C) the incumbency and signature of Alexza’s representatives authorized to execute anddeliver documents on its behalf in connection with the obligations contemplated hereby and by theother Operative Documents.          (f) Further Documents, Certificates, Etc. Holdings shall have received such otherdocuments, certificates or opinions as Holdings may reasonably request in connection with theconsummation of the transactions contemplated by this Agreement.Warrant Purchase Agreement
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          (g) No Events of Default. No breach, default, event of default or other similar eventby Alexza, and no event which with the giving of notice, the passage of time, or both, wouldconstitute any of the foregoing, under any Operative Document or any other material contract oragreement to which Alexza is a party, shall have occurred and be continuing, and no condition shallexist that constitutes, or with the giving of notice, the passage of time, or both, wouldconstitute such default, event of default or other similar event.          (h) No Violation. The transactions contemplated hereby shall comply with allapplicable law in effect as of the Warrant Date, and no party (other than Holdings) to suchtransactions shall be in violation of any such applicable law. Holdings shall not be subject toany penalty or liability pursuant to any violation of applicable law in effect as of such WarrantDate by virtue of the transactions contemplated hereby and by each of the other OperativeDocuments.          (i) Change in Law. There shall have been no change in any law, rule or regulation orthe interpretation thereof (including any law, rule or regulation relating to taxes) that prohibitsor prevents the consummation of this Agreement or any of the transactions contemplated hereby(including the sale and purchase of the Warrants) or by the Operative Documents or that results inany material increase in taxes payable by Holdings or Investors.     Section 3.03 Conditions Precedent to Alexza’s Obligations. The obligation of Alexzato effect the transactions contemplated hereby shall be subject to the satisfaction of the furtherconditions precedent contained in this Section 3.03, or the waiver thereof in writing byAlexza, prior to or on the Warrant Date.          (a) Authorization, Execution and Delivery of Documents. This Agreement and each ofthe other Operative Documents (including all schedules and exhibits thereto) required to be enteredinto on or prior to the Warrant Date shall have been duly authorized, executed and delivered byeach of the parties thereto (other than Alexza) and shall be in full force and effect.          (b) Performance of Obligations by Holdings; Representations and Warranties. As of theWarrant Date, Holdings shall have performed in all material respects and complied in all materialrespects with all agreements and conditions contained in this Agreement and the other OperativeDocuments required to be performed or complied with by it prior to or at the Warrant Date. Each ofHoldings’ representations and warranties set forth in Section 4.01 of this Agreement shallbe true and correct in all respects as of the Warrant Date with the same effect as though suchrepresentations and warranties were made on and as of the Warrant Date (or if stated to have beenmade as of an earlier date, as of such date).          (c) No Events of Default. No breach, default, event of default or other similar eventby Holdings, and no event which with the giving of notice, the passage of time, or both, wouldconstitute any of the foregoing, under any Operative Document or any other material contract oragreement to which Holdings is a party, shallWarrant Purchase Agreement
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have occurred and be continuing, and no condition shall exist that constitutes, or with thegiving of notice, the passage of time, or both, would constitute such default, event of default orother similar event.          (d) No Violation. The transactions contemplated hereby shall comply in all materialrespects with all applicable law in effect as of the Warrant Date, and no party (other than Alexza)to such transactions shall be in material violation of any such applicable law. Alexza shall notbe subject to any penalty or liability pursuant to any violation of applicable law in effect as ofsuch Warrant Date by virtue of the transactions contemplated hereby and by each of the otherOperative Documents, the failure to comply with which would, either individually or in theaggregate, reasonably be expected to have a material adverse effect on the Programs.**ARTICLE IV****REPRESENTATIONS, WARRANTIES AND COVENANTS**     Section 4.01 Representations, Warranties and Covenants of Holdings.          (a) Holdings hereby represents and warrants to Alexza that:               (i) Organization. Holdings is a limited liability company, duly formed, validlyexisting and in good standing under the laws of the State of Delaware.               (ii) Authority and Validity. Holdings has all requisite limited liability companypower and authority to execute, deliver and perform its obligations under this Agreement and toconsummate the transactions contemplated hereby. The execution, delivery and performance byHoldings of this Agreement and the consummation of the transactions contemplated hereby have beenduly and validly authorized by all necessary action required on the part of Holdings, and no otherproceedings on the part of Holdings are necessary to authorize this Agreement or for Holdings toperform its obligations under this Agreement. This Agreement constitutes the lawful, valid andlegally binding obligation of Holdings, enforceable in accordance with its terms, except as thesame may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similarlaws affecting the enforcement of creditors’ rights generally and general equitable principlesregardless of whether such enforceability is considered in a proceeding at law or in equity.               (iii) No Violation or Conflict. The execution, delivery and performance of thisAgreement and the transactions contemplated hereby do not (A) violate, conflict with or result inthe breach of any provision of the Organizational Documents of Holdings, (B) conflict with orviolate any law or Governmental Order applicable to Holdings or any of its assets, properties orbusinesses, or (C) conflict with, result in any breach of, constitute a default (or event that withthe giving of notice or lapse of time, or both, would become a default) under, require any consentunder, or give to others any rights of termination, amendment, acceleration, suspension, revocationorWarrant Purchase Agreement
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cancellation of, or result in the creation of any Encumbrance on any of the assets orproperties of Holdings, pursuant to, any note, bond, mortgage or indenture, contract, agreement,lease, sublease, license, permit, franchise or other instrument or arrangement to which Holdings isa party except, in the case of clauses (B) and (C), to the extent that suchconflicts, breaches, defaults or other matters would not, individually or in the aggregate,reasonably be expected to have a Material Adverse Effect on Holdings.               (iv) Governmental Consents and Approvals. The execution, delivery and performance ofthis Agreement by Holdings do not, and the consummation of the transactions contemplated hereby donot and will not, require any Governmental Approval which has not already been obtained, effectedor provided, except with respect to which the failure to so obtain, effect or provide would not,individually or in the aggregate, reasonably be expected to have a Material Adverse Effect onHoldings.               (v) Litigation. There are no actions by or against Holdings pending before anyGovernmental Authority or, to the knowledge of Holdings, threatened to be brought by or before anyGovernmental Authority, that would, individually or in the aggregate, reasonably be expected tohave a Material Adverse Effect on Holdings. There are no pending or, to the knowledge of Holdings,threatened actions to which Holdings is a party (or threatened to be named as a party) to setaside, restrain, enjoin or prevent the execution, delivery or performance of this Agreement or theOperative Documents or the consummation of the transactions contemplated hereby or thereby by anyparty hereto or thereto. Holdings is not subject to any Governmental Order (nor, to the knowledgeof Holdings, is there any such Governmental Order threatened to be imposed by any GovernmentalAuthority) that would, individually or in the aggregate, reasonably be expected to have a MaterialAdverse Effect on Holdings.               (vi) Accredited Investor.                    (A) Holdings is and will remain at all relevant times an “Accredited Investor”.                    (B) Holdings has relied completely on the advice of, or has consulted with or has had theopportunity to consult with, its own personal tax, investment, legal or other advisors and has notrelied on Alexza or any of its Affiliates for advice. Holdings has reviewed the InvestmentOverview and is aware of the risks disclosed therein. Holdings acknowledges that it has had areasonable opportunity to conduct its own due diligence with respect to the Products, the Programs,Symphony Allegro, Alexza and the transactions contemplated by the Operative Documents.                    (C) Holdings has been advised and understands that the offer and sale of the Warrants and theWarrant Shares have not been registered under the Securities Act. Holdings is able to bear theeconomic risk of such investment for an indefinite period and to afford a complete loss thereof.Warrant Purchase Agreement
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                    (D) Holdings is acquiring the Warrants and the Warrant Shares solely for Holdings’ own accountfor investment purposes as a principal and not with a view to the resale of all or any partthereof; provided, that Holdings may transfer the Warrants as set forth in Section 6.01hereof. Holdings agrees that the Warrants and the Warrant Shares may not be resold (1) withoutregistration thereof under the Securities Act (unless an exemption from such registration isavailable), or (2) in violation of any law. Holdings is not and will not be an underwriter withinthe meaning of Section 2(11) of the Securities Act with respect to the Warrants and the WarrantShares.                    (E) No person or entity acting on behalf of, or under the authority of, Holdings is or will beentitled to any broker’s, finder’s, or similar fees or commission payable by Alexza or any of itsAffiliates.                    (F) Holdings acknowledges and agrees to treat the Warrants for federal, state and local incometax purposes as option premium paid in return for the grant and maintenance of the Purchase Option.     Section 4.02 Representations, Warranties and Covenants of Alexza.          (a) Alexza hereby represents and warrants to Holdings that:               (i) Organization. Alexza is a corporation, duly organized, validly existing and ingood standing under the laws of the State of Delaware.               (ii) Authority and Validity. Alexza has all requisite corporate power and authorityto execute, deliver and perform its obligations under this Agreement and to consummate thetransactions contemplated hereby. The execution, delivery and performance by Alexza of thisAgreement and the consummation of the transactions contemplated hereby have been duly and validlyauthorized by all necessary action required on the part of Alexza, and no other proceedings on thepart of Alexza are necessary to authorize this Agreement or for Alexza to perform its obligationsunder this Agreement. This Agreement constitutes the lawful, valid and legally binding obligationof Alexza, enforceable in accordance with its terms, except as the same may be limited byapplicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting theenforcement of creditors’ rights generally and general equitable principles regardless of whethersuch enforceability is considered in a proceeding at law or in equity.               (iii) No Violation or Conflict. The execution, delivery and performance of thisAgreement and the transactions contemplated hereby do not (A) violate, conflict with or result inthe breach of any provision of the Organizational Documents of Alexza, (B) conflict with or violateany law or Governmental Order applicable to Alexza or any of its assets, properties or businesses,or (C) conflict with, result in any breach of, constitute a default (or event that with the givingof notice or lapse of time, or both, would become a default) under, require any consent under, orgive to others any rights of termination, amendment, acceleration, suspension, revocation orWarrant Purchase Agreement
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cancellation of, or result in the creation of any Encumbrance on any of the assets orproperties of Alexza, pursuant to, any note, bond, mortgage or indenture, contract, agreement,lease, sublease, license, permit, franchise or other instrument or arrangement to which Alexza is aparty except, in the case of clauses (B) and (C), to the extent that suchconflicts, breaches, defaults or other matters would not, individually or in the aggregate,reasonably be expected to have a Material Adverse Effect on Alexza.               (iv) Governmental Consents and Approvals. The execution, delivery and performance ofthis Agreement by Alexza do not, and the consummation of the transactions contemplated hereby donot and will not, require any Governmental Approval which has not already been obtained, effectedor provided, except with respect to which the failure to so obtain, effect or provide would not,individually or in the aggregate, reasonably be expected to have a Material Adverse Effect onAlexza.               (v) Litigation. Except as disclosed in any Alexza Public Filings available as of thedate hereof, there are no actions by or against Alexza pending before any Governmental Authorityor, to the knowledge of Alexza, threatened to be brought by or before any Governmental Authority,that would, individually or in the aggregate, reasonably be expected to have a Material AdverseEffect on Alexza. There are no pending or, to the knowledge of Alexza, threatened actions, towhich Alexza is a party (or is threatened to be named as a party) to set aside, restrain, enjoin orprevent the execution, delivery or performance of this Agreement or the Operative Documents or theconsummation of the transactions contemplated hereby or thereby by any party hereto or thereto.Alexza is not subject to any Governmental Order (nor, to the knowledge of Alexza, is there any suchGovernmental Order threatened to be imposed by any Governmental Authority) that would, individuallyor in the aggregate, reasonably be expected to have a Material Adverse Effect on Alexza.               (vi) Private Placement. Assuming the accuracy of Holdings’ representations andwarranties set forth in Section 4.01, (i) the purchase and sale of the Warrants is exemptfrom the registration requirements of the Securities Act, and (ii) no other offering of CommonStock by Alexza will be integrated with the offering of the Warrants or the Warrant Shares.Neither Alexza nor any Person acting on its behalf has or will offer the Warrants or the WarrantShares by any form of general solicitation or general advertising and all filings required underRule 503 of the Securities Act will be made in a timely manner.          (b) Alexza covenants and agrees with Holdings that, so long as any of the Warrants areoutstanding (including as such Warrants may be reissued pursuant to transfer in accordance withSection 6.01 hereof), Alexza shall take all action necessary to reserve and keep availableout of its authorized and unissued Alexza Common Stock, solely for the purpose of effecting theexercise of the Warrants, 100% of the number of shares of Alexza Common Stock issuable uponexercise of the Warrants. Upon exercise in accordance with the Warrants, the Alexza Common Stockdelivered thereby will be validly issued, fully paid and nonassessable and free from all taxes,liensWarrant Purchase Agreement
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and charges with respect to the issue thereof, with the holders being entitled to all rightsaccorded to a holder of the Alexza Common Stock.          (c) Alexza acknowledges and agrees to treat the Warrants for federal, state and local incometax purposes as option premium paid in return for the grant of the Purchase Option.**ARTICLE V****INDEMNITY**     Section 5.01 Indemnification. To the greatest extent permitted by applicable law,Alexza shall indemnify and hold harmless Holdings, and Holdings shall indemnify and hold harmlessAlexza, and each of their respective Affiliates, officers, directors, employees, agents, partners,members, successors, assigns, representatives of, and each Person, if any (including any officers,directors, employees, agents, partners, members of such Person) who controls, Holdings and Alexza,as applicable, within the meaning of the Securities Act or the Exchange Act, (each, an“Indemnified Party”), from and against any and all actions, causes of action, suits,claims, losses, costs, interest, fees, liabilities and damages, and expenses in connectiontherewith (irrespective of whether any such Indemnified Party is a party to the action for whichindemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements(hereinafter, a “Loss”), incurred by any Indemnified Party to the extent resulting from,arising out of or relating to: (i) in the case of Alexza being the Indemnifying Party, (A) anybreach of any representation or warranty made by Alexza herein, (B) any breach of any covenant,agreement or obligation of Alexza contained herein, or (C) any untrue statement of a material factabout Alexza contained in the reports filed by Alexza with the SEC, or the omission therefrom of amaterial fact about Alexza required to be stated therein or necessary in order to make thestatements therein, in light of the circumstances under which they were made, not misleading, tothe extent that such reports are attached to the Investment Overview; provided, that theinformation contained in a later filed report filed prior to the date of this Agreement shall bedeemed to update any related information contained in a previously filed report (the items setforth herein in clauses (A), (B) and (C) being hereinafter referred to asthe “Holdings Claims”), and (ii) in the case of Holdings being the Indemnifying Party, (x)any breach of any representation or warranty made by Holdings herein, (y) any breach of anycovenant, agreement or obligation of Holdings contained herein, or (z) any untrue statement oralleged untrue statement of a material fact about Holdings contained in the Investment Overview orthe omission or alleged omission therefrom of a material fact about Holdings required to be statedtherein or necessary in order to make the statements therein, in light of the circumstances underwhich they were made, not misleading, (the items set forth herein in clauses (x),(y) and (z) being hereinafter referred to as the “Alexza Claims”). To theextent that the foregoing undertaking by Alexza or Holdings may be unenforceable for any reason,such Party shall make the maximum contribution to the payment and satisfaction of any Loss that ispermissible under applicable law.Warrant Purchase Agreement
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     Section 5.02 Notice of Claims. Any Indemnified Party that proposes to assert a rightto be indemnified under this Article V shall notify Alexza or Holdings, as applicable (the“Indemnifying Party”), promptly after receipt of notice of commencement of any action, suitor proceeding against such Indemnified Party (an “Indemnified Proceeding”) in respect ofwhich a claim is to be made under this Article V, or the incurrence or realization of anyLoss in respect of which a claim is to be made under this Article V, of the commencement ofsuch Indemnified Proceeding or of such incurrence or realization, enclosing a copy of all relevantdocuments, including all papers served and claims made, but the omission to so notify theapplicable Indemnifying Party promptly of any such Indemnified Proceeding or incurrence orrealization shall not relieve (x) such Indemnifying Party from any liability that it may have tosuch Indemnified Party under this Article V or otherwise, except, as to such IndemnifyingParty’s liability under this Article V, to the extent, but only to the extent, that suchIndemnifying Party shall have been prejudiced by such omission, or (y) any other indemnitor fromliability that it may have to any Indemnified Party.     Section 5.03 Defense of Proceedings. In case any Indemnified Proceeding shall bebrought against any Indemnified Party, it shall notify the applicable Indemnifying Party of thecommencement thereof as provided in Section 5.02, and such Indemnifying Party shall beentitled to participate in, and provided such Indemnified Proceeding involves a claimsolely for money damages and does not seek an injunction or other equitable relief against theIndemnified Party and is not a criminal or regulatory action, to assume the defense of, suchIndemnified Proceeding with counsel reasonably satisfactory to such Indemnified Party. Afternotice from such Indemnifying Party to such Indemnified Party of such Indemnifying Party’s electionto so assume the defense thereof and the failure by such Indemnified Party to object to suchcounsel within ten (10) Business Days following its receipt of such notice, such Indemnifying Partyshall not be liable to such Indemnified Party for legal or other expenses related to suchIndemnified Proceedings incurred after such notice of election to assume such defense except asprovided below and except for the reasonable costs of investigating, monitoring or cooperating insuch defense subsequently incurred by such Indemnified Party reasonably necessary in connectionwith the defense thereof. Such Indemnified Party shall have the right to employ its counsel in anysuch Indemnified Proceeding, but the fees and expenses of such counsel shall be at the expense ofsuch Indemnified Party unless:               (i) the employment of counsel by such Indemnified Party at the expense of the applicableIndemnifying Party has been authorized in writing by such Indemnifying Party;               (ii) such Indemnified Party shall have reasonably concluded in its good faith (whichconclusion shall be determinative unless a court determines that such conclusion was not reachedreasonably and in good faith) that there is or may be a conflict of interest between the applicableIndemnifying Party and such Indemnified Party in the conduct of the defense of such IndemnifiedProceeding or that there are or may be one or more different or additional defenses, claims,counterclaims,Warrant Purchase Agreement
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or causes of action available to such Indemnified Party (it being agreed that in any casereferred to in this clause (ii) such Indemnifying Party shall not have the right to directthe defense of such Indemnified Proceeding on behalf of the Indemnified Party);               (iii) the applicable Indemnifying Party shall not have employed counsel reasonably acceptableto the Indemnified Party, to assume the defense of such Indemnified Proceeding within a reasonabletime after notice of the commencement thereof; provided, however, that (A) thisclause (iii) shall not be deemed to constitute a waiver of any conflict of interest thatmay arise with respect to any such counsel, and (B) an Indemnified Party may not invoke thisclause (iii) if such Indemnified Party failed to timely object to such counsel pursuant tothe first paragraph of this Section 5.03 above (it being agreed that in any case referredto in this clause (iii) such Indemnifying Party shall not have the right to direct thedefense of such Indemnified Proceeding on behalf of the Indemnified Party); or               (iv) any counsel employed by the applicable Indemnifying Party shall fail to timely commenceor diligently conduct the defense of such Indemnified Proceeding and such failure has prejudiced(or is in immediate danger of prejudicing) the outcome of such Indemnified Proceeding (it beingagreed that in any case referred to in this clause (iv) such Indemnifying Party shall nothave the right to direct the defense of such Indemnified Proceeding on behalf of the IndemnifiedParty);in each of which cases the reasonable fees and expenses of counsel for such Indemnified Party shallbe at the expense of such Indemnifying Party. Only one counsel shall be retained by allIndemnified Parties with respect to any Indemnified Proceeding, unless counsel for any IndemnifiedParty reasonably concludes in good faith (which conclusion shall be determinative unless a courtdetermines that such conclusion was not reached reasonably and in good faith) that there is or maybe a conflict of interest between such Indemnified Party and one or more other Indemnified Partiesin the conduct of the defense of such Indemnified Proceeding or that there are or may be one ormore different or additional defenses, claims, counterclaims, or causes or action available to suchIndemnified Party.     Section 5.04 Settlement. Without the prior written consent of such Indemnified Party,such Indemnifying Party shall not settle or compromise, or consent to the entry of any judgment in,any pending or threatened Indemnified Proceeding, unless such settlement, compromise, consent orrelated judgment (i) includes an unconditional release of such Indemnified Party from all liabilityfor Losses arising out of such claim, action, investigation, suit or other legal proceeding, (ii)provides for the payment of money damages as the sole relief for the claimant (whether at law or inequity), (iii) involves no admission of fact adverse to the Indemnified Party or finding oradmission of any violation of law or the rights of any Person by the Indemnified Party, and (iv) isnot in the nature of a criminal or regulatory action. No Indemnified Party shall settle orcompromise, or consent to the entry of any judgment in, any pending or threatened IndemnifiedProceeding (A) in respect of which any payment would result hereunder or under, (B) which includesan injunction that will materially adversely affect any Indemnifying Party, (C) which involves anadmission of fact adverse to the IndemnifyingWarrant Purchase Agreement
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Party or a finding or admission of any violation of law or the rights of any Person by theIndemnifying Party, or (D) which is in the nature of a criminal or regulatory action, without theprior written consent of the Indemnifying Party, such consent not to be unreasonably conditioned,withheld or delayed.**ARTICLE VI****TRANSFER RESTRICTIONS**     Section 6.01 Transfer Restrictions. Holdings agrees (and agrees to cause all of itsmembers and any subsequent transferees thereof to so agree) that (i) except as specifically setforth in the proviso immediately below, it will not, directly or indirectly, offer, sell, assign,transfer, distribute, grant or sell a participation in, pledge or otherwise dispose of any Warrantsor Warrant Shares or solicit any offers to buy or otherwise acquire, or take a pledge of, anyWarrants (collectively, “Transfer”) unless such Warrants or Warrant Shares are registeredand/or qualified under the Securities Act and applicable state securities laws, or unless anexemption from the registration or qualification requirements is otherwise available;provided, that, prior to such registration or qualification, (x) Holdings mayTransfer Warrants or Warrant Shares to Investors, RRD and each Symphony Fund, (y) Investors mayTransfer Warrants or Warrant Shares to its members, and (z) SCP may, in a single distribution,further Transfer Warrants or Warrant Shares to its limited partners, but in no event shall any ofRRD, the members of Investors (other than SCP) or SCP’s limited partners further Transfer suchWarrants or Warrant Shares prior to their registration or qualification (unless in accordance withclauses (x), (y) or (z)); (ii) (A) no Transfer of such Warrants, or (B)with respect to a private placement of the Warrant Shares, no Transfer of such Warrant Shares,shall be effective or recognized unless the transferor and the transferee make the representationsand agreements contained herein and furnish to Alexza such certifications and other information asAlexza may reasonably request to confirm that any proposed transfer complies with the restrictionsset forth herein and any applicable laws; and (iii) (1) except with respect to a Transfer madepursuant to the proviso in clause (i) above, Warrants may only be transferred in minimumdenominations of Warrants representing the right to purchase at least 30,000 Warrant Shares, and(2) prior to the registration of Warrant Shares as contemplated in the Registration RightsAgreement, the Warrant Shares may only be transferred in minimum denominations of at least 30,000Warrant Shares (other than a Transfer following a Transaction Event); provided,however, that in the event that any holder of any Warrants or Warrant Shares holds Warrantsrepresenting the right to purchase less than 30,000 Warrant Shares, or holds less than 30,000Warrant Shares, as the case may be, such holder shall be entitled to exercise all, but not lessthan all, such Warrants and sell all, but not less than all, such Warrant Shares delivered to it inconnection therewith, notwithstanding the fact that the number of such Warrant Shares is less than30,000; provided, further, that Holdings agrees (and agrees to cause its membersand any subsequent transferees thereof to so agree), that with respect to the Warrants, such holderof Warrants will not sell or otherwise transfer any Warrants, except in private placements toAccredited Investors or as otherwise permitted hereunder. Notwithstanding anything to the contrarycontained herein, it is understood and agreedWarrant Purchase Agreement
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that Holdings (and its Affiliates) and any transferees thereof shall be entitled toimmediately exercise all or any portion of its Warrants and Transfer such Warrant Shares withoutregard to the minimum share limitations hereunder at any time after a Transaction Event;provided, however, that following the public announcement by Alexza that theproposed transaction has been terminated in accordance with its terms, holders of Warrant Sharesshall be subject to the share limitations hereunder.     Section 6.02 Legends.          (a) Holdings acknowledges and agrees that Alexza shall affix to each certificate evidencingoutstanding Warrants (and any certificates issued upon the transfer of the Warrants) a legend insubstantially the following form (a “Warrant Legend”):“NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISEHEREOF HAVE BEEN THE SUBJECT OF REGISTRATION UNDER THE SECURITIESACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANYSTATE, AND THE SAME HAVE BEEN (OR WILL BE, WITH RESPECT TO THESECURITIES ISSUABLE UPON EXERCISE HEREOF) ISSUED IN RELIANCE ONEXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCHLAWS. NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPONEXERCISE HEREOF MAY BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OROTHERWISE DISPOSED OF EXCEPT AS PERMITTED UNDER SUCH SECURITIESLAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.THE WARRANT EVIDENCED BY THIS CERTIFICATE IS SUBJECT TO CERTAINRESTRICTIONS ON TRANSFER AS SET FORTH IN THE WARRANT PURCHASEAGREEMENT, DATED AS OF DECEMBER 1, 2006, COPIES OF WHICH ARE ONFILE AT THE PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER. NOREGISTRATION OF TRANSFER OF THIS WARRANT WILL BE MADE ON THE BOOKSOF THE ISSUER UNLESS AND UNTIL SUCH RESTRICTIONS SHALL HAVE BEENCOMPLIED WITH.”     Section 6.03 Warrant Legend Removal. If the certificates representing such Warrants,include a Warrant Legend (as set forth in Section 6.02 hereof), Alexza shall, upon arequest from Holdings, or a member or subsequent transferee thereof, asWarrant Purchase Agreement
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soon as practicable but in no event more than thirty (30) days after receiving such request,remove or cause to be removed (i) if the Warrants cease to be restricted securities, the securitieslaw portion of the Warrant Legend and/or (ii) in the event of a sale of the Warrants in compliancewith the transfer restrictions, the transfer restriction portion of the Warrant Legend, from suchcertificates representing the Warrants as Holdings, or such member or transferee, shall designate,in accordance with the terms hereof and, if applicable, in accordance with the terms of theapplicable Warrant.     Section 6.04 Improper Transfer. Any attempt to sell, assign, transfer, grant or sella participation in, pledge or otherwise dispose of any Warrants or any Warrant Shares, not incompliance with this Agreement shall be null and void and Alexza, and such transfer agent as Alexzamay employ, shall give no effect to, and shall not register or record a transfer pursuant to, suchattempted sale, assignment, transfer, grant, sale of a participation, pledge or other dispositionthat is not made in accordance with the terms of this Agreement.     Section 6.05 Limits on Daily Disposition. Holdings and its Affiliates each agreethat, in the event that any holder of Warrants exercises some or all of such Warrants anddetermines to dispose of the resulting Warrant Shares on the market, Holdings (and its Affiliates)or the transferee of Holdings of those Warrant Shares will not sell or otherwise dispose in anysingle day of Warrant Shares totaling, in the aggregate, in excess of the greater of (x) 35,000shares or (y) 25% of the average daily trading volume of Alexza Common Stock over the course of theprevious twenty-eight (28) calendar days (as reported on the NASDAQ Global Market or such othernational exchange representing the primary exchange on which Alexza Common Stock is listed) (the“Average Daily Volume”), and that, upon any transfer of the Warrant Shares to multipleholders, each subsequent holder shall be subject to a daily disposition limit in respect of itsWarrant Shares that is its pro rata share of the 35,000 share limit or 25% of the Average DailyVolume, whichever is greater, reflecting its proportionate share of the total number of WarrantShares; provided, however, that Holdings (and its Affiliates) and any transfereesthereof may sell or otherwise dispose of their Warrant Shares without regard to the sharelimitations hereunder (i) at any time after the public announcement (a “Transaction Event”)by Alexza that it has entered into an agreement relating to the merger, sale, reorganization,reclassification, acquisition, disposition or consolidation of Alexza, including withoutlimitation, any Change of Control transaction, upon the consummation of which Alexza will not bethe Surviving Entity; provided, however, that following the public announcement byAlexza that the proposed transaction has been terminated in accordance with its terms, holders ofWarrant Shares shall be subject to the share limitations hereunder, and (ii) in a private placementto accredited investors; and providedfurther, that any holder of Warrant Sharesholding less than 35,000 shares shall not be subject to the disposition restrictions set forth inthis Section 6.05. Holdings and its Affiliates shall notify any transferee of the Warrantsor Warrant Shares of the terms of this Section 6.05, but shall in no event be responsiblefor monitoring the disposition of the Warrant Shares by any transferee.Warrant Purchase Agreement
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          (a) Holdings acknowledges and agrees that any stock certificate(s) representing Warrant Sharesissued by Alexza pursuant hereto may contain a legend (the “Warrant Share Legend”)substantially as follows:THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAINRESTRICTIONS ON TRANSFER AS SET FORTH IN ARTICLE VI OF THEWARRANT PURCHASE AGREEMENT, DATED AS OF DECEMBER 1, 2006, BY ANDBETWEEN THE ISSUER HEREOF AND SYMPHONY ALLEGRO HOLDINGS LLC(COPIES OF WHICH ARE ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OFTHE ISSUER HEREOF), INCLUDING, BUT NOT LIMITED TO, A DAILY SHAREDISPOSITION LIMIT, WHICH IS THE GREATER OF (X) 35,000 SHARES OR(Y) 25% OF THE AVERAGE DAILY TRADING VOLUME OF ALEXZA COMMON STOCKOVER THE COURSE OF THE PREVIOUS TWENTY-EIGHT (28) CALENDAR DAYS(AS REPORTED ON THE NASDAQ GLOBAL MARKET OR SUCH OTHER NATIONALEXCHANGE REPRESENTING THE PRIMARY EXCHANGE ON WHICH ALEXZA COMMONSTOCK IS LISTED) PER DAY IN RESPECT OF THE WARRANT SHARES OF THEHOLDER HEREOF. UPON A SALE OR OTHER TRANSACTION RESULTING IN ADIVISION OF THE SHARES REPRESENTED HEREBY, SUCH MAXIMUM DAILYDISPOSITION AMOUNT WILL BE DIVIDED PRO RATA AMONG SUBSEQUENTHOLDERS OF THE WARRANT SHARES.**ARTICLE VII****MISCELLANEOUS**     Section 7.01 Notice of Breach. Each Party covenants and agrees that, upon itsacquiring Knowledge of any breach by it of any representation, warranty, covenant or any other termor condition of this Agreement or acquiring Knowledge of a material event or development that is,or is reasonably expected to be, adverse to the other Party with respect to any Program or thetransactions contemplated hereby, such Party shall promptly notify the other Party in writingwithin three (3) Business Days of acquiring such Knowledge; provided, that the failure toprovide such notice shall not impair or otherwise be deemed a waiver of any rights any Party mayhave arising from such breach, material event or development and that notice under this Section7.01 shall not in itself constitute notice of any breach, unless explicitly stated in suchnotice.Warrant Purchase Agreement
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     Section 7.02 Notices. Any notice, request, demand, waiver, consent, approval or othercommunication which is required or permitted to be given to any Party shall be in writing addressedto the Party at its address set forth below and shall be deemed given (i) when delivered to theParty personally, (ii) if sent to the Party by facsimile transmission (promptly followed by ahard-copy delivered in accordance with this Section 7.02), when the transmitting Partyobtains written proof of transmission and receipt; provided, however, that notwithstanding theforegoing, any communication sent by facsimile transmission after 5:00 PM (receiving Party’s time)or not on a Business Day shall not be deemed received until the next Business Day, (iii) whendelivered by next Business Day delivery by a nationally recognized courier service, or (iv) if sentby registered or certified mail, when received, provided postage and registration or certificationfees are prepaid and delivery is confirmed by a return receipt:     Alexza:Alexza Pharmaceuticals, Inc.