CONVERSION AGREEMENT
EXHIBIT
10.2
THIS
CONVERSION
AGREEMENT
(this
“Agreement”)
is made
and entered into as of June 5, 2006, by
and
among AEOLUS
PHARMACEUTICALS,
INC.,
a
Delaware corporation (the “Company”),
and
the parties who are signatories hereto.
RECITALS
WHEREAS,
the
Company is contemplating the issuance and sale of shares (the “Shares”)
of its
common stock (the “Common
Stock”)
and
warrants to purchase shares of Common Stock in a private placement (the
“Private
Placement”)
to
EFFICACY
BIOTECH MASTER FUND LTD.
(“Efficacy”)
and
RONIN CAPITAL, LLC (“Ronin”)
pursuant to that certain Subscription Agreement, dated as of even date herewith,
by and among the Company, Efficacy and Ronin (the “Subscription
Agreement”);
WHEREAS,
the
Subscription Agreement contemplates that the Shares shall be sold at a purchase
price of $0.50 per share;
WHEREAS,
pursuant to Section 6(d) of the Company’s Certificate of Designations,
Preferences and Rights of Series A Convertible Preferred Stock to the
Company’s Amended and Restated Certificate of Incorporation (the “Certificate
of Designations”),
in the
event the Company shall issue or sell (or be deemed to have issued or sold)
certain shares of its Common Stock (a
“Trigger
Security”)
for a
consideration per share that is less than the then-applicable conversion price
(the “Conversion
Price”)
of the
Company’s Series A Preferred Stock (the “Series
A Preferred”),
then
effective as of the close of business on the first effective date of such sale
or issuance (the “Effective
Time”),
the
Conversion Price shall be automatically reduced to the lowest price per share
at
which any such Trigger Security was issued or sold or deemed to have been issued
or sold;
WHEREAS,
the
Conversion Price is currently $1.00 per share;
WHEREAS,
each
Share shall be a Trigger Security pursuant to the terms of the Certificate
of
Designations, whereby the sale of the Shares at a purchase price (the
“Purchase
Price”)
of less
than $1.00 per share in the Private Placement shall trigger an automatic
reduction of the Conversion Price to the Purchase Price, effective as of the
Effective Time;
WHEREAS,
it is a
condition to consummate the Private Placement that the holders of all of the
Company’s outstanding shares of Series A Preferred (the “Series
A Holders”)
execute
and deliver this Agreement whereby they agree that all of their outstanding
shares of Series A Preferred shall automatically convert into shares of Common
Stock immediately after the Conversion Price is reduced to $0.50 per share
in
accordance with Section 6(a) of the Certificate of Designations as a result
of
the first sale or issuance of the Shares in the Private Placement;
and
WHEREAS,
the
Series A Holders wish to assist the Company in proceeding with the Private
Placement and, in connection therewith, desire to effect the conversion of
their
Series A Preferred into Common Stock as set forth herein.
AGREEMENT
NOW,
THEREFORE,
the
parties to this Agreement, for good and valuable consideration, the receipt
and
sufficiency of which are acknowledged and agreed, hereby agree as
follows:
1. Agreement
to Convert.
Provided
Efficacy and Ronin purchase at least $5 million of Shares from the Company
in
the Private Placement in the aggregate, then, in
accordance with Section 6(a) of the Certificate of Designations, each
Series
A
Holder hereby converts all shares of its Series A Preferred into shares of
Common Stock, effective immediately following and contingent upon the
effectiveness of the adjustment of the Conversion Price from $1.00 per share
to
$0.50 per share triggered by the first closing of the Private Placement (the
“Adjustment”),
as
provided under Section 6(d) of the Certificate of Designations. Subject to
the
foregoing sentence, this Agreement constitutes written notice to the Company
by
each Series A Holder that such Series A Holder elects to convert its shares
of
Series A Preferred into Common Stock, as required under Section 6(a) of the
Certificate of Designations.
2. Third
Party Beneficiaries.
It is the clear intent of the Company and the Series A Holders that Efficacy
and
Ronin be the intended third party beneficiaries for purposes of this Agreement
and that the principal benefits and remedies under or by reason of this
Agreement be conferred upon Efficacy and Ronin. This Agreement will be
fully enforceable in every respect, at law or in equity, by Efficacy and Ronin,
or either of them as the intended third party beneficiaries hereunder.
This Section 2 shall survive the termination of this Agreement.
3. Sunset.
Notwithstanding
anything to the contrary set forth herein, this Agreement and all obligations
hereunder shall terminate at 5:00 p.m. Pacific Time on June 30, 2006 if
none of the Shares have been issued or sold as of such time.
4. Registration
of Additional Shares. The
Company hereby acknowledges that pursuant to Section 2(a)(ii) of that certain
Registration
Rights Agreement made and entered into as of November 21, 2005, by and among
the
Company and certain investors listed on the signature pages thereto, the Company
is required to effect a registration for resale pursuant to a registration
statement filed with the Securities and Exchange Commission the additional
shares of Common Stock issuable upon conversion of the Series A Preferred as
a
result of the Adjustment.
5. Miscellaneous.
(a) Entire
Agreement; Binding Effect.
This
Agreement constitutes the entire agreement of the parties hereto related to
the
matters set forth in Sections 1 through 4 hereof, and supersedes all prior
agreements between such parties, whether written or oral, related to such
subject matter. 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 hereto.
(b) Amendment;
Waiver.
Neither
this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by each of the parties
hereto.
(c) Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of California as applied to contracts among California residents entered
into and performed entirely within California.
(d) Counterparts;
Facsimile.
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.
Facsimile signatures shall be as effective as original signatures.
(e) Further
Assurances.
Each
party hereto agrees to execute and deliver, or cause to be executed and
delivered, such further instruments or documents or take such other actions
as
may be reasonably necessary to consummate the transactions contemplated by
this
Agreement.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS
WHEREOF,
the
parties hereto have executed this CONVERSION
AGREEMENT as
of the
date first written above.
|
COMPANY:
AEOLUS
PHARMACEUTICALS,
INC.
|
||
| |
|
|
| By: | /s/ Xxxxxxx X. Xxxxxxx, Xx. | |
|
Name:
Xxxxxxx X. Xxxxxxx, Xx.
Its:
Chief Executive Officer
|
||
|
EFFICACY:
EFFICACY
BIOTECH
MASTER
FUND
LTD.
|
||
| |
By: |
/s/ Efficacy
Capital Ltd.
Its: Investment Manager |
| By: | /s/ Xxxx X. Xxxxx | |
|
Name:
Xxxx
X. Xxxxx
Title:
Managing Partner
|
||
|
RONIN:
RONIN
CAPITAL,
LLC
|
||
| |
|
|
|
By:
|
/S/ Xxxx Xxxxxxxx | |
| Name: | Xxxx Xxxxxxxx III | |
| Title: | CEO | |
[SIGNATURE PAGE TO CONVERSION AGREEMENT]
|
SERIES A HOLDERS:
XMARK OPPORTUNITY FUND, L.P.
|
||
| By: | /s/ Xxxxx X. Xxxxxxxx | |
| Name: | Xxxxx X. Xxxxxxxx | |
|
Its:
|
COO | |
|
XMARK OPPORTUNITY FUND, LTD.
|
||
| By: | /s/ Xxxxx X. Xxxxxxxx | |
| Name: | Xxxxx X. Xxxxxxxx | |
|
Its:
|
COO | |
|
XMARK JV INVESTMENT PARTNERS, LLC
|
||
| By: | /s/ Xxxxx X. Xxxxxxxx | |
| Name: | Xxxxx X. Xxxxxxxx | |
|
Its:
|
COO | |
[SIGNATURE PAGE TO CONVERSIONAGREEMENT]
|
BIOTECHNOLOGY VALUE FUND, L.P.
By: BVF Partners L.P., its General Partner |
||
| By: | /s/ Xxxx Xxxxxxx | |
| Name: | Xxxx Xxxxxxx | |
|
Title:
|
President | |
|
BIOTECHNOLOGY VALUE FUND II, L.P.
By: BVF Partners L.P., its General Partner |
||
| By: | /s/ Xxxx Xxxxxxx | |
| Name: | Xxxx Xxxxxxx | |
|
Title:
|
President | |
|
BVF INVESTMENTS, L.L.C.
By: BVF
Partners L.P., its Managing Partner
By: BVF
Inc., its General Partner
|
||
| By: | /s/ Xxxx Xxxxxxx | |
| Name: | Xxxx Xxxxxxx | |
|
Title:
|
President | |
|
INVESTMENT 10 L.L.C.
By: BVF
Partners L.P., its Managing Partner
By: BVF
Inc., its Attorney-In-Fact
|
||
| By: | /s/ Xxxx Xxxxxxx | |
| Name: | Xxxx Xxxxxxx | |
|
Title:
|
President | |
[SIGNATURE
PAGE
TO
CONVERSION
AGREEMENT]
|
BIOMEDICAL OFFSHORE VALUE FUND, LTD.
|
||
| By: | /s/ Xxxxx X. Xxxxxx | |
| Name: | Xxxxx X. Xxxxxx | |
|
Its:
|
Chief Financial Officer | |
[SIGNATURE
PAGE
TO
CONVERSION
AGREEMENT]
