Oxygen Biotherapeutics (NASDAQ:OXBT) has reached a tentative settlement with institutional investors who claimed that they didn’t get first crack at OxyBio shares when the company raised money in 2011.

The Morrisville company said today that the tentative agreement calls for OxyBio to pay $600,000 cash in six quarterly installments. The deal comes just before the parties were scheduled to head back to court on March 7.

Tenor Opportunity Master Fund filed the suit August 2011 in the U.S. District Court for the Southern District of New York. The fund claimed OxyBio’s June 2011 financing, which raised $4.6 million, breached the firm’s right of first offer. In that financing, OxyBio said it raised the money from an institutional investor that it did not identify.

Last July, the court agreed with Tenor that the company breached the deal. The matter was headed to a jury trial to determine what damages Tenor suffered from the breach of the agreement. The tentative settlement includes other investors Aria Opportunity Fund and Parsoon Opportunity Fund. The settlement is still subject to approval from Tenor’s investment committee and OxyBio’s board of directors. But the company said that it admits no wrongdoing as part of the settlement.

Oxygen Biotherapeutics is a drug developer focused on therapies that increase the delivery of oxygen to damaged tissue. The company’s lead candidate, OxyCyte, is in mid-stage clinical trials as an experimental treatment for traumatic brain injury.

In a statement, interim CEO Michael Jebsen said that the settlement allows the company to continue development of its therapeutic candidates “without the distraction and additional legal fees further litigation of this matter would have generated.”