0000950142-09-001301.txt : 20090908 0000950142-09-001301.hdr.sgml : 20090907 20090908172744 ACCESSION NUMBER: 0000950142-09-001301 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20090908 DATE AS OF CHANGE: 20090908 GROUP MEMBERS: HARRI V. TARANTO GROUP MEMBERS: MARK KESSEL GROUP MEMBERS: SYMPHONY CAPITAL GP, L.P. GROUP MEMBERS: SYMPHONY CAPITAL PARTNERS, L.P. GROUP MEMBERS: SYMPHONY GP, LLC GROUP MEMBERS: SYMPHONY STRATEGIC PARTNERS, LLC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: Alexza Pharmaceuticals Inc. CENTRAL INDEX KEY: 0001344413 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 770567768 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-82505 FILM NUMBER: 091058850 BUSINESS ADDRESS: STREET 1: 2091 STIERLIN COURT CITY: MOUNTAIN VIEW STATE: CA ZIP: 94043 BUSINESS PHONE: 650.944.7000 MAIL ADDRESS: STREET 1: 2091 STIERLIN COURT CITY: MOUNTAIN VIEW STATE: CA ZIP: 94043 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: Symphony Capital Partners LP CENTRAL INDEX KEY: 0001296059 IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: C/O SYMPHONY CAPITAL LLC STREET 2: 875 THIRD AVENUE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 212-632-5400 MAIL ADDRESS: STREET 1: C/O SYMPHONY CAPITAL LLC STREET 2: 875 THIRD AVENUE CITY: NEW YORK STATE: NY ZIP: 10022 SC 13D 1 sc13d_alexza.htm SCHEDULE 13D

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934

(Amendment No. ) *

ALEXZA PHARMACEUTICALS, INC.

(Name of Issuer)

Common Stock, Par Value $0.0001 Per Share

(Title of Class of Securities)

015384100

(CUSIP Number)

Mark Kessel
Symphony Capital Partners, L.P.
875 Third Avenue

18th Floor
New York, NY 10022
(212) 632-5400

(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)

August 26, 2009

(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box. o

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7(b) for other parties to whom copies are to be sent.

*The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

CUSIP No. 015384100

Page 2 of 21 Pages

SCHEDULE 13D

1	NAME OF REPORTING PERSON Symphony Capital Partners, L.P.
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP			(a) o (b) x
3	SEC USE ONLY
4	SOURCE OF FUNDS OO
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)			o
6	CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7 8 9 10	SOLE VOTING POWER -0- SHARED VOTING POWER 10,086,000 SOLE DISPOSITIVE POWER -0- SHARED DISPOSITIVE POWER 10,086,000
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 10,086,000
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES:			o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 21.6%
14	TYPE OF REPORTING PERSON PN

CUSIP No. 015384100

Page 3 of 21 Pages

SCHEDULE 13D

1	NAME OF REPORTING PERSON Symphony Capital GP, L.P.
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP			(a) o (b) x
3	SEC USE ONLY
4	SOURCE OF FUNDS OO
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)			o
6	CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7 8 9 10	SOLE VOTING POWER -0- SHARED VOTING POWER 10,086,000 SOLE DISPOSITIVE POWER -0- SHARED DISPOSITIVE POWER 10,086,000
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 10,086,000
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES:			o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 21.6%
14	TYPE OF REPORTING PERSON PN

CUSIP No. 015384100

Page 4 of 21 Pages

SCHEDULE 13D

1	NAME OF REPORTING PERSON Symphony GP, LLC
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP			(a) o (b) x
3	SEC USE ONLY
4	SOURCE OF FUNDS OO
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)			o
6	CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7 8 9 10	SOLE VOTING POWER -0- SHARED VOTING POWER 10,086,000 SOLE DISPOSITIVE POWER -0- SHARED DISPOSITIVE POWER 10,086,000
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 10,086,000
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES:			o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 21.6%
14	TYPE OF REPORTING PERSON CO

CUSIP No. 015384100

Page 5 of 21 Pages

SCHEDULE 13D

1	NAME OF REPORTING PERSON Mark Kessel
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP			(a) o (b) x
3	SEC USE ONLY
4	SOURCE OF FUNDS OO
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)			o
6	CITIZENSHIP OR PLACE OF ORGANIZATION United States
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7 8 9 10	SOLE VOTING POWER -0- SHARED VOTING POWER 10,086,000 SOLE DISPOSITIVE POWER -0- SHARED DISPOSITIVE POWER 10,086,000
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 10,086,000
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES:			o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 21.6%
14	TYPE OF REPORTING PERSON IN

CUSIP No. 015384100

Page 6 of 21 Pages

SCHEDULE 13D

1	NAME OF REPORTING PERSON Harri V. Taranto
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP			(a) o (b) x
3	SEC USE ONLY
4	SOURCE OF FUNDS OO
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)			o
6	CITIZENSHIP OR PLACE OF ORGANIZATION United States
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7 8 9 10	SOLE VOTING POWER -0- SHARED VOTING POWER 10,086,000 SOLE DISPOSITIVE POWER -0- SHARED DISPOSITIVE POWER 10,086,000
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 10,086,000
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES:			o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 21.6%
14	TYPE OF REPORTING PERSON IN

CUSIP No. 015384100

Page 7 of 21 Pages

SCHEDULE 13D

1	NAME OF REPORTING PERSON Symphony Strategic Partners, LLC
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP			(a) o (b) x
3	SEC USE ONLY
4	SOURCE OF FUNDS OO
5	CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)			o
6	CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7 8 9 10	SOLE VOTING POWER -0- SHARED VOTING POWER 10,086,000 SOLE DISPOSITIVE POWER -0- SHARED DISPOSITIVE POWER 10,086,000
11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 10,086,000
12	CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES:			o
13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 21.6%
14	TYPE OF REPORTING PERSON CO

CUSIP No. 015384100

Page 8 of 21 Pages

SCHEDULE 13D

Item 1.

Security and Issuer.

This Statement on Schedule 13D (this “Statement”) relates to the common stock, par value $0.0001 per share (the “Common Stock”) of Alexza Pharmaceuticals, Inc., a Delaware corporation (the “Issuer”). The address of the principal executive offices of the Issuer is 2091 Stierlin Court, Mountain View, California 94043.

Item 2.

Identity and Background.

(a) The names of the persons filing under this Statement are Symphony Capital Partners, L.P. (“Symphony Capital”), Symphony Capital GP, L.P, (“Symphony GP”) Symphony GP, LLC (“Symphony GP LLC”), Mark Kessel, Harri V. Taranto and Symphony Strategic Partners, LLC (“Symphony Strategic Partners”) (each, a “Reporting Person” and collectively, the “Reporting Persons”).

(b) The business address of each of the Reporting Persons is 875 Third Avenue, 18th Floor, New York, NY 10022. Mr. Kessel and Mr. Taranto are the managing members of Symphony GP LLC and Symphony Strategic Partners. The attached Schedule A sets forth the controlling persons, the executive officers and the directors of Symphony Capital, Symphony GP, Symphony GP LLC and Symphony Strategic Partners and contains the following information with respect to each such person: (i) name, (ii) citizenship and (iii) present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment is conducted.

	(c)
Name of Reporting Person		Principal Business/Occupation
Symphony Capital		Involved in purchasing, holding and selling securities and other investments.
Symphony GP		General Partner of Symphony Capital
Symphony GP LLC		General Partner of Symphony GP
Mark Kessel		Managing Member of Symphony GP LLC and Symphony Strategic Partners
Harri V. Taranto		Managing Member of Symphony GP LLC and Symphony Strategic Partners
Symphony Strategic Partners		Involved in purchasing, holding and selling securities and other investments.

CUSIP No. 015384100

Page 9 of 21 Pages

SCHEDULE 13D

(d) During the past five years, none of the persons referred to in paragraph (a) above has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors).

(e) During the past five years, none of the persons referred to in paragraph (a) above has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding, was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

	(f)
Name of Reporting Person		Citizenship
Symphony Capital		Delaware limited partnership.
Symphony GP		Delaware limited partnership.
Symphony GP LLC		Delaware limited liability company.
Mark Kessel		United States citizen.
Harri V. Taranto		United States citizen.
Symphony Strategic Partners		Delaware limited liability company

Item 3.

Source and Amount of Funds or Other Consideration.

On June 15, 2009, Symphony Allegro Holdings LLC (“Holdings”) and Symphony Allegro, Inc. (“Symphony Allegro”) entered into a series of related agreements with the Issuer pursuant to which such parties agreed to amend the terms of the Purchase Option Agreement dated as of December 1, 2006 (the “Purchase Option Agreement”) pursuant to an Amended and Restated Purchase Option Agreement (the “APOA”). Concurrently with the execution of the APOA, the Issuer notified Holdings and Symphony Allegro of its exercise of the Purchase Option (the “Purchase Option”) to purchase all of the outstanding Symphony Allegro equity securities owned by Holdings.

Pursuant to the Issuer’s exercise of its Purchase Option, the closing under the APOA occurred on August 26, 2009. At closing, the Issuer acquired all of the outstanding shares of Common Stock of Symphony Allegro from Holdings. In consideration for the Issuer’s exercise of its Purchase Option, Holdings had the right to receive an aggregate of 10,000,000 shares of Common Stock and Warrants (“Warrants”) to purchase up to an aggregate of 5,000,000 shares of the Issuer’s Common Stock at an exercise price of $2.26 per share, which right it assigned to its investors. As such, 6,724,000 shares of Common Stock and Warrants to purchase up to 3,362,000 shares of the Issuer’s Common Stock were issued to Symphony Capital and Symphony Strategic Partners and 3,276,000 shares of Common Stock and Warrants to purchase up to

CUSIP No. 015384100

Page 10 of 21 Pages

SCHEDULE 13D

1,638,000 shares of the Issuer’s Common Stock were issued to certain other investors in Holdings that are not affiliates of the Reporting Persons. The Warrants contain a cashless exercise provision under which its holder may, in lieu of payment of the exercise price in cash, surrender such Warrant and receive a net amount of shares based on the fair market value of the Issuer’s Common Stock at the time of exercise of such Warrant after deduction of the aggregate exercise price. Each Warrant contains provisions for the appropriate and proportionate adjustment to the number of shares issuable upon exercise in the event of certain stock dividends, stock splits, recapitalizations, reorganizations and reclassifications. In the event of a merger or acquisition in which the surviving or resulting parent entity is an entity other than the Issuer, each Warrant also provides for the issuance of a replacement warrant that is exercisable for shares of the surviving entity or the surrender of such Warrant in consideration of a specified cash payment for each share of the Issuer’s common stock subject to such Warrant, depending on the consideration paid by the surviving entity in such transaction. Each Warrant will expire on August 26, 2014, if not earlier exercised. As further consideration for the exercise of the Purchase Option, the Issuer agreed to make a contingent cash payment equal to specified percentages of certain upfront, milestone, royalty, profit sharing or similar payments received by the Issuer in respect of any agreement or arrangement with any third party with respect to the development and/or commercialization of the Programs (as defined in Item 4 below).

This description of the APOA is qualified in its entirety by reference to the APOA, included as Exhibit 2 to the Statement and incorporated herein by reference.

Item 4.

Purpose of Transaction

On December 1, 2006, the Issuer entered into a series of related agreements with Symphony Capital, Holdings and Symphony Allegro providing for the financing of additional clinical and non-clinical development of product candidates AZ-002 Staccato alprazolam, and AZ-004/AZ-104, Staccato loxapine (together, the “Programs”). Symphony Allegro invested $50 million to fund the Programs, and the Issuer exclusively licensed to Symphony Allegro certain intellectual property rights related to the Programs, while maintaining manufacturing rights. In connection with such transaction, the Issuer and Holdings entered into a Purchase Option Agreement that provided for the exclusive right, but not the obligation, of the Issuer to repurchase both Programs at specified times in the future, at certain specified prices.

As described in Item 3, the Issuer, Holdings and Symphony Allegro amended the terms of the Purchase Option Agreement and entered into the APOA pursuant to which Holdings, in consideration for the Issuer’s exercise of its Purchase Option, had the right to receive from the Issuer (i) an aggregate 10,000,000 shares of Common Stock, of which 6,724,000 shares of Common Stock were issued to Symphony Capital and Symphony Strategic Partners and 3,276,000 shares of Common Stock were issued to certain other investors in Holdings that are not affiliates of the Reporting Persons, (ii) Warrants to purchase up to an aggregate 5,000,000 shares of Common Stock at an exercise price of $2.26 per share, of which Warrants to purchase up to 3,362,000 shares of the Issuer’s Common Stock were issued to Symphony Capital and Symphony Strategic Partners and Warrants to purchase up to 1,638,000 shares of the Issuer’s

CUSIP No. 015384100

Page 11 of 21 Pages

SCHEDULE 13D

Common Stock were issued to certain other investors in Holdings that are not affiliates of the Reporting Persons. In addition, Holdings (or its affiliates) has the right to appoint one member to the Issuer’s Board of Directors (subject to certain ownership thresholds).

The Reporting Persons intend to review from time to time the Issuer’s business affairs and financial position. Based on such evaluation and review, as well as general economic and industry conditions existing at the time, the Reporting Persons may consider from time to time various alternative courses of action. Pursuant to the restrictions set forth in the Corporate Governance Agreement (as defined in Item 6 below), each Reporting Person may at any time and from time to time, in privately negotiated transactions or otherwise, acquire additional securities of the Issuer, including additional Common Stock, dispose of all or a portion of the securities of the Issuer, including the Common Stock, that the Reporting Persons now own or may hereafter acquire and/or enter into derivative transactions with institutional counterparties with respect to the Issuer's securities. The Reporting Persons may also, pursuant to the restrictions set forth in the Corporate Governance Agreement (as defined in Item 6 below) engage in discussions with management, members of the Board, shareholders and other relevant parties concerning the operations, management, Board composition, ownership, capital structure, strategy and future plans of the Issuer. In the future, the Reporting Persons intend to exercise their right to appoint a representative to the Issuer’s Board of Directors.

As described in Item 6 below, the Issuer has also agreed to provide certain registration under the U.S. Securities Act of 1933, as amended, (the “U.S. Securities Act”) with respect to the Common Stock and the shares issuable upon exercise of the Warrant.

Except as described above in this Item 4, no Reporting Person or any individual otherwise identified in Item 2 of this Schedule 13D has any present plans or proposals which relate to or would result in any of the actions described in clauses (a) through (j) of Item 4 of Schedule 13D.

Item 5.

Interest in Securities of the Issuer.

(a) By virtue of the fact that (i) Symphony GP is the general partner of Symphony Capital, (ii) Symphony GP LLC is the general partner of Symphony GP and (iii) Mr. Kessel and Mr. Taranto are the managing members of Symphony GP LLC and Symphony Strategic Partners, and as such are authorized to vote and dispose of the securities held by Symphony Strategic Partners and Symphony Capital, each the Reporting Persons may be deemed to own the following shares of Common Stock:

(i)

Symphony Capital

Number of Shares of Common Stock: 10,086,000

Percentage Outstanding Common Stock: 21.6%

(ii)

Symphony GP

CUSIP No. 015384100

Page 12 of 21 Pages

SCHEDULE 13D

Number of Shares of Common Stock: 10,086,000

Percentage Outstanding Common Stock: 21.6%

(iii)

Symphony GP LLC

Number of Shares of Common Stock: 10,086,000

Percentage Outstanding Common Stock: 21.6%

(iv)

Mark Kessel

Number of Shares of Common Stock: 10,086,000

Percentage Outstanding Common Stock: 21.6%

(v)

Harri V. Taranto

Number of Shares of Common Stock: 10,086,000

Percentage Outstanding Common Stock: 21.6%

(vi)

Symphony Strategic Partners

Number of Shares of Common Stock: 10,086,000

Percentage Outstanding Common Stock: 21.6%

The percentage of the Common Stock beneficially owned or deemed to be beneficially owned by each of the Reporting Persons as set forth above is based on the Issuer’s representation that it had 33,251,440 shares outstanding as of July 27, 2009, as reported in the Issuer’s Form 10-Q filed with the Securities and Exchange Commission on August 5, 2009, plus the 10,000,000 shares that were issued pursuant to the terms of the APOA and the 3,362,000 shares of the Issuer’s Common Stock issuable to Symphony Capital and Symphony Strategic Partners upon exercise of the Warrants.

(b) By virtue of the fact that (i) Symphony GP is the general partner of Symphony Capital, (ii) Symphony GP LLC is the general partner of Symphony GP and (iii) Mr. Kessel and Mr. Taranto are the managing members of Symphony GP LLC and Symphony Strategic Partners, and as such are authorized to vote and dispose of the securities held by Symphony Strategic Partners and Symphony Capital, each the Reporting Persons may be deemed to hold the following voting and investment power:

(i)

Symphony Capital Partners

Sole power to vote or direct the vote: 0

Shared power to vote or direct the vote: 10,086,000 shares

CUSIP No. 015384100

Page 13 of 21 Pages

SCHEDULE 13D

Sole power to dispose or to direct the disposition: 0

Shared power to dispose or to direct the disposition: 10,086,000 shares

(ii)

Symphony GP

Sole power to vote or direct the vote: 0

Shared power to vote or direct the vote: 10,086,000 shares

Sole power to dispose or to direct the disposition: 0

Shared power to dispose or to direct the disposition: 10,086,000 shares

(iii)

Symphony GP LLC

Sole power to vote or direct the vote: 0

Shared power to vote or direct the vote: 10,086,000 shares

Sole power to dispose or to direct the disposition: 0

Shared power to dispose or to direct the disposition: 10,086,000 shares

(iv)

Mark Kessel

Sole power to vote or direct the vote: 0

Shared power to vote or direct the vote: 10,086,000 shares

Sole power to dispose or to direct the disposition: 0

Shared power to dispose or to direct the disposition: 10,086,000 shares

(v)

Harri V. Taranto

Sole power to vote or direct the vote: 0

Shared power to vote or direct the vote: 10,086,000 shares

Sole power to dispose or to direct the disposition: 0

Shared power to dispose or to direct the disposition: 10,086,000 shares

(vi)

Symphony Strategic Partners

CUSIP No. 015384100

Page 14 of 21 Pages

SCHEDULE 13D

Sole power to vote or direct the vote: 10,086,000 shares

Shared power to vote or direct the vote: 0

Sole power to dispose or to direct the disposition: 10,086,000 shares

Shared power to dispose or to direct the disposition: 0

The voting and disposition power of the Common Stock beneficially owned or deemed to be beneficially owned by each of the Reporting Persons as set forth above is based on the Issuer’s representation that it had 33,251,440 shares outstanding as of July 27, 2009, as reported in the Issuer’s Form 10-Q filed with the Securities and Exchange Commission on August 5, 2009, plus the 10,000,000 shares that were issued pursuant to the terms of the APOA and the 3,362,000 shares of the Issuer’s Common Stock issuable to Symphony Capital and Symphony Strategic Partners upon exercise of the Warrants.

(c) During the last 60 days, the Reporting Persons have received 6,724,000 shares of Common Stock of the Issuer and Warrants to purchase up to 3,362,000 shares of Common Stock of the Issuer at an exercise price of $2.26 per share. Except for such dispositions, to the knowledge of the Reporting Persons with respect to the persons named in response to paragraph (a), none of the persons named in response to paragraph (a) has effected any transactions in shares of Common Stock during the past 60 days.

(d)

Not applicable.

(e)

Not applicable.

Item 6.

Contracts, Arrangements, Understandings or Relationship with Respect to Securities of the Issuer.

The disclosure under Item 3 and Item 4 hereof is incorporated herein by reference.

Corporate Governance Letter Agreement

On August 26, 2009, in connection with the closing of the transaction, the Issuer, Holdings, Symphony Capital and Symphony Strategic Partners (collectively, “Symphony”) entered into an agreement (the “Corporate Governance Agreement”) pursuant to which the Issuer agreed to nominate and use its commercially reasonable efforts to cause to be elected and cause to remain as a director on the Issuer’s Board of Directors, one individual designated by Symphony, for so long as Symphony and its affiliates beneficially own more than 10% of the total outstanding shares of the Issuer’s Common Stock. Pursuant to the Corporate Governance Agreement, Symphony also agreed, for so long as Symphony and its affiliates beneficially own more than 10% of the total outstanding shares of the Issuer’s Common Stock, to certain limitations on its ability acquire additional securities or assets of the Issuer or any subsidiary, to participate in a

CUSIP No. 015384100

Page 15 of 21 Pages

SCHEDULE 13D

“group” (as defined in the U.S. Securities Exchange Act of 1934, as amended) with respect to the beneficial ownership of any securities of the Issuer, vote its shares or take certain actions intended to influence the management, Board of Directors, or policies of the Issuer. These limitations do not limit any individual serving as a director of the Issuer to take any actions (or to refrain from taking any actions) in his or her capacity as a director of the Issuer.

In the event Symphony and its affiliates beneficially own more than 33% of the Issuer’s outstanding Common Stock, any shares of Common Stock entitled to vote for the election of directors beneficially owned by Symphony and its affiliates in excess of 33% of the shares of Common Stock then outstanding, with respect to the election or removal of directors only, shall be voted either, solely at Symphony’s election (a) as recommended by the Board or (b) in an election, in the same proportion with the votes of shares of Common Stock voted in such election (subject to certain limitations). Symphony retains the right to vote (or to withhold its vote) all of its shares on all other matters.

This description of the Corporate Governance Agreement is qualified in its entirety by reference to the Corporate Governance Agreement, included as Exhibit 3 to the Statement and incorporated herein by reference.

Amended and Restated Registration Rights Agreement

The Issuer and Holdings entered into an Amended and Restated Registration Rights Agreement on June 15, 2009 (the “Registration Rights Agreement”) pursuant to which the Issuer has agreed to provide certain registration rights under the U.S. Securities Act, with respect to the Common Stock and the shares issuable upon exercise of the Warrant issued to Holdings under the APOA and thereby issued to Symphony Capital and to Symphony Strategic Partners.

This description of the Registration Rights Agreement is qualified in its entirety by reference to the Registration Rights Agreement, included as Exhibit 4 to the Statement and incorporated herein by reference.

Warrant Purchase Agreement

The Issuer and Holdings entered into a Warrant Purchase Agreement on June 15, 2009 (the “Warrant Purchase Agreement”) pursuant to which the Issuer authorized the issuance to Holdings of Warrants representing the right to purchase 5,000,000 shares of the Issuer’s Common Stock with an exercise price of $2.26 per share. As described in Items 3 and 4, Holdings assigned its right to such Warrants to Symphony Capital and Symphony Strategic Partners and certain other investors in Holdings that are not affiliates of the Reporting Persons. The Warrant Purchase Agreement also includes provisions for an appropriate and proportionate adjustment to the number of shares issuable upon the exercise of the Warrant in the event of certain stock dividends, stock splits, recapitalizations, reorganizations and reclassifications.

CUSIP No. 015384100

Page 16 of 21 Pages

SCHEDULE 13D

This description of the Warrant Purchase Agreement is qualified in its entirety by reference to the Warrant Purchase Agreement, included as Exhibit 5 to the Statement and incorporated herein by reference.

Item 7.

Material to be Filed as Exhibits.

Exhibit No.	Description
1	Joint Filing Agreement dated as of September 8, 2009.
2	Amended and Restated Purchase Option Agreement among Symphony Allegro Holdings LLC, Symphony Allegro, Inc. and Alexza Pharmaceuticals, Inc. dated as of June 15, 2009. *
3	Corporate Governance Letter Agreement between Alexza Pharmaceuticals, Inc. and Symphony Allegro Holdings LLC dated as of August 26, 2009.
4	Amended and Restated Registration Rights Agreement between Alexza Pharmaceuticals, Inc. and Symphony Allegro Holdings LLC dated as of June 15, 2009.*
5	Warrant Purchase Agreement between Alexza Pharmaceuticals, Inc. and Symphony Allegro Holdings LLC dated as of June 15, 2009. *
6	Form of Warrant dated as of August 26, 2009.

_______________________________

*	Previously filed as an exhibit to the Issuer’s Current Report on Form 8-K/A filed with the Securities and Exchange Commission on August 26, 2009 and incorporated herein by reference.

CUSIP No. 015384100

Page 17 of 21 Pages

SCHEDULE 13D

SIGNATURE

After reasonable inquiry and to the best of its or his knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct.

Dated: September 8, 2009

		SYMPHONY CAPITAL PARTNERS, L.P.
		By:	Symphony Capital GP, L.P. its general partner
		By:	Symphony GP, LLC its general partner
		By:	/s/ Mark Kessel
			Name: Mark Kessel Title: Managing Member

		SYMPHONY CAPITAL GP, L.P.
		By:	Symphony GP, LLC its general partner
		By:	/s/ Mark Kessel
			Name: Mark Kessel Title: Managing Member

		SYMPHONY GP, LLC
		By:	/s/ Mark Kessel
			Name: Mark Kessel Title: Managing Member

		MARK KESSEL
		By:	/s/ Mark Kessel
			Name: Mark Kessel Title: Managing Member

CUSIP

Page 18 of 21 Pages

SCHEDULE 13D

		HARRI V. TARANTO
		By:	/s/ Harri V. Taranto
			Name: Harri V. Taranto Title: Managing Member

		SYMPHONY STRATEGIC PARTNERS, LLC
		By:	/s/ Mark Kessel
			Name: Mark Kessel Title: Managing Member

CUSIP No. 015384100

Page 19 of 21 Pages

SCHEDULE 13D

INDEX TO EXHIBITS

Exhibit No.	Description
1	Joint Filing Agreement dated as of September 8, 2009.
2	Amended and Restated Purchase Option Agreement among Symphony Allegro Holdings LLC, Symphony Allegro, Inc. and Alexza Pharmaceuticals, Inc. dated as of June 15, 2009. *
3	Corporate Governance Letter Agreement between Alexza Pharmaceuticals, Inc.and Symphony Allegro Holdings LLC dated as of August 26, 2009.
4	Amended and Restated Registration Rights Agreement between Alexza Pharmaceuticals, Inc. and Symphony Allegro Holdings LLC dated as of June 15, 2009.*
5	Warrant Purchase Agreement between Alexza Pharmaceuticals, Inc. and Symphony Allegro Holdings LLC dated as of June 15, 2009. *
6	Form of Warrant dated as of August 26, 2009.

CUSIP No. 015384100

Page 20 of 21 Pages

SCHEDULE 13D

SCHEDULE A

SYMPHONY CAPITAL PARTNERS, L.P.

Mark Kessel
Managing Member

United States citizen

Symphony Capital Partners, L.P.

875 Third Avenue, 18th Floor

New York, NY 10022

Harri V. Taranto
Managing Member

United States citizen

Symphony Capital Partners, L.P.

875 Third Avenue, 18th Floor

New York, NY 10022

SYMPHONY CAPITAL GP, L.P.

Mark Kessel
Managing Member

United States citizen

Symphony Capital Partners, L.P.

875 Third Avenue, 18th Floor

New York, NY 10022

Harri V. Taranto
Managing Member

United States citizen

Symphony Capital Partners, L.P.

875 Third Avenue, 18th Floor

New York, NY 10022

SYMPHONY GP, LLC

Mark Kessel
Managing Member

United States citizen

Symphony Capital Partners, L.P.

875 Third Avenue, 18th Floor

New York, NY 10022

Harri V. Taranto
Managing Member

United States citizen

Symphony Capital Partners, L.P.

875 Third Avenue, 18th Floor

New York, NY 10022

CUSIP No. 015384100

Page 21 of 21 Pages

SCHEDULE 13D

SYMPHONY STRATEGIC PARTNERS, LLC

Mark Kessel
Managing Member

United States citizen

Symphony Capital Partners, L.P.

875 Third Avenue, 18th Floor

New York, NY 10022

Harri V. Taranto
Managing Member

United States citizen

Symphony Capital Partners, L.P.

875 Third Avenue, 18th Floor

New York, NY 10022

EX-99 2 ex1-sc13d_alexza.htm EXHIBIT 99.1

EXHIBIT 1

JOINT FILING AGREEMENT

In accordance with Rule 13d-1(k) under the Securities Exchange Act of 1934, as amended, the persons named below agree to the joint filing on behalf of each of them of the Schedule 13D (and any further amendment filed by them) with respect to the Common Stock, par value $0.0001 per share, of the Issuer, a Delaware corporation.

Dated: September 8, 2009

		SYMPHONY CAPITAL PARTNERS, L.P.
		By:	Symphony Capital GP, L.P. its general partner
		By:	Symphony GP, LLC its general partner
		By:	/s/ Mark Kessel
			Name: Mark Kessel Title: Managing Member

		SYMPHONY CAPITAL GP, L.P.
		By:	Symphony GP, LLC its general partner
		By:	/s/ Mark Kessel
			Name: Mark Kessel Title: Managing Member

		SYMPHONY GP, LLC
		By:	/s/ Mark Kessel
			Name: Mark Kessel Title: Managing Member

		MARK KESSEL
		By:	/s/ Mark Kessel
			Name: Mark Kessel Title: Managing Member

		HARRI V. TARANTO
		By:	/s/ Harri V. Taranto
			Name: Harri V. Taranto Title: Managing Member

		SYMPHONY STRATEGIC PARTNERS, LLC
		By:	/s/ Mark Kessel
			Name: Mark Kessel Title: Managing Member

EX-99 3 ex3-sc13d_alexza.htm EXHIBIT 3

EXHIBIT 3

August 26, 2009

Alexza Pharmaceuticals, Inc.

2091 Stierlin Court

Mountain View, CA 94043

Attention: Chief Executive Officer

Ladies and Gentlemen:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

3. No Effect on Directors. Notwithstanding any of the foregoing, the provisions set forth in Section 2 shall in no way limit the ability of any individual who is serving as a director

of the Company to take any actions (or to refrain from taking any actions) in his or her capacity as a director of the Company.

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

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

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

7. Specific Enforcement; Legal Effect. The parties hereto agree that any breach of this letter agreement would result in irreparable injury to the other party and that money damages would not be an adequate remedy for such breach. Accordingly, without prejudice to the rights and remedies otherwise available under applicable law, either party shall be entitled to specific performance and equitable relief by way of injunction or otherwise if the other party breaches or threatens to breach any of the provisions of this letter agreement. It is further understood and agreed that no failure or delay by either party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any right, power or privilege hereunder. If any term, provision, covenant or restriction in this letter agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this letter agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated, provided that the parties hereto shall negotiate in good faith to attempt to place the parties in the same position as they would have been in had such provision not been held to be invalid, void or unenforceable. This letter agreement contains the entire agreement between the parties hereto concerning the matters addressed herein. No

modification of this letter agreement or waiver of the terms and conditions hereof shall be binding upon either party hereto, unless approved in writing by each such party; provided, however, that no waiver or amendment shall be effective as against the Company unless such waiver or amendment is approved in writing by the vote of a majority of the independent members of the Board who are not Affiliated with Symphony. This Agreement shall be governed by and construed in accordance with the law of the State of New York.

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

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

[Remainder of page left blank intentionally]

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

Very truly yours,

SYMPHONY ALLEGRO HOLDINGS LLC

By:	Symphony Capital Partners, L.P., its Manager

By:	Symphony Capital GP, L.P., its General Partner

By:	Symphony GP, LLC, its General Partner

By:	/s/ Mark Kessel
	Name:	Mark Kessel
	Title:	Managing Member

SYMPHONY CAPITAL PARTNERS, L.P.

By:	Symphony Capital GP, L.P., its General Partner

By:	Symphony GP, LLC, its General Partner

By:	/s/ Mark Kessel
	Name:	Mark Kessel
	Title:	Managing Member

SYMPHONY STRATEGIC PARTNERS, LLC

By:	/s/ Mark Kessel
	Name:	Mark Kessel
	Title:	Managing Member

Confirmed and Agreed:

ALEXZA PHARMACEUTICALS, INC.

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

Signature Page to Corporate Governance Agreement

EX-99 4 ex6-sc13d_alexza.htm EXHIBIT 6

EXHIBIT 6

FORM OF WARRANT

NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN THE SUBJECT OF REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE, AND THE SAME HAVE BEEN (OR WILL BE, WITH RESPECT TO THE SECURITIES ISSUABLE UPON EXERCISE HEREOF) ISSUED IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF MAY BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT AS PERMITTED UNDER SUCH SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.

THE WARRANT EVIDENCED BY THIS CERTIFICATE IS SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH IN THE WARRANT PURCHASE AGREEMENT, DATED AS OF JUNE 15, 2009, COPIES OF WHICH ARE ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER. NO REGISTRATION OF TRANSFER OF THIS WARRANT WILL BE MADE ON THE BOOKS OF THE ISSUER UNLESS AND UNTIL SUCH RESTRICTIONS SHALL HAVE BEEN COMPLIED WITH.

ALEXZA PHARMACEUTICALS, INC.

WARRANT TO PURCHASE COMMON STOCK

No. CW-_

[_________], 2009

Void After [________], 2014

THIS CERTIFIES THAT, for value received, SYMPHONY ALLEGRO HOLDINGS LLC, with its principal office at 7361 Calhoun Place, Suite 325, Rockville, MD 20855, or its assigns (the “Holder”), is entitled to subscribe for and purchase at the Exercise Price (defined below) from Alexza Pharmaceuticals, Inc., a Delaware corporation, with its principal office at 2091 Stierlin Court, Mountain View, CA 94043 (the “Company”) up to five million (5,000,000) shares of the Common Stock of the Company (the “Common Stock”), subject to adjustment as provided herein. This Warrant is being issued pursuant to the terms of the Warrant Purchase Agreement, dated June 15, 2009, by and among the Company and the Holder (the “Warrant Purchase Agreement”). Capitalized terms not otherwise defined herein shall have the respective meanings ascribed to such terms in the Warrant Purchase Agreement.

1. DEFINITIONS. As used herein, the following terms shall have the following respective meanings:

B-1

(a) “Exercise Period” shall mean the period commencing on [_______], 2009 and ending on [_________], 2014, except as otherwise provided below.

(b) “Exercise Price” shall mean $2.26 per share, subject to adjustment pursuant to Section 6 below.

(c) “Exercise Shares” shall mean the shares of the Company’s Common Stock issuable upon exercise of this Warrant, subject to adjustment pursuant to the terms herein, including but not limited to adjustment pursuant to Section 6 below.

EXERCISE OF WARRANT.

2.1 Method of Exercise. The rights represented by this Warrant may be exercised in whole or in part at any time during the Exercise Period or earlier at any time upon a Transaction Event, by delivery of the following to the Company at its address set forth above (or at such other address as it may designate by notice in writing to the Holder):

(a) An executed Notice of Exercise in the form attached hereto;

(b) Payment of the Exercise Price of the Exercise Shares purchased thereby (i) in cash or by check or wire transfer of immediately available funds, (ii) pursuant to a Cashless Exercise, as described below, or (iii) by a combination of (i) and (ii); and

(c) Upon the exercise of the rights represented by this Warrant, shares of Common Stock shall be issued for the Exercise Shares so purchased, and shall be registered in the name of the Holder or persons affiliated with the Holder, if the Holder so designates, within a reasonable amount of time following receipt by the Company of all of the items designated in clauses (a), (b) and (c) above, but in no event later than thirty (30) days after the date of exercise pursuant to this Section 2.1. The Company shall (i) upon request of the Holder, if available and if allowed under applicable securities laws, use commercially reasonable efforts to deliver Exercise Shares electronically through the Depository Trust Corporation or another established clearing corporation performing similar functions, or (ii) if requested by the Holder, deliver to the Holder certificates evidencing the Exercise Shares. The person in whose name any Exercise Shares are to be issued upon exercise of this Warrant shall be deemed to have become the holder of record of such shares on the date on which delivery of the Notice of Exercise, delivery of this Warrant and payment of the Exercise Price were made, irrespective of the date of issuance of the shares of Common Stock, except that, if the date of such delivery and payment is a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the stock transfer books are open.

B-2

2.2 Cashless Exercise. Notwithstanding any provisions herein to the contrary, if, at any time during the Exercise Period, the Current Market Price (as defined below) of one share of Common Stock is greater than the Exercise Price (at the date of calculation as set forth below), in lieu of exercising this Warrant by payment of cash, the Holder may exercise this Warrant in whole or part by a cashless exercise by surrender of this Warrant at the principal office of the Company together with the properly endorsed Notice of Exercise and the Company shall issue to the Holder a number of shares of Common Stock computed using the following formula:

	X =	Y (B-A) B
Where:	X =	the number of shares of Common Stock to be issued to the Holder.
	Y =	the number of shares of Common Stock purchasable upon exercise of all of the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being exercised (in each case subject to adjustment pursuant to the terms herein, including but not limited to adjustment pursuant to Section 6 below).
	A =	the Exercise Price.
	B =	the Current Market Price of one share of Common Stock.

“Current Market Price” means on any particular date:

(a) if the Common Stock is traded on the Nasdaq SmallCap Market or the Nasdaq Global Market, the average of the closing prices of the Common Stock of the Company on such market over the five (5) trading days ending immediately prior to the applicable date of valuation (in the case of a cashless exercise, the date of valuation will be the exercise date);

(b) if the Common Stock is traded on any registered national stock exchange but is not traded on the Nasdaq SmallCap Market or the Nasdaq Global Market, the average of the closing prices of the Common Stock of the Company on such exchange over the five (5) trading days ending immediately prior to the applicable date of valuation (in the case of a cashless exercise, the date of valuation will be the exercise date).

(c) if the Common Stock is traded over-the-counter, but not on the Nasdaq SmallCap Market, the Nasdaq Global Market or a registered national stock exchange, the average of the closing bid prices over the five (5) trading day period ending immediately prior to the applicable date of valuation (in the case of a cashless exercise, the date of valuation will be the exercise date); and

B-3

(d) if there is no active public market for the Common Stock, the value thereof, as determined in good faith by the Board of Directors of the Company upon due consideration of the proposed determination thereof by the Holder.

2.3 Partial Exercise. If this Warrant is exercised in part only, the Company shall, upon surrender of this Warrant, execute and deliver, within ten (10) days of the date of exercise, a new Warrant evidencing the rights of the Holder, or such other person as shall be designated in the Notice of Exercise, to purchase the balance of the Exercise Shares purchasable hereunder. In no event shall this Warrant be exercised for a fractional Exercise Share, and the Company shall not distribute a Warrant exercisable for a fractional Exercise Share. Fractional Exercise Shares shall be treated as provided in Section 5 hereof.

2.4

Legend.

(a) All certificates evidencing the shares to be issued to the Holder may bear the following legend (provided that no such legend shall be borne by Exercise Shares issued following the valid disposition of such shares pursuant to a registration statement which is effective under the Securities Act):

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

(b) If the certificates representing shares include the legend set forth in Section 2.4(a) hereof, the Company shall, upon a request from a Holder, or subsequent transferee of a Holder, as soon as practicable but in no event more than thirty (30) days after receiving such request, remove or cause to be removed (i) if the shares cease to be restricted securities, the securities law portion of the legend and/or (ii) in the event of a sale of the shares subject to issuance following the transfer of the shares in compliance with the transfer restrictions, the transfer restriction portion of the legend, from certificates representing the shares delivered by a Holder (or a subsequent transferee).

2.5 Charges, Taxes and Expenses. Issuance of the Exercise Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of any electronic or paper certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event Exercise Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder; and the Company may require, as a condition thereto, the payment

B-4

of a sum sufficient to reimburse it for any transfer tax incidental thereto. Notwithstanding anything to the contrary in this Section 2.5, all issue or transfer tax or other incidental expenses imposed by a Governmental Authority outside the United States shall be 100% borne by the Holder.

COVENANTS OF THE COMPANY.

3.1 Covenants as to Exercise Shares. The Company covenants and agrees that all Exercise Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be duly authorized and validly issued and outstanding, fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issuance thereof. The Company further covenants and agrees that the Company will at all times during the Exercise Period, have authorized and reserved, free from preemptive rights, a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant. If at any time during the Exercise Period the number of authorized but unissued shares of Common Stock shall not be sufficient to permit exercise of this Warrant, the Company will take such corporate action as may, in the opinion of counsel, be necessary to increase its authorized but unissued shares of Common Stock (or other securities as provided herein) to such number of shares as shall be sufficient for such purposes.

3.2 No Impairment. Except and to the extent as waived or consented to by the Holder in accordance with Section 11 hereof, the Company will not, by amendment of its Certificate of Incorporation (as such may be amended from time to time), or through any means, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith carry out of all the provisions of this Warrant and take all such action as may be necessary or appropriate in order to protect the exercise rights of the Holder against such impairment.

3.3

Notices of Record Date. If at any time:

(a) the Company shall take a record of the holders of Common Stock for the purpose of entitling them to receive a dividend or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right (other than with respect to any equity or equity equivalent security issued pursuant to a rights plan adopted by the Company’s Board of Directors);

(b) there shall be any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger of the Company, or any sale, transfer or other disposition of all or substantially all the property, assets or business of the Company; or

B-5

then, in any one or more of such cases, the Company shall use commercially reasonable efforts to give to the Holder, provided that such action is available and permitted under the applicable securities laws, at least ten (10) days’ prior written notice of the record date for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, recapitalization, consolidation, merger, sale, transfer, disposition, dissolution, liquidation or winding up of the Company. Any notice provided hereunder shall specify the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and the then current estimated date for the closing of the transaction contemplated by any proposed reorganization, reclassification, recapitalization, consolidation, merger, sale, transfer, disposition, dissolution, liquidation or winding up of the Company.

REPRESENTATIONS OF HOLDER.

4.1 Acquisition of Warrant for Personal Account. The Holder represents and warrants that it is acquiring the Warrant and the Exercise Shares solely for its account for investment and not with a present view toward the public sale or public distribution of said Warrant or Exercise Shares or any part thereof and has no intention of selling or distributing said Warrant or Exercise Shares or any arrangement or understanding with any other persons regarding the sale or distribution of said Warrant or the Exercise Shares, except as would not result in a violation of the Securities Act. The Holder will not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) the Warrant except in accordance with the provisions of Article VI of the Warrant Purchase Agreement and will not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) the Exercise Shares except in accordance with the provisions of Article VI of the Warrant Purchase Agreement or pursuant to and in accordance with the Securities Act.

4.2

Securities Are Not Registered.

(a) The Holder understands that the offer and sale of neither the Warrant nor the Exercise Shares has been registered under the Securities Act.

(b) The Holder recognizes that the Warrant and the Exercise Shares must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. The Holder recognizes that the Company has no obligation to register the Warrant or, except as provided in the Warrant Purchase Agreement and the Registration Rights Agreement, the Exercise Shares, or to comply with any exemption from such registration.

(c) The Holder is aware that neither the Warrant nor the Exercise Shares may be sold pursuant to Rule 144 adopted under the Securities Act unless certain conditions are met, including, among other things, the availability of certain current public information about the Company and the expiration of the required holding period under Rule 144.

B-6

4.3

Disposition of Warrant and Exercise Shares.

(a) The Holder further agrees not to make any disposition of all or any part of the Warrant or Exercise Shares in any event unless and until one of the following occurs:

(i) The Company shall have received a letter secured by the Holder from the SEC stating that no action will be recommended to the Commission with respect to the proposed disposition;

(ii) There is then in effect a registration statement under the Securities Act covering the Exercise Shares and such disposition is made in accordance with said registration statement; or

(iii) The Holder shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, for the Holder to the effect that such disposition will not require registration of such Warrant or Exercise Shares under the Securities Act or any applicable state securities laws; provided, that so long as the Holder provides the Company with a representation letter in customary form with respect to such Rule 144 disposition, no opinion shall be required for any disposition made or to be made in accordance with the provisions of Rule 144.

5. FRACTIONAL SHARES. No fractional shares shall be issued upon the exercise of this Warrant as a consequence of any adjustment pursuant hereto. All Exercise Shares (including fractions) issuable upon exercise of this Warrant may be aggregated for purposes of determining whether the exercise would result in the issuance of any fractional share. If, after aggregation, the exercise would result in the issuance of a fractional share, the Company shall, in lieu of issuance of any fractional share, pay the Holder otherwise entitled to such fraction a sum in cash equal to the product resulting from multiplying the then Current Market Price (as of the applicable exercise date) of an Exercise Share by such fraction.

CERTAIN EVENTS.

6.1 Dividends, Subdivisions, Combinations and Reclassifications. The number and kind of securities purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the happening of any of the following. In case the Company shall (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock to holders of its outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, or (iv) issue any shares of its capital stock in a reclassification of the Common Stock, then the number of Warrant Shares purchasable upon exercise of this Warrant immediately prior thereto shall be adjusted so that the Holder shall be entitled to receive the kind and number of Warrant Shares or other securities of the Company which it would have owned or have been entitled to receive had such Warrant been exercised in advance thereof. Upon each such adjustment of the kind and number of Warrant Shares or other securities of the

B-7

Company which are purchasable hereunder, the Holder shall thereafter be entitled to purchase the number of Warrant Shares or other securities resulting from such adjustment at an Exercise Price per Warrant Share or other security obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares purchasable pursuant hereto immediately prior to such adjustment and dividing by the number of Warrant Shares or other securities of the Company resulting from such adjustment. An adjustment made pursuant to this paragraph shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event.

6.2 Corporate Transactions. In the event that the Company enters into a merger or acquisition in which the surviving or resulting “parent” entity is an entity other than the Company, then the Holder shall either exercise the Warrant or surrender the Warrant in exchange for a new warrant exercisable in return for shares or common stock of the Surviving Entity (as defined in the Warrant Purchase Agreement) (the “Replacement Warrant”), provided that:

(i) in accordance with Section 7.08 of the Warrant Purchase Agreement, if the consideration for a merger or acquisition consists of a combination of cash and stock of the Surviving Entity, then the Replacement Warrant issued to the Holder shall be solely for common stock of the Surviving Entity at an exchange ratio reflecting the total consideration paid by the Surviving Entity at the time of such change in control as if the total consideration (including cash) for each share of the Common Stock was instead paid only in common stock of the Surviving Entity at the time of such change of control (as illustrated on Exhibit C to the Warrant Purchase Agreement), and the holders of the Replacement Warrants shall have the registration rights for stock issuable upon exercise of the Replacement Warrants as provided under the Registration Rights Agreement; or

(ii) in accordance with Section 7.08 of the Warrant Purchase Agreement, if prior to the end of the Term (as defined in the Warrant Purchase Agreement), a merger or acquisition shall occur and the consideration for such merger or acquisition shall be paid entirely in cash, then the Holder of this Warrant shall then have the option to irrevocably elect within fifteen (15) Business Days of the public announcement of the merger or acquisition by written notice of election to the Company, either (A) to retain the Warrant and the right to exercise the Warrant then outstanding for Exercise Shares in accordance with the terms of this Warrant, which exercise shall occur no later than immediately prior to the closing of such merger or acquisition, or (B) to surrender the Warrant to the Company in consideration of a cash payment for each share of the Common Stock subject to purchase under this Warrant in an amount equal to 40% of the per share cash consideration to be received by a holder of one share of the Common Stock to be tendered in the merger or acquisition (the “Warrant Surrender Price”). The Warrant Surrender Price shall be paid upon the surrender of the Warrants promptly following the closing of the all cash merger or acquisition. Any failure by the Holder to deliver a written notice of election to the Company pursuant to this Section 6.3(ii) shall be deemed an election of clause (B) of this Section 6.2(ii).

B-8

Following a merger or acquisition involving consideration of cash and stock in which the Surviving Entity is other than the Company, reference to the Common Stock shall instead be deemed a reference to the common stock of the Surviving Entity. For purposes of Section 6.2(i), “common stock of the Surviving Entity” shall include stock of such corporation of any class which is not preferred as to dividends or assets over any other class of stock of such corporation and which is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the occurrence of a specified event and any warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 6.2 shall similarly apply to successive reorganizations, reclassifications, mergers, acquisitions, consolidations or disposition of assets.

6.3 Adjustment of Exercise Price. The form of this Warrant need not be changed because of any adjustment in the number, class, and kind of shares subject to this Warrant. The Company shall promptly provide a certificate from its principal accounting officer notifying the Holder in writing of any adjustment in the Exercise Price and/or the total number, class, and kind of shares (and other securities or property) issuable upon exercise of this Warrant, which certificate shall specify the Exercise Price and number, class and kind of shares (and other securities or property) under this Warrant after giving effect to such adjustment and shall set forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made.

7. NO STOCKHOLDER RIGHTS. Except to the extent specified in Section 6, this Warrant in and of itself shall not entitle the Holder to any voting rights or other rights as a stockholder of the Company. Upon the exercise of this Warrant in accordance with Section 2, the Exercise Shares so purchased shall be and be deemed to be issued to such Holder as the record owner of such shares as of the close of business on the date of such exercise.

8. TRANSFER OF WARRANT. Subject to applicable laws, the restriction on transfer set forth on the first page of this Warrant and the provisions of Article VI of the Warrant Purchase Agreement, this Warrant and all rights hereunder are transferable by the Holder, in person or by duly authorized attorney, upon delivery of this Warrant, the Assignment Form attached hereto and funds sufficient to pay any transfer taxes (in accordance with Section 2.5 hereof) payable upon the making of such transfer, to any transferee designated by Holder. The transferee will sign and deliver to the Company an investment letter in a form that is commercially reasonable, customary for use in similar transactions and reasonably satisfactory to the Company. Upon such delivery and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if properly assigned, may be exercised by a new holder for the purchase of Exercise Shares without having a new Warrant issued.

B-9

9. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms as to indemnity or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed. Any such new Warrant shall constitute an original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable by anyone.

10. RESTRICTIONS. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws. The Holder hereby acknowledges and agrees that if a registration statement under the Securities Act is not effective at the time this Warrant is exercised, the Holder shall only be permitted to exercise this Warrant by means of a “cashless exercise” pursuant to Section 2.2.

11. MODIFICATIONS AND WAIVER. This Warrant and any provision hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the Company and the Holder.

12. NOTICES, ETC. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed facsimile if sent during normal business hours of the recipient, if not, then on the next business day, (c) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one business day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the Company at the address listed on the signature page and to the Holder at the addresses on the Company records, or at such other address as the Company or Holder may designate by ten days’ advance written notice to the other party hereto.

13. ACCEPTANCE. Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein.

14. GOVERNING LAW. This Warrant and all rights, obligations and liabilities hereunder shall be governed by the laws of the State of New York without regard to the principles of conflict of laws. The Company and, by accepting this Warrant, the Holder, each irrevocably submits and consents to the exclusive jurisdiction of the courts of the State of New York located in New York County and the United States District Court for the Southern District of New York for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Warrant and the transactions contemplated hereby. The Company and, by accepting this Warrant, the Holder, each irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. EACH OF THE COMPANY AND, BY ITS ACCEPTANCE HEREOF,

B-10

THE HOLDER HEREBY WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS WARRANT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

15. DESCRIPTIVE HEADINGS. The descriptive headings of the several paragraphs of this Warrant are inserted for convenience only and do not constitute a part of this Warrant. The language in this Warrant shall be construed as to its fair meaning without regard to which party drafted this Warrant.

16. SUCCESSORS AND ASSIGNS. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of the Holder.

17. SEVERABILITY. The invalidity or unenforceability of any provision of this Warrant in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction, or affect any other provision of this Warrant, which shall remain in full force and effect.

18. REGISTRATION RIGHTS. The holder of this Warrant and of the Exercise Shares shall be entitled to the registration rights and other applicable rights with respect to the Exercise Shares as and to the extent set forth in the Warrant Purchase Agreement and the Registration Rights Agreement.

19. ENTIRE AGREEMENT. This Warrant constitutes the entire agreement between the parties pertaining to the subject matter contained in it and supersedes all prior and contemporaneous agreements, representations, and undertakings of the parties, whether oral or written, with respect to such subject matter.

[Signature Page Follows]

B-11

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized officer as of __________, 2009.

ALEXZA PHARMACEUTICALS, INC.

By:
Name:
Title:
	Address:	2091 Stierlin Court Mountain View, CA 94043 Attn: August J. Moretti Facsimile: (650) 944-7999
	W/copy to:	Cooley Godward Kronish LLP 380 Interlocken Crescent Suite 900 Broomfield, CO 80021 Attn: Brent D. Fassett, Esq. Facsimile: (720) 566-4099

B-12

NOTICE OF EXERCISE

TO:

ALEXZA PHARMACEUTICALS, INC

(1)

The undersigned hereby elects to (check one box only):

o purchase __________ shares of the Common Stock of Alexza Pharmaceuticals, Inc. (the “Company”) pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price in full for such shares.

o purchase the number of shares of Common Stock of the Company by cashless exercise pursuant to the terms of the Warrant as shall be issuable upon cashless exercise of the portion of the Warrant relating to ________ shares.

(2) Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in such other name as is specified below:

___________________________

(Name)

___________________________

(Address)

(3) If the Warrant is not being exercised in full, please issue a certificate representing a new Warrant evidencing the right of the Holder to purchase the balance of the Exercise Shares purchasable under the Warrant, such certificate to be registered in the name of the undersigned or in such other name as is specified below:

___________________________

(Name)

___________________________

(Address)

(4) The undersigned represents that (i) the aforesaid shares of Common Stock are being acquired for the account of the undersigned not with a view to, or for resale in connection with, the distribution thereof in violation of the Securities Act of 1933, as amended (the “Securities Act”) and that the undersigned has no present intention of distributing or reselling such shares in violation of the Securities Act; (ii) the undersigned is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision regarding its investment in the Company; (iii) the undersigned is experienced in making investments of this type and has such knowledge and background in financial and business matters that the undersigned is capable of evaluating the merits and risks of this investment and protecting the undersigned’s own interests; (iv) the

B-13

undersigned understands that the shares of Common Stock issuable upon exercise of this Warrant must be held indefinitely unless subsequently registered under the Securities Act or an exemption from such registration is available, and (v) the undersigned agrees not to make any disposition of all or any part of the aforesaid shares of Common Stock unless and until there is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with said registration statement, or the undersigned has provided the Company with an opinion of counsel satisfactory to the Company, stating that such registration is not required.

___________________________________ (Date)	___________________________________ (Signature)
	___________________________________ (Print Name)

B-14

ASSIGNMENT FORM

(To assign the foregoing Warrant, subject to compliance with Section 4.3 hereof, execute this form and supply required information. Do not use this form to purchase shares.)

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to

Name: __________________________________________________________________

(Please Print)

Address: ________________________________________________________________

(Please Print)

Dated: ____________________, 20__

Holder’s

Signature: _______________________________________

Holder’s
Address: _______________________________________

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

B-15

WARRANT CONVERSION EXAMPLE

In the event that Alexza is the target of a merger or acquisition in which the share purchase price paid by the acquiror is paid in cash or a mixture of cash and stock, the outstanding Warrants are to be exchanged for Replacement Warrants of the Surviving Entity such that the holders of Warrants shall receive additional Replacement Warrants in lieu of the cash portion of the share purchase price, as set out in the following example:

•	A holder hereunder holds Warrants exercisable for 100,000 shares of Alexza Common Stock at an exercise price of $10.00 per share, and the share purchase price paid by the acquiror is $15.00 per share of Alexza Common Stock, with $5.00 to be paid in cash and $10.00 to be paid in shares of the common stock of the Surviving Entity (“New Stock”), based on a price of $100.00 per share of New Stock.
•	The Warrants of the holder, exercisable for 100,000 shares of Alexza Common Stock, shall be converted as follows:
	(1)	The New Stock portion of the purchase price ($10.00 / share, or a ratio of New Stock to Alexza Common Stock of 10 to 1) shall yield Replacement Warrants exercisable for 10,000 shares of New Stock; and
	(2)	The cash portion of the purchase price ($5.00 / share, or $500,000 total) shall, at the New Stock price of $100 /share, yield Replacement Warrants exercisable for 5,000 shares of New Stock ($500,000 / $100 = 5,000).
•	Therefore, in such a scenario, a holder of Warrants exercisable for 100,000 shares of Alexza Common Stock would receive Replacement Warrants exercisable for 15,000 shares of New Stock at an exercise price of $66.67 per share ($10.00 / $15.00 = 0.67 x $100.00 = $66.67).