EXHIBIT 10.120

 

McManus & Company, Inc.

23811 Inverness Place

Laguna Niguel, California 92677

(949) 481-9820        Fax: (949) 481-9829

 

June 16, 2005

 

Richard Burgoon, Jr.

Chief Executive Officer

Aeolus Pharmaceuticals, Inc.

79 T. W. Alexander Drive

4401 Research Commons, Suite 200

Research Triangle Park, NC 22709

 

Dear Rick:

 

This will confirm the terms of our mutual understanding and agreement
(“Agreement”) in connection with the efforts of McManus & Company, Inc. (“M&C”)
to provide consulting services to Aeolus Pharmaceuticals, Inc. or its
affiliates, sister companies or principals (collectively the “Company” or
“Aeolus”) as follows:

 

1. Appointment.

 

The Company hereby authorizes M&C to provide the Company services in connection
with the outsourcing of the accounting, finance and administration functions.
These services shall include but are not limited to:

 

  •   Accounts payable/accounts receivable supervision

 

  •   Cash management

 

  •   Purchasing management

 

  •   Budgeting

 

  •   Audit coordination, facilitation and administration

 

  •   Human resources administration

 

  •   Insurance administration

 

  •   Contract administration

 

  •   Shareholder services

 

  •   Accounting

 

  •   Financial statement preparation

 

  •   Lease administration

 

  •   Patent coordination

 

  •   Legal coordination

 

  •   Board of directors facilitation/minutes, and

 

  •   Other corporate activities

 

CONFIDENTIAL

      Aeolus Pharmaceuticals, Inc.

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Furthermore, it is agreed that M&C will become an agent of the Company. Michael
P. McManus is appointed Chief Accounting Officer and Treasurer and will perform
all duties typically associated with such position as well as be given all of
the responsibilities.

 

It is understood that M&C is acting as a consultant only and is not a licensed
securities or real estate broker or dealer.

 

M&C may, at M&C’s own expense, use employees or consultants to perform the
Services under this Agreement.

 

Michael P. McManus, as an officer of Aeolus will be covered under the Company’s
insurance plans including its directors and officers policy.

 

2. Compensation.

 

Outsourcing Compensation

 

The Company will pay M&C a monthly payment of $12,500 in cash for the duration
of this agreement beginning on June 15, 2005. The parties each agree to review,
in good faith, the monthly payment after September 15, 2005 to determine, in
good faith and based upon the work-load requirements of the Company, if the
monthly compensation needs to be adjusted.

 

Incentive Compensation.

 

On the last day of each month during the term of this Agreement, Michael P.
McManus will be granted a stock option to purchase 1,250 shares of the Aeolus
Pharmaceuticals, Inc. Common Stock, par value $0.01 per share, with an exercise
price equal to the closing stock price on the last day of that month.

 

Other Compensation

 

Michael P. McManus shall also be entitled to receive any other compensation
given to other executive officers of the Company at a level commensurate with
their levels of responsibilities and at a value determined by the board of
directors. Other compensation would include but not be limited to stock option
grants, long-term incentive plans and cash bonuses.

 

Out-of-Pocket Expenses

 

Aeolus will reimburse M&C for actual and reasonable out-of-pocket expenses on a
monthly basis.

 

3. Fees.

 

The fees due M&C as set forth in Section 2 above shall be paid by bank or
cashier’s check.

 

CONFIDENTIAL

      Aeolus Pharmaceuticals, Inc.

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4. Term

 

The initial term of this Agreement shall begin as of June 15, 2005 and shall
expire June 15, 2006. Thereafter, this Agreement will automatically renew for
one (1) year periods, unless either party gives to the other written notice at
least ninety (90) days prior to the commencement of the next year, of such
party’s intent not to renew this Agreement.

 

5. Termination.

 

This Agreement may be terminated at the option of Aeolus at any time for cause.
For purposes of this Agreement, “cause” shall be defined as any of the
following, provided however, that the board of directors of the Corporation by a
duly adopted resolution has determined the presence of such cause in good faith:
(i) M&C’s material breach of any of its duties and responsibilities under this
Agreement; or, (ii) M&C’s commission of an act of fraud or willful misconduct or
gross negligence in the performance of its duties.

 

Aeolus shall have the right to terminate this Agreement without cause at any
time immediately upon written notice to M&C, but any such termination shall be
without prejudice to M&C’s rights to receive all payments under this agreement.
Such payment will be due and payable upon termination of this agreement.

 

M&C, Inc. shall have the right to terminate this Agreement with or without cause
at any time.

 

6. Indemnification

 

The Company agrees to indemnify and hold M&C and each of its respective
affiliates and their respective directors, officers, employees, agents and
controlling persons harmless from and against any loss, damage, expense
(including legal and other related fees and expenses), liability or claim
arising out of negligent or other wrongful actions or inactions by the Company,
its affiliates or its officers or employees. M&C shall advise the Company in
writing of any such claim of liability within a reasonable time after first
receipt of any notice or other information which would suggest the likelihood of
such claim or action.

 

While representing itself as an agent of the Company, M&C agrees to indemnify
and hold the Company harmless from and against any loss, damage, expense
(including legal and other related fees and expenses), liability or claim
arising out of negligent or other wrongful actions by M&C or its officers or
employees under this Agreement. The Company shall advise M&C in writing of any
such claim of liability within a reasonable time after first receipt of any
notice or other information which would suggest the likelihood of such claim or
action.

 

CONFIDENTIAL

      Aeolus Pharmaceuticals, Inc.

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7. Accurate Information.

 

The Company hereby represents and warrants that all information provided M&C
pertaining to the Company shall be true and correct; and the Company shall hold
M&C harmless from any and all liability, expenses or claims arising from the
disclosure or use of such information.

 

8. Applicable Law.

 

This Agreement is governed by and construed under the laws of the State of
California, and any action brought by either party against the other party to
enforce or interpret this Agreement shall be brought in an appropriate court of
such State.

 

9. Notices.

 

Any notice, request, instruction or other document to be given under this
Agreement by either party to the other party shall be in writing and (a)
delivered personally; (b) sent by telecopy; (c) delivered by overnight express
(charges prepaid); or (d) sent by registered or certified mail, postage prepaid:

 

If to Company to:    Aeolus Pharmaceuticals, Inc., 4401 Research Commons, Suite
200, P.O. Box 14287, Research Triangle Park, NC 27709 If to M&C to:    McManus &
Company, Inc., 23811 Inverness Place, Laguna Niguel, CA 92677

 

or at such other address for a party as shall be specified by like notice. Any
notice which is delivered personally, telecopied or sent by overnight express in
the manner provided in this section 8 shall be deemed to have been duly given to
the party to whom it is addressed upon actual receipt by such party. Any notice
which is addressed and mailed in the manner herein provided shall be
conclusively presumed to have been given to the party to whom it is addressed at
the close of business, local time of the recipient, on the third business day
after it is so placed in the mail.

 

10. Complete Understanding.

 

This Agreement shall constitute the entire agreement and understanding between
the parties and supersedes all prior agreements and understanding, both written
and oral, between the parties hereto with respect to the subject matter.

 

11. Headings and Capitalized Terms.

 

The headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of its provisions.

 

CONFIDENTIAL

      Aeolus Pharmaceuticals, Inc.

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12. Successors and Assigns.

 

The terms and conditions of this Agreement shall insure to the benefit of and be
binding upon the parties and their respective successors and permitted assigns.
Neither M&C nor Company may assign their rights or delegate their obligations
under this Agreement without the prior written consent of the other.

 

13. Modification and Waiver.

 

None of the terms or conditions of this Agreement may be waived except in
writing by the party that is entitled to the benefits thereof. No supplement,
modification or amendment of this Agreement shall be binding unless executed in
writing by M&C and Company. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision (whether or
not similar) nor shall such waiver constitute a continuing waiver.

 

14. Invalid Provisions.

 

If any provision of this Agreement is held to be illegal, invalid or
unenforceable under present or future laws by any court of competent
jurisdiction, such illegality, invalidity or unenforceability shall not affect
the legality, enforceability or validity of any other provisions or of the same
provision as applied to any other fact or circumstance and such illegal,
unenforceable or invalid provision shall be modified to the minimum extent
necessary to make such provision legal, valid or enforceable, as the case may
be.

 

If the foregoing correctly sets forth our Agreement, please sign and return the
enclosed copy of this letter.

 

Sincerely,

/s/ Michael P. McManus

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Michael P. McManus Executive Vice President McManus & Co., Inc

 

AGREED TO AND ACCEPTED AS OF THE DATE HEREOF

 

By:  

/s/ Richard Burgoon, Jr.

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    Richard Burgoon, Jr.     Chief Executive Officer     Aeolus Pharmaceuticals,
Inc.

 

CONFIDENTIAL

      Aeolus Pharmaceuticals, Inc.