RIGHT OF FIRST OFFER AGREEMENT
EXHIBIT
10.5
THIS
RIGHT OF FIRST OFFER AGREEMENT (this “Agreement”)
is
made as of June 5, 2006 by and between Aeolus Pharmaceuticals, Inc., a Delaware
corporation (the “Company”),
and
Efficacy Capital Biotech Master Fund Ltd, a company formed under the laws of
Bermuda (“Efficacy”).
RECITALS
A. Efficacy
and the Company are parties to that certain Subscription Agreement dated as
of
the date hereof (the “Subscription
Agreement”)
relating to the issue and sale of shares of Common Stock of the Company
(“Common
Stock”)
and
warrants to acquire shares of Common Stock of the Company (the “Warrants”).
Terms
used herein and not otherwise defined herein shall have the meanings given
such
terms in the Subscription Agreement.
B. The
obligations of Efficacy under the Subscription Agreement are conditioned, among
other things, upon the execution and delivery of this Agreement by the
Company.
NOW,
THEREFORE, in consideration of the mutual premises and covenants set forth
herein, the parties hereto agree as follows:
1. Right
of First Offer in favor of Efficacy.
(a) Subject
to the terms and conditions specified in this Section 1, the Company hereby
grants to Efficacy a right of first offer with respect to any future sales
by
the Company of its Securities (as hereinafter defined) made at any time from
the
date hereof through December 1, 2007 (the “First
Offer Period”).
Efficacy may transfer the rights granted hereunder to any affiliate of
Efficacy that
is
an “accredited investor,” as such term is defined in Rule 501(a) of Regulation D
promulgated under the Act (as defined below), and may apportion such right
of
first offer among itself and such affiliates in such proportions as it deems
appropriate, so long as such apportionment does not cause the loss of the
exemption under Section 4(2) of the Securities Act of 1933, as amended (the
“Act”),
or
any similar exemption under applicable state securities laws in connection
with
such sale of Securities by the Company.
(b) Each
time
the Company proposes to offer any shares of, or securities convertible into
or
exchangeable or exercisable for any shares of, any class of its capital stock
or
any debt securities (whether or not convertible into or exchangeable for capital
stock) (the “Securities”)
during
the First Offer Period, the Company shall first make an offering of such
Securities to Efficacy in accordance with the following provisions:
(i) The
Company shall deliver a notice (the “Notice”)
to
Efficacy stating:
(1) its
bona
fide intention to offer such Securities,
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(2) the
number and/or principal amount of such Securities to be offered, and
(3) the
price
and other terms upon which it proposes to offer such Securities.
(ii) By
written notification received by the Company, within seven (7) calendar days
after Efficacy’s receipt of the Notice (the Notice
Period”),
Efficacy may elect to purchase or obtain, at the price and on the terms
specified in the Notice, all or any portion of such Securities. Any such
purchase or acquisition shall be consummated within ten (10) days of Efficacy’s
notice to the Company that it has elected to purchase or obtain such Securities.
(iii) If
all
Securities that Efficacy is entitled to purchase or obtain pursuant to this
Section are not elected to be purchased or obtained or if all such Securities
are not fully paid for by Efficacy (or its affiliates) within the ten (10)
days
following such election, all as provided in Section 1(b)(ii), the Company may,
during the one hundred eighty (180) day period following the expiration of
the
Notice Period, offer the remaining unsubscribed portion of such Securities
to
any person or persons at a price not substantially less than, and upon
substantially the same terms and conditions as those specified in the Notice.
If
the Company does not enter into an agreement for the sale of the Securities
within such 180 day period, or if such agreement is not consummated within
sixty
(60) days of the execution thereof, the right provided hereunder shall be deemed
to be revived and such Securities shall not be offered unless first reoffered
to
Efficacy in accordance herewith.
(c) The
right
of first offer in this Section1 shall not be applicable to:
(i) the
issuance of securities pursuant to a split or subdivision of the outstanding
shares of the Company’s capital stock or pursuant to a dividend or other
distribution entitling any holder of capital stock of the Company to receive
directly or indirectly, additional securities without payment of any
consideration by such holder;
(ii) the
issuance of shares of Common Stock or options therefor to employees,
consultants, officers, or directors of the Company directly or pursuant to
a
stock option plan or restricted stock purchase plan approved by the Board of
Directors of the Company;
(iii) the
issuance of Securities (A) in a bona fide, firmly underwritten public offering
under the Act, or (B) upon exercise of warrants or rights granted to
underwriters in connection with such a public offering;
(iv) the
issuance of shares of capital stock of the Company pursuant to the conversion
or
exercise of convertible or exercisable securities outstanding as of the date
hereof or subsequently issued after compliance with this Section 1;
(v) the
issuance of Securities in connection with a bona fide business acquisition
of or
by the Company, whether by merger, consolidation, sale of assets, sale or
exchange of stock or otherwise, each as approved by the Board of Directors
of
the Company; or
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(vi) the
issuance of Securities issued, for primarily other than fundraising purposes,
in
connection with strategic transactions approved by the Board of Directors of
the
Company and other entities, including joint ventures, collaborations,
manufacturing, marketing or distribution arrangements or technology license,
transfer or development arrangements.
2. Miscellaneous.
2.1 Successors
and Assigns.
Except
as
otherwise provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
2.2 Governing
Law; Venue.
This
Agreement is to be construed in accordance with and governed by the internal
laws of the State of California without giving effect to any choice of law
rule
that would cause the application of the laws of any jurisdiction other than
the
internal laws of the State of California to the rights and duties of the
parties. All disputes and controversies arising out of or in connection with
this Agreement shall be resolved exclusively by the state and federal courts
located in San Diego County in the State of California, and each party hereto
agrees to submit to the jurisdiction of said courts and agrees that venue shall
lie exclusively with such courts.
2.3 Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument.
2.4 Titles
and Subtitles.
The
titles and subtitles used in this Agreement are used for convenience only and
are not to be considered in construing or interpreting this
Agreement.
2.5 Notices.
Except
as
may be otherwise provided herein, all notices, requests, waivers and other
communications made pursuant to this Agreement shall be in writing and shall
be
conclusively deemed to have been duly given (a) when hand delivered to the
other party; (b) when sent by facsimile if sent between 8:00 a.m. and 5:00
p.m. recipient’s local time on a business day, or on the next business day if
sent by facsimile other than between 8:00 a.m. and 5:00 p.m. recipient’s local
time on a business day; (c) three business days after deposit in the U.S.
mail with first class or certified mail receipt requested postage prepaid and
addressed to the other party; or (d) the next business day after deposit
with a national overnight delivery service, postage prepaid, addressed to the
parties with next business day delivery guaranteed, provided that the sending
party receives a confirmation of delivery from the delivery service provider.
Each person making a communication hereunder by facsimile shall promptly confirm
by telephone to the person to whom such communication was addressed each
communication made by it by facsimile pursuant hereto but the absence of such
confirmation shall not affect the validity of any such communication. All
communications shall be sent to the address or facsimile of a party appearing
in
its signature block hereto or at such address or facsimile as such party may
designate by 10 days advance written notice to the other parties
hereto.
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2.6 Expenses.
If
any
action at law or in equity is necessary to enforce or interpret the terms of
this Agreement, the prevailing party shall be entitled to reasonable attorney’s
fees, costs and necessary disbursements in addition to any other relief to
which
such party may be entitled.
2.7 Amendments
and Waivers.
Any
term
of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Efficacy.
2.8 Severability.
If
one or
more provisions of this Agreement are held to be unenforceable under applicable
law, such provision shall be excluded from this Agreement and the balance of
the
Agreement shall be interpreted as if such provision were so excluded and shall
be enforceable in accordance with its terms.
2.9 Entire
Agreement.
This
Agreement and the documents referred to herein constitute the entire agreement
among the parties with respect to the subject matter hereof and no party shall
be liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth herein or
therein.
[Remainder
of Page Intentionally Left Blank]
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IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date
first above written.
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COMPANY:
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| AEOLUS PHARMACUETICALS, INC. | ||
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| By: | /s/ Xxxxxxx X. Xxxxxxx | |
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Xxxxxxx X. Xxxxxxx |
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| Chief Executive Officer | ||
| Address: | 00000 Xxxxxxxxx Xxxxx | |
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Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
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| Telephone: | (000) 000-0000 | |
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| Facsimile: | (000) 000-0000 | |
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EFFICACY
BIOTECH MASTER
FUND
LTD.
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| By: | Efficacy Capital Ltd. | |
| Its: | Investment Manager | |
| By: | /s/ Xxxx X. Xxxxx | |
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Xxxx X. Xxxxx |
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| Managing Partner | ||
| Address: | X.X. Xxx 0000 | |
| Xxxxxx Xxxxx Xx, XX 00000 | ||
| Telephone: | (000) 000-0000 | |
| Facsimile: | (000) 000-0000 | |
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