April 30, 2007 STRICTLY CONFIDENTIAL Mr. John McManus President/Chief Executive Officer Aeolus Pharmaceuticals, Inc. 23811 Inverness Place Laguna Niguel, CA 92677 Dear Mr. McManus:
Exhibit
10.3
April
30, 2007
STRICTLY
CONFIDENTIAL
Mr.
Xxxx
XxXxxxx
President/Chief
Executive Officer
00000
Xxxxxxxxx Xxxxx
Xxxxxx
Xxxxxx, XX 00000
Dear
Xx.
XxXxxxx:
This
letter (the “Agreement”) constitutes the agreement between Aeolus
Pharmaceuticals, Inc. (“Company”) and Xxxxxx & Xxxxxxx, LLC (“Xxxxxx”) that
Xxxxxx shall serve as the exclusive placement agent (the “Services”) for the
Company, on a “best efforts” basis, in connection with the proposed offer and
placement (the Offering”) by the Company of securities of the Company (the
“Securities”). The terms of the Offering and the Securities shall be mutually
agreed upon by the Company and the investors and nothing herein implies that
Xxxxxx would have the power or authority to bind the Company or an obligation
for the Company to issue any Securities or complete the Offering. The
Company expressly acknowledges and agrees that Xxxxxx’x obligations hereunder
are on a reasonable best efforts basis only and that the execution of this
Agreement does not constitute a commitment by Xxxxxx to purchase the Securities
and does not ensure the successful placement of the Securities or any portion
thereof or the success of Xxxxxx with respect to securing any other financing
on
behalf of the Company.
A. Fees
and Expenses. In connection with the Services described above,
the Company shall pay to Xxxxxx the following compensation:
1. Placement
Agent’s Fee. The Company shall pay to Rodman a cash placement fee
(the “Placement Agent’s Fee”) equal to 7% of the aggregate purchase price paid
by each purchaser of Securities that are placed in the Offering.
2. Warrants. As
additional compensation for the Services, the Company shall issue to Xxxxxx
or
its designees (provided that such designee is an “accredited investor” under
Regulation D of the Securities Act of 1933) at the closing of the Offering
(the
“Closing”), warrants (the “Xxxxxx Warrants”) to purchase that number of shares
of common stock of the Company (“Shares”) equal to 7% of the aggregate number of
Shares placed in the Offering. The Xxxxxx Warrants shall have the same terms,
including exercise price and registration rights as the warrants issued to
investors (“Investors”) in the Offering. If no warrants are issued to
Investors, the Xxxxxx Warrants shall have an exercise price equal to 120% of
the
price at which Shares are issued to Investors, an exercise period of five years
and registration rights for the Shares underlying the Xxxxxx Warrants equivalent
to those granted with respect to the Shares.
3. Expenses. In
addition to any fees payable to Xxxxxx hereunder, but only if an Offering is
consummated, the Company hereby agrees to reimburse Xxxxxx for all actual,
reasonable and documented travel and other out-of-pocket expenses incurred
in
connection with Xxxxxx’x engagement, including the reasonable fees and expenses
of Xxxxxx’x counsel. Such reimbursement shall be limited to
$25,000 without prior written approval by the Company.
0000
Xxxxxx xx xxx Xxxxxxxx, 00xx Xxxxx
Xxx
Xxxx,
XX 00000
B. Term
and Termination of Engagement. The term (the “Term”) of Xxxxxx’x
engagement will begin on the date hereof and end on the earlier of the
consummation of the Offering or 15 days after the receipt by either party hereto
of written notice of termination; provided that no such notice may be given
by
the Company for a period of 30 days after the date hereof. Notwithstanding
anything to the contrary contained herein, the provisions concerning
confidentiality, indemnification, contribution and the Company’s obligations to
pay fees and reimburse expenses (provided such fees and expenses are earned
and
incurred by Xxxxxx during the Term) contained herein will survive any expiration
or termination of this Agreement.
C. Fee
Tail. Xxxxxx shall be entitled to a Placement Agent’s Fee and
Xxxxxx Warrants, calculated in the manner provided in Paragraph A, with respect
to any subsequent public or private offering or other financing or
capital-raising transaction of any kind, excluding any capital-raising
transaction pursuant to the Company’s equity benefit programs for its employees,
directors and consultants (“Subsequent Financing”), to the extent that such
financing or capital is provided to the Company by investors whom Xxxxxx had
introduced to the Company during the Term, if such Subsequent Financing is
consummated at any time within the 18-month period following the expiration
or
termination of this Agreement (the “Tail Period”). Notwithstanding the
foregoing, in no event shall Xxxxxx be entitled to a Placement Agent’s Fee,
Xxxxxx Warrants or any other compensation from the Company pursuant to Paragraph
A or this Paragraph C for any investment made during the Tail Period by Efficacy
Biotech Master Fund, Ltd. (“Efficacy”), Xmark Opportunity Partners, LLC
(“Xmark”), or any entity or individual affiliated with or otherwise related to
the foregoing. For further clarity, the Company shall pay Xxxxxx the Placement
Agent’s Fee and Xxxxxx Warrants with respect to any investment by Efficacy or
Xmark (or any of their affiliates) in the Offering itself. Within 30
days of the termination of the engagement, Xxxxxx shall provide the Company
with
a list of such investors whom Xxxxxx introduced to the Company, provided that
such list shall not be binding on the Company with respect to any investor
as to
which the Company makes reasonable objection within 5 business days of its
receipt of the list from Xxxxxx.
D. Use
of Information. The Company will furnish Rodman such written
information as Xxxxxx reasonably requests in connection with the performance
of
its services hereunder. The Company understands, acknowledges and
agrees that, in performing its services hereunder, Xxxxxx will use and rely
entirely upon such information as well as publicly available information
regarding the Company and other potential parties to an Offering and that Xxxxxx
does not assume responsibility for independent verification of the accuracy
or
completeness of any information, whether publicly available or otherwise
furnished to it, concerning the Company or otherwise relevant to an Offering,
including, without limitation, any financial information, forecasts or
projections considered by Xxxxxx in connection with the provision of its
services.
E. Confidentiality. In
the event of the consummation or public announcement of any Offering, Xxxxxx
shall have the right to disclose its participation in such Offering, including,
without limitation, the placement at its cost of “tombstone” advertisements in
financial and other newspapers and journals. Xxxxxx agrees not to use any
confidential information concerning the Company provided to Xxxxxx by the
Company for any purposes other than those contemplated under this
Agreement.
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F. Securities
Matters. The Company shall be responsible for any and all
compliance with the securities laws applicable to it, including Regulation
D and
the Securities Act of 1933, and Rule 506 promulgated thereunder, and unless
otherwise agreed in writing, all state securities (“blue sky”) laws. Xxxxxx
agrees to cooperate with counsel to the Company in that regard.
G. Indemnity.
1. In
connection with the Company’s engagement of Xxxxxx as placement agent, the
Company hereby agrees to indemnify and hold harmless Xxxxxx and its Affiliates,
and the respective controlling persons, directors, officers, shareholders,
agents and employees of any of the foregoing (collectively the “Indemnified
Persons”), from and against any and all claims, actions, suits, proceedings
(including those of shareholders), damages, liabilities and expenses incurred
by
any of them (including the reasonable fees and expenses of counsel),
(collectively a “Claim”), which are (A) related to or arise out of (i) any
actions taken or omitted to be taken (including any untrue statements made
or
any statements omitted to be made) by the Company, or (ii) any actions taken
or
omitted to be taken by any Indemnified Person in connection with the Company’s
engagement of Xxxxxx, or (B) otherwise relate to or arise out of Xxxxxx’x
activities on the Company’s behalf under Xxxxxx’x engagement, and the Company
shall reimburse any Indemnified Person for all expenses (including the
reasonable fees and expenses of counsel) incurred by such Indemnified Person
in
connection with investigating, preparing or defending any such claim, action,
suit or proceeding, whether or not in connection with pending or threatened
litigation in which any Indemnified Person is a party. The Company
will not, however, be responsible for any Claim, which is finally judicially
determined to have resulted from the gross negligence or willful misconduct
of
any person seeking indemnification for such Claim. The Company
further agrees that no Indemnified Person shall have any liability to the
Company for or in connection with the Company’s engagement of Xxxxxx except for
any Claim incurred by the Company as a result of such Indemnified Person’s gross
negligence or willful misconduct.
2. The
Company further agrees that it will not, without the prior written consent
of
Rodman, settle, compromise or consent to the entry of any judgment in any
pending or threatened Claim in respect of which indemnification may be sought
hereunder (whether or not any Indemnified Person is an actual or potential
party
to such Claim), unless such settlement, compromise or consent includes an
unconditional, irrevocable release of each Indemnified Person from any and
all
liability arising out of such Claim.
3. Promptly
upon receipt by an Indemnified Person of notice of any complaint or the
assertion or institution of any Claim with respect to which indemnification
is
being sought hereunder, such Indemnified Person shall notify the Company in
writing of such complaint or of such assertion or institution but failure to
so
notify the Company shall not relieve the Company from any obligation it may
have
hereunder, except and only to the extent such failure results in the forfeiture
by the Company of substantial rights and defenses. If the Company so
elects or is requested by such Indemnified Person, the Company will assume
the
defense of such Claim, including the employment of counsel reasonably
satisfactory to such Indemnified Person and the payment of the fees and expenses
of such counsel. In the event, however, that legal counsel to such Indemnified
Person reasonably determines that having common counsel would present such
counsel with a conflict of interest or if the defendant in, or target of, any
such Claim, includes an Indemnified Person and the Company, and legal counsel
to
such Indemnified Person reasonably concludes that there may be legal defenses
available to it or other Indemnified Persons different from or in addition
to
those available to the Company, then such Indemnified Person may employ its
own
separate counsel to represent or defend him, her or it in any such Claim and
the
Company shall pay the reasonable fees and expenses of such
counsel. Notwithstanding anything herein to the contrary, if the
Company fails timely or diligently to defend, contest, or otherwise protect
against any Claim, the relevant Indemnified Party shall have the right, but
not
the obligation, to defend, contest, compromise, settle, assert crossclaims,
or
counterclaims or otherwise protect against the same, and shall be fully
indemnified by the Company therefor, including without limitation, for the
reasonable fees and expenses of its counsel and all amounts paid as a result
of
such Claim or the compromise or settlement thereof. In addition, with
respect to any Claim in which the Company assumes the defense, the Indemnified
Person shall have the right to participate in such Claim and to retain his,
her
or its own counsel therefor at his, her or its own expense.
3
4. The
Company agrees that if any indemnity sought by an Indemnified Person hereunder
is held by a court to be unavailable for any reason then (whether or not Xxxxxx
is the Indemnified Person), the Company and Xxxxxx shall contribute to the
Claim
for which such indemnity is held unavailable in such proportion as is
appropriate to reflect the relative benefits to the Company, on the one hand,
and Xxxxxx on the other, in connection with Xxxxxx’x engagement referred to
above, subject to the limitation that in no event shall the amount of Xxxxxx’x
contribution to such Claim exceed the amount of fees actually received by Xxxxxx
from the Company pursuant to Xxxxxx’x engagement. The Company hereby
agrees that the relative benefits to the Company, on the one hand, and Xxxxxx
on
the other, with respect to Xxxxxx’x engagement shall be deemed to be in the same
proportion as (a) the total value paid or proposed to be paid or received by
the
Company or its stockholders as the case may be, pursuant to the Offering
(whether or not consummated) for which Xxxxxx is engaged to render services
bears to (b) the fee paid or proposed to be paid to Xxxxxx in connection with
such engagement.
5. The
Company’s indemnity, reimbursement and contribution obligations under this
Agreement (a) shall be in addition to, and shall in no way limit or otherwise
adversely affect any rights that any Indemnified Party may have at law or at
equity and (b) shall be effective whether or not the Company is at fault in
any
way.
H. Limitation
of Engagement to the Company. The Company acknowledges that
Xxxxxx has been retained only by the Company, that Xxxxxx is providing services
hereunder as an independent contractor (and not in any fiduciary or agency
capacity) and that the Company’s engagement of Xxxxxx is not deemed to be on
behalf of, and is not intended to confer rights upon, any shareholder, owner
or
partner of the Company or any other person not a party hereto as against Xxxxxx
or any of its affiliates, or any of its or their respective officers, directors,
controlling persons (within the meaning of Section 15 of the Act or Section
20
of the Securities Exchange Act of 1934), employees or agents. Unless
otherwise expressly agreed in writing by Xxxxxx, no one other than the Company
is authorized to rely upon this Agreement or any other statements or conduct
of
Xxxxxx, and no one other than the Company is intended to be a beneficiary of
this Agreement. The Company acknowledges that any recommendation or
advice, written or oral, given by Xxxxxx to the Company in connection with
Xxxxxx’x engagement is intended solely for the benefit and use of the Company’s
management and directors in considering a possible Offering, and any such
recommendation or advice is not on behalf of, and shall not confer any rights
or
remedies upon, any other person or be used or relied upon for any other
purpose. Xxxxxx shall not have the authority to make any commitment
binding on the Company. The Company, in its sole discretion, shall
have the right to reject any investor introduced to it by Xxxxxx. The
Company agrees that it will perform and comply with the covenants and other
obligations set forth in the purchase agreement and related transaction
documents between the Company and the investors in the Offering, and that Xxxxxx
will be entitled to rely on the representations, warranties, agreements and
covenants of the Company contained in such purchase agreement and related
transaction documents as if such representations, warranties, agreements and
covenants were made directly to Xxxxxx by the Company.
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I. Limitation
of Xxxxxx’x Liability to the Company. Xxxxxx and the Company
further agree that neither Xxxxxx nor any of its affiliates or any of its their
respective officers, directors, controlling persons (within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act of 1934), employees
or
agents shall have any liability to the Company, its security holders or
creditors, or any person asserting claims on behalf of or in the right of the
Company (whether direct or indirect, in contract, tort, for an act of negligence
or otherwise) for any losses, fees, damages, liabilities, costs, expenses or
equitable relief arising out of or relating to this Agreement or the Services
rendered hereunder, except for losses, fees, damages, liabilities, costs or
expenses that arise out of or are based on any action of or failure to act
by
Xxxxxx and that are finally judicially determined to have resulted solely from
the gross negligence or willful misconduct of Xxxxxx.
J. Governing
Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements
made
and to be fully performed therein. Any disputes which arise under
this Agreement, even after the termination of this Agreement, will be heard
only
in the state or federal courts located in the City of New York, State of New
York. The parties hereto expressly agree to submit themselves to the
jurisdiction of the foregoing courts in the City of New York, State of New
York.
The parties hereto expressly waive any rights they may have to contest the
jurisdiction, venue or authority of any court sitting in the City and State
of
New York. In the event of the bringing of any action, or suit by a
party hereto against the other party hereto, arising out of or relating to
this
Agreement, the party in whose favor the final judgment or award shall be entered
shall be entitled to have and recover from the other party the costs and
expenses incurred in connection therewith, including its reasonable attorneys’
fees. Any rights to trial by jury with respect to any such action,
proceeding or suit are hereby waived by Xxxxxx and the Company.
K. Notices. All
notices hereunder will be in writing and sent by certified mail, hand delivery,
overnight delivery or telefax, if sent to Xxxxxx, to Xxxxxx & Xxxxxxx, LLC,
0000 Xxxxxx xx xxx Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000, Telefax
number (000) 000-0000, Attention: Xxxxxx Xxxxx, and if sent to the Company,
to
00000 Xxxxxxxxx Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxxx 00000, Telefax number (000)
000-0000, Attention: Chief Executive Officer. Notices sent by
certified mail shall be deemed received five days thereafter, notices sent
by
hand delivery or overnight delivery shall be deemed received on the date of
the
relevant written record of receipt, and notices delivered by telefax shall
be
deemed received as of the date and time printed thereon by the telefax
machine.
L. Miscellaneous. This
Agreement shall not be modified or amended except in writing signed by Xxxxxx
and the Company. This Agreement shall be binding upon and inure to
the benefit of both Xxxxxx and the Company and their respective assigns,
successors, and legal representatives. This Agreement constitutes the
entire agreement of Xxxxxx and the Company with respect to the subject matter
hereof and supersedes any prior agreements. If any provision of this Agreement
is determined to be invalid or unenforceable in any respect, such determination
will not affect such provision in any other respect, and the remainder of the
Agreement shall remain in full force and effect. This Agreement may
be executed in counterparts (including facsimile counterparts), each of which
shall be deemed an original but all of which together shall constitute one
and
the same instrument.
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In
acknowledgment that the foregoing correctly sets forth the understanding reached
by Xxxxxx and the Company, please sign in the space provided below, whereupon
this letter shall constitute a binding Agreement as of the date indicated
above.
Very
truly yours,
XXXXXX
&
XXXXXXX,
LLC
By
__/s/ Xxxx
Borer_______________
Name: Xxxx
Xxxxx
Title: CEO
Accepted
and Agreed:
By
___/s/ Xxxxxxx X. McManus________
Name: Xxxxxxx
X. XxXxxxx
Title: Chief
Financial Officer
