Exhibit
      4.1

    REGISTRATION
      RIGHTS AGREEMENT

    


    This
      Registration Rights Agreement (the “Agreement”)
      is
      made and entered into as of this 21st day of November, 2005 by and among Aeolus
      Pharmaceuticals, Inc., a Delaware corporation (the “Company”),
      and
      the “Investors” named in that certain Purchase Agreement dated as of the date
      hereof by and among the Company and the Investors (including any Investors
      that
      may hereafter become a party to the Purchase Agreement in accordance with its
      terms) (the “Purchase
      Agreement”).
      Capitalized terms used but not otherwise defined in this Agreement shall have
      the meanings set forth in the Purchase Agreement. 

     

    The
      parties hereby agree as follows: 

     

    1.  Certain
      Definitions.

     

    As
      used
      in this Agreement, the following terms shall have the following
      meanings:

     

    “Affiliate”
      means,
      with respect to any person, any other person which directly or indirectly
      controls, is controlled by, or is under common control with, such
      person.

     

    “Business
      Day”
      means a
      day, other than a Saturday or Sunday, on which banks in New York City are open
      for the general transaction of business.

     

    “Common
      Stock”
      shall
      mean the Company’s common stock, par value $0.01 per share, and any securities
      into which such shares may hereinafter be reclassified.

     

    “Investors”
      shall
      mean the Investors identified in the Purchase Agreement and any Affiliate or
      permitted transferee of any Investor who is a subsequent holder of any Shares,
      Warrants or Registrable Securities.

     

    “Lead
      Series A Investors”
      shall
      mean each of Xmark Opportunity Fund, L.P. and Xmark Opportunity Fund,
      Ltd.

     

    “Preferred
      Stock”
      shall
      mean the Company’s Series A Preferred Stock, par value $0.01 per
      share.

     

    “Prospectus”
      shall
      mean the prospectus included in any Registration Statement, as amended or
      supplemented by any prospectus supplement, with respect to the terms of the
      offering of any portion of the Registrable Securities covered by such
      Registration Statement and by all other amendments and supplements to the
      prospectus, including post-effective amendments and all material incorporated
      by
      reference in such prospectus.

     

    “Register,” “registered”
      and
“registration”
      refer
      to a registration made by preparing and filing a Registration Statement or
      similar document in compliance with the 1933 Act (as defined below), and the
      declaration or ordering of effectiveness of such Registration Statement or
      document.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Registrable
      Securities”
      shall
      mean the shares of Common Stock issuable (i) upon conversion of the Shares,
      (ii)
      as payment-in-kind dividends on the Shares pursuant to Section 3 of the
      Certificate of Designations, (iii) upon exercise of the Warrants, and (iv)
      any
      other securities issued or issuable with respect to or in exchange for such
      securities set forth in clause
      (i),
      (ii), and (iii) above; provided, that, a security shall cease to be a
      Registrable Security upon sale pursuant to a Registration Statement or Rule
      144.

     

    “Registration
      Statement”
      shall
      mean any registration statement of the Company filed under the 1933 Act that
      covers the resale of any of the Registrable Securities pursuant to the
      provisions of this Agreement, amendments and supplements to such registration
      statement, including post-effective amendments, all exhibits and all material
      incorporated by reference in such registration statement.

     

    “Required
      Investors”
      means
      the Investors holding a majority of the Registrable Securities, including each
      Lead Series A Preferred Investor so long as such Lead Series A Preferred
      Investor owns any Shares or Registrable Securities.

     

    “Rule
      144”
      means
      Rule 144 promulgated under the 1933 Act. 

     

    “SEC”
      means
      the U.S. Securities and Exchange Commission.

     

    “Shares”
      means
      the shares of Preferred Stock issued or issuable (whether at the First Closing
      or any Subsequent Closing) pursuant to the Purchase Agreement.

     

    “Warrant
      Shares”
      means
      the shares of Common Stock issuable upon the exercise of the
      Warrants.

     

    “Warrants”
      means the warrants to purchase shares of Common Stock issued or issuable to
      the
      Investors (whether at the First Closing or any Subsequent Closing) pursuant
      to
      the Purchase Agreement.

     

    “1933
      Act”
      means
      the Securities Act of 1933, as amended, and the rules and regulations
      promulgated thereunder.

     

    “1934
      Act”
      means
      the Securities Exchange Act of 1934, as amended, and the rules and regulations
      promulgated thereunder.

     

    2.  Registration.

     

    (a)  Registration
      Statements.

     

    (i)  Promptly
      following the First Closing but no later than ninety
      (90)
      days
      after the First Closing (the “Filing
      Deadline”),
      the
      Company shall prepare and file with the SEC one Registration Statement on Form
      S-2 (or, if Form S-2 is not then available to the Company, on such form of
      registration statement as is then available to effect a registration for resale
      of the Registrable Securities, subject to the Required Investors’ consent)
      covering the resale of the Registrable Securities
      (the
“Initial Registration Statement”).
      Such
      Initial Registration Statement shall include a plan of distribution in
      substantially the form attached hereto as Exhibit
      A.
      Such
      Initial Registration Statement also shall cover, to the extent allowable under
      the 1933 Act and the rules promulgated thereunder (including Rule 416), such
      indeterminate number of additional shares of Common Stock resulting from stock
      splits, stock dividends or similar transactions with respect to the Registrable
      Securities. The Company shall use its commercially reasonable efforts to obtain
      from each person who now has piggyback registration rights with respect to
      any
      Company securities a waiver of those rights with respect to the Initial
      Registration Statement. The Initial Registration Statement (and each amendment
      or supplement thereto, and each request for acceleration of effectiveness
      thereof) shall be provided in accordance with Section 3(c) to the Investors
      and
      their counsel prior to its filing or other submission. If the Initial
      Registration Statement covering the Registrable Securities is not filed with
      the
      SEC on or prior to the Filing Deadline, the Company will make pro rata payments
      to each Investor, as liquidated damages and not as a penalty, in an amount
      equal
      to 1.0% of the aggregate amount invested by such Investor (for purposes of
      this
      Agreement, the amount invested by an Investor shall equal the aggregate purchase
      price of the Shares and Warrants acquired by such Investor pursuant to the
      Purchase Agreement) for each 30-day period or pro rata for any portion thereof
      following the date by which such Initial Registration Statement should have
      been
      filed for which no Initial Registration Statement is filed with respect to
      the
      Registrable Securities. Such payments shall be in partial compensation to the
      Investors, and shall not constitute the Investors’ exclusive remedy for such
      events. Such payments shall be made to each Investor in cash or by check. The
      amounts payable as liquidated damages pursuant to this paragraph shall be
      payable in lawful money of the United States, and amounts payable as liquidated
      damages shall be paid within three (3) Business Days of the last day of each
      such 30-day period during which the Initial Registration Statement should have
      been filed for which the Initial Registration Statement was not filed with
      respect to the Registrable Securities.

     

    
      
        
        

      

      
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    (ii)  Additional
      Registrable Securities.
      Upon
      the written demand of any Investor following any change in the Warrant Price
      (as
      defined in the Warrants) or the Conversion Price (as defined in the Certificate
      of Designations) such that additional shares of Common Stock become issuable
      upon the exercise of the Warrants or conversion of the Shares, the Company
      shall
      (a) prepare and file with the SEC one or more Registration Statements on Form
      S-2 (or, if Form S-2 is not then available to the Company, on such form of
      Registration Statement as is then available (the “Additional
      Registration Statement”),
      or
      (b) amend the Initial Registration Statement filed pursuant to clause (i) above,
      if such Initial Registration Statement has not previously been declared
      effective (the “Amended
      Registration Statement”)
      to
      effect a registration for resale of such additional shares of Common Stock
      (the
“Additional
      Shares”),
      subject to the Required Investors’ consent) covering the resale of the
      Additional Shares, but only to the extent the Additional Shares are not at
      the
      time covered by an effective Registration Statement. Such Additional
      Registration Statement or Amended Registration Statement also shall cover,
      to
      the extent allowable under the 1933 Act and the rules promulgated thereunder
      (including Rule 416), such indeterminate number of additional shares of Common
      Stock resulting from stock splits, stock dividends or similar transactions
      with
      respect to the Additional Shares. The Company shall use its commercially
      reasonable efforts to obtain from each person who now has piggyback registration
      rights with respect to any Company securities a waiver of those rights with
      respect to such Additional Registration Statement or Amended Registration
      Statement. The Additional Registration Statement or Amended Registration
      Statement (and each amendment or supplement thereto, and each request for
      acceleration of effectiveness thereof) shall be provided in accordance with
      Section 3(c) to the Investors and their counsel prior to its filing or other
      submission. If an Additional Registration Statement or Amended Registration
      Statement covering the Additional Shares is required to be filed under this
      Section 2(a)(ii) and is not filed with the SEC within twenty (20) Business
      Days
      of the request of any Investor,
      or upon
      the occurrence of any of the events specified in this Section 2(a)(ii), the
      Company will make pro rata payments to each Investor, as liquidated damages
      and
      not as a penalty, in an amount equal to 1.0% of the aggregate amount invested
      by
      such Investor for each 30-day period or pro rata for any portion thereof
      following the date by which such Additional Registration Statement
      or
      Amended Registration Statement should have been filed for which no Additional
      Registration Statement or Amended Registration Statement is filed with respect
      to the Additional Shares. Such payments shall be in partial compensation to
      the
      Investors, and shall not constitute the Investors’ exclusive remedy for such
      events. Such payments shall be made to each Investor in cash or by check. The
      amounts payable as liquidated damages pursuant to this paragraph shall be
      payable in lawful money of the United States, and amounts payable as liquidated
      damages shall be paid within five (5) Business Days of the last day of each
      such
      30-day period during which the Additional Registration Statement or Amended
      Registration Statement should have been filed for which no Additional
      Registration Statement or Amended Registration Statement was filed with respect
      to the Additional Shares.

     

    
      
        
        

      

      
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    (iii)  Promptly
      following the date (the “Qualification
      Date”)
      upon
      which the Company becomes eligible to use a registration statement on Form
      S-3
      to register the Registrable Securities or Additional Shares, as applicable,
      for
      resale, but in no event more than thirty
      (30)
      days
      after the Qualification Date (the “Qualification
      Deadline”),
      the
      Company shall file an amendment to the Initial Registration Statement,
      Additional Registration Statement or Amended Registration Statement, as
      applicable, on Form S-3 covering the Registrable Securities or Additional
      Shares, as applicable (or a post-effective amendment on Form S-3 to the Initial
      Registration Statement, Additional Registration Statement or Amended
      Registration Statement) (a “Shelf
      Registration Statement”)
      and
      shall use commercially reasonable efforts to cause such Shelf Registration
      Statement to be declared effective as promptly as practicable thereafter. If
      a
      Shelf Registration Statement covering the Registrable Securities is not filed
      with the SEC on or prior to the Qualification Deadline, the Company will make
      pro rata payments to each Investor, as liquidated damages and not as a penalty,
      in an amount equal to 1.0% of the aggregate amount invested by such Investor
      for
      each 30-day period or pro rata for any portion thereof following the date by
      which such Shelf Registration Statement should have been filed for which no
      such
      Shelf Registration Statement is filed with respect to the Registrable Securities
      or Additional Shares, as applicable. Such payments shall be in partial
      compensation to the Investors, and shall not constitute the Investors’ exclusive
      remedy for such events. Such payments shall be made to each Investor in cash
      or
      by check. The amounts payable as liquidated damages pursuant to this paragraph
      shall be payable in lawful money of the United States, and amounts payable
      as
      liquidated damages shall be paid within five (5) Business Days of the last
      day
      of each such 30-day period during which the Shelf Registration Statement should
      have been filed for which no Shelf Registration Statement was
      filed.

     

    (b)  Expenses.
      The
      Company will pay (a) all expenses associated with each registration, including
      filing and printing fees, the Company’s counsel and accounting fees and
      expenses, costs associated with clearing the Registrable Securities for sale
      under applicable state securities laws, and listing fees, and (b) reasonable
      fees and expenses of one counsel to the Investors and the Investors’ reasonable
      expenses in connection with the registration, in the case of clause (b), in
      an
      amount not to exceed $35,000 (so long as there is no review of the applicable
      Registration Statement, Additional Registration Statement or Amended
      Registration Statement by the SEC) but excluding discounts, commissions, fees
      of
      underwriters, selling brokers, dealer managers or similar securities industry
      professionals with respect to the Registrable Securities being
      sold.

     

    
      
        
        

      

      
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    (c)  Effectiveness.

     

    (i)  The
      Company shall use its commercially reasonable efforts to have each Registration
      Statement declared effective as soon as practicable. The Company shall notify
      the Investors by facsimile or e-mail as promptly as practicable, and in any
      event, within twenty-four (24) hours, after any Registration Statement is
      declared effective and shall simultaneously provide the Investors with copies
      of
      any related Prospectus to be used in connection with the sale or other
      disposition of the securities covered thereby. If (A)(x) a Registration
      Statement covering the Registrable Securities is not declared effective by
      the
      SEC by the earlier of (1) ninety (90) days after it
      is
      filed with the
      SEC
      or (2)
      five (5) days following the Company’s receipt of a no-review letter from the SEC
      relating to such Registration Statement (the “Effectiveness
      Deadline”),
      (y) a
      Registration Statement covering Additional Shares is not declared effective
      by
      the SEC by the earlier of (1) ninety (90) days following the time such
      Registration Statement was required to be filed pursuant to Section 2(a)(ii)
      or
      (2) five (5) days following the Company’s receipt of a no-review letter from the
      SEC relating to such Registration Statement, or (z) a Shelf Registration
      Statement is not declared effective by the SEC by the earlier of (1) ninety
      (90)
      days after the Qualification Deadline or (2) five (5) days following the
      Company’s receipt of a no-review letter from the SEC relating to such Shelf
      Registration Statement, or (B)
      after
      a Registration Statement has been declared effective by the SEC, sales cannot
      be
      made pursuant to such Registration Statement for any reason (including,
      without limitation by reason of a stop order, or the Company’s failure to update
      the Registration Statement),
      but
      excluding the inability of any Investor to sell the Registrable Securities
      covered thereby due to market conditions and except as excused pursuant to
      subparagraph (ii) below, then
      the
      Company will make pro rata payments to each Investor, as liquidated damages
      and
      not as a penalty, in an amount equal to 1.5% of the aggregate amount invested
      by
      such Investor for each 30-day period or pro rata for any portion thereof
      following the date by which such Registration Statement should have been
      effective (the “Blackout
      Period”).
      Such
      payments shall be in partial compensation to the Investors, and shall not
      constitute the Investors’ exclusive remedy for such events. The amounts payable
      as liquidated damages pursuant to this paragraph shall be paid monthly within
      three (3) Business Days of the last day of each month following the commencement
      of the Blackout Period until the termination of the Blackout Period. Such
      payments shall be made to each Investor in cash.

     

    (ii)  For
      not
      more than thirty (30) consecutive days or for a total of not more than sixty
      (60) days in any twelve (12) month period, the Company may delay the disclosure
      of material non-public information concerning the Company, by suspending the
      use
      of any Prospectus included in any registration contemplated by this Section
      containing such information, the disclosure of which at the time is not, in
      the
      good faith opinion of the Company, in the best interests of the Company (an
      “Allowed Delay”); provided, that the Company shall promptly (a) notify the
      Investors in writing of the existence of (but in no event, without the prior
      written consent of an Investor, shall the Company disclose to such Investor
      any
      of the facts or circumstances regarding) material non-public information giving
      rise to an Allowed Delay, (b) advise the Investors in writing to cease all
      sales
      under the Registration Statement until the end of the Allowed Delay and (c)
      use
      commercially reasonable efforts to terminate an Allowed Delay as promptly as
      practicable.

     

    
      
        
        

      

      
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    3.  Company
      Obligations. The Company will use commercially reasonable efforts to effect
      the
      registration of the Registrable Securities in accordance with the terms hereof,
      and pursuant thereto the Company will, as expeditiously as
      possible:

     

    (a)  use
      commercially reasonable efforts to cause such Registration Statement to become
      effective and to remain continuously effective for a period that will terminate
      upon the earliest to occur of (i) the date on which all Registrable Securities
      covered by such Registration Statement as amended from time to time, have been
      sold pursuant thereto or under Rule 144, (ii) the date on which all Registrable
      Securities held by and issuable to each Investor may be sold under Rule 144
      during any 90-day period, or (iii) the third anniversary of the date of the
      last
      Closing (the “Effectiveness
      Period”)
      and
      advise the Investors in writing when the Effectiveness Period has
      expired;

     

    (b)  prepare
      and file with the SEC such amendments and post-effective amendments to the
      Registration Statement and the Prospectus as may be necessary to keep the
      Registration Statement effective for the period specified in Section 3(a) and
      to
      comply with the provisions of the 1933 Act and the 1934 Act with respect to
      the
      distribution of all of the Registrable Securities covered thereby;

     

    (c)  provide
      copies to and permit counsel designated by the Investors to review each
      Registration Statement and all amendments and supplements thereto no fewer
      than
      five (5) days prior to their filing with the SEC and,
      except
      as required by law,
      not file
      any document to which such counsel reasonable objects;

     

    (d)  furnish
      to the Investors and their legal counsel (i) promptly after the same is prepared
      and publicly distributed, filed with the SEC, or received by the Company (but
      not later than two (2) Business Days after the filing date, receipt date or
      sending date, as the case may be), at least five (5) copies of any Registration
      Statement and any amendment thereto, each preliminary prospectus and Prospectus
      and each amendment or supplement thereto, and each letter written by or on
      behalf of the Company to the SEC or the staff of the SEC, and each item of
      correspondence from the SEC or the staff of the SEC, in each case relating
      to
      such Registration Statement (other than any portion of any thereof which
      contains information for which the Company has sought confidential treatment),
      and (ii) such number of copies of a Prospectus, including a preliminary
      prospectus, and all amendments and supplements thereto and such other documents
      as each Investor may reasonably request in order to facilitate the disposition
      of the Registrable Securities owned by such Investor that are covered by the
      related Registration Statement;

     

    (e)  use
      commercially reasonable efforts to (i) prevent the issuance of any stop order
      or
      other suspension of effectiveness and, (ii) if such order is issued, obtain
      the
      withdrawal of any such order at the earliest possible moment;

     

    (f)  prior
      to
      any public offering of Registrable Securities, use commercially reasonable
      efforts to register or qualify or cooperate with the Investors and their counsel
      in connection with the registration or qualification of such Registrable
      Securities for offer and sale under the securities or blue sky laws of such
      jurisdictions requested by the Investors and do any and all other commercially
      reasonable acts or things necessary or advisable to enable the distribution
      in
      such jurisdictions of the Registrable Securities covered by the Registration
      Statement;
      provided, however, that the Company shall not be required in connection
      therewith or as a condition thereto to (i) qualify to do business in any
      jurisdiction where it would not otherwise be required to qualify but for this
      Section 3(f), (ii) subject itself to general taxation in any jurisdiction where
      it would not otherwise be so subject but for this Section 3(f), or (iii) file
      a
      general consent to service of process in any such jurisdiction;

     

    
      
        
        

      

      
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    (g)  use
      commercially reasonable efforts to cause all Registrable Securities covered
      by a
      Registration Statement to be listed on each securities exchange, interdealer
      quotation system or other market on which similar securities issued by the
      Company are then listed;

     

    (h)  immediately
      notify the Investors, at any time when a Prospectus relating to Registrable
      Securities is required to be delivered under the 1933 Act, upon discovery that,
      or upon the happening of any event as a result of which, the Prospectus included
      in a Registration Statement, as then in effect, includes an untrue statement
      of
      a material fact or omits to state any material fact required to be stated
      therein or necessary to make the statements therein not misleading in light
      of
      the circumstances then existing, and at the request of any such holder, promptly
      prepare and furnish to such holder a reasonable number of copies of a supplement
      to or an amendment of such Prospectus as may be necessary so that, as thereafter
      delivered to the purchasers of such Registrable Securities, such Prospectus
      shall not include an untrue statement of a material fact or omit to state a
      material fact required to be stated therein or necessary to make the statements
      therein not misleading in light of the circumstances then existing;


     

    (i)  otherwise
      use commercially reasonable efforts to comply with all applicable rules and
      regulations of the SEC under the 1933 Act and the 1934 Act, take such other
      actions as may be reasonably necessary to facilitate the registration of the
      Registrable Securities hereunder; and make available to its security holders,
      as
      soon as reasonably practicable, but not later than the Availability Date (as
      defined below), an earnings statement covering a period of at least twelve
      (12)
      months, beginning after the effective date of each Registration Statement,
      which
      earnings statement shall satisfy the provisions of Section 11(a) of the 1933
      Act, including Rule 158 promulgated thereunder (for the purpose of this
      subsection 3(i), “Availability
      Date”
      means
      the 45th day following the end of the fourth fiscal quarter that includes the
      effective date of such Registration Statement, except that, if such fourth
      fiscal quarter is the last quarter of the Company’s fiscal year, “Availability
      Date”
      means
      the 90th day after the end of such fourth fiscal quarter); and

     

    (j)  With
      a
      view to making available to the Investors the benefits of Rule 144 (or its
      successor rule) and any other rule or regulation of the SEC that may at any
      time
      permit the Investors to sell shares of Common Stock to the public without
      registration, the Company covenants and agrees to use commercially reasonable
      efforts to: (i) make and keep public information available, as those terms
      are
      understood and defined in Rule 144, until such date as all of the Registrable
      Securities shall have been resold; (ii) file with the SEC in a timely manner
      all
      reports and other documents required of the Company under the 1934 Act; and
      (iii) furnish to each Investor upon request, as long as such Investor owns
      any
      Registrable Securities, (A) a written statement by the Company that it has
      complied with the reporting requirements of the 1934 Act, (B) a copy of the
      Company’s most recent Annual Report on Form 10-K or Quarterly Report on Form
      10-Q, and (C) such other information as may be reasonably requested in order
      to
      avail such Investor of any rule or regulation of the SEC that permits the
      selling of any such Registrable Securities without registration under the 1933
      Act.

     

    
      
        
        

      

      
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    4.  Due
      Diligence Review; Information. The Company shall make available, during normal
      business hours, for inspection and review by the Investors, advisors to and
      representatives of the Investors (who may or may not be affiliated with the
      Investors and who are reasonably acceptable to the Company), all financial
      and
      other records, all SEC Filings and other filings with the SEC, and all other
      corporate documents and properties of the Company as may be reasonably necessary
      for the purpose of such review, and cause the Company’s officers, directors and
      employees, within a reasonable time period, to supply all such information
      reasonably requested by the Investors or any such representative, advisor or
      underwriter in connection with such Registration Statement (including, without
      limitation, in response to all questions and other inquiries reasonably made
      or
      submitted by any of them), prior to and from time to time after the filing
      and
      effectiveness of the Registration Statement for the sole purpose of enabling
      the
      Investors and such representatives, advisors and underwriters and their
      respective accountants and attorneys to conduct initial and ongoing due
      diligence with respect to the Company and the accuracy of such Registration
      Statement; provided, however, that any such access shall be conducted at such
      Investor’s, its advisors’ and representatives’ expense and in a manner not to
      interfere with the normal operation of the business of the Company.

     

    The
      Company shall not disclose material nonpublic information to the Investors,
      or
      to advisors to or representatives of the Investors, unless prior to disclosure
      of such information the Company identifies such information as being material
      nonpublic information and provides the Investors, such advisors and
      representatives with the opportunity to accept or refuse to accept such material
      nonpublic information for review and any such Investor, advisor or
      representative wishing to obtain such information enters into an appropriate
      confidentiality agreement with the Company with respect thereto.

     

    5.  Obligations
      of the Investors.

     

    (a)  Each
      Investor shall furnish in writing to the Company such information regarding
      itself, the Registrable Securities held by it and the intended method of
      disposition of the Registrable Securities held by it, as shall be reasonably
      requested to effect the registration of such Registrable Securities and shall
      execute such documents in connection with such registration as the Company
      may
      reasonably request. At least ten (10) Business Days prior to the first
      anticipated filing date of any Registration Statement, the Company shall notify
      each Investor of the information the Company requires from such Investor if
      such
      Investor elects to have any of the Registrable Securities included in the
      Registration Statement. An Investor shall provide such information to the
      Company at least five (5) Business Days prior to the first anticipated filing
      date of such Registration Statement if such Investor elects to have any of
      the
      Registrable Securities included in the Registration Statement.

     

    (b)  Each
      Investor, by its acceptance of the Registrable Securities, agrees to cooperate
      with the Company as reasonably requested by the Company in connection with
      the
      preparation and filing of a Registration Statement hereunder, unless such
      Investor has notified the Company in writing of its election to exclude all
      of
      its Registrable Securities from such Registration Statement.

     

    
      
        
        

      

      
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    (c)  Each
      Investor agrees that, upon receipt of any notice from the Company of either
      (i)
      the commencement of an Allowed Delay pursuant to Section 2(c)(ii) or (ii) the
      happening of an event pursuant to Section 3(h) hereof, such Investor will
      immediately discontinue disposition of Registrable Securities pursuant to the
      Registration Statement covering such Registrable Securities, until the
      Investor’s receipt of the copies of the supplemented or amended prospectus filed
      with the SEC and until any related post-effective amendment is declared
      effective and, if so directed by the Company, the Investor shall deliver to
      the
      Company (at the expense of the Company) or destroy (and deliver to the Company
      a
      certificate of destruction) all copies in the Investor’s possession of the
      Prospectus covering the Registrable Securities current at the time of receipt
      of
      such notice.

     

    6.  Indemnification.

     

    (a)  Indemnification
      by the Company.
      To the
      extent permitted by the law, the Company will indemnify and hold harmless each
      Investor and its officers, directors, managers, members, employees and agents,
      successors and assigns, and each other person, if any, who controls such
      Investor within the meaning of the 1933 Act, against any losses, claims, damages
      or liabilities, joint or several, to which they may become subject under the
      1933 Act or otherwise, insofar as such losses, claims, damages or liabilities
      (or actions in respect thereof) arise out of or are based upon: (i) any untrue
      statement or alleged untrue statement of any material fact contained in any
      Registration Statement, any preliminary prospectus or final prospectus contained
      therein, or any amendment or supplement thereof; (ii) any blue sky application
      or other document executed by the Company specifically for that purpose or
      based
      upon written information furnished by the Company filed in any state or other
      jurisdiction in order to qualify any or all of the Registrable Securities under
      the securities laws thereof; (iii) the omission or alleged omission to state
      therein a material fact required to be stated therein or necessary to make
      the
      statements therein not misleading; (iv) any violation by the Company or its
      agents of any rule or regulation promulgated under the 1933 Act applicable
      to
      the Company or its agents and relating to action or inaction required of the
      Company in connection with such registration; or (v) any failure to register
      or
      qualify the Registrable Securities included in any such Registration Statement
      in any state where the Company or its agents has affirmatively undertaken or
      agreed in writing that the Company will undertake such registration or
      qualification on an Investor’s behalf; and the Company will reimburse such
      Investor, and each such officer, director, manager or member and each such
      controlling person for any legal or other expenses reasonably incurred by them
      in connection with investigating or defending any such loss, claim, damage,
      liability or action; provided,
      however,
      that
      the Company will not be liable in any such case if and to the extent that any
      such loss, claim, damage or liability arises out of or is based upon an untrue
      statement or alleged untrue statement or omission or alleged omission (y) so
      made in conformity with information furnished by such Investor or any such
      controlling person in writing specifically for use in such Registration
      Statement or Prospectus or preliminary prospectus or amendment or supplement,
      or
      (z) which was cured in an amendment or supplement to the Prospectus (or any
      amendment or supplement thereto) delivered to the Investor on a timely basis
      to
      permit delivery thereof prior to the date on which the Shares were
      sold.

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

     

    (b)  Indemnification
      by the Investors.
      To the
      extent permitted by law, each Investor agrees, severally but not jointly, to
      indemnify and hold harmless, to the fullest extent permitted by law, the
      Company, its directors, officers, employees, stockholders and each person who
      controls the Company (within the meaning of the 1933 Act) against any losses,
      claims, damages, liabilities and expense (including reasonable attorney fees)
      resulting from any untrue statement of a material fact or any omission of a
      material fact required to be stated in the Registration Statement or Prospectus
      or preliminary prospectus or amendment or supplement thereto or necessary to
      make the statements therein not misleading, to the extent, but only to the
      extent that such untrue statement or omission is contained in any information
      furnished in writing by such Investor to the Company specifically for inclusion
      in such Registration Statement or Prospectus or amendment or supplement thereto.
      In no event shall the liability of an Investor be greater in amount than the
      dollar amount of the proceeds (net of all expense paid by such Investor in
      connection with any claim relating to this Section 6 and the amount of any
      damages such Investor has otherwise been required to pay by reason of such
      untrue statement or omission) received by such Investor upon the sale of the
      Registrable Securities included in the Registration Statement giving rise to
      such indemnification obligation.

     

    (c)  Conduct
      of Indemnification Proceedings.
      Any
      person entitled to indemnification hereunder shall (i) give prompt notice to
      the
      indemnifying party of any claim with respect to which it seeks indemnification
      and (ii) permit such indemnifying party to assume the defense of such claim
      with
      counsel reasonably satisfactory to the indemnified party; provided
      that any
      person entitled to indemnification hereunder shall have the right to employ
      separate counsel and to participate in the defense of such claim, but the fees
      and expenses of such counsel shall be at the expense of such person unless
      (a)
      the indemnifying party has agreed to pay such fees or expenses, or (b) the
      indemnifying party shall have failed to assume the defense of such claim and
      employ counsel reasonably satisfactory to such person or (c) in the reasonable
      judgment of any such person, based upon written advice of its counsel, a
      conflict of interest exists between such person and the indemnifying party
      with
      respect to such claims such that representation of both persons would be
      inappropriate (in which case, if the person notifies the indemnifying party
      in
      writing that such person elects to employ separate counsel at the expense of
      the
      indemnifying party, the indemnifying party shall not have the right to assume
      the defense of such claim on behalf of such person); and provided,
      further,
      that
      the failure of any indemnified party to give notice as provided herein shall
      not
      relieve the indemnifying party of its obligations hereunder, except to the
      extent that such failure to give notice shall materially adversely affect the
      indemnifying party in the defense of any such claim or litigation. It is
      understood that the indemnifying party shall not, in connection with any
      proceeding in the same jurisdiction, be liable for fees or expenses of more
      than
      one separate firm of attorneys at any time for all such indemnified parties.
      No
      indemnifying party will, except with the consent of the indemnified party,
      consent to entry of any judgment or enter into any settlement that does not
      include as an unconditional term thereof the giving by the claimant or plaintiff
      to such indemnified party of a release from all liability in respect of such
      claim or litigation.

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

     

    (d)  Contribution.
      If for
      any reason the indemnification provided for in the preceding paragraphs (a)
      and
      (b) is unavailable to an indemnified party or insufficient to hold it harmless,
      other than as expressly specified therein, then the indemnifying party, in
      lieu
      of indemnifying such indemnified party, to the extent permitted by applicable
      law, shall contribute to the amount paid or payable by the indemnified party
      as
      a result of such loss, claim, damage or liability in such proportion as is
      appropriate to reflect the relative fault of the indemnified party and the
      indemnifying party, as well as any other relevant equitable considerations.
      The
      relative fault of the indemnifying party and of the indemnified party shall
      be
      determined by a court of law by reference to, among other things, whether the
      untrue or alleged untrue statement of material fact or the omission to state
      a
      material fact relates to information supplied by the indemnifying party or
      indemnified party and the parties’ relative intent, knowledge, access to
      information and opportunity to correct or prevent such statement or omission.
      Notwithstanding the foregoing, no person guilty of fraudulent misrepresentation
      within the meaning of Section 11(f) of the 1933 Act shall be entitled to
      contribution from any person not guilty of such fraudulent misrepresentation.
      In
      no event shall the contribution obligation of a holder of Registrable Securities
      be greater in amount than the dollar amount of the proceeds (net of all expenses
      paid by such holder in connection with any claim relating to this Section 6
      and
      the amount of any damages such holder has otherwise been required to pay by
      reason of such untrue or alleged untrue statement or omission or alleged
      omission) received by it upon the sale of the Registrable Securities giving
      rise
      to such contribution obligation.

     

    7.  Miscellaneous.

     

    (a)  Amendments
      and Waivers.
      This
      Agreement may be amended only by a writing signed by the Company and the
      Required Investors. The Company may take any action herein prohibited, or omit
      to perform any act herein required to be performed by it, only if the Company
      shall have obtained the written consent to such amendment, action or omission
      to
      act, of the Required Investors.

     

    (b)  Notices.
      All
      notices and other communications provided for or permitted hereunder shall
      be
      made as set forth in Section 8.4 of the Purchase Agreement.

     

    (c)  Assignments
      and Transfers by Investors.
      The
      provisions of this Agreement shall be binding upon and inure to the benefit
      of
      the Investors and their respective successors and assigns. An Investor may
      transfer or assign, in whole or from time to time in part, to one or more
      persons its rights hereunder in connection with the transfer of Registrable
      Securities by such Investor to such person, provided that such Investor complies
      with all laws applicable thereto and provides written notice of assignment
      to
      the Company promptly after such assignment is effected.

     

    (d)  Assignments
      and Transfers by the Company.
      This
      Agreement may not be assigned by the Company (whether by operation of law or
      otherwise) without the prior written consent of the Required Investors,
      provided, however, that the Company shall assign its rights and delegate its
      duties hereunder to any surviving or successor corporation in connection with
      a
      merger or consolidation of the Company with another corporation, or a sale,
      transfer or other disposition of all or substantially all of the Company’s
      assets to another corporation, without the prior written consent of the Required
      Investors, after notice duly given by the Company to each Investor.

     

    (e)  Benefits
      of the Agreement.
      The
      terms and conditions of this Agreement shall inure to the benefit of and be
      binding upon the respective permitted successors and assigns of the parties.
      Nothing in this Agreement is intended to confer upon any party other than the
      parties hereto or their respective successors and assigns any rights, remedies,
      obligations, or liabilities under or by reason of this Agreement, except as
      expressly provided in this Agreement.

     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

    (f)  Counterparts;
      Faxes.
      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. This Agreement may also be executed via facsimile, which shall
      be
      deemed an original.

     

    (g)  Titles
      and Subtitles.
      The
      titles and subtitles used in this Agreement are used for convenience only and
      are not to be considered in construing or interpreting this
      Agreement.

     

    (h)  Severability.
      Any
      provision of this Agreement that is prohibited or unenforceable in any
      jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
      such prohibition or unenforceability without invalidating the remaining
      provisions hereof but shall be interpreted as if it were written so as to be
      enforceable to the maximum extent permitted by applicable law, and any such
      prohibition or unenforceability in any jurisdiction shall not invalidate or
      render unenforceable such provision in any other jurisdiction. To the extent
      permitted by applicable law, the parties hereby waive any provision of law
      which
      renders any provisions hereof prohibited or unenforceable in any
      respect.

     

    (i)  Further
      Assurances.
      The
      parties shall execute and deliver all such further instruments and documents
      and
      take all such other actions as may reasonably be required to carry out the
      transactions contemplated hereby and to evidence the fulfillment of the
      agreements herein contained.

     

    (j)  Entire
      Agreement.
      Subject
      to the terms of the Purchase Agreement, this Agreement is intended by the
      parties as a final expression of their agreement and intended to be a complete
      and exclusive statement of the agreement and understanding of the parties hereto
      in respect of the subject matter contained herein and supersedes all prior
      agreements and understandings between the parties with respect to such subject
      matter.

     

    (k)  Governing
      Law; Consent to Jurisdiction; Waiver of Jury Trial.
      This
      Agreement shall be governed by, and construed in accordance with, the internal
      laws of the State of New York without regard to the choice of law principles
      thereof. Each of the parties hereto irrevocably submits to the jurisdiction
      of
      the courts of the State of New York located in New York County and the United
      States District Court for the Southern District of New York for the purpose
      of
      any suit, action, proceeding or judgment relating to or arising out of this
      Agreement and the transactions contemplated hereby. Service of process in
      connection with any such suit, action or proceeding may be served on each party
      hereto anywhere in the world by the same methods as are specified for the giving
      of notices under this Agreement. Each of the parties hereto irrevocably consents
      to the jurisdiction of any such court in any such suit, action or proceeding
      and
      to the laying of venue in such court. Each party hereto irrevocably waives
      any
      objection to the laying of venue of any such suit, action or proceeding brought
      in such courts and irrevocably waives any claim that any such suit, action
      or
      proceeding brought in any such court has been brought in an inconvenient forum.
      EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
      LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN
      CONSULTED SPECIFICALLY AS TO THIS WAIVER.

     

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the parties have executed this Agreement or caused their duly
      authorized officers to execute this Agreement as of the date first above
      written.

     

    
      	 	 	COMPANY:
	 	 
	 
 	 
 	
               

              Aeolus
                Pharmaceuticals, Inc.
 

            
	 	 	By:
              /s/ Richard P. Burgoon, Jr.
	 	
              

               

              Name:
                Richard
                P. Burgoon, Jr.

              
                

              

               

              Title:  
                Chief
                Executive Officer

              
                

                 

            
	 	 


    

     

    
      	 	 	INVESTORS:
	 	 
	 
 	 
 	
               

              Xmark
                Opportunity Fund, L.P. 

            
	 	 	 
	 	 	By:
              /s/ Mitchell D. Kaye
	 	
              

               

              Name:
                Mitchell D. Kaye

              
                

              

               

              Title:  
                C.I.O.

              
                

              

              
                
                   

                  Address
                    for Notice:

                  301
                    Tresser Boulevard, Suite 1320

                  Stamford,
                    CT 06901

                  Attn:
                    Mitchell Kaye

                  Telephone:
                    203.653.2500

                  Facsimile:
                    203.653.2501

                   

                

                
                  With
                    a Copy To:

                   

                  Lowenstein
                    Sandler PC

                  65
                    Livingston Avenue

                  Roseland,
                    NJ 07068

                  Attn:
                    Steven Siesser, Esq.

                  Telephone:
                    973.597.2500

                  Facsimile:
                    973.597.2400

                

              

            
	 	 


    

     

    [SIGNATURE
      PAGE TO PURCHASE AGREEMENT]

     

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

    
       

      
        	 	 	Xmark
                Opportunity Fund, Ltd.
	 	 
	 
 	 
 	
                
 

              
	 	 	By:
                /s/ Mitchell D. Kaye
	 	
                

                 

                Name:
                  Mitchell D. Kaye

                
                  

                

                 

                Title:  
                  C.I.O

                
                  

                

                 

                
                  Address
                    for Notice:

                  301
                    Tresser Boulevard, Suite 1320

                  Stamford,
                    CT 06901

                  Attn:
                    Mitchell Kaye

                  Telephone:
                    203.653.2500

                  Facsimile:
                    203.653.2501

                   

                  With
                    a Copy To:

                   

                  Lowenstein
                    Sandler PC

                  65
                    Livingston Avenue

                  Roseland,
                    NJ 07068

                  Attn:
                    Steven Siesser, Esq.

                  Telephone:
                    973.597.2500

                  Facsimile:
                    973.597.2400

                

                  

              
	 	 


      

       

    

     

    [SIGNATURE
      PAGE TO PURCHASE AGREEMENT]

     

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

     

     

    
      
         

        
          	 	 	Xmark
                  JV Investment Partners, LLC
	 	 
	 
 	 
 	
                  
 

                
	 	 	By:
                  /s/ Mitchell D. Kaye
	 	
                  

                   

                  Name:
                    Mitchell D. Kaye

                  
                    

                  

                   

                  Title:  
                    C.I.O.

                  
                    

                  

                   

                  
                    
                      Address
                        for Notice:

                      301
                        Tresser Boulevard, Suite 1320

                      Stamford,
                        CT 06901

                      Attn:
                        Mitchell Kaye

                      Telephone:
                        203.653.2500

                      Facsimile:
                        203.653.2501

                       

                      With
                        a Copy To:

                       

                      Lowenstein
                        Sandler PC

                      65
                        Livingston Avenue

                      Roseland,
                        NJ 07068

                      Attn:
                        Steven Siesser, Esq.

                      Telephone:
                        973.597.2500

                      Facsimile:
                        973.597.2400

                    

                  

                
	 	 


        

         

      

    

    [SIGNATURE
      PAGE TO PURCHASE AGREEMENT]

     

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

    

     

    
      
        
           

          
            	 	 	Biotechnology
                    Value Fund, L.P. 
	 	 
	 
 	 
 	
                    
 

                  
	 	 	
                    By: 
                      BVF Partners L.P. 

                       Its:
                      General Partner 

                  
	 	
                     

                    
                      By: 
                        BVF Partners L.P. 

                      Its:
                        General Partner 
    

                    By: 
                      /s/ Mark Lampert 

                    
                      

                    

                    Name:
                      Mark Lampert

                    Title:
                      President

                     

                    
                      
                        Address
                          for Notice:

                        
                          
                            900
                              N. Michigan Ave, Suite 1100

                            Chicago
                              IL 60611

                            Telephone:
                              312.506.6813

                            Facsimile:
                              312.506.6888

                          

                        

                      

                    

                  
	 	 


          

           

          
             

            
              
                
                  
                    	 	 	Biotechnology
                            Value Fund II, L.P. 
	 	 
	 
 	 
 	
                            
 

                          
	 	 	
                            By: 
                              BVF Partners L.P. 

                               Its:
                              General Partner 

                          
	 	
                             

                            
                              By: 
                                BVF Partners L.P. 

                              Its:
                                General Partner 
    

                            By: 
                              /s/ Mark Lampert 

                            
                              

                            

                            Name:
                              Mark Lampert

                            Title:
                              President

                             

                            
                              
                                Address
                                  for Notice:

                                
                                  
                                    900
                                      N. Michigan Ave, Suite 1100

                                    Chicago
                                      IL 60611

                                    Telephone:
                                      312.506.6813

                                    Facsimile:
                                      312.506.6888

                                  

                                

                              

                            

                          
	 	 


                  

                   

                

              

            

          

        

      

    

    [SIGNATURE
      PAGE TO PURCHASE AGREEMENT]

     

     

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

     

    
      
        
          
            
              
                	 	 	BVF
                        Investments, L.L.C. 
	 	 
	 
 	 
 	
                        
 

                      
	 	 	
                        By: 
                          BVF Partners L.P. 

                           Its:
                          Managing Partner 

                      
	 	
                         

                        
                          By: 
                            BVF, Inc. 

                          Its:
                            General Partner 
    

                        By:
                           /s/ Mark Lampert 

                        
                          

                        

                        Name:
                          Mark Lampert

                        Title:
                          President

                         

                        
                          
                            Address
                              for Notice:

                            
                              
                                900
                                  N. Michigan Ave, Suite 1100

                                Chicago
                                  IL 60611

                                Telephone:
                                  312.506.6813

                                Facsimile:
                                  312.506.6888

                              

                            

                          

                        

                      
	 	 


              

               

            

          

        

      

    

    
      
        
          
            
              
                
                  	 	 	Investment
                          10 L.L.C. 
	 	 
	 
 	 
 	
                          
 

                        
	 	 	
                          By: 
                            BVF Partners L.P. 

                             Its:
                            Managing Partner 

                        
	 	
                           

                          
                            By: 
                              BVF, Inc. 

                            Its: 
                              Attorney-in-fact
    

                          By: 
                            /s/ Mark Lampert   

                          
                            

                          

                          Name:
                            Mark Lampert

                          Title:
                            President

                           

                          
                            
                              Address
                                for Notice:

                              
                                
                                  900
                                    N. Michigan Ave, Suite 1100

                                  Chicago
                                    IL 60611

                                  Telephone:
                                    312.506.6813

                                  Facsimile:
                                    312.506.6888

                                

                              

                            

                          

                        
	 	 


                

                 

              

            

          

        

      

    

    


    [SIGNATURE
      PAGE TO PURCHASE AGREEMENT]

    


    
      
        
        

      

      
        -17-

        
          

        

      

      
        
        

      

    

    
       

       

      
        
          
            
              
                
                  
                    
                      	 	 	Biomedical
                              Offshore Value Fund, Ltd.
	 	 
	 	 	
                               

                            
	 	 	
                               

                            
	 	
                              By: 
                                /s/ David P. Gerber    

                              
                                

                              

                              Name:
                                David P. Gerber   

                              Title:
                                Chief Financial Officer

                               

                              
                                
                                  Address
                                    for Notice:

                                  
                                    
                                      
                                        2
                                          Pickwick Plaza, Suite 450

                                        Greenwich,
                                          CT 06830

                                        Telephone:
                                          203.971.3300

                                        Facsimile:
                                          203.971.3320

                                      

                                    

                                  

                                

                              

                            
	 	 


                    

                     

                  

                

              

            

          

        

      

    

    [SIGNATURE
      PAGE TO PURCHASE AGREEMENT] 

    
      
        
        

      

      
        -18-

        
          

        

      

      
        
        

      

    

    Exhibit
      A

     

    Plan
      of Distribution

    


    The
      selling stockholders, which as used herein includes donees, pledgees,
      transferees or other successors-in-interest selling shares of common stock
      or
      interests in shares of common stock received after the date of this prospectus
      from a selling stockholder as a gift, pledge, partnership distribution or other
      transfer, may, from time to time, sell, transfer or otherwise dispose of any
      or
      all of their shares of common stock or interests in shares of common stock
      on
      any stock exchange, market or trading facility on which the shares are traded
      or
      in private transactions. These dispositions may be at fixed prices, at
      prevailing market prices at the time of sale, at prices related to the
      prevailing market price, at varying prices determined at the time of sale,
      or at
      negotiated prices.

     

    The
      selling stockholders may use any one or more of the following methods when
      disposing of shares or interests therein:

     

    -
      ordinary brokerage transactions and transactions in which the broker-dealer
      solicits purchasers;

     

    -
      block
      trades in which the broker-dealer will attempt to sell the shares as agent,
      but
      may position and resell a portion of the block as principal to facilitate the
      transaction;

     

    -
      purchases by a broker-dealer as principal and resale by the broker-dealer for
      its account;

     

    -
      an
      exchange distribution in accordance with the rules of the applicable
      exchange;

     

    -
      privately negotiated transactions;

     

    -
      short
      sales effected after the date of this Prospectus;

     

    -
      through
      the writing or settlement of options or other hedging transactions, whether
      through an options exchange or otherwise;

     

    -
      broker-dealers may agree with the selling stockholders to sell a specified
      number of such shares at a stipulated price per share;

     

    -
      a
      combination of any such methods of sale; and

     

    -
      any
      other method permitted pursuant to applicable law.

     

    The
      selling stockholders may, from time to time, pledge or grant a security interest
      in some or all of the shares of common stock owned by them and, if they default
      in the performance of their secured obligations, the pledgees or secured parties
      may offer and sell the shares of common stock, from time to time, under this
      prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or
      other applicable provision of the Securities Act amending the list of selling
      stockholders to include the pledgee, transferee or other successors in interest
      as selling stockholders under this prospectus. The selling stockholders also
      may
      transfer the shares of common stock in other circumstances, in which case the
      transferees, pledgees or other successors in interest will be the selling
      beneficial owners for purposes of this prospectus.

     

    
      
        
        

      

      
        -19-

        
          

        

      

      
        
        

      

    

    In
      connection with the sale of our common stock or interests therein, the selling
      stockholders may enter into hedging transactions with broker-dealers or other
      financial institutions, which may in turn engage in short sales of the common
      stock in the course of hedging the positions they assume. The selling
      stockholders may also sell shares of our common stock short and deliver these
      securities to close out their short positions, or loan or pledge the common
      stock to broker-dealers that in turn may sell these securities. The selling
      stockholders may also enter into option or other transactions with
      broker-dealers or other financial institutions or the creation of one or more
      derivative securities which require the delivery to such broker-dealer or other
      financial institution of shares offered by this prospectus, which shares such
      broker-dealer or other financial institution may resell pursuant to this
      prospectus (as supplemented or amended to reflect such
      transaction).

     

    The
      aggregate proceeds to the selling stockholders from the sale of the common
      stock
      offered by them will be the purchase price of the common stock less discounts
      or
      commissions, if any. Each of the selling stockholders reserves the right to
      accept and, together with their agents from time to time, to reject, in whole
      or
      in part, any proposed purchase of common stock to be made directly or through
      agents. We will not receive any of the proceeds from this offering. Upon any
      exercise of the warrants by payment of cash, however, we will receive the
      exercise price of the warrants.

     

    The
      selling stockholders also may resell all or a portion of the shares in open
      market transactions in reliance upon Rule 144 under the Securities Act of 1933,
      provided that they meet the criteria and conform to the requirements of that
      rule.

     

    The
      selling stockholders and any underwriters, broker-dealers or agents that
      participate in the sale of the common stock or interests therein may be
      "underwriters" within the meaning of Section 2(11) of the Securities Act. Any
      discounts, commissions, concessions or profit they earn on any resale of the
      shares may be underwriting discounts and commissions under the Securities Act.
      Selling stockholders who are "underwriters" within the meaning of Section 2(11)
      of the Securities Act will be subject to the prospectus delivery requirements
      of
      the Securities Act.

     

    To
      the
      extent required, the shares of our common stock to be sold, the names of the
      selling stockholders, the respective purchase prices and public offering prices,
      the names of any agents, dealer or underwriter, any applicable commissions
      or
      discounts with respect to a particular offer will be set forth in an
      accompanying prospectus supplement or, if appropriate, a post-effective
      amendment to the registration statement that includes this
      prospectus.

     

    In
      order
      to comply with the securities laws of some states, if applicable, the common
      stock may be sold in these jurisdictions only through registered or licensed
      brokers or dealers. In addition, in some states the common stock may not be
      sold
      unless it has been registered or qualified for sale or an exemption from
      registration or qualification requirements is available and is complied
      with.

     

    
      
        
        

      

      
        -20-

        
          

        

      

      
        
        

      

    

     

    We
      have
      advised the selling stockholders that the anti-manipulation rules of Regulation
      M under the Exchange Act may apply to sales of shares in the market and to
      the
      activities of the selling stockholders and their affiliates. In addition, we
      will make copies of this prospectus (as it may be supplemented or amended from
      time to time) available to the selling stockholders for the purpose of
      satisfying the prospectus delivery requirements of the Securities Act. The
      selling stockholders may indemnify any broker-dealer that participates in
      transactions involving the sale of the shares against certain liabilities,
      including liabilities arising under the Securities Act.

     

    We
      have
      agreed to indemnify the selling stockholders against liabilities, including
      liabilities under the Securities Act and state securities laws, relating to
      the
      registration of the shares offered by this prospectus.

     

    We
      have
      agreed with the selling stockholders to keep the registration statement of
      which
      this prospectus constitutes a part effective until such time as all of the
      shares covered by this prospectus have been disposed of pursuant to and in
      accordance with the registration statement.

     

    
      
        
        

      

      
        -21-