Document:

exv10w25

 

Exhibit 10.25

2006 Performance Bonus Program.

On June 1, 2006, the Board of Directors (the “Board”) of Alexza Pharmaceuticals, Inc. (the
“Company”), based upon the approval and recommendation of the Compensation Committee (the
“Committee”), approved the adoption of the 2006 Performance Bonus Program (the “Bonus Program”) for
the Company’s employees, including its executive officers. The Bonus Program was adopted to
attract, motivate and retain the Company’s employees.

In order to be eligible for participation in the Bonus Program, an employee must be employed by the
Company for at least six months (i.e. a start date before July 1, 2006) and still be employed at
the end of 2006. Employees employed more than six months, but less than one year, are eligible to
receive a pro-rated bonus payout. The annual cash bonuses and stock option awards, if any, for all
employees, including executive officers, are calculated in accordance with a formula that takes
into account base salary and accomplishment of specified corporate, departmental and individual
goals. The Board determines the achievement of the corporate goals and the Company’s management
team determines the achievement of departmental and individual goals. The relative weighting of the
components of the goals, the allocation of awards between cash bonuses and stock option awards, and
the percentage of base salary used to determine bonus eligibility vary by the levels of employee,
with the bonuses of executive officers being weighted toward achievement of corporate goals, stock
option awards and a higher percentage of base salary. Stock option awards are valued based on a
Black Scholes calculation of the option award value. Payment of bonuses pursuant to the Bonus
Program are based on the achievement of the following corporate goals: (i) completion of the
Company’s initial public offering; (ii) certain corporate development goals; (iii) achievement of
certain commercial manufacturing goals; (iv) achievement of certain clinical trial advancement
goals; and (v) corporate/financial goals relating to achievement of certain financial measures.

The Company expects that the cash and stock bonuses payable for fiscal year 2006, if any, will be
calculated in the manner set forth above and will vary depending on the extent to which actual
performance meets, exceeds, or falls short of the specified corporate goals and attainment of
individual and departmental goals. In addition, the Company’s management team, the Committee and
the Board retain the discretion to (i) increase, reduce or eliminate the cash and stock option
bonuses that otherwise might be payable to all employees or any individual based on actual
performance as compared to pre-established goals, and (ii) structure future or additional bonus and
equity incentives in a manner that they believe will appropriately motivate and reward the
Company’s employees, including the Company’s executive officers.exv10w26

 

Exhibit 10.26

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

 

PURCHASE OPTION AGREEMENT

by and among

ALEXZA PHARMACEUTICALS, INC.,

SYMPHONY ALLEGRO HOLDINGS LLC

and

SYMPHONY ALLEGRO, INC.

 

Dated as of December 1, 2006

 

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page
	Section 1.

	 	Grant of Purchase Option
	 	 	2	 
	 
	 	 	 	 	 	 
	Section 2.

	 	Exercise of Purchase Option
	 	 	3	 
	 
	 	 	 	 	 	 
	Section 2A.

	 	Change of Control Put Option; Obligations
	 	 	7	 
	 
	 	 	 	 	 	 
	Section 2B.

	 	Related Product Payments
	 	 	8	 
	 
	 	 	 	 	 	 
	Section 3.

	 	Alexza Representations, Warranties and Covenants
	 	 	9	 
	 
	 	 	 	 	 	 
	Section 4.

	 	Holdings Representations, Warranties and Covenants
	 	 	12	 
	 
	 	 	 	 	 	 
	Section 5.

	 	Symphony Allegro Representations, Warranties and Covenants
	 	 	15	 
	 
	 	 	 	 	 	 
	Section 6.

	 	Notice of Material Event
	 	 	24	 
	 
	 	 	 	 	 	 
	Section 7.

	 	Assignment; Transfers; Legend
	 	 	24	 
	 
	 	 	 	 	 	 
	Section 8.

	 	Costs and Expenses; Payments
	 	 	25	 
	 
	 	 	 	 	 	 
	Section 9.

	 	Expiration; Termination of Agreement
	 	 	25	 
	 
	 	 	 	 	 	 
	Section 10.

	 	Survival; Indemnification
	 	 	26	 
	 
	 	 	 	 	 	 
	Section 11.

	 	No Petition
	 	 	29	 
	 
	 	 	 	 	 	 
	Section 12.

	 	Third-Party Beneficiary
	 	 	29	 
	 
	 	 	 	 	 	 
	Section 13.

	 	Notices
	 	 	29	 
	 
	 	 	 	 	 	 
	Section 14.

	 	Governing Law; Consent to Jurisdiction and Service of Process
	 	 	30	 
	 
	 	 	 	 	 	 
	Section 15.

	 	WAIVER OF JURY TRIAL
	 	 	31	 
	 
	 	 	 	 	 	 
	Section 16.

	 	Entire Agreement
	 	 	31	 
	 
	 	 	 	 	 	 
	Section 17.

	 	Amendment; Successors; Counterparts
	 	 	31	 
	 
	 	 	 	 	 	 
	Section 18.

	 	Specific Performance
	 	 	32	 
	 
	 	 	 	 	 	 
	Section 19.

	 	Severability
	 	 	32	 
	 
	 	 	 	 	 	 
	Section 20.

	 	Tax Reporting
	 	 	32	 

 

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

i

 

	 	 	 	 	 	 	 
	Annex A

	 	Certain Definitions	 	 	 	 
	 
	 	 	 	 	 	 
	Exhibit 1

	 	Purchase Exercise Notice	 	 	 	 
	Exhibit 2

	 	Form of Opinion of Cooley Godward Kronish LLP	 	 	 	 

 

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

ii

 

PURCHASE OPTION AGREEMENT

     This PURCHASE OPTION AGREEMENT (this “Agreement”) is entered into as of December 1,
2006 (the “Closing Date”), by and among ALEXZA PHARMACEUTICALS, INC., a Delaware
corporation (“Alexza”), SYMPHONY ALLEGRO HOLDINGS LLC, a Delaware limited liability company
(“Holdings”), and SYMPHONY ALLEGRO, INC., a Delaware corporation (“Symphony
Allegro”). Capitalized terms used herein and not defined herein shall have the meanings
assigned to such terms in Annex A attached hereto.

PRELIMINARY STATEMENT

     WHEREAS, Alexza and Holdings have entered into a Technology License Agreement pursuant to
which Alexza has granted Holdings an exclusive license (the “License”) to the use of
certain intellectual property related to the Programs owned or controlled by Alexza;

     WHEREAS, contemporaneously with the execution of this Agreement, Alexza, Holdings and Symphony
Allegro are entering into a Novated and Restated Technology License Agreement, pursuant to which,
among other things, Holdings will assign by way of novation the License to Symphony Allegro;

     WHEREAS, Alexza and Holdings have entered into a Research and Development Agreement pursuant
to which Alexza has agreed, among other things, to perform, on behalf of Holdings, research and
development of the Programs;

     WHEREAS, contemporaneously with the execution of this Agreement, Alexza, Holdings and Symphony
Allegro are entering into an Amended and Restated Research and Development Agreement, pursuant to
which, among other things, Holdings will assign its rights and obligations under the Research and
Development Agreement to Symphony Allegro;

     WHEREAS, contemporaneously with the execution of this Agreement, in order to fund such
research and development, institutional investors are committing to invest $50,000,000 in Holdings
(the “Financing”) in exchange for membership interests in Holdings and for warrants (the
“Warrants”) to purchase up to a total of 2 million shares of Alexza Common Stock, to be
initially issued to Holdings, and Holdings will agree to contribute the proceeds of the Financing
to Symphony Allegro;

     WHEREAS, Holdings desires, in consideration for the Warrants, to grant Alexza an option to
purchase all of the Common Stock of Symphony Allegro and any other Equity Securities issued by
Symphony Allegro (together, the “Symphony Allegro Equity Securities”) owned, or hereinafter
acquired, by Holdings on the terms described in this Agreement; and

     WHEREAS, Symphony Allegro and Holdings have determined that it is in each of its best interest
to perform and comply with certain agreements and covenants relating to each of its ongoing
operations contained in this Agreement;

 

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

 

 

     NOW, THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto
(the “Parties”) agree as follows:

          Section 1. Grant of Purchase Option

               (a) Holdings hereby grants to Alexza an exclusive option (the “Purchase Option”) to
purchase all, but not less than all, of the outstanding Symphony Allegro Equity Securities owned or
hereinafter acquired by Holdings, in accordance with the terms of this Agreement.

               (b) Symphony Allegro hereby covenants and agrees that all Symphony Allegro Equity Securities
issued by Symphony Allegro at any time prior to the expiration of the Term (including to Holdings
on, prior to, or after the date hereof or to any other Person at any time whatsoever, in all cases
prior to the expiration of the Term) shall be subject to a purchase option on the same terms as the
Purchase Option (except as provided by the immediately following sentence) and all of the other
terms and conditions of this Agreement without any additional action on the part of Alexza or
Holdings. Further, to the extent Symphony Allegro shall issue any Symphony Allegro Equity
Securities (including any issuance in respect of a transfer of Symphony Allegro Equity Securities
by any holder thereof, including Holdings) after the date hereof to any Person (including Holdings)
(any issuance of such Symphony Allegro Equity Securities being subject to the prior written consent
of Alexza as set forth in Sections 5(c) and 7(b) hereof, as applicable), Symphony
Allegro hereby covenants and agrees that it shall cause such Symphony Allegro Equity Securities to
be subject to the Purchase Option without the payment of, or any obligation to pay, any additional
consideration in respect of such Symphony Allegro Equity Securities by Alexza, Symphony Allegro or
any Symphony Allegro Subsidiary to the Person(s) acquiring such subsequently issued Symphony
Allegro Equity Securities, the Parties acknowledging and agreeing that the sole consideration
payable by Alexza pursuant to this Agreement for all of the outstanding Symphony Allegro Equity
Securities now or hereinafter owned by any Person shall be the Purchase Price (as defined in
Section 2(b) hereof).

               (c) Alexza’s right to exercise the Purchase Option granted hereby is subject to the following
conditions:

                    (i) The Purchase Option may only be exercised for the purchase of all, and not less than all,
of the Symphony Allegro Equity Securities;

                    (ii) The Purchase Option may only be exercised a single time;

                    (iii) Except as expressly provided in Sections 1(c)(iv) and (v), the Purchase
Option may be exercised only during the period (the “Purchase Option Period”) commencing on
and including December 1, 2007 (the “Purchase Option 
Commencement Date”) and ending on and including the earlier of (x) December 1, 2010
(the “Final Termination Date”), and (y) the [ * ] calendar day (such [ * ] calendar day,
the

 

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

2

 

“Funds Termination Date”) immediately following the first date (each, a “Balance
Sheet Deficiency Date”) on which a notice of an impending Funds Termination Date (a “Funds
Termination Notice”) is delivered to Alexza by Holdings or Symphony Allegro in accordance with
Section 13 hereof, accompanied by an internally prepared, unaudited, balance sheet of
Symphony Allegro (prepared in accordance with GAAP) stating that the working capital of Symphony
Allegro is less than the Balance Sheet Deficiency Threshold at such time (any such event, a
“Balance Sheet Deficiency”);

                    (iv) In the event that Alexza has agreed to share the costs of additional research pursuant to
the Research Cost Sharing and Extension Agreement, the Purchase Option Period shall be determined
in accordance with the Research Cost Sharing and Extension Agreement (for the avoidance of doubt,
amounts transferred by Alexza pursuant to the Research Cost Sharing and Extension Agreement shall
not be included in any calculation of the Purchase Price hereunder); and

                    (v) In the event that Symphony Allegro terminates the Amended and Restated Research and
Development Agreement pursuant to Section 17.2 thereof, Alexza shall have [ * ] to notify
Holdings of its exercise of the Purchase Option under the terms of this Agreement. Such exercise
of the Purchase Option by Alexza may occur prior to the Purchase Option Commencement Date (an
“Early Purchase Option Exercise”).

          Section 2. Exercise of Purchase Option

               (a) Exercise Notice. Alexza may exercise the Purchase Option only by delivery of a
notice in the form attached hereto as Exhibit 1 (the “Purchase Option Exercise
Notice”) during the Purchase Option Period. The Purchase Option Exercise Notice shall be
delivered on a Business Day to Holdings and Symphony Allegro and shall be irrevocable once
delivered. The date on which the Purchase Option Exercise Notice is first delivered to Holdings
and Symphony Allegro is referred to as the “Purchase Option Exercise Date.” The Purchase
Option Exercise Notice shall contain (1) an estimated date for the settlement of the Purchase
Option (the “Purchase Option Closing”), which date shall be estimated in accordance with
this Section 2(a), (2) the Purchase Price, determined in accordance with Section
2(b) hereof, and (3) if Alexza intends to pay part of the Purchase Price in Alexza Common
Stock, notice of such intent, the number of shares to be transferred at such purchase price, the
valuation thereof and the percentage such portion bears to (A) the Purchase Price, and (B) the
total amount of Alexza Common Stock then issued and outstanding (which shall be no greater
percentages than are permitted under Section 2(c)). Such notice and election shall be
irrevocable once delivered. If, during the period following the delivery of the Purchase Option
Exercise Notice, the working capital held by Symphony Allegro is less than or equal to the Balance
Sheet Deficiency Threshold, then Symphony Allegro shall cease payment of any amounts owed to Alexza
in respect of its activities pursuant to the
Amended and Restated Research and Development Agreement, but shall continue to pay amounts
owed to all other Persons. All cash and cash equivalents on Symphony Allegro’s balance sheet on
the date of the Purchase Option Closing (the “Purchase Option

 

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

3

 

Closing Date”) are to remain
with Symphony Allegro. The Purchase Option Closing Date shall be determined as follows:

                    (i) If Alexza elects to pay the entire Purchase Price in cash, the Purchase Option Closing
Date shall be the date that is the later of: (A) [ * ] following the Purchase Option Exercise
Date; and (B) [ * ] following the date that Alexza receives all necessary Government Approvals
related to its HSR Filings; provided, however that unless Holdings receives from
Alexza an opinion from nationally recognized anti-trust counsel (which opinion is acceptable in
form and substance to Holdings) to the effect that no HSR Filings are required, Alexza and Holdings
shall make all necessary HSR Filings within [ * ] following the Purchase Option Exercise Date and
shall promptly and diligently pursue the related regulatory process, including without limitation,
responding to any second request from the Federal Trade Commission or the Department of Justice, as
applicable; and provided, further that (1) if there is no second request from the
Federal Trade Commission or the Department of Justice, as applicable, with respect to Alexza’s or
Holdings’ HSR Filings, then in no event shall the Purchase Option Closing Date be more than [ * ]
following the Purchase Option Exercise Date, and (2) if there is a second request from the Federal
Trade Commission or the Department of Justice, as applicable, with respect to Alexza’s or Holdings’
HSR Filings, then in no event shall the Purchase Option Closing Date be more than [ * ] following
the date upon which the later of Alexza or Holdings delivers documents pursuant to such second
request. If Alexza shall fail to make such cash payment on the Purchase Option Closing Date within
the applicable time period set forth above, then in addition to any other rights that Holdings
shall have hereunder, this Agreement shall terminate and Alexza shall relinquish all rights
hereunder to purchase the Symphony Allegro Equity Securities; or

                    (ii) If Alexza elects to pay a portion of the Purchase Price in Alexza Common Stock (subject
to the limitations set forth herein and in the Registration Rights Agreement), the Purchase Option
Closing Date shall be the date that is the later of:

               (A) [ * ] following the Purchase Option Exercise Date;

               (B) [ * ] following the Effective Registration Date of such Alexza Common Stock;
provided, that Alexza shall file the Registration Statement contemplated by
Section 3(b)(i) within (x) [ * ] after the Purchase Option Exercise Date if Alexza
is eligible to use Form S-3 under the Securities Act (or any successor form), or (y) [ * ]
after the Purchase Option Exercise Date if Alexza is not eligible to use Form S-3 under the
Securities Act (or any successor form); and

               (C) [ * ] following the date that Alexza receives the necessary Government Approvals
related to its HSR Filings (if any) related to
the exercise of the Purchase Option; provided, however, that Alexza
and Holdings shall make all necessary HSR Filings within [ * ] following the Purchase
Option

 

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

4

 

Exercise Date and shall promptly and diligently pursue the related regulatory
process consistent with the provisos in clause (i) above;

provided, further, that Alexza shall use commercially reasonable efforts to have
such Registration Statement declared effective by the SEC as promptly as possible following the
filing of the Registration Statement. Alexza shall use commercially reasonable efforts to maintain
the effectiveness of any such Registration Statement for a period of two (2) years following the
SEC’s declaration. In the event that such Registration Statement is not declared effective within
[ * ] of the Purchase Option Exercise Date, Alexza shall immediately pay the full Purchase Price in
cash with such Purchase Price determination based on the Purchase Price effective in the applicable
quarter in which such immediate cash payment is required to be made by Alexza (in which event the
Purchase Option Closing Date shall be the date upon which such cash payment is made by Alexza). If
Alexza shall fail to make such immediate cash payment, then in addition to any other rights or
remedies that Holdings shall have arising from such breach, this Agreement shall terminate and
Alexza shall relinquish all rights hereunder to purchase the Symphony Allegro Equity Securities.

               (b) Purchase Price Upon Option Exercise. Upon exercise of the Purchase Option and as
complete and full consideration for the sale to Alexza by Holdings of its Symphony Allegro Equity
Securities (and for the Symphony Allegro Equity Securities of any other Person), Alexza shall pay
the “Quarterly Price” set forth on Schedule I hereto for the applicable quarter
following the Closing Date in which the Purchase Option Closing Date actually occurs, [ * ], (ii)
any amount paid by Alexza for the Symphony Allegro Equity Securities of any other Person and (iii)
[ * ]. In the event of the Early Purchase Option Exercise, pursuant to Section 1(c)(v)
hereof, the “Purchase Price” shall be an amount equal to the amount set forth on Schedule I
applicable to the Quarterly Price for the 5th Quarter, [ * ]; (B) any amount paid by Alexza for the
Symphony Allegro Equity Securities of any other Person; [ * ].

               (c) Form of Payment. Subject to Sections 2(a) and 2(e), the Purchase
Price may be paid in cash or in a combination of cash and Alexza Common Stock, at the sole
discretion of Alexza; provided, that in no event may the value of Alexza Common Stock
(determined in accordance with Section 2(e) hereof) delivered in connection with the
exercise of the Purchase Option constitute more than either (x) [ * ] of the total consideration to
be tendered for payment of the Purchase Option Exercise Price, calculated using the Alexza Common
Stock Valuation (as defined herein) procedure, or (y) [ * ] of all the Alexza Common Stock issued
and outstanding immediately preceding the Purchase Option Closing Date.

               (d) Surrender of Symphony Allegro Equity Securities; Symphony Allegro Board. Subject
to the terms and conditions of this Agreement, on the Purchase Option Closing Date, Holdings shall
surrender to Alexza its certificates representing its Symphony Allegro Equity Securities, and shall
convey good title to such Symphony Allegro Equity Securities, free from any Encumbrances and from
any and all
restrictions that any sale, assignment or other transfer of such Symphony Allegro Equity
Securities be consented to or approved by any Person. On or prior to the Purchase

 

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

5

 

Option Closing
Date, Holdings shall remove all directors serving on the Symphony Allegro Board, other than the
Alexza Director (as defined in Section 4(b)(iv) hereof), as of the Purchase Option Closing
Date. Furthermore, Holdings shall use commercially reasonable efforts to deliver to Alexza,
promptly after the Purchase Option Closing Date, any certificates representing Symphony Allegro
Equity Securities which were not surrendered to Alexza on the Purchase Option Closing Date.

               (e) Valuation of Alexza Stock. In the event that Alexza elects to pay part of the
Purchase Price through the delivery to Holdings of Alexza Common Stock, the value per share thereof
(the “Alexza Common Stock Valuation”) shall equal the average closing price of Alexza
Common Stock, as reported by the NASDAQ Global Market, or other national exchange that is the
primary exchange on which Alexza Common Stock is listed, for the [ * ] immediately preceding (but
not including) the second trading day prior to the Purchase Option Exercise Date. If Alexza Common
Stock is not traded on a national exchange or the NASDAQ Global Market, then Alexza shall be
obligated to pay the Purchase Price solely in cash on the Purchase Option Closing Date. Alexza
shall calculate the Alexza Common Stock Valuation in accordance with this Section 2(e),
subject to review and confirmation by Holdings.

               (f) Government Approvals. On or prior to the Purchase Option Closing Date, each of
Alexza, Symphony Allegro and Holdings shall have taken all necessary action to cause all
Governmental Approvals with respect to such Party (including, without limitation, the preparing and
filing of any pre-merger notification and report forms required under the HSR Filings required to
be in effect in connection with the transactions contemplated by this Agreement to be in effect;
provided, however, that with respect to Government Approvals required by a
Governmental Authority other than the United States federal government and its various branches and
agencies, the Parties’ obligations under this Section 2(f) shall be limited to causing to
be in effect only those Government Approvals, the failure of which to be in effect would, either
individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on any
of the Parties. Each of Symphony Allegro and Alexza shall pay its own costs associated with taking
such action. Symphony Allegro shall pay any costs of Holdings associated with obtaining Government
Approvals required in connection with the exercise of the Purchase Option. All other costs and
expenses of Holdings shall be paid by Holdings pursuant to Section 8(b) hereof, including
any costs arising from any error in Holdings’ initial valuation of its investment in Symphony
Allegro.

               (g) Transfer of Title. Transfer of title to Alexza of all of the Symphony Allegro
Equity Securities shall be deemed to occur automatically on the Purchase Option Closing Date,
subject to the payment by Alexza on such date of the Purchase Price and its performance of its
other obligations herein required to be performed under Sections 2(e) and (f), and
under the Registration Rights Agreement, as applicable, on or prior to the Purchase Option Closing
Date to the reasonable satisfaction of Holdings, and thereafter Symphony Allegro shall treat Alexza
as the sole holder of all
Symphony Allegro Equity Securities, notwithstanding the failure of Holdings to tender
certificates representing such shares to Alexza in accordance with Section 2(d) hereof.

 

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

6

 

After the Purchase Option Closing Date, Holdings shall have no rights in connection with such
Symphony Allegro Equity Securities other than the right to receive the Purchase Price;
provided, however, that nothing in this Section 2(g) shall affect the
survivability of any indemnification provision in this Agreement upon termination of this
Agreement.

               (h) Consents and Authorizations. On or prior to the Purchase Option Closing Date,
Alexza shall have obtained all consents and authorizations necessary from stockholders and/or its
board of directors for the consummation of the exercise and closing of the Purchase Option, as may
be required under the organizational documents of Alexza, any prior stockholders or board
resolution, any stock exchange or similar rules or any applicable law; provided,
however, that with respect to consents or authorizations required by a Governmental
Authority other than the United States federal government and its various branches and agencies,
the Parties’ obligations under this Section 2(h) shall be limited to obtaining only those
consents and authorizations, the failure of which to be obtained would, either individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on any of the Parties.

          Section 2A. Change of Control Put Option; Obligations

               (i) Holdings has an exclusive option (the “Change of Control Put Option”) to put 100%
of the Symphony Allegro Equity Securities to Alexza, an acquiror or the Surviving Entity, as
applicable, which may be exercised if, following a Change of Control with respect to Alexza, the
Surviving Entity breaches a material obligation of any Operative Document or any other document
delivered by the Surviving Entity in connection with such Change of Control and such breach
continues unremedied for a period of [ * ] after Holdings has delivered written notice thereof to
such successor entity. Alexza shall, and if and as applicable, cause the Surviving Entity to, (i)
subject to the terms of the Confidentiality Agreement and any confidentiality agreement entered
into in connection with a Change of Control, provide notice to Holdings of a Change of Control no
less than [ * ] prior to the execution of a definitive agreement committing Alexza to a Change of
Control, (ii) subject to the terms of the Confidentiality Agreement and any confidentiality
agreement entered into in connection with a Change of Control, use commercially reasonable efforts
to provide Holdings reasonable access to the senior executive officers, as available, who have
responsibility for commercial or research and development activities of the acquiror or the
Surviving Entity, as applicable, prior to the Change of Control to discuss in good faith and
reasonable detail the Surviving Entity’s ongoing operations, (iii) execute and deliver to Symphony
Allegro and Holdings instruments, in form and substance reasonably acceptable to Symphony Allegro
and Holdings, whereby the Surviving Entity expressly assumes all of the obligations of Alexza
hereunder and under each other Operative Document to which Alexza is a party, (iv) provide to
Symphony Allegro and Holdings an opinion of nationally recognized outside counsel (in customary
form and subject to customary assumptions and
qualifications) to the effect that (A) the instruments referred to in clause (iii)
above are valid and binding obligations of such Surviving Entity, enforceable in accordance with
their terms, except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights

 

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

7

 

generally
or general equitable principles regardless of whether such enforceability is considered in a
proceeding at law or in equity, and (B) such Change of Control does not violate any material term
of the Operative Documents, and (v) ensure that all material applications and filings have been
made to, and all material consents have been received from, the FDA, and any applicable foreign
equivalent thereof, necessary for the Surviving Entity to satisfy all of its material obligations
under the Operative Documents, except to the extent that failure to make such applications or
filings or receive such consents would not reasonably be expected to have a material adverse effect
on the Programs or Symphony Allegro’s rights under the Operative Documents.

               (j) Holdings may exercise the Change of Control Put Option only by delivery of written notice
(the “Change of Control Put Option Exercise Notice”) during the Purchase Option Period.
The Change of Control Put Option Exercise Notice shall be delivered on a Business Day to the
successor entity to Alexza and Symphony Allegro, and shall thereafter be deemed for all purposes
under the terms of this Agreement to be a Purchase Option Exercise Notice by Alexza (in accordance
with the provisions of Section 2 hereof) as of the date such notice is delivered (such date
to be deemed for all purposes under the terms of this Agreement as the Purchase Option Exercise
Date). The Purchase Price with respect to such an exercise of the Change of Control Put Option
shall be the Purchase Price otherwise applicable (under Section 2(b) hereof) to the
Purchase Option Closing Date selected by Alexza following Alexza’s receipt of the Change of Control
Put Option Exercise Notice. In the event Holdings exercises the Change of Control Put Option and
such sale is consummated, Holdings shall have no further rights or claims against the successor
entity in respect of such breach; provided, that notwithstanding the foregoing, Holdings
shall maintain and does not release any rights or claims against the Surviving Entity that are
unrelated to such breach, including rights or claims whereby Holdings is otherwise entitled to
reimbursement or indemnification under any of the Operative Documents or any other document
delivered by the Surviving Entity in connection with such Change of Control.

          Section 2B. Related Product Payments

               (a) AZ-004 Related Products. If Alexza does not exercise the Purchase Option prior to its expiration or termination
under the terms of this Agreement and (i) Alexza enters into any agreement or arrangement with any
third party with respect to the development and/or commercialization of an AZ-004 Related Product
(defined below) (an “AZ-004 Related Product Agreement”), and (ii) if the AZ-004 Program has
not been discontinued and (iii) if the AZ-004 Related Product has commenced IND-Enabling GLP
Inhalation Toxicology Studies for the same, or substantially the same, indication or indications
that are being pursued at such time for AZ-004: then, Alexza shall be obligated to make the
following payments to Symphony Allegro: (x) on the date of the expiration or termination of the
Purchase Option (“Termination Date”), an amount equal to 50% of any upfront, milestone,
royalty, profit sharing, or similar payments received by

 

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

8

 

Alexza under any such AZ-004 Related
Product Agreement prior to the Termination Date and (y) at any time and from time to time
thereafter, an amount equal to 50% of any upfront, milestone, royalty, profit sharing or similar
payments received by Alexza under any such AZ-004 Related Product Agreement within ten (10)
Business Days of receipt by Alexza of such payment. For the purposes of this Section 2B,
“AZ-004 Related Product” means a therapeutic product comprised of an active ingredient
which is an antipsychotic drug, other than prochlorperazine ,(typical or atypical) delivered by
means of the Staccato Technology.

               (b) AZ-002 Related Products. If Alexza does not exercise the Purchase Option prior to its expiration or termination
under the terms of this Agreement and (i) Alexza enters into any agreement or arrangement with any
third party with respect to the development and/or commercialization of an AZ-002 Related Product
(defined below) (an “AZ-002 Related Product Agreement”), and (ii) if the AZ-002 Program has
not been discontinued and (iii) if the AZ-002 Related Product has commenced IND-Enabling GLP
Inhalation Toxicology Studies for the same, or substantially the same, indication or indications
that are being pursued at such time for AZ-002: then, Alexza shall be obligated to make the
following payments to Symphony Allegro: (x) on the Termination Date, an amount equal to 50% of any
upfront, milestone, royalty, profit sharing or similar payments received by Alexza under any such
AZ-002 Related Product Agreement prior to the Termination Date and (y) at any time and from time to
time thereafter, an amount equal to 50% of any upfront, milestone, royalty, profit sharing or
similar payments received by Alexza under any such AZ-002 Related Product Agreement within ten (10)
Business Days of receipt by Alexza of such payment. For purposes of this Section 2B,
“AZ-002 Related Product” means a therapeutic product comprised of an active ingredient
which is a benzodiazepine delivered by means of the Staccato Technology.

               (c) The aggregate of all payments pursuant to this Section 2B is not to exceed the
Quarterly Price in effect during the 16th quarter following the Closing Date as set forth on
Schedule 1.

          Section 3. Alexza Representations, Warranties and Covenants

               (a) As of the date hereof, Alexza hereby represents and warrants, and, except to the extent
that any of the following representations and warranties are limited to the date of this Agreement
or otherwise limited, on the Purchase Option Closing Date, shall be deemed to have represented and
warranted, to Holdings and Symphony Allegro that:

                    (i) Organization. Alexza is a corporation, duly organized, validly existing and in
good standing under the laws of the State of Delaware.

                    (ii) Authority and Validity. Alexza has all requisite corporate power and authority
to execute, deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance by Alexza of this
Agreement and the consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary action required on the part of Alexza, and no other proceedings on the
part of Alexza are necessary to authorize this Agreement or for Alexza to perform its obligations
under this

 

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

9

 

Agreement. This Agreement constitutes the lawful, valid and legally binding obligation
of Alexza, enforceable in accordance with its terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors’ rights generally and general equitable principles regardless of whether
such enforceability is considered in a proceeding at law or in equity.

                    (iii) No Violation or Conflict. The execution, delivery and performance of this
Agreement and the transactions contemplated hereby do not (A) violate, conflict with or result in
the breach of any provision of the Organizational Documents of Alexza, (B) as of the date of this
Agreement, and as of the Purchase Option Closing Date if Alexza elects to pay part of the Purchase
Price through the delivery of Alexza Common Stock (a “Partial Stock Payment”), conflict
with or violate any law or Governmental Order applicable to Alexza or any of its assets, properties
or businesses, or (C) conflict with, result in any breach of, constitute a default (or event that
with the giving of notice or lapse of time, or both, would become a default) under, require any
consent under, or give to others any rights of termination, amendment, acceleration, suspension,
revocation or cancellation of, or result in the creation of any Encumbrance on any of the assets or
properties of Alexza, pursuant to, any note, bond, mortgage or indenture, contract, agreement,
lease, sublease, license, permit, franchise or other instrument or arrangement to which Alexza is a
party except, in the case of clauses (B) and (C), to the extent that such
conflicts, breaches, defaults or other matters would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Alexza.

                    (iv) Governmental Consents and Approvals. Other than any HSR Filings which, if the
Purchase Option is exercised by Alexza and if such HSR Filings are required pursuant to Section
2(a)(i) hereof, will be obtained on or prior to the Purchase Option Closing Date, the
execution, delivery and performance of this Agreement by Alexza do not, and the consummation of the
transactions contemplated hereby do not and will not, require any Governmental Approval which has
not already
been obtained, effected or provided, except with respect to which the failure to so obtain,
effect or provide would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Alexza.

                    (v) Litigation. As of (A) the date of this Agreement, except as disclosed in any
Alexza Public Filings available as of the date hereof, and (B) the Purchase Option Closing Date if
Alexza elects to make a Partial Stock Payment, there are no actions by or against Alexza pending
before any Governmental Authority or, to the knowledge of Alexza, threatened to be brought by or
before any Governmental Authority, that would, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Alexza. There are no pending or, to the knowledge of
Alexza, threatened actions, to which Alexza is a party (or is threatened to be named as a party) to
set aside, restrain, enjoin or prevent the execution, delivery or performance of this Agreement or
the Operative Documents or the consummation of the transactions contemplated hereby or thereby by
any party hereto or thereto. As of the date of this

 

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

10

 

Agreement, and as of the Purchase Option
Closing Date if Alexza elects to make a Partial Stock Payment, Alexza is not subject to any
Governmental Order (nor, to the knowledge of Alexza, is there any such Governmental Order
threatened to be imposed by any Governmental Authority) that would, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on Alexza.

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

                    (i) Immediately prior to the Purchase Option Closing Date, Alexza shall have sufficient
amounts of cash and, if applicable, sufficient authorized but unissued, freely transferable and
nonassessable Alexza Common Stock available, to satisfy the portion of the Purchase Price to be
paid in cash or Alexza Common Stock pursuant to Sections 2(b) and 2(c);
provided, that if the Purchase Option Closing Date does not occur within (A) [ * ] if no
HSR Filings are required or (B) [ * ] if HSR Filings are required, in each case following the
Purchase Option Exercise Date and pursuant to Section 2(a) hereof, Alexza shall provide
Holdings with evidence of firm commitments from third parties with the wherewithal to pay, or other
guaranty of payment, which is reasonably acceptable to Holdings, for that portion of the Purchase
Price to be paid in cash. In the event that Alexza elects to satisfy any portion of the Purchase
Price in Alexza Common Stock (A) Alexza shall have, not later than the Purchase Option Closing
Date, a Registration Statement declared effective by the Securities and Exchange Commission for the
resale of any such shares of Alexza Common Stock to be delivered in partial satisfaction of the
Purchase Price, accompanied by evidence reasonably acceptable to Holdings that such Alexza Common
Stock has been approved for listing on the NASDAQ Global Market or such other national market on
which the Alexza Common Stock is then listed, and (B) Alexza shall deliver to Holdings on or before
the Purchase Option Closing Date, a legal opinion from Cooley Godward Kronish LLP, counsel to
Alexza, or such other counsel as Alexza and Holdings shall mutually agree, which opinion shall be,
in form and substance, reasonably acceptable to Holdings and shall contain, with respect to the
Alexza Common Stock to be used as
partial payment of the Purchase Price, substantially the same opinions rendered by counsel to
Alexza in paragraphs 5, 7 and 8 of the opinion delivered to Holdings on the Closing Date, along
with customary assumptions and limitations.

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

                    (iii) Upon the expiration of the Purchase Option or the termination of this Agreement pursuant
to Section 9 hereof, or as soon thereafter as is practical, Alexza shall (A) in accordance
with and pursuant to Sections 2.7 and 2.8 of the Novated and Restated Technology
License Agreement, deliver to Symphony Allegro all Regulatory Files and Tangible Materials, and (B)
in accordance with and pursuant to

 

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

11

 

Section 2.11 of the Novated and Restated Technology
License Agreement, provide and supply, or cause to be provided and supplied, finished dosage form
of Products.

                    (iv) In the event that Alexza exercises the Purchase Option, then Alexza shall maintain the
separate corporate existence of Symphony Allegro for a minimum of one (1) year following such
exercise, unless such maintenance would have a Material Adverse Effect on Alexza or any of its
Affiliates.

          Section 4. Holdings Representations, Warranties and Covenants

               (a) As of the date hereof, Holdings hereby represents and warrants, and, except to the extent
that any of the following representations and warranties are limited to the date of this Agreement
or otherwise limited, on the Purchase Option Closing Date, shall be deemed to have represented and
warranted, to Alexza and Symphony Allegro that:

                    (i) Organization. Holdings is a limited liability company, duly formed, validly
existing and in good standing under the laws of the State of Delaware.

                    (ii) Authority and Validity. Holdings has all requisite limited liability company
power and authority to execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and performance by
Holdings of this Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary action required on the part of Holdings, and no other
proceedings on the part of Holdings are necessary to authorize this Agreement or for Holdings to
perform its obligations under this Agreement. This Agreement constitutes the lawful, valid and
legally binding obligation of Holdings, enforceable in accordance with its terms, except as the
same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights
generally and general equitable principles regardless of whether such enforceability is considered
in a proceeding at law or in equity.

                    (iii) No Violation or Conflict. The execution, delivery and performance of this
Agreement and the transactions contemplated hereby do not (A) violate, conflict with or result in
the breach of any provision of the Organizational Documents of Holdings, (B) as of the date of this
Agreement, conflict with or violate any law or Governmental Order applicable to Holdings or any of
its assets, properties or businesses, or (C) as of the date of this Agreement, conflict with,
result in any breach of, constitute a default (or event that with the giving of notice or lapse of
time, or both, would become a default) under, require any consent under, or give to others any
rights of termination, amendment, acceleration, suspension, revocation or cancellation of, or
result in the creation of any Encumbrance on any of the assets or properties of Holdings, pursuant
to, any note, bond, mortgage or indenture, contract, agreement, lease, sublease, license, permit,
franchise or other instrument or arrangement to which Holdings is a party except, in the case of
clauses (B) and (C), to the extent that such conflicts, breaches,

 

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

12

 

defaults or other
matters would not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Holdings.

                    (iv) Governmental Consents and Approvals. The execution, delivery and performance of
this Agreement by Holdings do not, and the consummation of the transactions contemplated hereby do
not and will not, require any Governmental Approval which has not already been obtained, effected
or provided, except with respect to which the failure to so obtain, effect or provide would not,
individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on
Holdings.

                    (v) Litigation. As of the date of this Agreement, there are no actions by or against
Holdings pending before any Governmental Authority or, to the knowledge of Holdings, threatened to
be brought by or before any Governmental Authority, that would, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Holdings. There are no pending or, to
the knowledge of Holdings, threatened actions to which Holdings is a party (or is threatened to be
named as a party) to set aside, restrain, enjoin or prevent the execution, delivery or performance
of this Agreement or the Operative Documents or the consummation of the transactions contemplated
hereby or thereby by any party hereto or thereto. As of the date of this Agreement, Holdings is
not subject to any Governmental Order (nor, to the knowledge of Holdings, is there any such
Governmental Order threatened to be imposed by any Governmental Authority) that would, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect on Holdings.

                    (vi) Stock Ownership. All of Symphony Allegro’s issued and outstanding Symphony
Allegro Equity Securities are owned beneficially and of record by Holdings, free and clear of any
and all encumbrances.

                    (vii) Interim Operations. Holdings was formed solely for the purpose of engaging in
the transactions contemplated by the Operative Documents, has engaged in no other business
activities and has conducted its operations only as contemplated by the Operative Documents.

                    (viii) Accredited Investor.

                    (A) Holdings is and will remain at all relevant times an Accredited Investor.

                    (B) Holdings has relied completely on the advice of, or has consulted with or has had
the opportunity to consult with, its own personal tax, investment, legal or other advisors
and has not relied on Alexza or any of its Affiliates for advice related to any offer and
sale of Alexza Common Stock in connection with the Purchase Option. Holdings has reviewed
the Investment Overview and is aware of the risks disclosed therein. Holdings acknowledges
that it has had a reasonable opportunity to conduct its own due

 

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

13

 

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

                    (C) Holdings is able to bear the economic risk of such investment for an indefinite
period and to afford a complete loss thereof.

                    (D) Holdings agrees that the Alexza Common Stock may not be resold (A) without
registration thereof under the Securities Act (unless an exemption from such registration
is available), or (B) in violation of any law.

                    (E) No person or entity acting on behalf of, or under the authority of, Holdings is or
will be entitled to any broker’s, finder’s, or similar fees or commission payable by Alexza
or any of its Affiliates.

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

                    (i) Contribution to Symphony Allegro. On or prior to the Stock Payment Date, Holdings
shall, pursuant to the Subscription Agreement, contribute proceeds from the Financing of
$50,000,000 to Symphony Allegro, Inc.

                    (ii) Encumbrance. Holdings will not, and will not permit any of its Subsidiaries to,
create, assume or suffer to exist any Encumbrance on any of its Symphony Allegro Equity Securities
except with the prior written consent of Alexza.

                    (iii) Transfer and Amendment. Commencing upon the date hereof and ending upon the
earlier to occur of (x) the Purchase Option Closing Date, (y) the unexercised expiration of the
Purchase Option Period, and (z) the termination of
this Agreement pursuant to Section 9 (such period, the “Term”), the manager of
Holdings shall not (A) transfer, or permit the transfer of, any Membership Interest without the
prior written consent of Alexza or (B) amend, or permit the amendment of, any provisions relating
to the transfer of Membership Interests, as set forth in Section 7.02 of the Holdings LLC
Agreement, to the extent such amendment would adversely affect Alexza’s right of consent set forth
in Sections 7.02(b)(i) and 7.02(c) of the Holdings LLC Agreement.

                    (iv) Symphony Allegro Directors. During the Term, Holdings agrees to vote all of its
Symphony Allegro Equity Securities (or to exercise its right with respect to such Symphony Allegro
Equity Securities to consent to action in writing without a meeting) in favor of, as applicable,
the election, removal and replacement of one director of the Symphony Allegro Board, and any
successor thereto, designated by Alexza (the “Alexza Director”) as directed by Alexza. In
furtherance and not in limitation of the foregoing, Holdings hereby grants to Alexza an irrevocable
proxy, with respect to all Symphony Allegro Equity Securities now owned or hereafter acquired by
Holdings, to vote such Symphony Allegro Equity Securities or to exercise the right to

 

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

14

 

consent to
action in writing without a meeting with respect to such Symphony Allegro Equity Securities, such
irrevocable proxy to be exercised solely for the limited purpose of electing, removing and
replacing the Alexza Director in the event of the failure or refusal of Holdings to elect, remove
or replace such Alexza Director, as directed by Alexza. Additionally, Holdings agrees, during the
Term, to elect two (2) independent directors (of the four (4) directors of Symphony Allegro not
chosen by Holdings at the direction of Alexza), and any successors thereto, as shall be selected by
mutual agreement of Alexza and Holdings.

                    (v) Symphony Allegro Board. During the Term, Holdings shall not vote any of its
Symphony Allegro Equity Securities (or exercise its rights with respect to such Symphony Allegro
Equity Securities by written consent without a meeting) to increase the size of the Symphony
Allegro Board to more than five (5) members without the prior written consent of Alexza.

                    (vi) Symphony Allegro Charter. During the Term, Holdings shall not approve or permit
any amendment to Article IV, Paragraphs (1) and (3); Article VI; Article
VII; Article X; Article XI or Article XIII of the Symphony Allegro
Charter without the prior written consent of Alexza.

          Section 5. Symphony Allegro Representations, Warranties and Covenants

               (a) As of the date hereof, Symphony Allegro hereby represents and warrants, and, except to the
extent that any of the following representations and warranties are limited to the date of this
Agreement or otherwise limited, on the Purchase Option Closing Date, shall be deemed to have
represented and warranted, to Alexza and Holdings that:

                    (i) Organization. Symphony Allegro is a corporation, duly organized, validly existing
and in good standing under the laws of the State of Delaware.

                    (ii) Authority and Validity. Symphony Allegro has all requisite corporate power and
authority to execute, deliver and perform its obligations under this Agreement and to consummate
the transactions contemplated hereby. The execution, delivery and performance by Symphony Allegro
of this Agreement and the consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary action required on the part of Symphony Allegro, and no other
proceedings on the part of Symphony Allegro are necessary to authorize this Agreement or for
Symphony Allegro to perform its obligations under this Agreement. This Agreement constitutes the
lawful, valid and legally binding obligation of Symphony Allegro, enforceable in accordance with
its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors’ rights generally and general
equitable principles regardless of whether such enforceability is considered in a proceeding at law
or in equity.

 

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

15

 

                    (iii) No Violation or Conflict. The execution, delivery and performance of this
Agreement and the transactions contemplated hereby do not (A) violate, conflict with or result in
the breach of any provision of the Organizational Documents of Symphony Allegro, (B) conflict with
or violate any law or Governmental Order applicable to Symphony Allegro or any of its assets,
properties or businesses, or (C) conflict with, result in any breach of, constitute a default (or
event that with the giving of notice or lapse of time, or both, would become a default) under,
require any consent under, or give to others any rights of termination, amendment, acceleration,
suspension, revocation or cancellation of, or result in the creation of any Encumbrance on any of
the assets or properties of Symphony Allegro, pursuant to, any note, bond, mortgage or indenture,
contract, agreement, lease, sublease, license, permit, franchise or other instrument or arrangement
to which Symphony Allegro is a party except, in the case of clauses (B) and (C), to
the extent that such conflicts, breaches, defaults or other matters would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on Symphony Allegro.

                    (iv) Governmental Consents and Approvals. The execution, delivery and performance of
this Agreement by Symphony Allegro do not, and the consummation of the transactions contemplated
hereby do not and will not, require any Governmental Approval which has not already been obtained,
effected or provided, except with respect to which the failure to so obtain, effect or provide
would not, individually or in the aggregate, reasonably be expected to have a Material Adverse
Effect on Symphony Allegro.

                    (v) Litigation. There are no actions by or against Symphony Allegro pending before
any Governmental Authority or, to the knowledge of Symphony Allegro, threatened to be brought by or
before any Governmental Authority that would, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Symphony Allegro. There are no pending or, to the
knowledge of
Symphony Allegro, threatened actions to which Symphony Allegro is a party (or is threatened to
be named as a party) to set aside, restrain, enjoin or prevent the execution, delivery or
performance of this Agreement or the Operative Documents or the consummation of the transactions
contemplated hereby or thereby by any party hereto or thereto. Symphony Allegro is not subject to
any Governmental Order (nor, to the knowledge of Symphony Allegro, is there any such Governmental
Order threatened to be imposed by any Governmental Authority) that would, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on Symphony Allegro.

                    (vi) Capitalization. Holdings is the beneficial and record owner of all issued and
outstanding Symphony Allegro Equity Securities. No shares of Symphony Allegro capital stock are
held in treasury by Symphony Allegro or any Symphony Allegro Subsidiary. All of the issued and
outstanding Symphony Allegro Equity Securities (A) have been duly authorized and validly issued and
are fully paid and nonassessable, (B) were issued in compliance with all applicable state and
federal securities laws, and (C) were not issued in violation of any preemptive rights or rights of
first refusal. No preemptive rights or rights of first refusal exist with respect to any

 

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

16

 

Symphony
Allegro Equity Securities and no such rights will arise by virtue of or in connection with the
transactions contemplated hereby (other than for the Purchase Option). Other than the Purchase
Option, there are no outstanding options, warrants, call rights, commitments or agreements of any
character to acquire any Symphony Allegro Equity Securities. There are no outstanding stock
appreciation, phantom stock, profit participation or other similar rights with respect to Symphony
Allegro. Symphony Allegro is not obligated to redeem or otherwise acquire any of its outstanding
Symphony Allegro Equity Securities.

                    (vii) Interim Operations. Symphony Allegro was formed solely for the purpose of
engaging in the transactions contemplated by the Operative Documents, has engaged in no other
business activities and has conducted its operations only as contemplated by the Operative
Documents.

                    (viii) Investment Company. Symphony Allegro is not, and after giving effect to the
transactions contemplated by the Operative Documents will not be, required to register as an
“investment company” as such term is defined in the Investment Company Act of 1940, as
amended.

               (b) Symphony Allegro covenants and agrees that:

                    (i) Symphony Allegro will comply with all laws, ordinances or governmental rules or
regulations to which it is subject and will obtain and maintain in effect all licenses,
certificates, permits, franchises and other Governmental Approvals necessary to the ownership of
its properties or to the conduct of its business, in each case to the extent necessary to ensure
that non-compliance with such laws, ordinances or governmental rules or regulations or failures to
obtain or maintain in effect such licenses, certificates, permits, franchises and other
Governmental Approvals would not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on Symphony Allegro.

                    (ii) Symphony Allegro will file (or cause to be filed) all material tax returns required to be
filed by it and pay all taxes shown to be due and payable on such returns and all other taxes
imposed on it or its assets to the extent such taxes have become due and payable and before they
have become delinquent and shall pay all claims for which sums have become due and payable that
have or might become attached to the assets of Symphony Allegro; provided, that Symphony
Allegro need not file any such tax returns or pay any such tax or claims if (A) the amount,
applicability or validity thereof is contested by Symphony Allegro on a timely basis in good faith
and in appropriate proceedings, and Symphony Allegro has established adequate reserves therefor in
accordance with GAAP on the books of Symphony Allegro or (B) the failure to file such tax returns
or the nonpayment of such taxes and assessments, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on Symphony Allegro.

                    (iii) Symphony Allegro will at all times preserve and keep in full force and effect its
corporate existence.

 

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

17

 

                    (iv) Symphony Allegro will keep complete, proper and separate books of record and account,
including a record of all costs and expenses incurred, all charges made, all credits made and
received, and all income derived in connection with the operation of the business of Symphony
Allegro, all in accordance with GAAP (which GAAP shall be conformed to those used by Alexza to the
extent practicable), in each case to the extent necessary to enable Symphony Allegro to comply with
the periodic reporting requirements of this Agreement, and will promptly notify Alexza if it adopts
or changes any accounting principle pursuant to a change in GAAP or applicable Law.

                    (v) Symphony Allegro will perform and observe in all material respects all of the terms and
provisions of each Operative Document to be performed or observed by it, maintain each such
Operative Document to which it is a party, promptly enforce in all material respects each such
Operative Document in accordance with its terms, take all such action to such end as may be from
time to time reasonably requested by Holdings or Alexza and make to each other party to each such
Operative Document such demands and requests for information and reports or for action as Symphony
Allegro is entitled to make under such Operative Document.

                    (vi) Symphony Allegro shall permit the representatives of Holdings (including Holdings’
members and their respective representatives), each Symphony Fund and Alexza, at each of their own
expense and upon reasonable prior notice to Symphony Allegro, to visit the principal executive
office of Symphony Allegro, to discuss the affairs, finances and accounts of Symphony Allegro with
Symphony Allegro’s officers and (with the consent of Symphony Allegro, which consent will not be
unreasonably withheld) its Auditors, all at such reasonable times and as often as may be reasonably
requested in writing.

                    (vii) Symphony Allegro shall permit each Symphony Fund, at its own expense and upon reasonable
prior notice to Symphony Allegro, to
inspect and copy Symphony Allegro’s books and records and inspect Symphony Allegro’s
properties at reasonable times.

                    (viii) Symphony Allegro shall allow Alexza or its designated representatives to have
reasonable visitation and inspection rights with regard to the Programs and materials, documents
and other information relating thereto.

                    (ix) Symphony Allegro shall permit each Symphony Fund to consult with and advise the
management of Symphony Allegro on matters relating to the research and development of the Programs
in order to develop the Product in accordance with the terms or provisions of the Amended and
Restated Research and Development Agreement.

                    (x) On the Purchase Option Closing Date, or as soon thereafter as is practical, Symphony
Allegro shall deliver to Alexza all materials, documents, files and other information relating to
the Programs (or, where necessary, copies thereof).

 

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

18

 

                    (xi) During the Term, Alexza shall have the right to consent to any increase in the size of
the Symphony Allegro Board to more than five (5) directors.

                    (xii) During the Term, Alexza shall have the right to designate, remove and replace one (1)
director of the Symphony Allegro Board, including any successor thereto, as contemplated by
Section 4(b)(iv).

                    (xiii) Symphony Allegro shall indemnify the directors and officers of Symphony Allegro against
liability incurred by reason of the fact that such Person is or was a director or officer of
Symphony Allegro, as permitted by Article VII of the Symphony Allegro Charter and
Section 9.01 of the Symphony Allegro By-laws, as set forth in, and on the terms of, the
Indemnification Agreement and the RRD Services Agreement, respectively.

                    (xiv) During the Term, Symphony Allegro shall comply with, and cause any Persons acting for it
to comply with, the terms of the Investment Policy with respect to the investment of any funds held
by it.

                    (xv) On or prior to the Purchase Option Closing Date, Symphony Allegro shall pay for a
non-cancelable run-off insurance policy, for a period of six (6) years after the Purchase Option
Closing Date to provide insurance coverage for events, acts or omissions occurring on or prior to
the Purchase Option Closing Date for all persons who were directors or officers of Symphony Allegro
on or prior to the Purchase Option Closing Date.

               (c) Symphony Allegro covenants and agrees that, until the expiration of the Term, it
shall not, and shall cause its Subsidiaries (if any) not to, without
Alexza’s prior written consent (such consent, in the case of clause (x) below, not to
be unreasonably withheld):

                    (i) issue any Symphony Allegro Equity Securities or any Equity Securities of any Subsidiary
thereof (other than any issuances of Equity Securities by Symphony Allegro made in accordance with
Section 1(b) hereof to Holdings so long as Symphony Allegro is a wholly owned subsidiary of
Holdings, or by a Subsidiary of Symphony Allegro to Symphony Allegro or to another wholly owned
Subsidiary of Symphony Allegro); provided, however, that in any event any such
Symphony Allegro Equity Securities shall be issued subject to the Purchase Option;

                    (ii) redeem, repurchase or otherwise acquire, directly or indirectly, any Symphony Allegro
Equity Securities or the Equity Securities of any Subsidiary of Symphony Allegro;

                    (iii) create, incur, assume or permit to exist (A) any Encumbrance over or on any of its
assets, other than (x) statutory liens or (y) liens created in the ordinary course of Symphony
Allegro’s business securing obligations valued at less than [ * ] in the aggregate principal amount
at any one time outstanding

 

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

19

 

(unless the Development Committee shall authorize the existence of
ordinary course liens securing obligations valued at greater than [ * ]), or (B) Debt other than
any Debt incurred pursuant to the Operative Documents and the Development Budget (including
payables incurred in the ordinary course of business) (“Excepted Debt”); provided,
however, that the aggregate outstanding principal amount of all Excepted Debt for borrowed
money (including the amount of Debt secured by any Encumbrances permitted pursuant to clause
(A)) shall not exceed [ * ] at any time;

                    (iv) declare or pay dividends or other distributions on any Symphony Allegro Equity Securities
other than any dividend declared from the proceeds of (x) the exercise of a Discontinuation Option,
or (y) a sale or license of a discontinued Program to a third party, in each case in respect of
which Symphony Allegro shall be entitled to pay (subject to the existence of lawfully available
funds) a dividend equal to the net amount (such net amount calculated as the gross proceeds
received less amounts required to be paid in respect of any and all corporate taxes owed by
Symphony Allegro as a result of the receipt of such gross amounts) of such Discontinuation Price or
the amounts received from such third party, as the case may be;

                    (v) enter into any transaction of merger or consolidation, or liquidate, wind up or dissolve
itself, or convey, transfer, license, lease or otherwise dispose of all, or a material portion of,
its properties, assets or business;

                    (vi) other than in respect of the Programs, engage in the development of products for any
other company or engage or participate in the development of products or engage in any other
material line of business;

                    (vii) other than entering into, and performing its obligations under, the Operative Documents
and participating in the Programs, engage in any action that negates or is inconsistent with any
rights of Alexza set forth herein;

                    (viii) (A) other than as contemplated by the RRD Services Agreement and Section 6.2 of
the Amended and Restated Research and Development Agreement, hire, retain or contract for the
services of, any employees until the termination of such agreements, or (B) appoint, dismiss or
change any RRD Investment Personnel;

                    (ix) incur any financial commitments in respect of the development of the Programs other than
those set forth in the Development Plan and the Development Budget, or those approved by the
Development Committee and, if so required by the terms of Paragraph 11 of the Development Committee
Charter, the Symphony Allegro Board in accordance with the Operative Documents;

                    (x) other than any transaction contemplated by the Operative Documents, enter into or engage
in any Conflict Transactions without the prior approval of a majority of the Disinterested
Directors of the Symphony Allegro Board; or

 

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

20

 

                    (xi) waive, alter, modify, amend or supplement in any manner whatsoever any material terms and
conditions of the RRD Services Agreement, the Subscription Agreement, the Research Cost Sharing and
Extension Agreement, or Articles 4 and 6 of the Amended and Restated Research and
Development Agreement, except in compliance with the terms of the Operative Documents.

               (d) Symphony Allegro covenants and agrees to deliver, cause to be delivered, and provide
access thereto, to each other Party, each Symphony Fund, and such Auditors as Alexza may designate,
so long as such Auditors shall (x) be subject to confidentiality requirements at least as stringent
as the Confidentiality Agreement or (y) be an Alexza Accounting Advisor retained pursuant to an
agreement which incorporates confidentiality provisions substantially the same as the ones
incorporated in the agreements in effect between Alexza and such Accounting Advisors as of the
Closing Date:

                    (i) upon request, copies of the then current Development Plan for each quarter, on or before
March 31, June 30, September 30, and December 31 of each year;

                    (ii) upon request, copies of the then current Development Budget for each quarter, including a
report setting forth in reasonable detail the projected expenditures by Symphony Allegro pursuant
to the Development Budget, on or before March 31, June 30, September 30, and December 31 of each
year;

                    (iii) prior to the close of each fiscal year, Symphony Allegro shall cause the Manager to seek
to obtain from the Symphony Allegro Auditors schedules of certain financial information to be
provided to Alexza’s Auditors in
connection with the Symphony Allegro Auditors’ audit of Symphony Allegro. Within [ * ] after
the close of each fiscal year, Symphony Allegro (or the Manager acting on its behalf) will provide
Alexza’s Auditors with the Client Schedules. If the Symphony Allegro Auditors deliver the Client
Schedules after the end of the fiscal year, Symphony Allegro (or the Manager acting on its behalf)
will provide the completed Client Schedules to Alexza’s Auditors within [ * ] of such receipt.
Following Alexza’s Auditors’ review of the Client Schedules, Symphony Allegro, or RRD on behalf of
Symphony Allegro, will promptly provide Alexza’s Auditors with any reasonably requested back-up
information related to the Client Schedules.

                    (iv) prior to the close of each fiscal year, Alexza’s Chief Financial Officer, the Symphony
Allegro Auditors, Alexza’s Auditors and Symphony Allegro (or the Manager acting on its behalf)
shall agree to a completion schedule that will include (A) the provision by Symphony Allegro to
Alexza of the financial information reasonably necessary for Alexza to consolidate the financial
results of Symphony Allegro and (B) the following financial statements, including the related notes
thereto, audited and certified by the Symphony Allegro Auditors: (1) a balance sheet of Symphony
Allegro as of the close of such fiscal year, (2) a statement of net income for such fiscal year,
and (3) a statement of cash flows for such fiscal year. Such audited annual financial statements
shall set forth in comparative form the figures for the

 

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

21

 

previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP, and Symphony Allegro (or the Manager acting on its
behalf) shall, to the extent that Symphony Allegro (or the Manager acting on its behalf), using
commercially reasonable means, can procure such an opinion, be accompanied by an opinion thereon of
the Symphony Allegro Auditors to the effect that such financial statements present fairly, in all
material respects, the financial position of Symphony Allegro and its results of operations and
cash flows and have been prepared in conformity with GAAP, and that the examination of such
accountants in connection with such financial statements has been made in accordance with generally
accepted auditing standards, and that such audit provides a reasonable basis for such opinion in
the circumstances;

                    (v) within [ * ] following each calendar month and upon receipt from Alexza of its monthly
invoice to Symphony Allegro, current accrued monthly vendor expenses and prepaid expenses, Symphony
Allegro (or the Manager acting on its behalf) will provide to Alexza: (A) the unaudited balance
sheet of Symphony Allegro for the previous calendar month; (B) the unaudited statement of net
income for such previous calendar month; (C) the trial balance schedule for such previous calendar
month; and (D) related account reconciliations for such previous calendar month (collectively,
“Unaudited Financial Information”);

                    (vi) within [ * ] following its filing, a copy of each income tax return so filed by Symphony
Allegro with any foreign, federal, state or local taxing authority (including all supporting
schedules thereto);

                    (vii) any other documents, materials or other information pertaining to the Programs or
Symphony Allegro as Alexza may reasonably request, including preliminary financial information;

                    (viii) promptly, and in any event within [ * ] of receipt thereof, copies of any notice to
Symphony Allegro from any federal or state Governmental Authority relating to any order, ruling,
statute or other law or regulation that would reasonably be expected to have a Material Adverse
Effect on Symphony Allegro;

                    (ix) promptly upon receipt thereof, notice of all actions, suits, investigations, litigation
and proceedings before any court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, affecting Symphony Allegro;

                    (x) promptly upon receipt thereof, copies of any other notices, requests, reports, financial
statements and other information and documents received by Symphony Allegro under or pursuant to
any other Operative Document, including, without limitation, any notices of breach or termination
of any subcontracts or licenses entered into or permitted pursuant to the Operative Documents; and

                    (xi) with reasonable promptness, such other data and information relating to the business,
operations, affairs, financial condition, assets or

 

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

22

 

properties of Symphony Allegro or relating to
the ability of Symphony Allegro to perform its obligations hereunder and under the Operative
Documents as from time to time may be reasonably requested by Alexza and/or Holdings;

provided, that neither Symphony Allegro, nor the Manager acting on behalf of Symphony
Allegro, shall have any liability to Alexza for the failure to deliver financial documents or other
materials hereunder, if such failure was caused by a failure of Alexza to provide, in a timely
manner, data required to prepare such financial documents or other materials to Symphony Alexza in
a timely manner.

               (e) Symphony Allegro will use commercially reasonable efforts, at its own expense (as set
forth in the Management Budget), to cooperate with Alexza in meeting Alexza’s government
compliance, disclosure, and financial reporting obligations, including without limitation under the
Sarbanes-Oxley Act of 2002, as amended, and any rules and regulations promulgated thereunder, and
under FASB Interpretation No. 46 (Revised). Without limiting the foregoing, Symphony Allegro
further covenants, until the completion of all the reporting, accounting and other obligations set
forth therein with respect to the fiscal year in which this Agreement shall terminate, expire and
end, that (w) the principal executive officer and the principal financial officer of Symphony
Allegro, or persons performing similar functions, shall provide certifications to Alexza
corresponding to those required with respect to public companies for which a class of securities is
registered under the Securities Exchange Act (“Public Companies”) under Sections 302 and
906 of the Sarbanes-Oxley Act of 2002, as amended; (x) Symphony Allegro shall maintain a system of
disclosure controls and internal controls (as defined under the Exchange Act) and conduct quarterly
and annual evaluations of the effectiveness of such controls as required under the Exchange Act for
Public Companies; (y) Symphony Allegro shall provide to Alexza an attestation report of its
Auditors with respect to Symphony Allegro management’s assessment of Symphony
Allegro’s internal controls as required under the Exchange Act for Public Companies; and (z)
Symphony Allegro will maintain, or cause to have maintained, such sufficient evidentiary support
for management’s assessment of the effectiveness of Symphony Allegro’s internal controls as
required under the Exchange Act for Public Companies.

 

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

23

 

          Section 6.
Notice of Material Event. Each Party covenants and agrees that, upon its acquiring Knowledge of any breach by it of
any representation, warranty, covenant or any other term or condition of this Agreement or
acquiring Knowledge of a material event or development that is, or is reasonably expected to be,
adverse to the other Party with respect to any Program or the transactions contemplated hereby,
such Party shall promptly notify the other Party in writing within three (3) Business Days of
acquiring such Knowledge; provided, that the failure to provide such notice shall not
impair or otherwise be deemed a waiver of any rights any Party may have arising from such breach,
material event or development and that notice under this Section 6 shall not in itself
constitute notice of any breach of any of the Operative Documents, unless explicitly stated in such
notice.

          Section 7. Assignment; Transfers; Legend

               (a) Assignment by Alexza and Symphony Allegro. Neither Alexza nor Symphony Allegro
may assign, delegate, transfer, sell or otherwise dispose of (collectively, “Transfer”), in
whole or in part, any or all of their rights or obligations hereunder to any Person (a
“Transferee”) without the prior written approval of each of the other Parties;
provided, however, that Alexza, without the prior approval of each of the other
Parties, acting in accordance with Section 2A of this Agreement, may make such Transfer to
any Person which acquires all or substantially all of Alexza’s assets or business (or assets or
business related to the Programs) or which is the surviving or resulting Person in a merger,
consolidation or other reorganization with Alexza. In no event shall such assignment alter the
definition of “Alexza Common Stock” except as a result of the surviving or resulting “parent”
entity in a merger being other than Alexza, in which case any reference to Alexza Common Stock
shall be deemed to instead reference the common stock, if any, of the surviving or resulting
entity.

               (b) Assignment and Transfers by Holdings. Prior to the expiration of the Term,
Holdings may not Transfer, in whole or in part, any or all of its Symphony Allegro Equity
Securities or any or all of its rights or obligations hereunder to any Person (other than Alexza)
without the prior written consent of Alexza. In addition, any Transfer of Symphony Allegro Equity
Securities by Holdings or any other Person to any Person other than Alexza shall be conditioned
upon, and no effect shall be given to any such Transfer unless such transferee shall agree in
writing in form and substance satisfactory to Alexza to be bound by all of the terms and conditions
hereunder, including the Purchase Option, as if such transferee were originally designated as
“Holdings” hereunder.

               (c) Legend. Any certificates evidencing Symphony Allegro Equity Securities shall bear
a legend in substantially the following form:

THE SECURITIES OF SYMPHONY ALLEGRO, INC., EVIDENCED HEREBY ARE
SUBJECT TO AN OPTION, HELD BY ALEXZA, AS DESCRIBED IN A PURCHASE
OPTION AGREEMENT (THE

 

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

24

 

“PURCHASE OPTION AGREEMENT”) DATED
AS OF DECEMBER 1, 2006, BY AND AMONG ALEXZA PHARMACEUTICALS, INC.,
AND THE OTHER PARTIES THERETO, TO PURCHASE SUCH SECURITIES AT A
PURCHASE PRICE DETERMINED PURSUANT TO SECTION 2 OF THE
PURCHASE OPTION AGREEMENT, EXERCISABLE BY WRITTEN NOTICE AT ANY
TIME DURING THE PERIOD SET FORTH THEREIN. COPIES OF THE PURCHASE
OPTION AGREEMENT ARE AVAILABLE AT THE PRINCIPAL PLACE OF BUSINESS
OF SYMPHONY ALLEGRO, INC. AT 7361 CALHOUN PLACE, SUITE 325,
ROCKVILLE, MARYLAND 20855, AND WILL BE FURNISHED TO THE HOLDER
HEREOF UPON WRITTEN REQUEST WITHOUT COST.

          Section 8. Costs and Expenses; Payments.

        
       (a)        Symphony Allegro Costs and Expenses. Symphony Allegro shall pay any of its
ongoing legal expenses with respect to the transactions described in the Operative Documents from
the funds allocated for such purpose in the Management Budget.

             
  (b)        Costs and Expenses of the Purchase Option. Except as otherwise specified in
Section 2(f) hereof, each Party shall pay its own costs and expenses incurred in connection
with the exercise of the Purchase Option.

           
    (c)        Payments to Holdings. Payment of the Purchase Price, plus any costs and expenses
payable by Symphony Allegro under Section 2(f) hereof, shall be made to the account of
Holdings contemporaneously with or prior to the payout of the Purchase Price on the Purchase Option
Closing Date no later than 1:00 pm (New York time).

          Section 9.
 Expiration; Termination of Agreement.

             
  (a)     Termination.

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

                    (ii)
Subject to Sections 1(c)(v) and 2A hereof, which shall survive termination of this
Agreement under this Section 9(a)(ii), each of Holdings and Symphony Allegro may terminate
this Agreement in the event that Symphony Allegro terminates the Amended and Restated Research
and Development Agreement in accordance with its terms.

 

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

25

 

          Section 10. Survival; Indemnification.

               (a) Survival of Representations and Warranties; Expiration of Certain Covenants.

                    (i) The representations and warranties of the Parties contained in this Agreement shall
survive for a period of one year from the making of such representations, except for
representations and warranties contained in Sections 3(a)(i) and (ii), 4(a)(i) and
(ii) and 5(a)(i) and (ii) hereof which shall survive indefinitely. The liability of
the Parties related to their respective representations and warranties hereunder shall not be
reduced by any investigation made at any time by or on behalf of Holdings, Symphony Allegro or
Alexza, as applicable.

                    (ii) For the avoidance of doubt, the covenants and agreements set forth in Sections
4(b), 5(b)(i), 5(b)(v), 5(b)(vii)-(ix), 5(b)(xi)-(xiv),
5(c), 5(d)(i), 5(d)(ii) and 5(d)(viii)-(xi) shall, upon the
expiration of the Term, expire and end without any further obligation by Symphony Allegro or
Holdings thereunder.

                    (iii) For the avoidance of doubt, the covenants and agreements set forth in Sections
5(b)(ii)-(iv), 5(b)(vi), 5(b)(x), 5(d)(iii)-(vii) and 5(e)
shall, upon the completion of all the reporting, accounting and other obligations set forth therein
with respect to the fiscal year in which this Agreement shall terminate, expire and end without any
further obligation by Symphony Allegro or Holdings thereunder.

               (b) Indemnification. To the greatest extent permitted by applicable law, Alexza shall
indemnify and hold harmless Holdings and Symphony Allegro and Holdings shall indemnify and hold
harmless Alexza, and each of their respective Affiliates, officers, directors, employees, agents,
partners, members, successors, assigns, representatives of, and each Person, if any (including any
officers, directors, employees, agents, partners, members of such Person) who controls Holdings,
Symphony Allegro and Alexza, as applicable, within the meaning of the Securities Act or the
Exchange Act, (each, an “Indemnified Party”), from and against any and all actions, causes
of action, suits, claims, losses, costs, interest, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnified Party is a party to the action
for which indemnification hereunder is sought), and including reasonable attorneys’ fees and
disbursements (hereinafter, a “Loss”), incurred by any Indemnified Party to the extent
resulting from, arising out of, or relating to: (i) in the case of Alexza being the Indemnifying
Party, (A) any breach of any representation or warranty made by Alexza herein or in Section
5.1 of the Novated and Restated Technology License Agreement, or (B) any breach of any
covenant, agreement or obligation of Alexza contained herein, and (ii) in the case of Holdings
being the Indemnifying Party, (A) any breach of any representation or warranty made by Holdings or
Symphony Allegro herein, or (B) any breach of any covenant, agreement or obligation of Holdings or
Symphony Allegro contained herein. To the extent that the foregoing undertaking by Alexza or
Holdings may be unenforceable for any reason, such Party shall make the maximum contribution to the
payment and satisfaction of any Loss that is permissible under applicable law.

 

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

26

 

               (c) Notice of Claims. Any Indemnified Party that proposes to assert a right to be
indemnified under this Section 10 shall notify Alexza or Holdings, as applicable (the
“Indemnifying Party”), promptly after receipt of notice of commencement of any action, suit
or proceeding against such Indemnified Party (an “Indemnified Proceeding”) in respect of
which a claim is to be made under this Section 10, or the incurrence or realization of any
Loss in respect of which a claim is to be made under this Section 10, of the commencement
of such Indemnified Proceeding or of such incurrence or realization, enclosing a copy of all
relevant documents, including all papers served and claims made, but the omission to so notify the
applicable Indemnifying Party promptly of any such Indemnified Proceeding or incurrence or
realization shall not relieve (x) such Indemnifying Party from any liability that it may have to
such Indemnified Party under this Section 10 or otherwise, except, as to such Indemnifying
Party’s liability under this Section 10, to the extent, but only to the extent, that such
Indemnifying Party shall have been prejudiced by such omission, or (y) any other indemnitor from
liability that it may have to any Indemnified Party under the Operative Documents.

               (d) Defense of Proceedings. In case any Indemnified Proceeding shall be brought
against any Indemnified Party, it shall notify the applicable Indemnifying Party of the
commencement thereof as provided in Section 10(c), and such Indemnifying Party shall be
entitled to participate in, and provided such Indemnified Proceeding involves a claim solely for
money damages and does not seek an injunction or other equitable relief against the Indemnified
Party and is not a criminal or regulatory action, to assume the defense of, such Indemnified
Proceeding with counsel reasonably satisfactory to such Indemnified Party. After notice from such
Indemnifying Party to such Indemnified Party of such Indemnifying Party’s election so to assume the
defense thereof and the failure by such Indemnified Party to object to such counsel within ten (10)
Business Days following its receipt of such notice, such Indemnifying Party shall not be liable to
such Indemnified Party for legal or other expenses related to such
Indemnified Proceedings incurred after such notice of election to assume such defense except
as provided below and except for the reasonable costs of investigating, monitoring or cooperating
in such defense subsequently incurred by such Indemnified Party reasonably necessary in connection
with the defense thereof. Such Indemnified Party shall have the right to employ its counsel in any
such Indemnified Proceeding, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party unless:

                    (i) the employment of counsel by such Indemnified Party at the expense of the applicable
Indemnifying Party has been authorized in writing by such Indemnifying Party;

                    (ii) such Indemnified Party shall have reasonably concluded in its good faith (which
conclusion shall be determinative unless a court determines that such conclusion was not reached
reasonably and in good faith) that there is or may be a conflict of interest between the applicable
Indemnifying Party and such Indemnified Party in the conduct of the defense of such Indemnified
Proceeding or that there are or may be one or more different or additional defenses, claims,
counterclaims,

 
 

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

27

 

or causes of action available to such Indemnified Party (it being agreed that in any
case referred to in this clause (ii) such Indemnifying Party shall not have the right to
direct the defense of such Indemnified Proceeding on behalf of the Indemnified Party);

                    (iii) the applicable Indemnifying Party shall not have employed counsel reasonably acceptable
to the Indemnified Party, to assume the defense of such Indemnified Proceeding within a reasonable
time after notice of the commencement thereof; provided, however, that (A) this
clause (iii) shall not be deemed to constitute a waiver of any conflict of interest that
may arise with respect to any such counsel, and (B) an Indemnified Party may not invoke this
clause (iii) if such Indemnified Party failed to timely object to such counsel pursuant to
the first paragraph of this Section 10(d) above (it being agreed that in any case referred
to in this clause (iii) such Indemnifying Party shall not have the right to direct the
defense of such Indemnified Proceeding on behalf of the Indemnified Party); or

                    (iv) any counsel employed by the applicable Indemnifying Party shall fail to timely commence
or reasonably conduct the defense of such Indemnified Proceeding and such failure has prejudiced
(or is in immediate danger of prejudicing) the outcome of such Indemnified Proceeding (it being
agreed that in any case referred to in this clause (iv) such Indemnifying Party shall not
have the right to direct the defense of such Indemnified Proceeding on behalf of the Indemnified
Party);

in each of which cases the fees and expenses of counsel for such Indemnified Party shall be at the
expense of such Indemnifying Party. Only one counsel shall be retained by all Indemnified Parties
with respect to any Indemnified Proceeding, unless counsel for any Indemnified Party reasonably
concludes in good faith (which conclusion shall be determinative unless a court determines that
such conclusion was not reached reasonably and in good faith) that there is or may be a conflict of
interest between such Indemnified Party and one or more other Indemnified Parties in the conduct of
the defense of such
Indemnified Proceeding or that there are or may be one or more different or additional defenses,
claims, counterclaims, or causes or action available to such Indemnified Party.

               (e) Settlement. Without the prior written consent of such Indemnified Party, such
Indemnifying Party shall not settle or compromise, or consent to the entry of any judgment in, any
pending or threatened Indemnified Proceeding, unless such settlement, compromise, consent or
related judgment (i) includes an unconditional release of such Indemnified Party from all liability
for Losses arising out of such claim, action, investigation, suit or other legal proceeding, (ii)
provides for the payment of money damages as the sole relief for the claimant (whether at law or in
equity), (iii) involves no admission of fact adverse to the Indemnified Party or finding or
admission of any violation of law or the rights of any Person by the Indemnified Party, and (iv) is
not in the nature of a criminal or regulatory action. No Indemnified Party shall settle or
compromise, or consent to the entry of any judgment in, any pending or threatened Indemnified
Proceeding (A) in respect of which any payment would result hereunder or under any other Operative
Document, (B) which includes an injunction that will adversely affect any Indemnifying Party, (C)
which involves an admission of fact adverse to the Indemnifying Party or a finding or admission of
any violation of law or the

 

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

28

 

rights of any Person by the Indemnifying Party, or (D) which is in the
nature of a criminal or regulatory action, without the prior written consent of the Indemnifying
Party, such consent not to be unreasonably conditioned, withheld or delayed.

          Section 11. No Petition. Each of Alexza and Holdings covenants and agrees that, prior to the date which is one year
and one day after the expiration of the Purchase Option Period, it will not institute or join in
the institution of any bankruptcy, insolvency, reorganization or similar proceeding against
Symphony Allegro. The provisions of this Section 11 shall survive the termination of this
Agreement.

          Section 12. Third-Party Beneficiary. Each of the Parties agrees that each Symphony Fund shall be a third-party beneficiary of
this Agreement.

Section 13. Notices. Any notice, request, demand, waiver, consent, approval or other communication which is required
or permitted to be given to any Party shall be in writing addressed to the Party at its address set
forth below and shall be deemed given (i) when delivered to the Party personally, (ii) if sent to
the Party by facsimile transmission (promptly followed by a hard-copy delivered in accordance with
this Section 13), when the transmitting Party obtains written proof of transmission and
receipt; provided, however, that notwithstanding the foregoing, any communication sent by facsimile
transmission after 5:00 PM (receiving Party’s time) or not on a Business Day shall not be deemed
received until the next Business Day, (iii) when delivered by next Business Day delivery by a
nationally recognized courier service, or (iv) if sent by registered or certified mail, when
received, provided postage and registration or certification fees are prepaid and delivery is
confirmed by a return receipt:

          Alexza:

Alexza Pharmaceuticals, Inc.

1020 East Meadow Circle

Palo Alto, CA 94303

Attn:August J. Moretti

Facsimile: (650) 687-3999

          with a copy to:

Cooley Godward Kronish LLP

Five Palo Alto Square

3000 El Camino Real

Palo Alto, CA 94306-2155

Attn: Barbara A. Kosacz, Esq.

Facsimile: (650) 849-7400

 
 

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

29

 

          Symphony Allegro:

Symphony Allegro, Inc.

7361 Calhoun Place, Suite 325

Rockville, MD 20855

Attn:Frank L. Hurley, Ph.D.

Facsimile: (301) 762-6154

          Holdings:

Symphony Allegro Holdings LLC

7361 Calhoun Place, Suite 325

Rockville, MD 20855

Attn:Robert L. Smith, Jr.

Facsimile: (301) 762-6154

          with copies to:

Symphony Capital Partners, L.P.

875 Third Avenue, 18th Floor

New York, NY 10022

Attn:Mark Kessel

Facsimile: (212) 632-5401

and

Symphony Strategic Partners, LLC

875 Third Avenue, 18th Floor

New York, NY 10022

Attn: Mark Kessel

Facsimile: (212) 632-5401

or to such other address as such Party may from time to time specify by notice given in the manner
provided herein to each other Party entitled to receive notice hereunder.

          Section 14. Governing Law; Consent to Jurisdiction and Service of Process.

                    (a) This Agreement shall be governed by, and construed in accordance with, the laws of the
State of New York; except to the extent that this Agreement pertains to the internal governance of
Symphony Allegro or Holdings, and to such extent this Agreement shall be governed and construed in
accordance with the laws of the State of Delaware.

                    (b) Each of the Parties hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court and Delaware State court or
federal court of the United States of America

 

			
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has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule
24b-2 of the Securities Exchange Act of 1934, as amended.

30

 

sitting in The City of New York, Borough of Manhattan
or Wilmington, Delaware, and any appellate court from any jurisdiction thereof, in any action or
proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any
judgment, and each of the Parties hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in any such New York State
court, any such Delaware State court or, to the fullest extent permitted by law, in such federal
court. Each of the Parties agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Nothing in this Agreement shall affect any right that any Party may
otherwise have to bring any action or proceeding relating to this Agreement.

                    (c) Each of the Parties irrevocably and unconditionally waives, to the fullest extent it may
legally and effectively do so, any objection that it may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating to this Agreement in any New
York State or federal court, or any Delaware State or federal court. Each of the Parties hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to
the maintenance of such action or proceeding in any such court. Each of the parties hereby
consents to service of process by mail.

          Section 15. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT.

          Section 16. Entire Agreement. This Agreement (including any Annexes, Schedules, Exhibits or other attachments hereto)
constitutes the entire agreement between the Parties with respect to the matters covered hereby and
supersedes all prior and contemporaneous agreements, correspondence, discussion, and understanding
with respect to such matters between the Parties, excluding the Operative Documents.

          Section 17. Amendment; Successors; Counterparts.

               (a) The terms of this Agreement shall not be altered, modified, amended, waived or
supplemented in any manner whatsoever except by a written instrument signed by each of the Parties.

               (b) Except as set forth in Section 12, nothing expressed or implied herein is intended
or shall be construed to confer upon or to give to any Person, other than the Parties, any right,
remedy or claim under or by reason of this Agreement or of any term, covenant or condition hereof,
and all the terms, covenants, conditions, promises and agreements contained herein shall be for the
sole and exclusive benefit of the Parties and their successors and permitted assigns.

 

			
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has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule
24b-2 of the Securities Exchange Act of 1934, as amended.

31

 

               (c) This Agreement may be executed in one or more counterparts, each of which, when executed,
shall be deemed an original but all of which, taken together, shall constitute one and the same
Agreement.

          Section 18. Specific Performance. The Parties acknowledge that irreparable damage would result if this Agreement were not
specifically enforced, and they therefore agree that the rights and obligations of the Parties
under this Agreement may be enforced by a decree of specific performance issued by a court of
competent jurisdiction. Such a remedy shall, however, not be exclusive, and shall be in addition
to any other remedies which any Party may have under this Agreement or otherwise. The Parties
further acknowledge and agree that a decree of specific performance may not be an available remedy
in all circumstances.

          Section 19. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being
enforced by any rule of law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as
the economic or legal substance of the transactions contemplated hereby is not affected in a
manner materially adverse to either party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the parties as closely
as possible in an acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.

          Section 20. Tax Reporting. The Parties acknowledge and agree that, for all federal and state income tax purposes:

               (a) (i) Holdings shall be treated as the owner of all the Equity Securities of Symphony
Allegro prior to the consummation of the Purchase Option; (ii) the Purchase Option shall be treated
as an option to acquire all the Equity Securities of Symphony Allegro; (iii) the Warrants shall be
treated as option premium payable in respect of the grant of the Purchase Option; and (iv) Symphony
Allegro shall be treated as the owner of all the Licensed Intellectual Property and shall be
entitled to all deductions claimed under Section 174 of the Code in respect of the Licensed
Intellectual Property to the extent of the amounts funded by Symphony Allegro (which, for the
avoidance of doubt, shall not preclude Alexza from claiming deductions under Section 174 of the
Code to which Alexza is otherwise entitled); and

               (b) No Party shall take any tax position inconsistent with any position described in
Section 20(a) above, except (i) in the event of a “determination” (as defined in
Section 1313 of the Code) to the contrary, or (ii) in the event either of the Parties receives an
opinion of counsel to the effect that there is no reasonable basis in law for such a position or
that a tax return cannot be prepared based on such a position without being subject to substantial
understatement penalties; provided, however, that in the case of Alexza, such
counsel shall be reasonably satisfactory to Holdings.

 
 

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

32

 

{SIGNATURES FOLLOW ON NEXT PAGE}

 

			
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has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule
24b-2 of the Securities Exchange Act of 1934, as amended.

33

 

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

	 	 	 	 	 	 	 
	 	 	ALEXZA PHARMACEUTICALS, INC.
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ August J. Moretti
	 	 	 	 	 
	 

	 	 	 	Name:
	 	August J. Moretti
	 

	 	 	 	Title:
	 	Senior Vice President and Chief Financial Officer
	 
	 	 	 	 	 	 
	 	 	SYMPHONY ALLEGRO HOLDINGS LLC
	 
	 	 	 	 	 	 
	 	 	By:	 	Symphony Capital Partners, L.P.,
	 	 	 	 	its Manager
	 
	 	 	 	 	 	 
	 	 	By:	 	Symphony Capital GP, L.P.,
	 	 	 	 	its member
	 
	 	 	 	 	 	 
	 	 	By:	 	Symphony GP, LLC,
	 	 	 	 	its member
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ Mark Kessel
	 	 	 	 	 
	 

	 	 	 	Name:
	 	Mark Kessel
	 

	 	 	 	Title:
	 	Managing Member
	 
	 	 	 	 	 	 
	 	 	SYMPHONY ALLEGRO, INC.
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ Neil J. Sandler
	 	 	 	 	 
	 

	 	 	 	Name:
	 	Neil J. Sandler
	 

	 	 	 	Title:
	 	Chairman of the Board

 

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

 

 

SCHEDULE I

PURCHASE PRICE TABLE

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

 

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

SCH-1

 

ANNEX A

CERTAIN DEFINITIONS

{See attached.}

 

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

A-1

 

CERTAIN DEFINITIONS

     “$” means United States dollars.

     “Accredited Investor” has the meaning set forth in Rule 501(a) of Regulation D
promulgated under the Securities Act of 1933, as amended.

     “Act” means the Delaware Limited Liability Company Act, 6 Del. C. § 18-101 et seq.

     “Ad Hoc Meeting” has the meaning set forth in Paragraph 6 of Annex B of the Amended
and Restated Research and Development Agreement.

     “Additional Party” has the meaning set forth in Section 14 of the
Confidentiality Agreement.

     “Additional Regulatory Filings” means such Governmental Approvals as required to be
made under any law applicable to the purchase of the Symphony Allegro Equity Securities under the
Purchase Option Agreement.

     “Adjusted Capital Account Deficit” has the meaning set forth in Section 1.01
of the Holdings LLC Agreement.

     “Affected Member” has the meaning set forth in Section 27 of the Investors LLC
Agreement.

     “Affiliate” means, with respect to any Person (i) any Person directly or indirectly
controlling, controlled by or under common control with such Person, (ii) any officer, director,
general partner, member or trustee of such Person, or (iii) any Person who is an officer, director,
general partner, member or trustee of any Person described in clauses (i) or (ii)
of this sentence. For purposes of this definition, the terms “controlling,” “controlled by” or
“under common control with” shall mean the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person or entity, whether through the
ownership of voting securities, by contract or otherwise, or the power to elect at least 50% of the
directors, managers, general partners, or persons exercising similar authority with respect to such
Person or entities.

     “Alexza” means Alexza Pharmaceuticals, Inc., a Delaware corporation.

     “Alexza Accounting Advisor” means Ernst & Young LLP.

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

     “Alexza Common Stock Valuation” has the meaning set forth in Section 2(e) of
the Purchase Option Agreement.

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

 

			
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has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule
24b-2 of the Securities Exchange Act of 1934, as amended.

A-2

 

and Restated Research and Development Agreement.

     “Alexza Personnel” has the meaning set forth in Section 8.4 of the Amended and
Restated Research and Development Agreement.

     “Alexza Public Filings” means all publicly available filings made by Alexza with the
SEC.

     “Alexza Subcontractor” means a third party that has entered into a Subcontracting
Agreement with Alexza.

     “Allegro Relevant Infringement” means an infringement, misappropriation, illegal use
or misuse of the Licensed Patent Rights or other Licensed Intellectual Property due to the
manufacture, use, sale or importation of a pharmaceutical product or device that delivers
Alprazolam (provided that Alexza has not exercised a Discontinuation Option for the AZ-002 Program)
or Loxapine (provided that Alexza has not exercised a Discontinuation Option for the AZ-004
Program), as applicable.

     “Alprazolam” means: (a) alprazolam and (b) all salts, metabolites, prodrug and other
physical forms thereof.

     “Amended and Restated Research and Development Agreement” means the Amended and
Restated Research and Development Agreement dated as of the Closing Date, among Alexza, Holdings
and Symphony Allegro.

     “Asset Value” has the meaning set forth in Section 1.01 of the Holdings LLC
Agreement.

     “Auditors” means an independent certified public accounting firm of recognized
national standing.

     “AZ-002 Product” means a pharmaceutical product in which Alprazolam is the sole active
ingredient and it is delivered using Staccato Technology.

     “AZ-002 Program” means the development, manufacture and/or use of any AZ-002 Product
in accordance with the Development Plan.

     “AZ-004 Product” means a pharmaceutical product in which Loxapine is the sole active
ingredient and it is delivered using Staccato Technology.

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

     “Balance Sheet Deficiency” has the meaning set forth in Section 1(c)(iii) of
the Purchase Option Agreement.

     “Balance Sheet Deficiency Date” has the meaning set forth in Section 1(c)(iii)
of the Purchase Option Agreement.

 

			
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has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule
24b-2 of the Securities Exchange Act of 1934, as amended.

A-3

 

     “Balance Sheet Deficiency Threshold” shall have the meaning set forth in Section 2(b)
of the Research Cost Sharing and Extension Agreement.

     “Bankruptcy Code” means the United States Bankruptcy Code.

     “Business Day” means any day other than Saturday, Sunday or any other day on which
commercial banks in the City of New York or the City of San Francisco are authorized or required by
law to remain closed.

     “Capital Contributions” has the meaning set forth in Section 1.01 of the
Holdings LLC Agreement.

     “Capitalized Leases” means all leases that have been or should be, in accordance with
GAAP, recorded as capitalized leases.

     “Cash Available for Distribution” has the meaning set forth in Section 1.01 of
the Holdings LLC Agreement.

     “Chair” has the meaning set forth in Paragraph 4 of Annex B to the Amended and
Restated Research and Development Agreement.

     “Change of Control” means and includes the occurrence of any of the following events,
but specifically excludes (i) acquisitions of capital stock directly from Alexza for cash, whether
in a public or private offering, (ii) sales of capital stock by stockholders of Alexza, and (iii)
acquisitions of capital stock by or from any employee benefit plan or related trust:

     (a) the merger, reorganization or consolidation of Alexza into or with another corporation or
legal entity in which Alexza’s stockholders holding the right to vote with respect to matters
generally immediately preceding such merger, reorganization or consolidation, own less than fifty
percent (50%) of the voting securities of the surviving entity; or

     (b) the sale of all or substantially all of Alexza’s assets or business.

     “Change of Control Put Option” has the meaning set forth in Section 2A of the
Purchase Option Agreement.

     “Change of Control Put Option Exercise Notice” has the meaning set forth in
Section 2A of the Purchase Option Agreement.

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

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

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

 

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

A-4

 

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

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

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

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

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

     “Client Schedules” has the meaning set forth in Section 5(b) of the RRD
Services Agreement.

     “Clinical Budget Component” has the meaning set forth in Section 4.1 of the
Amended and Restated Research and Development Agreement.

     “Clinical Trial Material” means Product and placebo for administration to animals for
pre-clinical testing or to humans for clinical testing.

     “Closing Date” means any time after the close of business in New York on December 1,
2006.

     “CMC” means the chemistry, manufacturing and controls documentation as required for
filings with a Regulatory Authority relating to the manufacturing, production and testing of drug
products.

     “Code” means the Internal Revenue Code of 1986, as amended from time to time.

     “Committed Capital” means $50,000,000.00.

     “Common Stock” means the common stock, par value $0.01 per share, of Symphony Allegro.

     “Company Expenses” has the meaning set forth in Section 5.09 of the Holdings
LLC Agreement.

     “Company Property” has the meaning set forth in Section 1.01 of the Holdings
LLC Agreement.

     “Confidential Information” has the meaning set forth in Section 2 of the
Confidentiality Agreement.

     “Confidentiality Agreement” means the Confidentiality Agreement, dated as of the
Closing Date, among Symphony Allegro, Holdings, Alexza, SCP, SSP, Investors, Symphony Capital and
RRD, as such agreement may be amended or amended and
restated from time to time.

 
 

			
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has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule
24b-2 of the Securities Exchange Act of 1934, as amended.

A-5

 

     “Conflict Transaction” has the meaning set forth in Article X of the Symphony
Allegro Charter.

     “Control” means, with respect to any material, information or intellectual property
right, that a Party owns or has a license to such item or right, and has the ability to grant the
other Party access, a license or a sublicense (as applicable) in or to such item or right as
provided in the Operative Documents without violating the terms of any agreement or other
arrangement with any third party.

     “Cross Program Expenses” are: (i) the Management Fee plus the Development Fee
pursuant to Section 6(a) of the RRD Services Agreement; (ii) actual expenses associated
with RRD carrying out its duties related to creating and maintaining the books of account, records,
financial statements and audit and tax preparation for Symphony Allegro pursuant to Section
5 of the RRD Services Agreement; and (iii) actual expenses for insurance procured for Symphony
Allegro pursuant to Section 1(a)(xi) of the RRD Services Agreement, reasonable legal
expenses incurred on behalf of Symphony Allegro, and travel and miscellaneous out of pocket
expenses of the Symphony Allegro Board, all as and to the extent reimbursable to RRD pursuant to
Section 6(b) of the RRD Services Agreement.

     “Current Products” has the meaning set forth in Section 5.1(g) of thef Novated
and Restated Technology License Agreement.

     “Debt” of any Person means, without duplication:

     (a) all indebtedness of such Person for borrowed money,

     (b) all obligations of such Person for the deferred purchase price of property or services
(other than any portion of any trade payable obligation that shall not have remained unpaid for 91
days or more from the later of (A) the original due date of such portion and (B) the customary
payment date in the industry and relevant market for such portion),

     (c) all obligations of such Person evidenced by bonds, notes, debentures or other similar
instruments,

     (d) all obligations of such Person created or arising under any conditional sale or other
title retention agreement with respect to property acquired by such Person (whether or not the
rights and remedies of the seller or lender under such agreement in an event of default are limited
to repossession or sale of such property),

     (e) all Capitalized Leases to which such Person is a party,

     (f) all obligations, contingent or otherwise, of such Person under acceptance, letter of
credit or similar facilities,

 

			
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has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule
24b-2 of the Securities Exchange Act of 1934, as amended.

A-6

 

     (g) all obligations of such Person to purchase, redeem, retire, defease or otherwise acquire
for value any Equity Securities of such Person,

     (h) the net amount of all financial obligations of such Person in respect of Hedge Agreements,

     (i) the net amount of all other financial obligations of such Person under any contract or
other agreement to which such Person is a party,

     (j) all Debt of other Persons of the type described in clauses (a) through (i)
above guaranteed, directly or indirectly, in any manner by such Person, or in effect guaranteed,
directly or indirectly, by such Person through an agreement (A) to pay or purchase such Debt or to
advance or supply funds for the payment or purchase of such Debt, (B) to purchase, sell or lease
(as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such Debt or to assure the holder of such Debt against loss,
(C) to supply funds to or in any other manner invest in the debtor (including any agreement to pay
for property or services irrespective of whether such property is received or such services are
rendered) or (D) otherwise to assure a creditor against loss, and

     (k) all Debt of the type described in clauses (a) through (i) above secured by (or for which
the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any
Encumbrance on property (including accounts and contract rights) owned or held or used under lease
or license by such Person, even though such Person has not assumed or become liable for payment of
such Debt.

     “Development Budget” means the budget (comprised of the Management Budget Component
and the Clinical Budget Component) for the implementation of the Development Plan (the initial form
of which was agreed upon by Alexza and Symphony Allegro as of the Closing Date and attached to the
Amended and Restated Research and Development Agreement as Annex C thereto), as may be further
developed and revised from time to time in accordance with the Development Committee Charter and
the Amended and Restated Research and Development Agreement.

     “Development Committee” has the meaning set forth in Article 3 of the Amended and
Restated Research and Development Agreement.

     “Development Committee Charter” has the meaning set forth in Article 3 of the Amended
and Restated Research and Development Agreement.

     “Development Committee Member” has the meaning set forth in Paragraph 1 of Annex B to
the Amended and Restated Research and Development Agreement.

     “Development Plan” means the development plan covering all the Programs (the initial
form of which was agreed upon by Alexza and Symphony Allegro as of the Closing Date and attached to
the Amended and Restated Research and Development Agreement as Annex C thereto), as may be further
developed and revised from time to

 

			
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has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule
24b-2 of the Securities Exchange Act of 1934, as amended.

A-7

 

time in accordance with the Development Committee Charter and the Amended and Restated
Research and Development Agreement.

     “Development Product” means an AZ-002 Product or an AZ-004 Product that is
administered in a clinical trial performed pursuant to the Development Plan.

     “Development Services” has the meaning set forth in Section 1(b) of the RRD
Services Agreement.

     “Development Subcontracting Agreement” means a Subcontracting Agreement that is
directly related to one or both of the Programs and is not a Manufacturing Subcontracting
Agreement.

     “Director(s)” means the Persons identified as such in the Preliminary Statement of the
Indemnification Agreement (including such Persons as may become parties thereto after the date
hereof).

     “Disclosing Party” has the meaning set forth in Section 4 of the
Confidentiality Agreement.

     “Discontinuation Option” has the meaning set forth in Section 11(a) of the
Amended and Restated Research and Development Agreement.

     “Discontinuation Option Closing Date” means the date of expiration of the
Discontinuation Option pursuant to Section 11(a) of the Amended and Restated Research and
Development Agreement.

     “Discontinuation Price” has the meaning set forth in Section 11(a) of the
Amended and Restated Research and Development Agreement.

     “Discontinued Program” has the meaning set forth in Section 2.10 of the
Novated and Restated Technology License Agreement.

     “Disinterested Directors” has the meaning set forth in Article IX of the
Symphony Allegro Charter.

     “Distribution” has the meaning set forth in Section 1.01 of the Holdings LLC
Agreement.

     “Drug Master Files” means all Regulatory Files with respect to the manufacture or
design of a Product, including without limitation drug master files, design history files and
similar files.

     “Early Purchase Option Exercise” has the meaning set forth in Section 1(c)(v)
of the Purchase Option Agreement.

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

 

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

A-8

 

     “Encumbrance” means (i) any security interest, pledge, mortgage, lien (statutory or
other), charge or option to purchase, lease or otherwise acquire any interest, (ii) any adverse
claim, restriction, covenant, title defect, hypothecation, assignment, deposit arrangement, license
or other encumbrance of any kind, preference or priority, or (iii) any other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement).

     “Equity Securities” means, with respect to any Person, shares of capital stock of (or
other ownership or profit interests in) such Person, warrants, options or other rights for the
purchase or other acquisition from such Person of shares of capital stock of (or other ownership or
profit interests in) such Person, securities convertible into or exchangeable for shares of capital
stock of (or other ownership or profit interests in) such Person or warrants, rights or options for
the purchase or other acquisition from such Person of such shares (or such other interests), and
other ownership or profit interests in such Person (including, without limitation, partnership,
member or trust interests therein), whether voting or nonvoting, and whether or not such shares,
warrants, options, rights or other interests are authorized or otherwise existing on any date of
determination.

     “ERISA” means the United States Employee Retirement Income Security Act of 1974, as
amended.

     “Excepted Debt” has the meaning set forth in Section 5(c)(iii) of the Purchase
Option Agreement.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.

     “Existing Confidentiality Agreement” has the meaning set forth in Section 2(a)
of the Confidentiality Agreement.

     “Exiting Product” means, with respect to a particular Program, any Development Product
that was administered in a clinical trial pursuant to the Development Plan at any time prior to (a)
the termination of the Discontinuation Option with respect to such Program without exercise by
Licensor or (b) the expiration or termination of the Purchase Option without exercise by Licensor,
whichever comes first.

     “Extension Funding” has the meaning set forth in Section 2 of the Research
Cost Sharing and Extension Agreement.

     “External Directors” means, at any time, up to two (2) Persons elected to the Symphony
Allegro Board after the Closing Date (who shall be neither employees of Symphony Capital nor of
Alexza) in accordance with the Symphony Allegro Charter, the Symphony Allegro By-laws and
Section 4(b)(iv) of the Purchase Option Agreement.

     “FDA” means the United States Food and Drug Administration or its successor agency in
the United States.

 

			
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has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule
24b-2 of the Securities Exchange Act of 1934, as amended.

A-9

 

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

     “Final Termination Date” has the meaning set forth in Section 1(c)(iii) of the
Purchase Option Agreement.

     “Financial Audits” has the meaning set forth in Section 6.7 of the Amended and
Restated Research and Development Agreement.

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

     “Fiscal Year” has the meaning set forth in each Operative Document in which it
appears.

     “Form S-3” means the Registration Statement on Form S-3 as defined under the
Securities Act.

     “FTE” means the time and effort of one or more qualified scientists working on the
AZ-002 Program or the AZ-004 Program that is equivalent to 1850 hours per year devoted exclusively
to the Programs by one (1) full-time employee. The portion of an FTE year devoted by any one
scientist to the Programs shall be determined by dividing the number of hours during any twelve
(12) month period devoted by such scientist to one or both Programs by 1850 hours, not to exceed
1.0 in any case.

     “Funds Termination Date” has the meaning set forth in Section 1(c)(iii) of the
Purchase Option Agreement.

     “Funds Termination Notice” has the meaning set forth in Section 1(c)(iii) of
the Purchase Option Agreement.

     “GAAP” means generally accepted accounting principles in effect in the United States
of America from time to time.

     “Governmental Approvals” means authorizations, consents, orders, declarations or
approvals of, or filings with, or terminations or expirations of waiting periods imposed by any
Governmental Authority.

     “Governmental Authority” means any United States or non-United States federal,
national, supranational, state, provincial, local, or similar government, governmental, regulatory
or administrative authority, agency or commission or any court, tribunal, or judicial or arbitral
body.

     “Governmental Order” means any order, writ, judgment, injunction, decree, stipulation,
determination or award entered by or with any Governmental Authority.

     “Hedge Agreement” means any interest rate swap, cap or collar agreement, interest rate
future or option contract, currency swap agreement, currency future or option
contract or other similar hedging agreement.

 

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

A-10

 

     “Holdings” means Symphony Allegro Holdings LLC, a Delaware limited liability company.

     “Holdings Claims” has the meaning set forth in Section 5.01 of the Warrant
Purchase Agreement.

     “Holdings LLC Agreement” means the Amended and Restated Limited Liability Company
Agreement of Holdings dated as of the Closing Date.

     “HSR Filings” means the pre-merger notification and report forms required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

     “IND” means an Investigational New Drug Application, as described in 21 U.S.C. §
355(i)(1) and 21 C.F.R. § 312 in the regulations promulgated by the United States Food and Drug
Administration, or any foreign equivalent thereof.

     “Indemnification Agreement” means the Indemnification Agreement among Symphony Allegro
and the Directors named therein, dated as of the Closing Date, as such agreement may be amended or
amended and restated from time to time.

     “Indemnified Party” has the meaning set forth in each Operative Document in which it
appears.

     “Indemnified Proceeding” has the meaning set forth in each Operative Document in which
it appears.

     “Indemnifying Party” has the meaning set forth in each Operative Document in which it
appears.

     “IND-Enabling GLP Inhalation Toxicology Studies” means the pharmacokinetic and
toxicology studies required for filing an IND.

     “Initial Development Budget” means the initial development budget prepared by
representatives of Symphony Allegro and Alexza prior to the Closing Date, and attached to the
Amended and Restated Research and Development Agreement as Annex C thereto.

     “Initial Development Plan” means the initial development plan prepared by
representatives of Symphony Allegro and Alexza prior to the Closing Date, and attached to the
Amended and Restated Research and Development Agreement as Annex C thereto.

     “Initial Holdings LLC Agreement” means the Agreement of Limited Liability Company of
Holdings, dated October 24, 2006.

     “Initial Investors LLC Agreement” means the Agreement of Limited Liability Company of
Investors, dated October 24, 2006.

 

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

A-11

 

     “Initial LLC Member” has the meaning set forth in Section 1.01 of the Holdings
LLC Agreement.

     “Interest Certificate” has the meaning set forth in Section 1.01 of the
Holdings LLC Agreement.

     “Investment Company Act” means the Investment Company Act of 1940, as amended.

     “Investment Overview” means the investment overview describing the transactions
entered into pursuant to the Operative Documents.

     “Investment Policy” has the meaning set forth in Section 1(a)(vi) of the RRD
Services Agreement.

     “Investors” means Symphony Allegro Investors LLC.

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

     “IRS” means the U.S. Internal Revenue Service.

     “Key Personnel” means those Alexza Personnel listed on Schedule 6.5 to the
Amended and Restated Research and Development Agreement, as such schedule may be updated from time
to time by mutual agreement of the parties to the Amended and Restated Research and Development
Agreement.

     “Know-How” means findings, discoveries, inventions, know-how, information, results and
data of any type whatsoever, including without limitation, technical information, techniques,
results of experimentation and testing, diagnostic and prognostic assays, specifications,
databases, manufacturing processes or protocols, any and all laboratory, research, pharmacological,
toxicological, analytical, quality control, pre-clinical and clinical data.

     “Knowledge” of Alexza, Symphony Allegro or Holdings, as the case may be, means the
actual (and not imputed) knowledge of the executive officers or managing member of such Person
without the duty of inquiry or investigation.

     “Law” means any law, statute, treaty, constitution, regulation, rule, ordinance, order
or Governmental Approval, or other governmental restriction, requirement or determination, of or by
any Governmental Authority.

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

     “Licensed Intellectual Property” means the Licensed Patent Rights and the Licensed
Know-How.

 
 

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

A-12

 

     “Licensed Know-How” means any and all Know-How that is Controlled by Licensor on or
after the Closing Date and prior to the unexercised expiration or termination of the Purchase
Option that:

     (a) is necessary or useful to practice the inventions claimed in the Licensed Patent Rights;
or

     (b) is a Symphony Allegro Enhancement;

     provided, however, that Licensed Know-How shall not include any Licensed
Patent Rights or any Know-How for the manufacture of a Product, including Know-How associated with
Product quality control or stability testing.

     “Licensed Patent Rights” means any and all patents and patent applications Controlled
by Licensor that:

     (a) are listed on Annex D of the Novated and Restated Technology License Agreement;

     (b) are reissues, continuations, divisionals, continuations-in-part, reexaminations, renewals,
substitutes, extensions or foreign counterparts of the patents and patent applications described in
(a) and (i) are filed prior to the unexercised expiration or termination of the Purchase Option or
(ii) are filed after such expiration or termination, but solely to the extent claiming Know-How
conceived and reduced to practice prior to such expiration or termination;

     (c) contain a claim that covers an invention disclosed in an invention disclosure listed on
Annex D of the Novated and Restated Technology License Agreement and (i) are filed prior to
the unexercised expiration or termination of the Purchase Option or (ii) are filed after such
expiration or termination, but solely to the extent claiming such invention;

     (d) contain a claim that covers a Symphony Allegro Enhancement and (i) are filed prior to the
unexercised expiration or termination of the Purchase Option or (ii) are filed after such
expiration or termination, but solely to the extent claiming such Symphony Allegro Enhancement; or

     (e) contain a claim that covers a Development Product or the manufacture or use thereof and
(i) are filed prior to the unexercised expiration or termination of the Purchase Option or (ii) are
filed after such expiration or termination, but solely to the extent claiming Development
Product-related Know-How conceived and reduced to practice prior to such expiration or termination.

     “Licensor” means Alexza.

     “Lien” has the meaning set forth in Section 1.01 of the Holdings LLC
Agreement.

     “Liquidating Event” has the meaning set forth in Section 8.01 of the Holdings
LLC Agreement.

 

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

A-13

 

     “LLC Agreements” means the Initial Holdings LLC Agreement, the Holdings LLC Agreement,
the Initial Investors LLC Agreement and the Investors LLC Agreement.

     “Loss” has the meaning set forth in each Operative Document in which it appears.

     “Loxapine” means: (a) loxapine and (b) all salts, metabolites, prodrug and other
physical forms thereof.

     “Management Fee” has the meaning set forth in Section 6(a) of the RRD Services
Agreement.

     “Management Services” has the meaning set forth in Section 1(a) of the RRD
Services Agreement.

     “Manager” means (i) for each LLC Agreement in which it appears, the meaning set forth
in such LLC Agreement, and (ii) for each other Operative Document in which it appears, RRD in its
capacity as manager of Symphony Allegro.

     “Manager Event” has the meaning set forth in Section 3.01(g) of the Holdings
LLC Agreement.

     “Manufacturing Subcontracting Agreement” means a Subcontracting Agreement that is
directly related to the manufacture of Product (including procurement of components and development
of improved manufacturing methods) or the improvement of the Staccato Technology.

     “Material Adverse Effect” means, with respect to any Person, a material adverse effect
on (i) the business, assets, property or condition (financial or otherwise) of such Person or, (ii)
its ability to comply with and satisfy its respective agreements and obligations under the
Operative Documents or, (iii) the enforceability of the obligations of such Person of any of the
Operative Documents to which it is a party.

     “Material Subsidiary” means, at any time, a Subsidiary of Alexza having assets in an
amount equal to at least 5% of the amount of total consolidated assets of Alexza and its
Subsidiaries (determined as of the last day of the most recent reported fiscal quarter of Alexza)
or revenues or net income in an amount equal to at least 5% of the amount of total consolidated
revenues or net income of Alexza and its Subsidiaries for the 12-month period ending on the last
day of the most recent reported fiscal quarter of Alexza.

     “Medical Discontinuation Event” means a series of adverse events, side effects or
other undesirable outcomes that, when collected in a Program, would cause a reasonable FDA Sponsor
to discontinue such Program.

     “Membership Interest” means (i) for each LLC Agreement in which it appears, the
meaning set forth in such LLC Agreement, and (ii) for each other Operative Document in which it
appears, the meaning set forth in the Holdings LLC Agreement.

 

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

A-14

 

     “NASDAQ” means the Nasdaq Stock Market, Inc.

     “NDA” means a New Drug Application, as defined in the regulations promulgated by the
United States Food and Drug Administration, or any foreign equivalent thereof.

     “Non-Alexza Capital Transaction” means any (i) sale or other disposition of all or
part of the Symphony Allegro Shares or all or substantially all of the operating assets of Symphony
Allegro, to a Person other than Alexza or an Affiliate of Alexza or (ii) distribution in kind of
the Symphony Allegro Shares following the unexercised expiration or termination of the Purchase
Option.

     “Novated and Restated Technology License Agreement” means the Novated and Restated
Technology License Agreement, dated as of the Closing Date, among Alexza, Symphony Allegro and
Holdings.

     “Operative Documents” means, collectively, the Indemnification Agreement, the Holdings
LLC Agreement, the Purchase Option Agreement, the Warrant Purchase Agreement, the Registration
Rights Agreement, the Subscription Agreement, the Technology License Agreement, the Novated and
Restated Technology License Agreement, the RRD Services Agreement, the Research and Development
Agreement, the Research Cost Sharing and Extension Agreement, the Amended and Restated Research and
Development Agreement, the Confidentiality Agreement, and each other certificate and agreement
executed in connection with any of the foregoing documents.

     “Organizational Documents” means any certificates or articles of incorporation or
formation, partnership agreements, trust instruments, bylaws or other governing documents.

     “Partial Stock Payment” has the meaning set forth in Section 3(a)(iii) of the
Purchase Option Agreement.

     “Party(ies)” means, for each Operative Document or other agreement in which it
appears, the parties to such Operative Document or other agreement, as set forth therein. With
respect to any agreement in which a provision is included therein by reference to a provision in
another agreement, the term “Party” shall be read to refer to the parties to the document
at hand, not the agreement that is referenced.

     “Payment Terms” has the meaning set forth in Section 8.2 of the Amended and
Restated Research and Development Agreement.

     “Percentage” has the meaning set forth in Section 1.01 of the Holdings LLC
Agreement.

     “Permitted Investments” has the meaning set forth in Section 1.01 of the
Holdings LLC Agreement.

     “Permitted Lien” has the meaning set forth in Section 1.01 of the Holdings LLC
Agreement.

 

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

A-15

 

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

     “Personnel” of a Party means such Party, its employees, subcontractors, consultants,
representatives and agents.

     “Prime Rate” means the quoted “Prime Rate” at JPMorgan Chase Bank or, if such
bank ceases to exist or is not quoting a base rate, prime rate reference rate or similar rate for
United States dollar loans, such other major money center commercial bank in New York City selected
by the Manager.

     “Products” means an AZ-002 Product and/or an AZ-004 Product.

     “Profit” has the meaning set forth in Section 1.01 of the Holdings LLC
Agreement.

     “Programs” means the AZ-002 Program and/or the AZ-004 Program.

     “Program-Specific Claim” means any claim in a patent or patent application in the
Licensed Patent Rights that is directed exclusively to AZ-002 Products and/or AZ-004 Products.

     “Program-Specific Patents” means any and all Licensed Patent Rights that contain at
least one Program-Specific Claim.

     “Protocol” means a written protocol that meets the substantive requirements of
Section 6 of the ICH Guideline for Good Clinical Practice as adopted by the FDA, effective
May 9, 1997, and is included within the Development Plan or later modified or added to the
Development Plan pursuant to the Amended and Restated Research and Development Agreement.

     “Public Companies” has the meaning set forth in Section 5(e) of the Purchase
Option Agreement.

     “Purchase Option” has the meaning set forth in Section 1(a) of the Purchase
Option Agreement.

     “Purchase Option Agreement” means the Purchase Option Agreement dated as of the
Closing Date, among Alexza, Holdings and Symphony Allegro.

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

     “Purchase Option Closing Date” has the meaning set forth in Section 2(a) of
the Purchase Option Agreement.

 

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

A-16

 

     “Purchase Option Commencement Date” has the meaning set forth in Section
1(c)(iii) of the Purchase Option Agreement.

     “Purchase Option Exercise Date” has the meaning set forth in Section 2(a) of
the Purchase Option Agreement.

     “Purchase Option Exercise Notice” has the meaning set forth in Section 2(a) of
the Purchase Option Agreement.

     “Purchase Option Offset Amount” shall mean, following the termination of the Amended
and Restated Research and Development Agreement by Alexza pursuant to Section 17.3 thereof, those
unpaid amounts actually owed to Alexza as a result of the material breach or default of any payment
obligation of Symphony Allegro to Alexza pursuant to the Amended and Restated Research and
Development Agreement by Symphony Allegro or Holdings that was the basis for such termination of
the Amended and Restated Research and Development Agreement by Alexza.

     “Purchase Option Period” has the meaning set forth in Section 1(c)(iii) of the
Purchase Option Agreement.

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

     “QA Audits” has the meaning set forth in Section 6.6 of the Amended and
Restated Research and Development Agreement.

     “Quarterly Price” has the meaning set forth in Section 2(b)(i) of the Purchase
Option Agreement.

     “Registration Rights Agreement” means the Registration Rights Agreement dated as of
the Closing Date, between Alexza and Holdings.

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

     “Regulatory Allocation” has the meaning set forth in Section 3.06 of the
Holdings LLC Agreement.

     “Regulatory Authority” means the United States Food and Drug Administration, or any
successor agency in the United States, or any health regulatory authority(ies) in any other country
that is a counterpart to the FDA and has responsibility for granting registrations or other
regulatory approval for the marketing, manufacture, storage, sale or use of drugs in such other
country.

     “Regulatory Files” means any IND, NDA or any other filings filed with any Regulatory
Authority with respect to the Programs.

     “Representative” of any Person means such Person’s shareholders, principals,
directors, officers, employees, members, managers and/or partners.

 

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

A-17

 

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

     “Research and Development Agreement” means the Research and Development Agreement
dated as of the Closing Date, between Alexza and Holdings.

     “RRD” means RRD International, LLC, a Delaware limited liability company.

     “RRD Indemnified Party” has the meaning set forth in Section 10(a) of the RRD
Services Agreement.

     “RRD Loss” has the meaning set forth in Section 10(a) of the RRD Services
Agreement.

     “RRD Personnel” has the meaning set forth in Section 1(a)(ii) of the RRD
Services Agreement.

     “RRD Services Agreement” means the RRD Services Agreement between Symphony Allegro and
RRD, dated as of the Closing Date.

     “Schedule K-1” has the meaning set forth in Section 9.02(a) of the Holdings
LLC Agreement.

     “Scheduled Meeting” has the meaning set forth in Paragraph 6 of Annex B of the Amended
and Restated Research and Development Agreement.

     “Scientific Discontinuation Event” has the meaning set forth in Section 4.2(c)
of the Amended and Restated Research and Development Agreement.

     “SCP” means Symphony Capital Partners, L.P., a Delaware limited partnership.

     “SEC” means the United States Securities and Exchange Commission.

     “Securities Act” means the Securities Act of 1933, as amended.

     “Selling Stockholder Questionnaire” has the meaning set forth in Section 4(a)
of the Registration Rights Agreement.

     “Shareholder” means any Person who owns any Symphony Allegro Shares.

     “Solvent” has the meaning set forth in Section 1.01 of the Holdings LLC
Agreement.

     “SSP” means Symphony Strategic Partners, LLC, a Delaware limited liability company.

 

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

A-18

 

     “Staccato Technology” means Alexza’s proprietary technology for the vaporization of a
pharmaceutical composition via rapid-heating to form a condensation aerosol that allows rapid
systemic drug delivery to humans through lung inhalation.

     “Stock Payment Date” has the meaning set forth in Section 2 of the
Subscription Agreement.

     “Stock Purchase Price” has the meaning set forth in Section 2 of the
Subscription Agreement.

     “Subcontracting Agreement” means (a) any written agreement between Alexza and a third
party pursuant to which the third party performs any Alexza Obligations or (b) any work order,
change order, purchase order or the like entered into pursuant to Section 6.2(b) of the Amended and
Restated Research and Development Agreement.

     “Sublicense Obligations” has the meaning set forth in Section 3.2 of the
Novated and Restated Technology License Agreement.

     “Sublicensed Intellectual Property” has the meaning set forth in Section 3.2
of the Novated and Restated Technology License Agreement.

     “Subscription Agreement” means the Subscription Agreement between Symphony Allegro and
Holdings, dated as the Closing Date.

     “Subsidiary” of any Person means any corporation, partnership, joint venture, limited
liability company, trust or estate of which (or in which) more than 50% of (a) the issued and
outstanding capital stock having ordinary voting power to elect a majority of the board of
directors of such corporation (irrespective of whether at the time capital stock of any other class
or classes of such corporation shall or might have voting power upon the occurrence of any
contingency); (b) the interest in the capital or profits of such partnership, joint venture or
limited liability company; or (c) the beneficial interest in such trust or estate is at the time
directly or indirectly owned or controlled by such Person, by such Person and one or more of its
other Subsidiaries or by one or more of such Person’s other Subsidiaries.

     “Surviving Entity” means the surviving legal entity which is surviving entity to
Alexza after giving effect to a Change of Control.

     “Symphony Allegro” means Symphony Allegro, Inc., a Delaware corporation.

     “Symphony Allegro Auditors” has the meaning set forth in Section 5(b) of the
RRD Services Agreement.

     “Symphony Allegro Board” means the board of directors of Symphony Allegro.

     “Symphony Allegro By-laws” means the By-laws of Symphony Allegro, as adopted by
resolution of the Symphony Allegro Board on the Closing Date.

 

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

A-19

 

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

     “Symphony Allegro Director Event” has the meaning set forth in Section
3.01(h)(i) of the Holdings LLC Agreement.

     “Symphony Allegro Enhancements” means any and all Know-How, whether or not patentable,
that is made by or on behalf of Symphony Allegro during the Term, including Know-How generated or
derived by RRD and assigned to Symphony Allegro pursuant to Section 12 of the RRD Services
Agreement.

     “Symphony Allegro Equity Securities” means the Common Stock and any other stock or
shares issued by Symphony Allegro.

     “Symphony Allegro Loss” has the meaning set forth in Section 10(b) of the RRD
Services Agreement.

     “Symphony Allegro Shares” has the meaning set forth in Section 2.02 of the
Holdings LLC Agreement.

     “Symphony Capital” means Symphony Capital LLC, a Delaware limited liability company.

     “Symphony Fund(s)” means Symphony Capital Partners, L.P., a Delaware limited
partnership, and Symphony Strategic Partners, LLC, a Delaware limited liability company.

     “Tangible Materials” means any tangible technical, medical, regulatory or marketing
documentation, whether written or electronic, existing as of the Closing Date or made by or on
behalf of Symphony Allegro during the Term, that (a) is Controlled by the Licensor and (b) embodies
or relates solely to the Regulatory Files (other than Drug Master Files), Exiting Products or the
Programs; provided, however, that Tangible Materials shall not include any manufacturing-related
documentation or any documentation related to Licensed Intellectual Property.

     “Tax Amount” has the meaning set forth in Section 4.02 of the Holdings LLC
Agreement.

     “Technology License Agreement” means the Technology License Agreement, dated as of the
Closing Date, between Alexza and Holdings.

     “Term” has the meaning set forth in Section 4(b)(iii) of the Purchase Option
Agreement, unless otherwise stated in any Operative Document.

     “Territory” means the world.

     “Third Party IP” has the meaning set forth in Section 2.9 of the Novated and
Restated Technology License Agreement.

 

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

A-20

 

     “Third Party Licensor” means a third party from which Alexza has received a license or
sublicense to Licensed Intellectual Property.

     “Transaction Event” has the meaning set forth in Section 6.05 of the Warrant
Purchase Agreement.

     “Transfer” has for each Operative Document in which it appears the meaning set forth
in such Operative Document.

     “Transferee” has, for each Operative Document in which it appears, the meaning set
forth in such Operative Document.

     “Voluntary Bankruptcy” has the meaning set forth in Section 1.01 of the
Holdings LLC Agreement.

     “Warrant Closing” has the meaning set forth in Section 2.03 of the Warrant
Purchase Agreement.

     “Warrant Date” has the meaning set forth in Section 2.02 of the Warrant
Purchase Agreement.

     “Warrant Purchase Agreement” means the Warrant Purchase Agreement, dated as of the
Closing Date, between Alexza and Holdings.

     “Warrant Shares” has the meaning set forth in Section 2.01 of the Warrant
Purchase Agreement.

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

     “Warrants” has the meaning set forth in Section 2.01 of the Warrant Purchase
Agreement.

 

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

A-21

 

EXHIBIT 1

PURCHASE OPTION EXERCISE NOTICE

                    , 20  

Attention:                     

Ladies and Gentlemen:

     Reference is hereby made to that certain Purchase Option Agreement dated as of December 1,
2006 (the “Purchase Option Agreement”), by and among Alexza Pharmaceuticals, Inc., a
Delaware corporation (“Alexza”), Symphony Allegro Holdings LLC, a Delaware limited
liability company, and Symphony Allegro, Inc., a Delaware corporation. Capitalized terms used
herein and not otherwise defined herein shall have the meanings assigned thereto in the Purchase
Option Agreement.

     Pursuant to Section 2(a) of the Purchase Option Agreement, Alexza hereby irrevocably
notifies you that it hereby exercises the Purchase Option.

     Subject to the terms set forth therein, Alexza hereby affirms the representations and
warranties set forth in Section 3(a) of the Purchase Option Agreement, as of the date
hereof.

     Alexza estimates that the Purchase Option Closing Date will be                     .

     The Purchase Price will be $                    , subject to adjustment if the Purchase Option Closing
Date occurs later than the estimated date set forth above.

     {Alexza intends to pay                     % of the Purchase Price in Alexza Common Stock. The number of
shares to be transferred at such Purchase Price will be                     , based on a per share valuation
of $                    . This represents                     % of the total amount of Alexza Common Stock issued and
outstanding as of the Purchase Option Closing Date.}

	 	 	 	 	 	 	 
	 	 	Very truly yours,
	 
	 	 	 	 	 	 
	 	 	ALEXZA PHARMACEUTICALS, INC.
	 

	 	By:	 	 	 	 
	 	 	 	 	 
	 

	 	 	 	Name:
	 	{August J. Moretti}
	 

	 	 	 	Title:
	 	{Senior Vice President and Chief Financial Officer}

 

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

 

 

EXHIBIT 2

FORM OF OPINION OF COOLEY GODWARD KRONISH LLP

{See attached.}

 

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

 

 

December 1, 2006

Symphony Allegro Holdings LLC

7361 Calhoun Place, Suite 325

Rockville, MD 20855

Dear Ladies and Gentlemen:

We have acted as counsel for Alexza Pharmaceuticals, Inc., a Delaware corporation (the “Company”),
in connection with the financing of certain of the Company’s research and development programs (the
"Financing”). In connection with the Financing, the Company is entering into the agreements listed
on Schedule I hereto (collectively, the “Transaction Agreements”). We are rendering this opinion
pursuant to Section 3.02(d) of the Warrant Purchase Agreement.

In connection with this opinion, we have examined and relied upon the representations and
warranties as to factual matters contained in and made pursuant to the Transaction Agreements by
the various parties and originals, or copies certified to our satisfaction, of such records,
documents, certificates, opinions, memoranda and other instruments as in our judgment are necessary
or appropriate to enable us to render the opinion expressed below.

As to certain factual matters, we have relied upon certificates of officers of the Company and have
not sought to independently verify such matters. Where we render an opinion “to our knowledge” or
concerning an item “known to us” or our opinion otherwise refers to our knowledge, it is based
solely upon (i) an inquiry of attorneys within this firm who have represented the Company in this
transaction, (ii) receipt of a certificate executed by an officer of the Company covering such
matters and (iii) such other investigation, if any, that we specifically set forth herein.

In rendering this opinion, we have assumed: the authenticity of all documents submitted to us as
originals; the conformity to originals of all documents submitted to us as copies; the accuracy,
completeness and authenticity of certificates of public officials; the due authorization, execution
and delivery of all documents (except the due authorization, execution and delivery by the Company
of the Transaction Agreements), where authorization, execution and delivery are prerequisites to
the effectiveness of such documents; and the genuineness and authenticity of all signatures on
original documents (except the signatures on behalf of the Company on the Transaction Agreements).
We have also assumed: that all individuals executing and delivering documents had the legal
capacity to so execute and deliver; that the Transaction Agreements are obligations binding upon
the parties thereto other than the Company; that the parties to the Transaction Agreements other
than the Company have filed any required California franchise or income tax returns and have paid
any required California franchise or income taxes; and that there are no extrinsic agreements or
understandings among the parties to the Transaction Agreements or to the Material Agreements (as
defined below) that would modify or interpret the terms of any such agreements or the respective
rights or obligations of the parties thereunder.

 

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

 

 

Our opinion is expressed only with respect to the federal laws of the United States of America, the
laws of the State of California, the laws of the State of New York and the General Corporation Law
of the State of Delaware. We express no opinion as to whether the laws of any particular
jurisdiction apply, and no opinion to the extent that the laws of any jurisdiction other than those
identified above are applicable to the subject matter hereof.

We are not rendering any opinion as to any statute, rule, regulation, ordinance, decree or
decisional law relating to antitrust, banking, land use, environmental, pension, employee benefit,
tax, usury, laws governing the legality of investments for regulated entities, regulations T, U or
X of the Board of Governors of the Federal Reserve System or local law. Furthermore, we express no
opinion with respect to compliance with antifraud laws, rules or regulations relating to securities
or the offer and sale thereof; compliance with fiduciary duties by the Company’s Board of Directors
or stockholders; compliance with safe harbors for disinterested Board of Director or stockholder
approvals; compliance with state securities or blue sky laws except as specifically set forth
below; or compliance with laws that place limitations on corporate distributions.

With regard to our opinion in paragraph 1 below, we have relied solely upon a certificate of the
Secretary of State of the State of Delaware as of a recent date.

With regard to our opinion in paragraph 3 below, with respect to the due and valid authorization of
each of the Transaction Documents, we have relied solely upon (i) a certificate of an officer of
the Company, (ii) a review of the certificate of incorporation and bylaws of the Company, (iii) a
review of the resolutions certified by an officer of the Company, (iv) and a review of the Delaware
General Corporation Law.

With regard to our opinion paragraph 4 below concerning material defaults under and any material
breaches of any agreement identified on Schedule II hereto, we have relied solely upon (i) a
certificate of an officer of the Company, (ii) a list supplied to us by the Company of material
agreements to which the Company is a party, or by which it is bound, a copy of which is attached
hereto as Schedule II (the “Material Agreements”) and (iii) an examination of the Material
Agreements in the form provided to us by the Company. We have made no further investigation.
Further, with regard to our opinion in paragraph 4 below concerning Material Agreements, we express
no opinion as to (i) financial covenants or similar provisions therein requiring financial
calculations or determinations to ascertain compliance, (ii) provisions therein relating to the
occurrence of a “material adverse event” or words of similar import or (iii) any statement or
writing that may constitute parol evidence bearing on interpretation or construction.

With regard to our opinion in paragraph 7 below, we express no opinion to the extent that,
notwithstanding its current reservation of shares of Common Stock, future issuances of securities
of the Company and/or antidilution adjustments to outstanding securities of the Company may cause
the Warrant Shares (as defined in the Warrant Purchase Agreement)or the Alexza Common Stock (as
defined in the Purchase Option Agreement) to exceed the number of shares of Common Stock that then
remain authorized but unissued.

 

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

 

 

With regard to our opinion in paragraph 8 concerning exemption from registration, our opinion is
expressed only with respect to the offer and sale of the Warrant or the Warrant Shares without
regard to any offers or sales of securities occurring prior to or subsequent to the date hereof.

With regard to our opinion in paragraph 9 below, we have based our opinion, to the extent we
consider appropriate, on Rule 3a-8 under the Investment Company Act of 1940, as amended, and a
certificate of an officer of the Company as to compliance with each of the requirements necessary
to comply with Rule 3a-8. We have conducted no further investigation.

On the basis of the foregoing, in reliance thereon and with the foregoing qualifications, we are of
the opinion that:

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

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

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

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

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

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

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

 

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

 

 

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

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

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

Our opinion in paragraph 6 above is specifically subject to the following limitations, exceptions,
qualifications and assumptions:

     A. The opinions expressed above are subject to, and may be limited by, applicable bankruptcy,
reorganization, insolvency, moratorium, fraudulent conveyance, debtor and creditor, and similar
laws which relate to or affect creditors’ rights generally. This opinion is also subject to, and
may be limited by, general principles of equity and the exercise of judicial discretion (regardless
of whether such validity or enforceability is considered in a proceeding in equity or at law),
including the possible unavailability of specific performance, injunctive relief or any other
equitable remedy and concepts of materiality, reasonableness, conscionability, good faith and fair
dealing.

     B. We express no opinion as to the effect of court decisions, invoking statutes or principles
of equity, which have held that certain covenants and provisions of agreements are unenforceable
where enforcement of such covenants or provisions under the circumstances would violate the
enforcing party’s implied covenant of good faith and fair dealing or would be limited by the
principles of course of dealing or course of performance.

     C. We express no opinion as to the effect of any federal or state law or equitable principle
which provides that a court may refuse to enforce, or may limit the application of, a contract or
any clause thereof that the courts find to be unconscionable at the time it was made or contrary to
public policy.

     D. We express no opinion as to the enforceability under certain circumstances of provisions
expressly or by implication waiving broadly or vaguely stated rights, unknown future rights
including without limitation rights to damages, or defenses to obligations or rights granted by
law, when such waivers are against public policy or prohibited by law.

     E. We express no opinion as to the enforceability under certain circumstances of provisions to
the effect that rights or remedies are not exclusive, that rights or remedies may be exercised
without notice, that every right or remedy is cumulative and may be exercised in addition to or
with any other right or remedy, that election of a particular remedy or remedies does not preclude
recourse to one or more remedies, or that failure to exercise or delay in exercising rights or
remedies will not operate as a waiver of any such right or remedy.

 

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

 

 

     F. We express no opinion as to the enforceability of any provision of an applicable agreement
requiring that waivers must be in writing; such provision may not be binding or enforceable if a
non-executory oral agreement has been created modifying any such provision or if an implied
agreement by trade practice or course of conduct has given rise to a waiver.

     G. We express no opinion as to the enforceability of the following rights and remedies which
may be limited by applicable law: (i) any provision which provides for a rate of interest which
exceeds that permissible under applicable law; (ii) any provision which purports to affect the
jurisdiction of a court (including provisions as to methods of service of process and as to
property which may be subject to such jurisdiction) or may be subject to the discretion of a court
(including provisions as to venue); (iii) any provision which purports to make available remedies
for violations, breaches or defaults that are determined by a court of competent jurisdiction to be
non-material or unreasonable; (iv) any provision which provides for a choice of law or choice of
forum; (v) any provision relating to contribution to or the indemnification or exculpation of any
party; and (vi) any provision that contains a waiver of the benefits of statutory, regulatory, or
constitutional rights, unless and to the extent the statute, regulation, or constitution explicitly
allows waiver, including without limitation, any provision which purports to waive trial by jury.

     H. We express no opinion with respect to the following: (i) any document referenced in the
Transaction Agreements that is not a Transaction Agreement; and (ii) the enforceability of the
Transaction Agreements by or against any person or entity that is not a party thereto.

     I. We express no opinion as to the enforceability of any provision for penalties, liquidated
damages, acceleration of future amounts due (other than principal) without appropriate discount to
present value, late charges, prepayment charges, or increased interest rates upon default.

     J. We express no opinion as the enforceability of any provision stating that the provisions of
a contract are severable.

     K. We express no opinion as to the enforceability of any provision that would permit the other
party to require performance without requiring consideration of the impracticability or
impossibility of performance at the time of attempted enforcement due to unforeseen circumstances
not within the contemplation of the parties.

     L. We express no opinion as to the enforceability of any provision which purports to assign,
grant a lien upon or security interest in or to any contract, right, agreement or other property
right or the proceeds thereof (other than assignments or security interests in accounts, general
intangibles, chattel paper or promissory notes to the extent provided by Sections 9-406(d), 9-407
and 9-408 of the New York Uniform Commercial Code), which by its terms or under applicable law,
rule or regulation is not so assignable or under which the grant of such a lien or security
interest is prohibited.

     M. We express no opinion as to the Company’s rights in the technology which is the subject of
the Technology License Agreement, the Novated and Restated Technology License Agreement, the
Research and Development Agreement, or the Amended and Restated Research

 
 

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

 

 

and Development Agreement (collectively, the “Technology Agreements”). We further express no
opinion to the extent that portions of the Technology Agreements may be deemed to be agreements to
agree, or as to the future interpretation of these agreements.

     This opinion is intended solely for your benefit and is not to be made available to or be
relied upon by any other person, firm, or entity without our prior written consent.

	 	 	 	 	 
	Sincerely,	 	 
	 
	 	 	 	 
	Cooley Godward Kronish LLP	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Barbara A. Kosacz
	 	 

 

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

 

 

Schedule I

List of Transaction Agreements

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

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

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

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

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

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

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

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

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

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

 

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

 

 

SCHEDULE II

LIST OF MATERIAL AGREEMENTS

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

 

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

 

 

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

 

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

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