exv10w3






Exhibit
10.3




Alexza Pharmaceuticals, Inc.

2005 Equity Incentive Plan





Option
Agreement

(Incentive Stock Option or Nonstatutory Stock Option)




     Pursuant to your Notice of Grant of Stock Options (“Grant Notice”) and this Option Agreement,
Alexza Pharmaceuticals, Inc. (the “Company”) has granted you an option under its 2005 Equity
Incentive Plan (the “Plan”) to purchase the number of shares of the Company’s Common Stock
indicated in your Grant Notice at the exercise price indicated in your Grant Notice. Defined terms
not explicitly defined in this Option Agreement but defined in the Plan shall have the same
definitions as in the Plan.



     The details of your option are as follows:



     1. Vesting.



          (a) Subject to the limitations contained herein, your option will vest as follows:
Thirty-three percent (33%) of the shares vest and become exercisable February 22, 2012;
the balance of the shares vest and become exercisable in a series of twenty-four (24) successive
equal monthly installments measured from February 22, 2012, subject to your Continuous Service as
of each such date. If your Continuous Service terminates within three (3) months prior to, or
twelve (12) months following, the effective date of a Change in Control due to (i) an involuntary
termination (excluding death or Disability) without Cause, or (ii) a voluntary termination for Good
Reason, the vesting and exercisability of your option shall be accelerated in full as of the later
of the date of the Change in Control or the date of such termination.




          (b) “Cause” means: (i) your arrest for violation of a state or federal criminal law involving
the commission of any felony against the Company; (ii) your intentional, material violation of any
material written contract or agreement between you and the Company (which, if curable, is not cured
within twenty (20) days after written notice thereof by the Company to you); (iii) your
unauthorized use or disclosure of the Company’s confidential information or trade secrets; or (iv)
your continued gross misconduct (which, if curable, is not cured within twenty (20) days after
written notice thereof by the Company to you). The determination that a termination is for Cause
shall be made by the Company in its sole discretion. Any determination by the Company that your
employment was terminated with or without Cause for the purposes of your option shall have no
effect upon any determination of the rights or obligations of the Company or you for any other
purpose.




          (c) “Good Reason” means that one or more of the following are undertaken by the Company
without your express written consent: (i) relocation of your place of work greater than twenty-five
(25) miles from your current work location; (ii) a decrease in compensation; or (iii) the Company
unilaterally makes significant detrimental changes to your
job responsibilities, including without limitation any action resulting in a diminution in
your position, authority, duties or responsibilities as of the date of this Agreement.





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     2. Number of Shares and Exercise Price. The number of shares of Common Stock subject
to your option and your exercise price per share referenced in your Grant Notice may be adjusted
from time to time for Capitalization Adjustments.



     3. Exercise Restriction for Non-Exempt Employees. In the event that you are an
Employee eligible for overtime compensation under the Fair Labor Standards Act of 1938, as amended
(i.e., a “Non-Exempt Employee”), you may not exercise your option until you have completed at least
six (6) months of Continuous Service measured from the Date of Grant specified in your Grant
Notice, notwithstanding any other provision of your option.



     4. Method of Payment. Payment of the exercise price is due in full upon exercise of
all or any part of your option. You may elect to make payment of the exercise price in cash or by
check or by one or more of the following methods:



          (a) In the Company’s sole discretion at the time your option is exercised and provided that at
the time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street
Journal, pursuant to a program developed under Regulation T as promulgated by the Federal Reserve
Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check)
by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to
the Company from the sales proceeds.




          (b) In the Company’s sole discretion at the time your option is exercised and provided that at
the time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street
Journal, by delivery to the Company (either by actual delivery or attestation) of already-owned
shares of Common Stock either that you have held for the period required to avoid a charge to the
Company’s reported earnings (generally six (6) months) or that you did not acquire, directly or
indirectly from the Company, that are owned free and clear of any liens, claims, encumbrances or
security interests, and that are valued at Fair Market Value on the date of exercise. “Delivery”
for these purposes, in the sole discretion of the Company at the time you exercise your option,
shall include delivery to the Company of your attestation of ownership of such shares of Common
Stock in a form approved by the Company. Notwithstanding the foregoing, you may not exercise your
option by tender to the Company of Common Stock to the extent such tender would violate the
provisions of any law, regulation or agreement restricting the redemption of the Company’s stock.




     5. Whole Shares. You may exercise your option only for whole shares of Common Stock.



     6. Securities Law Compliance. Notwithstanding anything to the contrary contained
herein, you may not exercise your option unless the shares of Common Stock issuable upon such
exercise are then registered under the Securities Act or, if such shares of Common Stock are not
then so registered, the Company has determined that such exercise and issuance would be exempt from
the registration requirements of the Securities Act. The exercise of your option also must comply
with other applicable laws and regulations governing your option, and
you may not exercise your option if the Company determines that such exercise would not be in
material compliance with such laws and regulations.



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     7. Term. You may not exercise your option before the commencement or after the
expiration of its term. The term of your option commences on the Date of Grant and expires upon
the earliest of the following:



          (a) three (3) months after the termination of your Continuous Service for any reason other
than your Disability or death or in connection with a Change in Control; provided, however, that if
during any part of such three (3) month period your option is not exercisable solely because of the
condition set forth in Section 6, your option shall not expire until the earlier of the Expiration
Date or until it shall have been exercisable for an aggregate period of three (3) months after the
termination of your Continuous Service;




          (b) twelve (12) months after the termination of your Continuous Service due to your
Disability;




          (c) eighteen (18) months after your death if you die during your Continuous Service;




          (d) twelve (12) months after the termination of your Continuous Service if your Continuous
Service terminates as of or within three (3) months prior to or twelve (12) months following such
Change in Control;




          (e) the Expiration Date indicated in your Grant Notice; or




          (f) the day before the tenth (10th) anniversary of the Date of Grant.




     Notwithstanding the foregoing, if you die during the period provided in Section 7(a) or 7(b)
above, the term of your option shall not expire until the earlier of eighteen (18) months after
your death, the Expiration Date indicated in your Grant Notice, or the day before the tenth
(10th) anniversary of the Date of Grant.



     If your option is an Incentive Stock Option, note that to obtain the federal income tax
advantages associated with an Incentive Stock Option, the Code requires that at all times beginning
on the date of grant of your option and ending on the day three (3) months before the date of your
option’s exercise, you must be an employee of the Company or an Affiliate, except in the event of
your death or Disability. The Company has provided for extended exercisability of your option
under certain circumstances for your benefit but cannot guarantee that your option will necessarily
be treated as an Incentive Stock Option if you continue to provide services to the Company or an
Affiliate as a Consultant or Director after your employment terminates or if you otherwise exercise
your option more than three (3) months after the date your employment with the Company or an
Affiliate terminates.



     8. Exercise.



          (a) You may exercise the vested portion of your option (and the unvested portion of your
option if your Grant Notice so permits) during its term on-line via E*Trade or by
delivering a Notice of Exercise (in a form designated by the Company) together with the
exercise price to the Secretary of the Company, or to such other person as the Company may
designate,





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during regular business hours, together with such additional documents as the Company
may then require.




          (b) By exercising your option you agree that, as a condition to any exercise of your option,
the Company may require you to enter into an arrangement providing for the payment by you to the
Company of any tax withholding obligation of the Company arising by reason of (i) the exercise of
your option, (ii) the lapse of any substantial risk of forfeiture to which the shares of Common
Stock are subject at the time of exercise, or (iii) the disposition of shares of Common Stock
acquired upon such exercise.




          (c) If your option is an Incentive Stock Option, by exercising your option you agree that you
will notify the Company in writing within fifteen (15) days after the date of any disposition of
any of the shares of the Common Stock issued upon exercise of your option that occurs within two
(2) years after the date of your option grant or within one (1) year after such shares of Common
Stock are transferred upon exercise of your option.




     9. Transferability. Your option is not transferable, except by will or by the laws
of descent and distribution, and is exercisable during your life only by you. Notwithstanding the
foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you
may designate a third party who, in the event of your death, shall thereafter be entitled to
exercise your option. In addition, you may transfer your option to a trust if you are considered
to be the sole beneficial owner (determined under Section 671 of the Code and applicable state law)
while the option is held in the trust, provided that you and the trustee enter into transfer and
other agreements required by the Company.



     10. Option not a Service Contract. Your option is not an employment or service
contract, and nothing in your option shall be deemed to create in any way whatsoever any obligation
on your part to continue in the employ of the Company or an Affiliate, or of the Company or an
Affiliate to continue your employment. In addition, nothing in your option shall obligate the
Company or an Affiliate, their respective stockholders, Boards of Directors, Officers or Employees
to continue any relationship that you might have as a Director or Consultant for the Company or an
Affiliate.



     11. Withholding Obligations.



          (a) At the time you exercise your option, in whole or in part, or at any time thereafter as
requested by the Company, you hereby authorize withholding from payroll and any other amounts
payable to you, and otherwise agree to make adequate provision for (including by means of a
“cashless exercise” pursuant to a program developed under Regulation T as promulgated by the
Federal Reserve Board to the extent permitted by the Company), any sums required to satisfy the
federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if
any, which arise in connection with the exercise of your option.




          (b) Upon your request and subject to approval by the Company, in its sole discretion, and
compliance with any applicable legal conditions or restrictions, the Company
may withhold from fully vested shares of Common Stock otherwise issuable to you upon the
exercise of your option a number of whole shares of Common Stock having a Fair Market Value,





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determined by the Company as of the date of exercise, not in excess of the minimum amount of tax
required to be withheld by law (or such lower amount as may be necessary to avoid classification of
your option as a liability for financial accounting purposes). If the date of determination of any
tax withholding obligation is deferred to a date later than the date of exercise of your option,
share withholding pursuant to the preceding sentence shall not be permitted unless you make a
proper and timely election under Section 83(b) of the Code, covering the aggregate number of shares
of Common Stock acquired upon such exercise with respect to which such determination is otherwise
deferred, to accelerate the determination of such tax withholding obligation to the date of
exercise of your option. Notwithstanding the filing of such election, shares of Common Stock shall
be withheld solely from fully vested shares of Common Stock determined as of the date of exercise
of your option that are otherwise issuable to you upon such exercise. Any adverse consequences to
you arising in connection with such share withholding procedure shall be your sole responsibility.




          (c) You may not exercise your option unless the tax withholding obligations of the Company
and/or any Affiliate are satisfied. Accordingly, you may not be able to exercise your option when
desired even though your option is vested, and the Company shall have no obligation to issue a
certificate for such shares of Common Stock or release such shares of Common Stock from any escrow
provided for herein unless such obligations are satisfied.




     12. Notices. Any notices provided for in your option or the Plan shall be given in
writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by
mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid,
addressed to you at the last address you provided to the Company.



     13. Governing Plan Document. Your option is subject to all the provisions of the
Plan, the provisions of which are hereby made a part of your option, and is further subject to all
interpretations, amendments, rules and regulations, which may from time to time be promulgated and
adopted pursuant to the Plan. In the event of any conflict between the provisions of your option
and those of the Plan, the provisions of the Plan shall control.




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