AMENDMENT 1

                         to Sponsored Research Agreement

This Amendment ("Amendment") to the Sponsored Research Agreement ("Agreement"),
effective July 1, 1997, by and between National Jewish Medical and Research
Center ("National Jewish") and Aeolus Pharmaceuticals, Inc. ("Sponsor"), shall
be effective as of July 1, 1998.

The parties agree to modify the Agreement as follows, all other terms of the
Agreement shall remain effective.

Paragraph 2 of the Agreement is replaced in its entirety by the following.

2.   Personnel

     The Research shall be performed by, and under the supervision and direction
of, Dr. Brian Day ("Day") and Dr. Ling-Yi Chang ("Chang") who collectively shall
be designated as the Principal Investigator, together with such additional
personnel as may be assigned by National Jewish. National Jewish covenants that
all personnel and entities (including any other organizations) performing
research hereunder shall execute agreements assigning all of their rights, title
and interest to and in any invention resulting from the Research to National
Jewish. If for any reason the Principal Investigator is unable to continue to
serve as Principal Investigator, and a successor acceptable to both National
Jewish and the Sponsor is not available, this agreement may be terminated as
provided in Article 10(a).

Paragraph 4 of the Agreement is replaced in its entirety by the following.

4.   Payment of Costs

     In consideration of National Jewish's performance hereunder, Sponsor agrees
to support National Jewish's costs incurred in performance of the research in an
amount not to exceed $400,000 for the period from July 1, 1997 through June 30,
1998 and $400,000 for the period from July 1, 1998 through June 30, 1999, which
amount shall not be exceeded unless mutually agreed upon in writing by Sponsor
and National Jewish. Sponsor shall make payments to National Jewish according
to the following schedule. For the first year, Sponsor paid $100,000 upon or
before the execution of the Research Agreement; and additional payments of
$100,000 on or before September 30, 1997, December 31, 1997 and March 30, 1998.
During the second year of the research program, Sponsor will pay $100,000 upon
or before execution of this Amendment for support of work performed by Dr. Day
and Dr. Chang, and will make additional payments while this Agreement is in
effect of $100,000 on or before October 1, 1998, January 2, 1999 and April 1,
1999 for support of work performed by Dr. Day and Dr. Chang. Notwithstanding the
foregoing, the amount of the payments may be changed upon mutual agreement by
Sponsor and National Jewish.



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Paragraph 5 of the Agreement is replaced in its entirety by the following.

5.   Research Reports

     National Jewish through the Principal Investigator shall prepare and
maintain records, including bound laboratory notebooks maintained in accordance
with generally accepted standard scientific procedures for the industry,
containing all appropriate data reflecting results of the Research, with each
page containing at least two (2) signatures. The Principal Investigator and Dr.
James Crapo ("Crapo") shall furnish to the Sponsor during the term of this
Agreement periodic informal written or oral reports regarding the progress of
the Research. Sponsor will have the opportunity to observe the work being
carried on under this Agreement as mutually agreed to and scheduled by both
parties.

Paragraph 6 of the Agreement is replaced in its entirety by the following.

6.   Publication

     National Jewish reserves, on behalf of the Principal Investigator, Crapo,
and other National Jewish employees and/or students, the right to disseminate
information, or to publish any material resulting from the Research; provided,
however, National Jewish shall make no such disclosure unless National Jewish
shall have provided the Sponsor with a copy of any proposed publication
forty-five (45) days in advance of the submission by National Jewish or any
author to a third party of any written materials intended for publication. If
the proposed disclosure contains Sponsor's Confidential Information, National
Jewish shall remove or cause the author to remove such Sponsor Confidential
Information prior to submission for publication or other public disclosure. The
Sponsor may request, and National Jewish shall agree to, a delay of such
proposed publication for an additional period, not to exceed forty-five (45)
days, in order to protect the potential patentability of any invention described
therein by having National Jewish or Sponsor prepare and file a patent
application. All publications resulting from this Agreement will include an
acknowledgement of the research support from the Sponsor.

Paragraph 7 of the Agreement is replaced in its entirety by the following.

7.   Proprietary Information

     All confidential information of either party disclosed to the other party
in connection with the Research hereunder ("Confidential Information") will be
treated by the receiving party as confidential and restricted in its use to only
those uses contemplated by the terms of this Agreement. Any information which is
to be treated as confidential must be clearly marked as confidential prior to
transmittal to the other party. If such Confidential Information is disclosed
orally, it shall be identified as being confidential at the time of disclosure,
and shall thereafter be reduced to writing within 30 days, marked as
confidential, and transmitted to the receiving party. The Sponsor may submit
Confidential Information only to the Principal Investigator or Crapo, who shall
be free to refuse to accept such Confidential Information. The obligations of
this paragraph shall survive and continue for five (5) years after termination
of this Agreement. Specifically excluded from such confidential treatment shall
be information which: (a) is or becomes part of the public domain, through no
fault of the receiving party; (b) is lawfully disclosed to the receiving party
by a third party who is not obligated to retain such information in confidence;
(c) is independently developed at the receiving party by someone not privy to
the confidential information; (d) is required to be disclosed to comply with
applicable laws or governmental regulations, provided that the disclosing party
receives prior notice of such disclosure and that the receiving party takes all
reasonable and lawful actions to minimize the extent of such disclosure, and if
possible to avoid such disclosure; or (e) as of the date of its disclosure
and/or delivery is already known to the party receiving such information, except
in the case of disclosures of information relating to the Research hereunder
made between Sponsor or consultants of Sponsor and the Principal Investigator or
Crapo.
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     Each party shall retain full ownership of all its Confidential Information
in the possession of the other party. At the termination of this Agreement, each
party shall secure the return of, or destroy, any Confidential Information that
is in its possession and that is owned by the other party.

Paragraph 8(a) of the Agreement is replaced in its entirety by the following.

8.   Results of the Research

     (a) All rights in any inventions or discoveries, whether or not patentable,
that are developed, conceived or reduced to practice in the course of the
Research or within the field of antioxidant compounds, nitrosylating compounds
or related discoveries from the research laboratories of Crapo, Day or Chang
solely by any persons, including Crapo, Day or Chang who work in their
respective laboratories under their supervision and are students, lab employees
or post-doctoral fellows ("National Jewish Employees") shall be property of
National Jewish ("National Jewish Inventions"). All rights in any inventions or
discoveries whether or not patentable, that are developed, conceived or reduced
to practice jointly by National Jewish Employees and Sponsor employees or
consultants in the course of the Research or within the field of antioxidant
compounds, nitrosylating compounds or related discoveries from the research
laboratories of Crapo, Day or Chang shall be jointly owned by National Jewish
and the Sponsor ("Joint Inventions"). Title to any Joint Inventions,
developments or discoveries resulting directly from the Research will be
determined in accordance with U.S. Patent law, Title 35 U.S.C., in effect at the
time of the invention, development or discovery. All rights in any inventions or
discoveries whether or not patentable, that are developed, conceived or reduced
to practice in the course of the Research solely by Sponsor employees or
consultants and without the use of any National Jewish resources or facilities
shall be property of the Sponsor. National Jewish shall promptly report to the
Sponsor any National Jewish Inventions. Both parties agree promptly to inform
the other party of any Joint Inventions. All license negotiation periods for any
type of invention hereunder shall be limited to between 90 and 120 days after
the option to license is exercised. For the purpose of this Section 8 only, any
National Jewish Employees may not be defined as a Sponsor consultant or
employee.



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Paragraph 8(b) of the Agreement is replaced in its entirety by the following.

8.   Results of the Research

     (b) National Jewish grants to Sponsor an option to negotiate for a
royalty-bearing exclusive license to any patent application filed by National
Jewish on any National Jewish Invention or Joint Invention resulting from the
Research or within the field of antioxidant compounds, nitrosylating compounds
or related discoveries from the research laboratories of Crapo, Day or Chang by
National Jewish Employees and any patents granted thereon, for an initial option
period of ninety (90) days after a patent has been filed on such invention.
Sponsor may elect to extend such option for a period not to exceed one hundred
twenty (120) days, provided the Sponsor reimburses National Jewish for all costs
related to the filing, prosecution and maintenance of said patent(s) or patent
applications. National Jewish and Sponsor agree that the royalty rate and other
license terms to be negotiated in any such license agreement(s) shall be fair,
reasonable, and customary for the industry to which the invention applies. In
addition, the royalty shall reflect the relative contributions of National
Jewish and of Sponsor in making the invention. It is anticipated by the parties
that a reasonable royalty rate on small molecule antioxidant compounds will be
approximately one percent to two percent of ultimate net sales of any product
developed. Royalties on inventions not contemplated in the scope of this
Agreement may result in royalty rates higher than those payable in connection
with the license of small molecule antioxidant compounds. In the event that
National Jewish and Sponsor are not able to reach agreement regarding the terms
of a license agreement for a National Jewish or Joint Invention, National Jewish
shall be free to offer a license (which would be a non-exclusive license in the
case of a Joint Invention) on terms it deems appropriate to third parties;
provided, however, National Jewish shall not offer a license to any such third
party on terms more favorable than those offered to Sponsor without first
offering Sponsor an opportunity to accept a license on the same terms as
National Jewish proposes to offer to such third party.



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     IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Agreement, and hereby reaffirm all other provisions of the Agreement, by their
duly authorized officers or representatives.

NATIONAL JEWISH MEDICAL AND                AEOLUS PHARMACEUTICALS, INC.
  RESEARCH CENTER


By: /s/Judith Baskett                      By: /s/Clayton I. Duncan
   ------------------------                   -------------------------
Name:  Judith Baskett                      Name:  Clayton I. Duncan
     ----------------------                     -----------------------

Title: Director                            Title: President &
       Research Administration                    CEO
      ---------------------                      ----------------------

Date:  8-3-98                              Date: 8-7-98
     ----------------------                     -----------------------


By: /s/Dr. James D. Crapo
   ------------------------
       Dr. James D. Crapo

Title:
      ---------------------
Date:  7-28-98
     ----------------------

Consented to by the Principal Investigators:


By: /s/Dr. Brian Day                       By: /s/Dr. Ling-Yi Chang
   ------------------------                   -------------------------
       Dr. Brian Day                              Dr. Ling-Yi Chang
       Principal Investigator                     Principal Investigator

Date:  7/28/98                             Date:  7/28/98
     ----------------------                     -----------------------




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