June 5, 2006
Exhibit
10.6
June
5,
2006
Efficacy
Biotech Master Fund Ltd.
X.X.
Xxx
0000
Xxxxxx
Xxxxx Xx, XX 00000
Attn:
Xxxx
X.
Xxxxx
Re: Observation
Rights
Dear
Xxxx:
This
letter agreement will confirm our agreement that pursuant to the purchase of
shares of common stock of Aeolus Pharmaceuticals, Inc., a Delaware corporation
(the “Company”), by Efficacy Biotech Master Fund Ltd. (“Investor”), Investor
will be entitled to the following rights:
1. Investor
shall be entitled to consult with and advise management of the Company on
significant business issues, including management’s proposed annual operating
plans, and management will meet with Investor periodically during each year
at
the Company’s facilities at mutually agreeable times for such consultation and
advice and to review progress in achieving said plans; and
2. If
Investor is not represented on the Company’s Board of Directors (the “Board”)
for any reason, the Company shall invite a representative of Investor (the
“Representative”) to attend all meetings of its Board (and all committees
thereof) in a nonvoting observer capacity and, in this respect, shall give
such
Representative copies of all notices, minutes, consents and other materials
that
it provides to its directors (including any Board committee members);
provided,
however,
that the
Company reserves the right to exclude such Representative from access to any
material or meeting or portion thereof if the Company determines in good faith
upon advice of counsel that such exclusion is necessary to preserve the
attorney-client privilege or to protect confidential proprietary information
of
the Company. Such Representative may participate in discussions of matters
brought to the Board (and any committee thereof).
Investor
agrees, and any Representative will agree, to hold in confidence and trust
and
not use or disclose any confidential information provided to or learned by
it in
connection with its rights under this letter agreement, except that Investor
and
any Representative may disclose such information to Investor’s officers,
directors and employees on a need-to-know basis.
The
rights described herein shall terminate and be of no further force or effect
upon the earliest to occur of: (i) the date the Company’s common stock is first
traded on the New York Stock Exchange or quoted on the Nasdaq National Market,
Inc. (or any successor market thereto); (ii) such time as Investor, together
with its affiliates, owns less than 2,500,000 shares of common stock of the
Company (as adjusted for any stock split, subdivision, stock dividend,
recapitalization, reclassification or the like); or (iii) the date of the
closing of a sale, lease or other disposition of all or substantially all of
the
Company’s assets or the Company’s merger into or consolidation with any other
corporation or other entity, or any other corporate reorganization, in which
the
Company’s outstanding voting stock immediately prior to such transaction
represents, immediately after such transaction, securities represents 50% or
less of the voting power of the corporation or other entity surviving such
transaction, provided
that
this
provision shall not apply to a merger, consolidation or reorganization effected
exclusively for the purpose of changing the domicile of the Company. The
confidentiality provisions hereof will survive any such
termination.
1.
This
letter agreement shall be governed by the laws of the State of California
without regard to conflicts of laws principles.
Very
truly yours,
| Aeolus Pharmaceuticals, Inc. | ||
| By: | /s/ Xxxxxxx X. Xxxxxxx, Xx. | |
|
Name: Xxxxxxx X. Xxxxxxx, Xx. |
||
| Title: Chief Executive Officer | ||
Acknowledged
and Agreed:
Efficacy
Biotech Master Fund Ltd.
By:
Efficacy Capital Ltd.
Its:
Investment Manager
| By: |
/s/
Xxxx X. Xxxxx
|
|
|
Name: Xxxx X. Xxxxx |
||
| Title: Managing Partner |
2.
