Exhibit 10.1
AMENDMENT AGREEMENT TO THE
SECURITIES PURCHASE AND EXCHANGE AGREEMENT
 
THIS AMENDMENT AGREEMENT TO THE SECURITIES PURCHASE AND EXCHANGE AGREEMENT (this
"Amendment Agreement"), dated as of December 24, 2009 (the "Effective Date"), is
made and entered into by and among Aeolus Pharmaceuticals, Inc. (the "Company"),
Xmark Opportunity Fund, L.P. ("XLP"), Xmark Opportunity Fund, Ltd. ("XLTD") and
Xmark JV Investment Partners, LLC ("XJV" and, together with XLP and XLTD, the
"Buyers" and, each individually, a "Buyer").  All defined terms used in this
Amendment Agreement but not defined herein shall have the meaning set forth for
such terms in that certain Securities Purchase and Exchange Agreement, by and
among the Company and the Buyers, dated as of October 6, 2009 (the "Original
Agreement").

WITNESSETH THAT:

WHEREAS, the Buyers and the Company are parties to the Original Agreement;

WHEREAS, the Original Agreement provided for, among other things, that as of
October 6, 2009 (the "Original Closing Date"), the Company and the Buyers shall
effect the Note Conversion;

WHEREAS, as of the Original Closing Date, the Company and the Buyers effected
the Note Conversion at the conversion price set forth in the Notes, and,
accordingly, the Company issued to the Buyers, as of the Original Closing Date,
collectively, 2,857,143 Shares of its Common Stock, and, in exchange for such
shares of Common Stock, the Buyers surrendered the Notes to the Company;

WHEREAS, the conversion price set forth in the Notes was $0.35 per share of
Common Stock (the "Old Conversion Price");

WHEREAS, in consideration of the various agreements, covenants, undertakings and
transactions to be undertaken by and among the parties pursuant to the Original
Agreement, the Company and the Buyers agreed that the Notes would be converted
at a conversion price equal to $0.28 per share of Common Stock (the "New
Conversion Price");

WHEREAS, because of a misunderstanding, the Original Agreement provided that the
Notes were to be converted at the Old Conversion Price instead of the New
Conversion Price;

WHEREAS, because of the misunderstanding, the Buyers received 2,857,143 Shares
of Common Stock upon the conversion of the Notes instead of 3,571,429 Shares of
Common Stock that was agreed by and among the Company and the Buyers to be
received by the Buyers in conversion of their Notes;

 
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WHEREAS, the Company and the Buyers desire to (i) correct the Original Agreement
such that the Original Agreement will reflect the correct understanding and
agreement by and among the Company and the Buyers that the Notes should be
converted at the New Conversion Price instead of the Old Conversion Price and
(ii) issue to the Buyers, in the aggregate, 714,286 Shares of Common Stock that
the Buyers would have received as of the Original Closing Date by converting the
Notes at the New Conversion Price instead of the Old Conversion Price;

WHEREAS, the parties believe it is in their respective best interests to correct
the misunderstanding with respect to the Original Agreement by the consensual
agreement as more fully set forth in this Amendment Agreement as opposed to
utilizing any other resolution mechanism; and

WHEREAS, the parties believe it to be in their respective best interests to set
forth herein the mutual understandings and agreements reached by and among them
with respect to the subject matter hereof, as more particularly provided herein.

NOW, THEREFORE, in consideration of the foregoing premises, the mutual covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:

Section 1. Amendment of the Original Agreement.

(a)           Recital C in the Original Agreement is hereby amended and restated
in its entirety as follows:

C.           Buyers and the Company are parties to a Securities Purchase
Agreement, dated as of August 1, 2008 (as amended as of the date hereof, the
"Note Purchase Agreement"), pursuant to which, among other things, Buyers
acquired (i) $1,000,000 in aggregate principal amount of the Company's Senior
Convertible Notes (the "Notes"), which are convertible into shares (the
"Conversion Shares") of Common Stock at a conversion price of $0.35 per share
(subject to adjustment), (ii) warrants (the "Note Warrants") to acquire up to an
aggregate of 2,000,000 shares of Common Stock (the "Note Warrant Shares") at an
exercise price of $0.50 per share (subject to adjustment), and (iii) the option
(the "Purchase Option") to acquire up to $4,000,000 in additional aggregate
principal amount of the Notes having the terms specified in the Note Purchase
Agreement and additional Note Warrants to acquire up to 8,000,000 additional
Note Warrant Shares at an exercise price of $0.35 per share (subject to
adjustment).

 
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(b)           Recital H in the Original Agreement is hereby amended and restated
in its entirety as follows:

H.           Simultaneous with the consummation of the Financing, the Company
and the Buyers wish to effect the following transactions (collectively, the
"Conversion"):  (i) the conversion of the Notes into the Conversion Shares at
$0.28 per share (the "Note Conversion"); (ii) the exchange (the "Warrant
Exchange") of the outstanding 2005 Warrants, the Note Warrants and the March
Warrants for new warrants (the "Exchange Warrants"), each in substantially the
form of the New Warrants, to purchase an aggregate of 17,542,857 shares of
Common Stock (the "Exchange Warrant Shares") at an exercise price equal to the
Exercise Price; and (iii) the exchange (the "Purchase Option Exchange") of the
Purchase Option for new warrants (the "Option Exchange Warrants"), each in
substantially the form of the New Warrants to purchase an aggregate of
14,285,714 shares of Common Stock (the "Option Exchange Warrant Shares") at an
exercise price equal to the Exercise Price.

(c)           Column (3) of the Conversion Schedule annexed to the Original
Agreement is hereby amended and restated as follows:

(3)
Number of Shares to be issued upon conversion of Notes
1,071,429
2,500,000
0
3,571,429
(3)

Section 2. Transfer of Additional Common Stock.

(a)           As of the Effective Date, the Company shall deliver to XLP one or
more stock certificates evidencing 214,286 Shares of Common Stock that would
have been delivered to XLP on the Original Closing Date but for the
misunderstanding of the parties as more fully set forth herein.

 
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(b)           As of the Effective Date, the Company shall deliver to XLTD one or
more stock certificates evidencing 500,000 Shares of Common Stock that would
have been delivered to XLTD on the Original Closing Date but for the
misunderstanding of the parties as more fully set forth herein.

Section 3. Representations and Warranties.

(a)           The Company represents and warrants that to the best of its
knowledge the representations and warranties of the Company as set forth in the
Original Agreement, as such representations and warranties may be effected by
the terms and provisions set forth in this Amendment Agreement, are true and
correct in all material respects as of the Original Closing Date.

(b)           The Company represents and warrants that the Company has the
requisite corporate power and authority to enter into, deliver and perform its
obligations under this Amendment Agreement and each of the other agreements
entered into by the Company and any Buyer pursuant to this Amendment Agreement
(collectively, the "Transaction Documents"), and to issue the Shares in
accordance with the terms hereof and thereof.  The execution and delivery of
this Amendment Agreement and the other Transaction Documents by the Company and
the consummation by the Company of the transactions contemplated hereby and
thereby, including, without limitation, the issuance of the Shares, have been
duly authorized by the Company's Board of Directors, and no further filing,
consent or authorization is required by the Company, its Board of Directors or
its stockholders.  This Amendment Agreement and the other Transaction Documents
of even date herewith have been duly executed and delivered by the Company as of
the Effective Date, and constitute the legal, valid and binding obligations of
the Company, enforceable against the Company in accordance with their respective
terms, except (i) as may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights generally, and (ii) as limited by laws relating to specific
performance, injunctive relief or other equitable remedies.

(c)           Each of the Buyers represents and warrants, severally and not
jointly, that to the best of their respective knowledge the representations and
warranties as set forth in the Original Agreement, as such representations and
warranties may be effected by the terms and provisions set forth in this
Amendment Agreement, are true and correct in all material respects as of the
Original Closing Date.

(d)           Each of the Buyers represents and warrants, severally and not
jointly, that the execution, delivery and performance by such Buyer of this
Amendment Agreement and each of the Transaction Documents to which such Buyer is
a party have been duly and validly authorized, executed and delivered on behalf
of such Buyer and shall constitute the legal, valid and binding obligations of
such Buyer enforceable against such Buyer in accordance with their respective
terms, except (i) as may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights generally, and (ii) as limited by laws relating to
specific performance, injunctive relief or other equitable remedies.

 
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Section 4. Releases.

(a)           Upon the consummation of the transactions set forth herein, the
Company hereby releases, acquits and forever discharges the Buyers of and from
all manner of actions, causes of action, suits, debts, dues, sums of money,
accounts, reckonings, bonds, bills, controversies, promises, damages, judgments,
executions, claims, liabilities and demands, whether in law or equity, resulting
from the misunderstanding as more fully set forth herein.

(b)           Upon the consummation of the transactions set forth herein, the
Buyers hereby release, acquit and forever discharge the Company of and from all
manner of actions, causes of action, suits, debts, dues, sums of money,
accounts, reckonings, bonds, bills, controversies, promises, damages, judgments,
executions, claims, liabilities and demands, whether in law or equity, resulting
from the misunderstanding as more fully set forth herein.

Section 5. Acknowledgment.

The parties acknowledge and agree that the transactions contemplated under this
Amendment Agreement and the Transaction Documents shall not modify or be deemed
to modify the terms of the Warrants in any respect.

Section 6. Governing Law; Jurisdiction; Jury Trial.

All questions concerning the construction, validity, enforcement and
interpretation of this Amendment Agreement shall be governed by the internal
laws of the State of New York, without giving effect to any choice of law or
conflict of laws provision or rule (whether of the State of New York or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York.  Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of New York, the borough of Manhattan, for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of such suit,
action or proceeding is improper.  Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by mailing a copy thereof to such party at the address for such
notices to it under the Original Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof.  Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law.  EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT
IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF
ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR
ANY TRANSACTION CONTEMPLATED HEREBY.

 
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Section 7. Entire Agreement.

This Amendment Agreement, together with the Original Agreement (as such Original
Agreement is amended by this Amendment Agreement), constitutes the full and
entire understanding and agreement by and among the parties with regard to the
subjects hereof and thereof.  The Original Agreement shall continue in full
force and effect, and nothing contained herein shall be construed as a waiver or
modification of any existing rights pursuant to the Original Agreement, except
as such rights are expressly modified in accordance with the terms and
provisions of this Amendment Agreement.

Section 8. Severability.

If any provision of this Amendment Agreement becomes, or is declared by a court
of competent jurisdiction to be, illegal, unenforceable or void, portions of
such provision, or such provision in its entirety, to the extent necessary,
shall be severed from this Amendment Agreement, and such court will replace such
illegal, void or unenforceable provision of this Amendment Agreement with a
valid and enforceable provision that will achieve, to the extent possible, the
same economic, business and other purposes of the illegal, void or unenforceable
provision.  The balance of this Amendment Agreement shall be enforceable in
accordance with its terms.

Section 9. Further Assurances.

Each party hereto agrees to execute and deliver, by the proper exercise of its
corporate, partnership, limited liability or other powers, all such other and
additional instruments and documents and do all such other acts and things as
may be necessary to more fully effectuate the terms and provisions set forth in
this Amendment Agreement.

Section 10. Counterparts; Facsimile Execution and Delivery.

(a)           This Amendment Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.

(b)           A facsimile, telecopy, pdf or other reproduction of this Amendment
Agreement may be executed by one or more parties hereto and delivered by such
party by facsimile or any similar electronic transmission device pursuant to
which the signature of, or on behalf of, such party can be seen.  Such execution
and delivery shall be considered valid, binding and effective for all
purposes.  At the request of any party hereto, all parties hereto agree to
execute and deliver an original of this Amendment Agreement as well as any
facsimile, telecopy, pdf or other reproduction hereof.

 
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Section 11. Inconsistency and Strict Construction.

(a)           In the event of any inconsistencies between the terms this
Amendment Agreement and the terms of the Original Agreement, the terms of this
Amendment Agreement shall control.

(b)          The language used in this Amendment Agreement shall be deemed the
language chosen by the parties to express their mutual intent; no rule of strict
construction shall be applied against any party.

[Signatures follow on the next page.]

 
 
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IN WITNESS WHEREOF, the parties have caused this Amendment Agreement to be
executed by their respective authorized signatories as of the Effective Date.

COMPANY:

AEOLUS PHARMACEUTICALS, INC.

By:             /s/ Michael P.
McManus                                                                         
Name:             Michael P. McManus
Title:             Chief Financial Officer

BUYERS:

XMARK OPPORTUNITY FUND, L.P.
By:           XMARK OPPORTUNITY GP, LLC, its General Partner
By:           XMARK OPPORTUNITY PARTNERS, LLC, its Sole Member
By:           XMARK CAPITAL PARTNERS, LLC, its Managing Member

By:           /s/ Mitchell D.
Kaye                                                                                     
Name:           Mitchell D. Kaye
Title:           Co-Managing Member

XMARK OPPORTUNITY FUND, LTD.
By:           XMARK OPPORTUNITY MANAGER, LLC, its Investment Manager
By:           XMARK OPPORTUNITY PARTNERS, LLC, its Sole Member
By:           XMARK CAPITAL PARTNERS, LLC, its Managing Member

By:           /s/ Mitchell D.
Kaye                                                                                     
Name:           Mitchell D. Kaye
Title:           Co-Managing Member

XMARK JV INVESTMENT PARTNERS, LLC
By:           XMARK OPPORTUNITY PARTNERS, LLC, its Investment Manager
By:           XMARK CAPITAL PARTNERS, LLC, its Managing Member

By:           /s/ Mitchell D.
Kaye                                                                                     
Name:           Mitchell D. Kaye
Title:           Co-Managing Member
 
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