Document:

ex10_3.htm

    Exhibit
A

    

    THIS
SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), UNDER ANY STATE SECURITIES LAW, OR UNDER ANY "BLUE SKY" LAWS, AND
THIS SECURITY MAY NOT BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, OR
OTHERWISE DISPOSED OF, UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF THE ACT
AND OF THE "BLUE SKY" LAWS, OR UNLESS AN EXEMPTION THEREFROM IS AVAILABLE, AS
ESTABLISHED BY A WRITTEN OPINION OF COUNSEL ACCEPTABLE TO DATAMEG
CORPORATION.

    

    SECURED
PROMISSORY NOTE

    

    $4,000,000 The
Effective Time: _______, 2007

    

    FOR VALUE
RECEIVED, the undersigned, AMERICAN MARKETING AND SALES, INC., a Massachusetts
corporation and any surviving entity (“Company Maker”), and Datameg Corporation,
a  Delaware Corporation (“Parent Maker”), both of whom hereinafter
referred to as Maker, hereby jointly and severally promises to pay to the order
of LEONARD J. TOCCI ("Holder") for the benefit of the Principal Shareholders
below identified, the principal sum of FOUR MILLION AND 00/100 DOLLARS
($4,000,000) (the "Initial Principal") and any additions to the Initial
Principal (“Additional Principal”) made from time to time as provided herein,
together with Interest thereon. Interest shall accrue on the Principal as
adjusted from time to time at a rate of six percent (6%) per annum computed on
the basis of the actual number of days elapsed without compounding until the
date of payment in full.

    

    This
Secured Promissory Note ("Note") evidences indebtedness of The Company and
Parent Maker to Holder with respect to the AGREEMENT AND PLAN OF
MERGER  (the "Merger Agreement") made and entered into as of August
14, 2007 by and among Datameg Corporation, a Delaware corporation ("Parent"), AM Acquisition
Corporation, a Massachusetts corporation that is a wholly-owned subsidiary of
Parent ("Sub"), and
American Marketing & Sales, Inc., a Massachusetts corporation ("Company"), Leonard J. Tocci,
Lynel J. Tocci, Leanne J. Whitney, and Linnea J. Clary (collectively, the "Principal Shareholders"). The
following is a statement of the rights of Holder and conditions to which this
Note is subject, and to which Holder, by the written acceptance of this Note
below made, agrees:

    

    Term and Maturity Date. The
date on which the Principal Balance and all Interest and other amounts shall be
due and payable (the “Maturity Date”) shall be on the date of the second
anniversary of the EFFECTIVE TIME as identified in the Merger Agreement and
above written.

    

    Additional
Principal.  From time to time, the Company shall have the right
to make cash loans from its operating cash in excess of the Company’s operating
needs to the Parent and/or one more of its other subsidiaries which loan
agreement between the Company and debtor(s) shall be in writing with interest as
provided herein and secured, as further provided by the terms of this
Note.  A copy of each loan agreement shall be consecutively number and
delivered to the Holder and appended to this Note.  Each loan
agreement’s amount shall become Additional Principal of this Note and bear
interest from the date of the loan. The Additional Principal of this Note may be
prepaid in whole or in part at any time prior to the Maturity Date. It is
specifically understood that the Company shall be under no obligation to make
cash loans totaling more than Five Hundred Thousand Dollars ($500,000) during
the term of this Note.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    Holder’s and Maker’s Election re
Fifteen Millions Shares of  Datameg Common
Stock.  The Principal Shareholders shall be issued, pro rata,
fifteen million shares of Datameg Corporation’s unregistered common stock (the
“Shares”) as provided in the Merger Agreement.  The Shares are to be
held in escrow by Datameg Corporation without restrictive legends other than as
required by law.  The Holder may at any time during the term of this
Note, upon sixty (60) day written notice, deliver its election to the Maker and
Datameg Corporation to return the Shares to Datameg Corporation and the
principal amount of the of this Note shall upon return of the Shares be
increased by Five Hundred Thousand Dollars ($500,000), at which time this Note
and any additional loans of the Company shall become immediately due and payable
(the Election Period”).  During the Election Period, Holder may, in
writing, waive its right to elect to return the Shares and upon delivery of the
waiver to Maker and Datameg Corporation the amounts due under the Note shall
thereupon be deemed satisfied in full upon delivery of the Shares to
Holder.

    

    Payment of Principal and
Interest.  Unless otherwise provided herein, Maker shall pay
Holder the entire principal sum then due plus all accrued and unpaid interest on
or before the Maturity Date.

    

    Security. To secure the timely
payment of the Principal Balance and the Interest under this Note and the
performance by Parent Maker and Company Maker of all of its commitments and
obligations under the Agreement, the Company hereby pledges and grants to the
Holder a security interest in all of the right, title and interest of the
Company in and to all of the assets, interests and undertakings of the Company,
including, without limitation, all equipment, molds, tooling, accounts
receivables, inventory and accounts, whether now owned or hereafter acquired,
existing or arising, tangible or intangible, including, without limitation, all
general intangible property, wherever located, together with all renewals
thereof, substitutions therefor and proceeds thereof and all interest,
dividends, income and revenue therefrom (the "Collateral"); and Company Maker
hereby grants to Holder a security interest in the Collateral and acknowledges
and agrees to take all steps necessary to perfect such security interest in
accordance with the applicable laws of the Commonwealth of Massachusetts,
including, without limitation, the Uniform Commercial Code of the Commonwealth
of Massachusetts as it may be amended from time to time (the
"UCC").  This instrument shall constitute a security agreement to the
extent the Collateral constitutes personal property, and Holder shall have all
of the rights of a "Secured Party" under the UCC.  Maker shall not
further pledge or otherwise further encumber, in whole or in part, the
Collateral without the written consent of the Holder.

     

    
      
         

      

      
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    As of the
date hereof, Maker represents and warrants that there are no liens, mortgages or
other encumbrances affecting or otherwise limiting or restricting the
transferability of any or all of the Collateral other than those existing under
any capital leases or similar arrangements with respect to property or equipment
leased by Maker. Maker waives any right to require Holder to proceed against
another person or to exhaust the Collateral or to pursue any other remedy which
Holder may have. Maker waives presentment, demand for performance, notice of
nonperformance, protest, notice of protest and dishonor with respect to the
Collateral. Maker waives the right to require Holder to preserve rights against
prior parties to instruments or chattel paper.

    

    Except in
an Event of Default, Maker shall retain all of its rights to, and use of, the
Collateral and to the use of the profits or proceeds from the
Collateral.

    

    Despite
anything to the contrary in this Note, and without in any manner affecting its
validity, in the event of any default under the terms of this Note, Holder’s
sole recourse shall be to the security for this Note.

    

    As
additional security, to secure the timely payments of all of the principal
balances and interest under this Note and the additional loans by the Maker
Company, the Parent hereby pledges and grants to the Holder all of the common
capital stock of the Company.

    

    Amendments. No amendment,
modification or waiver of any provision of this Note, nor consent to any
departure by the Maker from the terms hereof, shall be effective unless the same
shall be in a writing signed by the Holder, and then only in the specific
instance and for the purpose for which given. No failure to exercise, and no
delay in exercising, any right under the Merger Agreement or this Note shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right under the Merger Agreement or this Note preclude any other or further
exercise thereof or the exercise of any other right. Each and every right
granted hereunder or by law or at equity shall be deemed cumulative, and such
remedies may be exercised from time to time concurrently or
consecutively.

    

    Controlling
Document.  To the extent that this Note conflicts with or is in
any way incompatible with any other document related specifically to the loan
evidenced by this Note, this Note shall control over any other such document,
and if this Note does not address an issue, then each other such document shall
control to the extent that it deals most specifically with an
issue.

    

    Defaults; Acceleration. Maker
shall be in default under this Note upon the occurrence of any of the following
events:(a) There is any default (i) in the full payment and timely receipt by
Holder of any installment hereunder or (ii) in the full repayment of the unpaid
principal or accrued and unpaid interest due under this Note or any and all
amounts owed to Holder when due hereunder.(b) Maker fails to perform any
covenant or observe any condition contained in this Note or Parent or Maker
breaches any representation, warranty, covenant, term or condition of this Note
or the Merger Agreement (c) The Maker is subject to or affected by: (i) the
appointment of a receiver, liquidator, or trustee; (ii) the filing of any
voluntary or involuntary petition for bankruptcy or reorganization by Maker or
Datameg Corporation; (iii) the insolvency or business failure of Maker; (iv) the
inability of Maker to pay its debts when due or the admission in writing by
Maker that its debts cannot be paid when due;(v) the removal of Maker’s
operations from Leominster, Massachusetts; (vi) the dissolution, termination of
existence, other than by merger, acquisition or other surviving existence;(vii)
any assignment for the benefit of creditors;(viii) the making or suffering of a
fraudulent transfer under applicable federal or state law;(ix) the concealment
of any of its property in fraud of creditors;(x) the making or suffering of a
preference within the meaning of the federal bankruptcy law. In the event of a
default by Maker, and subject to any applicable right expressly granted to Maker
to cure such a default, the entire principal sum, with accrued interest thereon
and all other sums due under this Note, shall at the option of Holder, become
immediately due and payable, and Holder shall been entitled to collect all such
amounts and to enforce any and all remedies provided in any other instrument or
document executed in connection with this Note.

     

    
      
         

      

      
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    Voluntary
Surrender.  Upon the occurrence of any event of default, the
Maker will immediately and voluntarily surrender to the Holder, all of the
assets pledged to secure this Note without further notice or demand by the
Holder, free and clear of any encumbrances.

    

    Return of Note. This Note
shall be returned to Maker upon the payment in full of the amount of this
Note.

    

    Non-Negotiable. This Note is
non-negotiable and may not otherwise be transferred.

    

    Non Assignment. The Maker's
rights and obligations under this Note are not assignable or delegable without
the prior written consent of the Holder.

    

    Successors and Assigns;
Participation. Subject to the prohibitions against Maker's assignment
herein, this Note shall inure to the benefit of Holder and bind Maker and all of
its respective successors (including by merger, acquisition or other surviving
existence), estates, heirs, personal representatives and assigns.

    

    Waivers. Maker hereby waives
presentment, demand of payment, notice of dishonor, protest, notice of
nonpayment and any and all other notices and demands whatsoever. No covenant,
condition, right or remedy in this Note may be waived or modified orally, by
course of conduct or previous acceptance or otherwise unless such waiver or
modification is specifically agreed to in a writing executed by Holder. Without
limiting the foregoing, no previous waiver and no failure or delay by Holder in
acting pursuant to the terms of this Note shall constitute a waiver of any
breach, default or failure of a condition under this Note or any obligations
contained therein or secured thereby. Maker further waives exhaustion of legal
remedies and the right to plead any and all statutes of limitation as a defense
to any demand on this Note, or to any agreement to pay the same.

     

    
      
         

      

      
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    Costs of Collection. Maker
promises to pay all costs, expenses and attorneys' fees incurred by Holder in
the exercise of any remedy (with or without litigation), in any proceeding for
the collection of this Note, or in any litigation or controversy arising from or
connected with this Note. Such proceedings shall include, without limitation,
any probate, bankruptcy, receivership, injunction, arbitration, mediation or
other proceeding, or any appeal from or petition for review of any of the
foregoing, in which Holder appears to enforce this Note. Maker shall also pay
all of Holder's costs and attorneys' fees incurred in connection with any
demand, workout, settlement, compromise or other activity in which Holder
engages to collect any portion of this Note not paid when due or as a result of
any other default of Maker. If a judgment is obtained by Holder which includes
an award of attorneys' fees, such fees shall be in whatever amount the court
shall deem reasonable and the judgment shall bear interest at the maximum legal
rate.

    

    Governing Law and
Interpretation. This Note shall be governed by and construed in
accordance with the internal laws of the Commonwealth of Massachusetts, except
to the extent that federal law preempts the laws of the Commonwealth of
Massachusetts. All sums referred to herein shall be calculated by reference to
and payable in the lawful currency of the United States. Time is of the essence
in the performance by Maker of all of Maker's duties and obligations under this
Note.

    

    Partial Invalidity. If any
section or provision of this Note is declared invalid or unenforceable by an
court of competent jurisdiction, such section or provision shall be enforceable
to the fullest extent permitted by law, and such a determination shall not
affect the validity or enforceability of the remaining terms hereof; by way of
example and not limitation, if any fee exceeds the maximum such fee permitted by
law, such fee shall be reduced so as to equal the maximum permitted by law, or
if any time period is shorter than required by law, such time period shall be
deemed increased to the minimum time period permitted by law. No such
determination in one jurisdiction shall affect any provision of this Note to the
extent it is otherwise enforceable under the laws of any other applicable
jurisdiction.

    

    Notices. Any notice required
or permitted to be delivered under this Note shall be in writing and shall be
served personally, or facsimile transmission, or electronic transmission
(email),or delivered or sent by a recognized private courier company or by
registered or certified United States mail, postage prepaid, return receipt
requested, and addressed to a recipient as provided in the Merger
Agreement.

    

    Notices
shall be deemed delivered upon delivery or refusal to accept delivery as
indicated by the person attempting to make personal service, in the U.S. Postal
Service return receipt or by similar advice from the courier company; provided,
however, that if any notice shall be delivered by electronic transmission
device, such as Telex, telecopy, fax machine or computer, such notice shall be
deemed delivered at the time and on the date of machine transmittal if the
sending party receives a written send verification on its machine and forwards a
copy thereof with its personally served, mailed or courier delivered notice. Any
party to whom notices are to be sent pursuant to this Note may from time to time
change its address or fax number for future communication hereunder by giving
notice in the manner prescribed herein to the other party, provided that any
change shall not be effective until five (5) business days after giving notice
of the change.

     

    
      
         

      

      
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    Consent to Jurisdiction. Maker
hereto agrees that all actions or proceedings arising in connection with this
Note shall be tried and litigated exclusively in the state and federal courts
located in the Commonwealth of Massachusetts. This choice of venue is intended
by Maker and Holder to be mandatory and not permissive in nature, thereby
precluding the possibility of litigation between or among the parties with
respect to or arising out of this Note in any jurisdiction other than that
specified in this section. Maker waives any right that it may have to assert the
doctrine forum non conveniens
or similar doctrine or to object to venue with respect to any proceeding
brought in accordance with this section, and stipulates that the state and
federal courts located in the Commonwealth of Massachusetts, shall have in
personam jurisdiction and venue over it for the purpose of litigating any
dispute, controversy or proceeding arising out of this Note. Nothing in this
Note shall be deemed or operate to preclude the parties from bringing suit or
taking other legal action in any other jurisdiction to obtain specific
performance to the extent allowed herein, or to enforce a judgment or other
court order in favor of any of the parties.

    

    Full Power and Authority.
Maker and each individual executing this Note on behalf of Maker have the full
power and authority to execute and deliver this Note, and this Note constitutes
the valid and binding obligation of Maker and is enforceable in accordance with
its terms.

    

    Captions; Certain Terms. The
various captions and headings contained in this Note are for reference only and
shall not be considered or referred to in resolving questions of interpretation
of this Note. No provision in this Note is to be interpreted for or against any
party because that party or that party's legal representative drafted such
provision, it being recognized that all parties have contributed substantially
and materially to the preparation of this Note. As used in this Note, the term
"including" means "including but not limited to" unless otherwise specified; the
word "or" means "and/or," the word "person" means and refers to any individual,
corporation, trust, estate, partnership, joint venture, government or
governmental authority or other entity and the word "affiliate" means and refers
to any entity that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, another entity. All
pronouns and any variations thereof, shall be deemed to refer to the masculine,
feminine, neuter, singular or plural as the identity of the person, persons,
entity or entities may require. Whenever in this Note locative adverbs such as
"herein" and "hereunder" are used, the same shall be made in reference to this
Note in its entirety and not any specific article, section, subsection, subpart,
paragraph or subparagraph.

    

    

    

    SIGNATURE
PAGE FOLLOWS:

     

    
      
         

      

      
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    "Maker"

    

    DATAMEG
CORPORATION, a Delaware corporation

    

     

    By: /s/ James Murphy

           James
Murphy, President

    

    AMERICAN
MARKETING AND SALES, INC., a Massachusetts corporation

    

    

    By: /s/ James Murphy

           James
Murphy, President

    

    AGREED
AND ACCEPTED:

    

    “Holder”

    

    

    /s/
Leonard J. Tocci

    LEONARD
J. TOCCIex41.htm

    Exhibit
4.1

    REGISTRATION
RIGHTS AGREEMENT

     

    REGISTRATION RIGHTS AGREEMENT
(this “Agreement”),
dated as of March 30, 2009, by and among Aeolus Pharmaceuticals, Inc., a
Delaware corporation, with headquarters located at 26361 Crown Valley Parkway,
Suite 150, Mission Viejo, California 92691 (the “Company”), and the investors
listed on the Schedule of Buyers attached hereto (each, a “Buyer” and collectively, the
“Buyers”).

     

    WHEREAS:

     

    A.           In
connection with the Securities Purchase Agreement by and among the parties
hereto dated as of even date herewith (the “Securities Purchase
Agreement”), the Company has agreed, upon the terms and subject to the
conditions of the Securities Purchase Agreement, to issue and sell to each Buyer
(i) shares (the “Shares”) of the Company’s
common stock, par value $0.01 per share (the “Common Stock”), and (ii)
warrants (the “Warrants”) exercisable to
purchase shares of Common Stock (the “Warrant Shares”).

     

    B.           In
accordance with the terms of the Securities Purchase Agreement, the Company has
agreed to provide certain registration rights under the Securities Act of 1933,
as amended, and the rules and regulations thereunder, or any similar successor
statute (collectively, the “1933 Act”), and applicable
state securities laws.

     

    NOW, THEREFORE, in
consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and each of the Buyers hereby agree as
follows:

     

    1. Definitions.

     

    Capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings set forth in the Securities Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:

     

    (a) “Business Day” means any day
other than Saturday, Sunday or any other day on which commercial banks in The
City of New York are authorized or required by law to remain
closed.

     

    (b) “Closing Date” shall have the
meaning thereof set forth in the Securities Purchase Agreement.

     

    (c) “Cutback Shares” means any
Uncovered Registrable Securities requested for inclusion in a Demand
Registration or an Additional Registration, but excluded from such Demand
Registration or Additional Registration, as applicable, as a result of a
limitation on the maximum number of shares of Common Stock of the Company
permitted to be registered by the staff of the SEC pursuant to Rule
415. For all purposes of this Agreement, the number of Cutback Shares shall
be allocated pro rata among the Investors with each Investor entitled to elect
the portion of its Shares and/or Warrant Shares that are to be considered
Cutback Shares.

     

    
      
        
        

      

      
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    (d) “Effective Date” means the
effective date of a Demand Registration Statement or an Additional Registration
Statement, as applicable.

     

    (e) “Eligible Market” means the
Over The Counter Bulletin Board, NYSE Alternext US LLC, the New York Stock
Exchange, Inc., The NASDAQ Global Select Market, the NASDAQ Global Market or The
NASDAQ Capital Market.

     

    (f) “Investor” means a Buyer, any
transferee or assignee thereof to whom a Buyer assigns its rights under this
Agreement and who agrees to be bound by all provisions of this Agreement in
accordance with Section 9 and any transferee
or assignee thereof to whom a transferee or assignee assigns its rights under
this Agreement and who agrees to be bound by all provisions of this Agreement in
accordance with Section 9.

     

    (g) “Person” means an individual, a
limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization and a government or any department or
agency thereof.

     

    (h) “register,” “registered,” and “registration” refer to a
registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the 1933 Act and pursuant to
Rule 415, and the declaration or ordering of effectiveness of such Registration
Statement(s) by the SEC.

     

    (i) “Registrable Securities” means
(i) the Shares, (ii) the Warrant Shares, and (iii) any capital stock of the
Company issued or issuable, with respect to the Shares, the Warrant Shares or
the Warrants as a result of any stock split, stock dividend, recapitalization,
exchange or similar event or otherwise, without regard to any limitations on
exercise of the Warrants; provided, however, that as to any
Registrable Securities, such securities will irrevocably cease to constitute
Registrable Securities upon the earliest to occur of: (i) the date on which the
securities are disposed of pursuant to an effective registration statement under
the 1933 Act; (ii) the date on which the securities are distributed to the
public pursuant to Rule 144; (iii) the date on which the securities may be
freely sold publicly without registration under the 1933 Act, including without
the requirement to be in compliance with Rule 144(c)(1) (or any successor
thereto); and (iv) the date on which the securities cease to be
outstanding.

     

    (j) “Registration Statement” means
a Demand Registration Statement, Additional Registration Statement or Piggyback
Registration Statement, as applicable.

     

    (k) “Required Holders” means, as of
any particular time, the holders of Registrable Securities representing at least
a majority of the Registrable Securities as of such time.

     

    (l)  “Rule 144” means Rule 144
promulgated under the 1933 Act, or any successor rule that may at any time
permit the Investors to freely sell securities of the Company to the public
without registration, in each case as may be amended from time to
time.

     

    
      
        
        

      

      
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    (m) “Rule 415” means Rule 415
promulgated under the 1933 Act or any successor rule providing for offering
securities on a continuous or delayed basis, in each case as may be amended from
time to time.

     

    (n) “Rule 424” means Rule 424 promulgated
under the 1933 Act or any successor rule, in each case as may be amended from
time to time.

     

    (o) “SEC” means the United States
Securities and Exchange Commission.

     

    (p) “Trading Day” means any day on
which the Common Stock is traded on the Principal Market, or, if the Eligible
Market is not the principal trading market for the Common Stock, then on the
principal securities exchange or securities market on which the Common Stock is
then traded; provided
that “Trading Day” shall not include any day on which the Common Stock is
scheduled to trade on such exchange or market for less than 4.5 hours or any day
that the Common Stock is suspended from trading during the final hour of trading
on such exchange or market (or if such exchange or market does not designate in
advance the closing time of trading on such exchange or market, then during the
hour ending at 4:00:00 p.m., New York Time).

     

    (q) “Uncovered Registrable
Securities” means, as of any particular time, those Registrable
Securities, if any, that are not covered by an effective and available resale
registration statement.

     

    2. Registration.

     

    (a) Demand
Registration.

     

    (i) Request for
Registration. Subject to the provisions of Section 2(a)(ii), (A)
one or more holders of the Registrable Securities representing at least a
majority of the outstanding Uncovered Registrable Securities may demand that the
Company register all or part of its Uncovered Registrable Securities for resale
under the 1933 Act (a “Demand
Registration”). Within five (5) Business Days after receipt of a demand
meeting the requirements of the foregoing sentence, the Company will notify in
writing all other holders of Uncovered Registrable Securities, if any, of the
demand. Any holder of Uncovered Registrable Securities who wants to include some
or all of its Uncovered Registrable Securities in the Demand Registration must
notify the Company within five (5) Business Days of receiving the notice of the
Demand Registration (the “Participation Deadline”). All
demands or requests made pursuant to this Section 2(a)(i) must
specify the number of Uncovered Registrable Securities to be registered in
connection with such Demand Registration (collectively, the “Requested Eligible
Securities”). In the event of a Demand Registration, the Company shall
prepare and file with the SEC as soon as commercially reasonable after the
Participation Deadline, but in any event within sixty (60) calendar days
following the Participation Deadline (the “Filing Deadline”) a
Registration Statement on Form S-3 covering at least that number of securities
equal to the Requested Eligible Securities minus the number of Cutback Shares,
if any; provided that in the event that Form
S-3 is unavailable for such a registration for any reason, the Company shall use
(a) Form S-1 or (b) such other form as is available for such a registration on

    
       

      
        
          
          

        

        
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      another
appropriate form reasonably acceptable to the holders of a majority of the
Requested Eligible Securities, subject to the provisions of Section 2(f) (the
“Demand Registration
Statement”). Such Demand Registration Statement shall contain
(except if otherwise directed in writing by the holders of a majority of the
Requested Eligible Securities or the SEC) the “Plan of Distribution” section in
substantially the form attached hereto as Exhibit B. The
Company shall use its commercially reasonable efforts to have the Demand
Registration Statement declared effective by the SEC as soon as practicable
after the filing thereof. By 9:30 a.m. New York time on the second Business
Day following the date such Demand Registration Statement has been declared
effective by the SEC, the Company shall file with the SEC in accordance with
Rule 424 the final prospectus to be used in connection with sales pursuant to
such Demand Registration Statement. The Company will use its commercially
reasonable efforts to cause such Demand Registration Statement to remain
effective until such time as all of the securities included therein no longer
constitute Registrable Securities.

    

     

    (ii) Number of
Demands.  The holders of Registrable Securities shall have the
right to two (2) Demand Registrations; provided, however, that the Company shall
not be obligated to effect more than one (1) Demand Registration within any
period of 12 consecutive months; and provided further that the Company shall not
be deemed to have satisfied its obligation to effect a Demand Registration if
the Registrable Securities included in a Demand Registration Statement as of its
initial effective date is less than 66 2/3% of the Requested Eligible
Securities.

     

    (b) Additional
Registrations. In the event that six (6) months after the second (2nd)
Demand Registration Statement has been filed by the Company and declared
effective by the SEC (the “Outside Date”) there are any
Uncovered Registrable Securities outstanding (collectively, the “Additional Registrable
Securities”), the Company shall prepare, and, as soon as practicable but
in no event later than forty-five (45) days after such Outside Date, file with
the SEC an additional registration statement on Form S-3 covering the resale of
all of the Additional Registrable Securities (each, an “Additional
Registration”). To the extent the staff of the SEC does not permit
all the Additional Registrable Securities to be registered for resale on such
registration statement, the Company shall take commercially reasonable steps to
file one or more additional registration statements successively trying to
register on each such additional registration statement until all such
Additional Registrable Securities have been registered for resale with the SEC
(each registration statement filed pursuant to this Section 2(b), an
“Additional Registration
Statement”). In the event that Form S-3 is unavailable for any such
registration for any reason, the Company shall use Form S-1 or such other form
as is available for such a registration on another appropriate form reasonably
acceptable to the holders of a majority of the Additional Registrable Securities
being included on such Additional Registration Statement, subject to the
provisions of Section 2(f). Each Additional Registration Statement shall
contain (except if otherwise directed in writing by the holders of a majority of
the Additional Registrable Securities being included on such Additional
Registration Statement or the SEC) the “Plan of Distribution” section in
substantially the form attached hereto as Exhibit B. The
Company shall use its commercially reasonable efforts to have each Additional
Registration Statement declared effective by the SEC as soon as practicable. By
9:30 a.m. New York time on the second Business Day following the effective
date of an Additional Registration Statement, the Company shall file with the
SEC in accordance with Rule 424 the final prospectus to be used in connection
with sales pursuant to such Additional Registration Statement.

     

    
      
        
        

      

      
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    (c) Allocation of Registrable
Securities.  The initial number of Uncovered Registrable
Securities included in any Registration Statement and any increase or decrease
in the number of Registrable Securities included therein shall be allocated pro
rata among the Investors based on the number of Uncovered Registrable Securities
held by each Investor at the time the Registration Statement covering such
initial number of Registrable Securities included in the Registration Statement
or increase or decrease thereof is declared effective by the SEC. In the event
that an Investor sells or otherwise transfers any of such Investor’s Registrable
Securities in a transfer involving the transfer of all or a part of the
Investor’s rights hereunder, each transferee shall be allocated a pro rata
portion of the then remaining number of Registrable Securities included in such
Registration Statement for such transferor. Any shares of Common Stock included
in a Registration Statement and which remain allocated to any Person which
ceases to hold any Registrable Securities covered by such Registration Statement
shall be allocated to the remaining Investors, pro rata based on the number of
Registrable Securities then held by such Investors which are covered by such
Registration Statement. In no event shall the Company include any securities
other than previously Uncovered Registrable Securities on any Registration
Statement without the prior written consent of the holders of a majority of the
Uncovered Registrable Securities being included in such Registration
Statement.

     

    (d) Piggyback
Registration.  At any time after the lapse of a ninety (90)-day
period following the Closing Date, if the Company proposes to register any
of its securities (other than pursuant to a registration statement on Form S-4
or Form S-8, or any equivalent or successor form to either Form, each as
promulgated under the 1933 Act), for its own account or for the account of any
other person, and as of such time, any Uncovered Registrable Securities are
outstanding, the Company shall give notice to the holders of such Uncovered
Registrable Securities (the “Piggyback Holders”) of such
intention. Upon the written request of the Piggyback Holders received by
the Company by no later than ten (10) days after receipt of any such notice, the
Company shall include in such registration statement (the “Piggyback Registration
Statement”) all of the Uncovered Registrable Securities indicated in such
request so as to permit the disposition of the shares so registered in the
manner requested by the Piggyback Holders holding a majority of the Uncovered
Registrable Securities requested for inclusion in such registration
statement. Notwithstanding any other provision of this Section 2(d), if the
registration relates to an underwritten offering of securities and the managing
underwriter or underwriters of the proposed underwritten offering advises the
Company that the total amount or kind of Uncovered Registrable
Securities or other securities, as applicable, that the Piggyback Holders
or any other Persons (other than the Company), as applicable, seek to include in
such offering may materially and adversely affect the success of such offering,
then, in addition to the number of such securities being included in the
offering for the account of the Company, the Company shall be required to
include in the offering only that number and type of such Uncovered Registrable
Securities that the Company’s Board of Directors determines, upon advice
from the underwriters, will not jeopardize the success of the
offering (collectively, the “Additional
Securities”).  Any such Additional Securities will be
apportioned to (i) the Piggyback Holders and (ii) the holders of any other
securities of the Company having piggyback registration rights granted by the
Company pursuant to a registration rights agreement (or similar agreement) which
has been executed prior to the date of this Agreement and which is publically
available through the SEC’s Electronic Data Gathering and Retrieval System or
any successor database (“EDGAR”), on a pro rata basis
with respect to the number of Uncovered Registrable 

    
       

      
        
          
          

        

        
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      Securities
or other securities, as applicable, each such holder seeks to include in such
registration compared to the number of Uncovered Registrable Securities or other
securities, as applicable, all of such holders seek to include in such
registration.

    

     

    (e) Legal
Counsel.  Subject to Section 5
hereof, the Required Holders shall have the right to select one legal counsel to
review and oversee any registration pursuant to this Section 2 in
which Registrable Securities are included (“Legal Counsel”), which shall
be Lowenstein Sandler PC or such other counsel as thereafter designated in
writing to the Company by the Required Holders.

     

    (f) Ineligibility for Form
S-3.  Notwithstanding anything in this Agreement to the
contrary, in the event that Form S-3 is not available for the registration of
the resale of Registrable Securities hereunder, the Company shall
(i) register the resale of the Registrable Securities on (a) Form S-1 or
(b) another appropriate form reasonably acceptable to the Required Holders and
(ii) undertake to register the Registrable Securities on Form S-3 as soon
as such form is available, provided that the Company shall maintain the
effectiveness of the Registration Statement then in effect until such time as a
Registration Statement on Form S-3 covering the Registrable Securities has been
declared effective by the SEC or, if earlier, until the end of the Registration
Period.

     

    3. Related
Obligations.

     

    At such
time as the Company is obligated to file a Registration Statement with the SEC
pursuant to Section 2(a)(i), 2(b) or 2(d), the Company
will use its commercially reasonable efforts to effect the registration of the
Registrable Securities in accordance with the intended method of disposition
thereof and, pursuant thereto, the Company shall have the following
obligations:

     

    (a) The
Company shall promptly prepare and file with the SEC a Registration Statement
with respect to the Registrable Securities and use its commercially reasonable
efforts to cause such Registration Statement relating to the Registrable
Securities to become effective as soon as practicable after such filing. The
Company shall keep each Registration Statement effective pursuant to Rule 415 at
all times until such initial date that the securities included in such
Registration Statement no longer constitute Registrable Securities (the “Applicable Registration Period”). The
Company shall ensure that each Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein) shall not contain any
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 (in the case of
prospectuses, in the light of the circumstances in which they were made) not
misleading. The term “commercially reasonable efforts” shall mean, among other
things, that the Company shall submit to the SEC, within five (5) Business Days
after the later of the date that (i) the Company is informed by the SEC that no
review of a particular Registration Statement will be made by the staff of the
SEC or that the staff has no further comments on a particular Registration
Statement, as the case may be, and (ii) the approval of Legal Counsel
pursuant to Section 3(c) (which
approval is immediately sought), a request for acceleration of effectiveness of
such Registration Statement to a date not later than two (2) Business Days after
the submission of such request if submitted during the 

    
       

      
        
          
          

        

        
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      hours of
normal operation of the SEC; and, otherwise, to a date not later than three (3)
Business Days after the submission of such request.

    

     

    (b) The
Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to a Registration Statement and the
prospectus used in connection with such Registration Statement, which prospectus
is to be filed pursuant to Rule 424, as may be necessary to keep such
Registration Statement effective at all times during the Applicable Registration
Period, and, during such period, comply with the provisions of the 1933 Act with
respect to the disposition of all Registrable Securities covered by such
Registration Statement. In the case of amendments and supplements to a
Registration Statement which are required to be filed pursuant to this Agreement
(including pursuant to this Section 3(b)) by reason of
the Company filing a report on Form 10-K, Form 10-Q or Form 8-K or any analogous
report under the Securities Exchange Act of 1934, as amended (the “1934 Act”), the Company shall
have incorporated such report by reference into such Registration Statement, if
applicable, or shall file such amendments or supplements with the SEC within two
(2) Business Days following the day on which the 1934 Act report is filed which
created the requirement for the Company to amend or supplement such Registration
Statement.

     

    (c) The
Company shall (A) permit Legal Counsel to review and comment upon (i) a
Registration Statement at least five (5) Business Days prior to its filing with
the SEC and (ii) all amendments and supplements to all Registration Statements
(except for Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K and any similar or successor reports) within a reasonable
number of days prior to their filing with the SEC, and (B) not file any
Registration Statement or amendment or supplement thereto in a form to which
Legal Counsel reasonably objects in writing delivered to the Company within
three (3) Business Days after the receipt of such proposed Registration
Statement, amendment or supplement, as applicable, by the Legal Counsel. The
Company shall not submit a request for acceleration of the effectiveness of a
Registration Statement or any amendment or supplement thereto without the prior
approval of Legal Counsel, which consent shall not be unreasonably withheld,
delayed or conditioned. The Company shall furnish to Legal Counsel, without
charge, (i) copies of any correspondence from the SEC or the staff of the SEC to
the Company or its representatives relating to any Registration Statement, (ii)
promptly after the same is prepared and filed with the SEC, one copy of any
Registration Statement and any amendment(s) thereto, including financial
statements and schedules, all documents incorporated therein by reference, if
requested by an Investor, and all exhibits, unless such document is publicly
available through EDGAR, and (iii) upon the effectiveness of any Registration
Statement, one copy of the prospectus included in such Registration Statement
and all amendments and supplements thereto. The Company shall consider
reasonable recommendations and comments provided by Legal Counsel in performing
the Company’s obligations pursuant to this Section 3.

     

    (d) The
Company shall furnish to each Investor whose Registrable Securities are included
in any Registration Statement, without charge, (i) promptly after the same is
prepared and filed with the SEC, at least one copy of such Registration
Statement and any amendment(s) thereto, including financial statements and
schedules, all documents incorporated therein by reference, if requested by an
Investor, all exhibits and each preliminary prospectus, (ii) upon the
effectiveness of any Registration Statement, one (1) copy of the prospectus
included in such Registration Statement and all amendments and supplements
thereto (or such other 

     

    
      
        
        

      

      
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      number of copies as such Investor may reasonably request) and
(iii) such other documents, including copies of any preliminary or final
prospectus, as such Investor may reasonably request from time to time in order
to facilitate the disposition of the Registrable Securities owned by such
Investor, unless such document is publicly available through EDGAR.

    

     

    (e) The
Company shall use its commercially reasonable efforts to (i) register and
qualify, unless an exemption from registration and qualification applies, the
resale by Investors of the Registrable Securities covered by a Registration
Statement under such other securities or “blue sky” laws of all applicable
jurisdictions in the United States, (ii) prepare and file in those jurisdictions
such amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be reasonably necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and
(iv) take all other actions reasonably necessary or advisable to qualify
the Registrable Securities for sale in such jurisdictions; provided, however,
that the Company shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Agreement, (y) subject itself to
general taxation in any such jurisdiction, or (z) file a general consent to
service of process in any such jurisdiction. The Company shall promptly notify
Legal Counsel and each Investor who holds Registrable Securities of the receipt
by the Company of any notification with respect to the suspension of the
registration or qualification of any of the Registrable Securities for sale
under the securities or “blue sky” laws of any jurisdiction in the United States
or its receipt of actual notice of the initiation or threatening of any
proceeding for such purpose.

     

    (f) The
Company shall notify Legal Counsel and each Investor in writing of the happening
of any event, as promptly as reasonably practicable after becoming aware of such
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 omission
to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (provided that in no event shall such notice contain any
material, nonpublic information), and, subject to Section 3(q), promptly
prepare a supplement or amendment to such Registration Statement to correct such
untrue statement or omission, and deliver ten (10) copies of such supplement or
amendment to Legal Counsel and each Investor (or such other number of copies as
Legal Counsel or such Investor may reasonably request) unless such supplement or
amendment is publicly available through EDGAR. The Company shall also
promptly notify Legal Counsel and each Investor in writing (i) when a
prospectus or any prospectus supplement or post-effective amendment has been
filed, and when a Registration Statement or any post-effective amendment has
become effective (notification of such effectiveness shall be delivered to Legal
Counsel and each Investor by facsimile on the same day of such effectiveness and
by overnight mail) unless such prospectus, prospectus supplement or
post-effective amendment is publicly available through EDGAR, (ii) of any
request by the SEC for amendments or supplements to a Registration Statement or
related prospectus or related information, and (iii) of the Company’s reasonable
determination that a post-effective amendment to a Registration Statement would
be appropriate. By 9:30 a.m. New York City time on the date following the
date any post-effective amendment has become 

    
       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      effective,
the Company shall file with the SEC in accordance with Rule 424 the final
prospectus to be used in connection with sales pursuant to such Registration
Statement.

    

     

    (g) The
Company shall use its commercially reasonable efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
or the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction and, if such an order or suspension is issued, to
obtain the withdrawal of such order or suspension at the earliest possible
moment and to notify Legal Counsel and each Investor who holds Registrable
Securities being sold of the issuance of such order and the resolution thereof
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.

     

    (h) If any
Investor is required under applicable securities laws to be described in the
Registration Statement as an underwriter of Registrable Securities, at the
reasonable request of such Investor, the Company shall furnish to such Investor,
on the date of the effectiveness of the Registration Statement and thereafter
from time to time on such dates as an Investor may reasonably request (i) a
letter, dated such date, from the Company’s independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the Investors, and (ii) an opinion, dated as of such date, of
counsel representing the Company for purposes of such Registration Statement, in
form, scope and substance as is customarily given in an underwritten public
offering, addressed to the Investors.

     

    (i) If any
Investor is required under applicable securities laws to be described in the
Registration Statement as an underwriter of Registrable Securities, the Company
shall make available for inspection by (i) such Investor, (ii) Legal Counsel and
(iii) one firm of accountants or other agents retained by the Investors
(collectively, the “Inspectors”), all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the “Records”), as shall be
reasonably deemed necessary by each Inspector, and cause the Company’s officers,
directors and employees to supply all information which any Inspector may
reasonably request; provided, however, that each Inspector shall agree to hold
in strict confidence and shall not make any disclosure (except to an Investor)
or use of any Record or other information which the Company determines in good
faith to be confidential, and of which determination the Inspectors are so
notified, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement or is otherwise
required under the 1933 Act, (b) the release of such Records is ordered pursuant
to a final, non-appealable subpoena or order from a court or government body of
competent jurisdiction, or (c) the information in such Records has been made
generally available to the public other than by disclosure in violation of this
Agreement. Each Investor agrees that it shall, upon learning that disclosure of
such Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential. Nothing herein (or in any other confidentiality agreement between
the Company and any Investor) shall be deemed to limit the Investors’ ability to
sell Registrable Securities in a manner which is otherwise consistent with
applicable laws and regulations.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    (j) The
Company shall hold in confidence and not make any disclosure of information
concerning an Investor provided to the Company unless (i) such information is
contained in a Selling Stockholder Questionnaire in the form attached hereto as
Exhibit C delivered by such Investor to the Company and, in the reasonable
opinion of the Company’s counsel, is required to be disclosed in a Registration
Statement, prospectus or prospectus supplement, (ii) disclosure of such
information is necessary, in the reasonable opinion of the Company’s counsel, to
comply with federal or state securities laws, (iii) the disclosure of such
information is necessary to avoid or correct a misstatement or omission in any
Registration Statement, prospectus or any amendment or supplement thereto, (iv)
the release of such information is ordered pursuant to a subpoena or other
final, non-appealable order from a court or governmental body of competent
jurisdiction, or (v) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement between the Company and such Investor. The Company agrees that it
shall, upon learning that disclosure of such information concerning an Investor
is sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt written notice to such Investor and allow such
Investor, at the Investor’s expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such
information.

     

    (k) In
connection with any sales or transfer of Registrable Securities pursuant to a
Registration Statement, the Company shall reasonably cooperate with the
Investors who hold Registrable Securities being offered and, to the extent
applicable, facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legend) representing the Registrable Securities to be
offered pursuant to a Registration Statement and enable such certificates to be
in such denominations or amounts, as the case may be, as the Investors may
reasonably request and registered in such names as the Investors may
request.

     

    (l) If
reasonably requested by an Investor, the Company shall as soon as reasonably
practicable: (i) incorporate in a prospectus supplement or post-effective
amendment to a Registration Statement such information as an Investor reasonably
requests in writing to be included therein relating to the sale and distribution
of Registrable Securities, including, without limitation, information with
respect to the number of Registrable Securities being offered or sold, the
purchase price being paid therefor and any other terms of the offering of the
Registrable Securities to be sold in such offering; (ii) make all required
filings of such prospectus supplement or post-effective amendment after being
notified of the matters to be incorporated in such prospectus supplement or
post-effective amendment; and (iii) supplement or make amendments to any
Registration Statement if reasonably requested by an Investor holding any
Registrable Securities.

     

    (m) The
Company shall use its commercially reasonable efforts to cause the Registrable
Securities covered by a Registration Statement to be registered with or approved
by such other governmental agencies or authorities as may be necessary to
consummate the disposition of such Registrable Securities in accordance with the
terms of the Plan of Distribution included in the applicable Registration
Statement, other than approvals that are required solely because of actions of
Investors after the date hereof.

     

    (n) The
Company shall make available to its security holders, as soon as reasonably
practicable, but not later than the Availability Date (as defined below), an
earnings 

    
       

      
        
          
          

        

        
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      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(n), “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).  For purposes of this Section 3(n), an
earnings statement shall be deemed to have been made generally available to the
Company’s security holders if it shall have been filed publicly with the SEC or
otherwise made available on or through the Company’s website.

    

     

    (o) The
Company shall otherwise use its commercially reasonable efforts to comply with
all applicable rules and regulations of the SEC in connection with any
registration hereunder, including, without limitation, Rule 172 promulgated
under the 1933 Act, file any final prospectus, including any supplement or
amendment thereof, with the SEC pursuant to Rule 424, promptly inform the
Investors in writing if, at any time during the Registration Period, the Company
does not satisfy the conditions specified in Rule 172 and, as a result thereof,
the Investors are required to deliver a prospectus in connection with any
disposition of Registrable Securities and take such other actions as may be
reasonably necessary to facilitate the registration of the Registrable
Securities hereunder.

     

    (p) Within
two (2) Business Days after a Registration Statement which covers Registrable
Securities is ordered effective by the SEC, the Company shall deliver to the
transfer agent for such Registrable Securities (with copies to the Investors
whose Registrable Securities are included in such Registration Statement)
confirmation that such Registration Statement has been declared effective by the
SEC in the form attached hereto as Exhibit
A.

     

    (q) Notwithstanding
anything to the contrary herein, at any time after the Effective Date, the
Company may delay the disclosure of material, non-public information concerning
the Company the disclosure of which at the time is not, in the good faith
judgment of the Board of Directors of the Company, in the best interest of the
Company and otherwise required (a “Grace Period”); provided, that
the Company shall promptly (i) notify the Investors in writing of the existence
of material, non-public information giving rise to a Grace Period (provided that
in each notice the Company will not disclose the content of such material,
non-public information to the Investors) and the date on which the Grace Period
will begin, and (ii) notify the Investors in writing of the date on which the
Grace Period ends; and, provided further, that no Grace Period shall exceed ten
(10) consecutive days and during any three hundred sixty five (365) day period,
such Grace Periods shall not exceed an aggregate of thirty (30) days and the
first day of any Grace Period must be at least five (5) Trading Days after the
last day of any prior Grace Period (each, an “Allowable Grace Period”). For
purposes of determining the length of a Grace Period above, the Grace Period
shall be deemed to begin on and include the date the Investors receive the
notice referred to in clause (i) and shall end on and include the later of the
date the Investors receive the notice referred to in clause (ii) and the date
referred to in such notice. The provisions of Section 3(g) hereof shall
not be applicable during the period of any Allowable Grace
Period.  Upon expiration of the Grace Period, the Company shall again
be bound by the first sentence of Section 3(f) with respect
to the information giving rise thereto unless such material, non-public
information is no longer applicable.  Notwithstanding anything

    
       

      
        
          
          

        

        
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      to the contrary, the Company shall cause its transfer agent to
deliver unlegended shares of Common Stock to a transferee of an Investor in
accordance with the terms of the Securities Purchase Agreement in connection
with any sale of Registrable Securities with respect to which an Investor has
entered into a contract for sale, prior to the Investor’s receipt of the notice
of a Grace Period and for which the Investor has not yet settled.

    

     

    (r) Neither
the Company nor any Subsidiary or affiliate thereof shall identify any Investor
as an underwriter in any public disclosure or filing with the SEC or any
Principal Market or Eligible Market and any Buyer being deemed an underwriter by
the SEC shall not relieve the Company of any obligations it has under this
Agreement or any other Transaction Document; provided, however, that the
foregoing shall not prohibit the Company from including the disclosure found in
the “Plan of Distribution” section attached hereto as Exhibit B in any
Registration Statement.

     

    4. Obligations of the
Investors.

     

    (a) Within
ten (10) days of receiving a written request from the Company, each Investor
shall provide the Company with a fully completed and executed Selling
Stockholder Questionnaire in the form attached hereto as Exhibit
C.  It shall be a condition precedent to the obligations of the
Company to complete any registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company all 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 required to effect and maintain the
effectiveness of the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request.  Each Investor shall promptly notify the Company
prior to the initial effective date of a Registration Statement of any material
change with respect to such information previously provided to the Company by
such Investor for inclusion in such Registration Statement.

     

    (b) Each
Investor agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of any Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor’s election to exclude all of such Investor’s Registrable
Securities from such Registration Statement. Notwithstanding anything to the
contrary set forth herein, in the event an Investor notifies the Company in
writing of such Investor’s election to exclude all of such Investor’s
Registrable Securities from a Registration Statement, effective as of the
receipt of such notice by the Company, such Investor’s Shares, Warrant
Shares, and any capital stock of the Company issued or issuable, with respect to
the Shares, the Warrant Shares or the Warrants as a result of any stock split,
stock dividend, recapitalization, exchange or similar event or otherwise,
without regard to any limitations on exercise of the Warrants, shall thereafter
not constitute Registrable Securities for any purposes hereunder.

     

    (c) Each
Investor agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(g) or the first
sentence of Section 3(f), such
Investor will immediately discontinue disposition of Registrable Securities
pursuant to any Registration Statement(s) covering such Registrable Securities
until 

    
      
        
          
          

        

        
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      such Investor’s receipt of copies of the supplemented or amended
prospectus as contemplated by Section 3(g) or the first
sentence of Section 3(f) or receipt
of notice that no supplement or amendment is
required.  Notwithstanding anything to the contrary, the Company shall
cause its transfer agent to deliver unlegended shares of Common Stock to a
transferee of an Investor in accordance with the terms of the Securities
Purchase Agreement in connection with any sale of Registrable Securities with
respect to which an Investor has entered into a contract for sale prior to the
Investor’s receipt of a notice from the Company of the happening of any event of
the kind described in Section 3(g) or the first
sentence of Section 3(f) and for
which the Investor has not yet settled.

    

     

    (d) Each
Investor covenants and agrees that it will comply with the prospectus delivery
requirements of the 1933 Act as applicable to it or an exemption therefrom in
connection with sales of Registrable Securities pursuant to the Registration
Statement.

     

    5. Expenses of
Registration.

     

    All
reasonable expenses, other than underwriting discounts and commissions and
similar fees, incurred in connection with registrations, filings or
qualifications required to be made by the Company pursuant to Sections 2 and 3, including, without
limitation, all registration, listing and qualifications fees, printers and
accounting fees, and fees and disbursements of counsel for the Company shall be
paid by the Company. The Company shall also reimburse the Investors for the
reasonable fees and disbursements of one Legal Counsel in connection with
registration, filing or qualification pursuant to Sections 2 and 3 of this Agreement
which amount shall be limited to $15,000 for each such Registration Statement,
including filing and qualification fees.

     

    6. Indemnification.

     

    In the
event any Registrable Securities are included in a Registration Statement under
this Agreement:

     

    (a) To the
fullest extent permitted by law, the Company will, and hereby does, indemnify,
hold harmless and defend each Investor, the directors, officers, partners,
members, employees, agents, representatives of, and each Person, if any, who
controls any Investor within the meaning of the 1933 Act or the 1934 Act (each,
an “Indemnified
Person”), against any losses, claims, damages, liabilities, judgments,
fines, penalties, charges, costs, reasonable attorneys’ fees, amounts paid in
settlement or expenses, joint or several (collectively, “Claims”), incurred in
investigating, preparing or defending any action, claim, suit, inquiry,
proceeding, investigation or appeal taken from the foregoing by or before any
court or governmental, administrative or other regulatory agency, body or the
SEC, whether pending or threatened, whether or not an indemnified party is or
may be a party thereto (“Indemnified Damages”), to
which any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon: (i) any untrue statement or alleged untrue statement of a
material fact in a Registration Statement or any post-effective amendment
thereto or in any filing made by or on behalf of the Company in connection with
the qualification of the offering subject to a Registration Statement under the
securities or other “blue sky” laws of any jurisdiction in which Registrable
Securities 

    
       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

      are
offered (“Blue Sky
Filing”), or the omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the effective date
of such Registration Statement, or contained in the final prospectus (as amended
or supplemented, if the Company files any amendment thereof or supplement
thereto with the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading,
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder, in each case relating to the offer or
sale of the Registrable Securities pursuant to a Registration Statement or (iv)
any breach by the Company of a representation, warranty or covenant contained in
this Agreement (the matters in the foregoing clauses (i) through (iv) being,
collectively, “Violations”). Subject to Section 6(c), the Company
shall reimburse the Indemnified Persons, promptly as such expenses are incurred
and are due and payable, for any reasonable legal fees or other expenses
incurred by them in connection with investigating or defending any such
Claim.  Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a) shall not
apply to (a) any Claim by an Indemnified Person arising out of or based
upon a Violation that occurs in reliance upon and in conformity with information
furnished in writing to the Company by such Indemnified Person for such
Indemnified Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement thereto, any
related prospectus or any prospectus supplement; (b) any failure by an Investor
to comply with the prospectus delivery requirements of the 1933 Act after the
Company promptly notifies the Investor in writing that the Company no longer
meets the requirements of Rule 172 and that the Investor is therefore required
to deliver a prospectus in connection with any disposition of the Registrable
Securities and such prospectus was timely made available by the Company to such
Investor pursuant to Section 3(d); (c) the use
by such Investor of an outdated or defective prospectus after the Company has
notified such Investor in writing that the prospectus is outdated or defective
and has provided to the Investor an amended or supplemented prospectus the
delivery of which would have avoided such Claim; or (d) amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company, which consent shall not be unreasonably withheld or
delayed. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section 9.

    

     

    (b) In
connection with any Registration Statement in which an Investor is
participating, each such Investor agrees to severally and not jointly indemnify,
hold harmless and defend, to the same extent and in the same manner as is set
forth in Section 6(a), the Company,
each of its directors, each of its officers who signs the Registration Statement
and each Person, if any, who controls the Company within the meaning of the 1933
Act or the 1934 Act (each, an “Indemnified Party”), against
any Claim or Indemnified Damages to which any of them may become subject, under
the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified
Damages arise out of or are based upon any Violation, in each case to the
extent, and only to the extent, that such Violation occurs in reliance upon and
in conformity with written information furnished to the Company by such Investor
expressly for use in connection with such Registration Statement; and, subject
to Section 6(c), such
Investor will reimburse any reasonable legal or expenses incurred by an
Indemnified Party, promptly as such legal and other 

    
       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

      expenses
are incurred, in connection with investigating or defending any such Claims;
provided, however, that the indemnity agreement contained in this Section 6(b) and the
agreement with respect to contribution contained in Section 7 shall not apply
to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Investor, which consent shall not be
unreasonably withheld or delayed; provided, further, however, that the Investor
shall be liable under this Section 6(b) for only that
amount of a Claim or Indemnified Damages as does not exceed the net proceeds to
such Investor as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9.

    

     

    (c) Promptly
after receipt by an Indemnified Person or Indemnified Party under this Section 6 of
notice of the commencement of any action or proceeding (including any
governmental action or proceeding) involving a Claim, such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the
indemnifying party a written notice of such Claim, and the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly noticed,
to assume control of the defense thereof with counsel mutually satisfactory to
the indemnifying party and the Indemnified Person or the Indemnified Party, as
the case may be; provided, however, that an Indemnified Person or Indemnified
Party shall have the right to retain its own counsel with the fees and expenses
of not more than one counsel for all such Indemnified Person or Indemnified
Party to be paid by the indemnifying party, if, in the reasonable opinion of
counsel retained by the indemnifying party, the representation by such counsel
of the Indemnified Person or Indemnified Party and the indemnifying party would
be inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. In the case of an Indemnified Person, legal counsel
referred to in the immediately preceding sentence shall be selected by the
Investors holding at least a majority in interest of the Registrable Securities
included in the Registration Statement(s) to which the Claim relates and subject
to the reasonable approval of the indemnifying party, which approval shall not
be unreasonably withheld, delayed or conditioned.  The Indemnified
Party or Indemnified Person shall cooperate fully with the indemnifying party in
connection with any negotiation or defense of any such action or Claim by the
indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the Indemnified Party or Indemnified Person which
relates to such action or Claim. The indemnifying party shall keep the
Indemnified Party or Indemnified Person fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim or
proceeding effected without its prior written consent, provided, however, that
the indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the prior written consent of the
Indemnified Party or Indemnified Person, consent to entry of any judgment or
enter into any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party or Indemnified Person of a full release from all liability in
respect to such Claim or litigation and such settlement shall not include any
admission as to fault on the part of the Indemnified Party. Following
indemnification as provided for hereunder, the rights of the indemnifying party
shall 

    
       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

      be subrogated to all rights of the Indemnified Party or
Indemnified Person with respect to all third parties, firms or corporations
relating to the matter for which indemnification has been made. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action.

    

     

    (d) No Person
involved in the sale of Registrable Securities who is guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) in
connection with such sale shall be entitled to indemnification from any Person
involved in such sale of Registrable Securities who is not guilty of fraudulent
misrepresentation.

     

    (e) The
indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or Indemnified Damages
are incurred.

     

    (f) The
indemnity agreements contained herein shall be in addition to (i) any cause of
action or similar right of the Indemnified Party or Indemnified Person against
the indemnifying party or others, and (ii) any liabilities the indemnifying
party may be subject to pursuant to the law.

     

    7. Contribution.

     

    To the
extent any indemnification by an indemnifying party is prohibited or limited by
law, the indemnifying party agrees to make the maximum contribution with respect
to any amounts for which it would otherwise be liable under Section 6 to the fullest
extent permitted by law; provided, however, that: (i) no Person involved in the
sale of Registrable Securities which Person is guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) in
connection with such sale shall be entitled to contribution from any Person
involved in such sale of Registrable Securities who is not guilty of fraudulent
misrepresentation; and (ii) contribution by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities pursuant to such Registration
Statement.

     

    8. Reports Under the 1934
Act.

     

    With a
view to making available to the Investors the benefits of Rule 144, during the
Registration Period the Company agrees to use commercially reasonable efforts
to:

     

    (a) make and
keep public information available, as those terms are understood and defined in
Rule 144;

     

    (b) file with
the SEC in a timely manner all reports and other documents required of the
Company under the 1933 Act and the 1934 Act so long as the Company remains
subject to such requirements and the filing of such reports and other documents
is required for the applicable provisions of Rule 144; and

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    (c) furnish
to each Investor so long as such Investor owns Registrable Securities, promptly
upon request, (i) a written statement by the Company, if true, that it has
complied with the applicable reporting requirements of Rule 144, the 1933 Act
and the 1934 Act, (ii) a copy of the most recent annual or quarterly report of
the Company and such other reports and documents so filed by the Company, and
(iii) such other information as may be reasonably requested to permit the
Investors to sell such securities pursuant to Rule 144 without
registration.

     

    9. Assignment of Registration
Rights.

     

    The
rights under this Agreement shall be automatically assignable by the Investors
to any transferee of all or any portion of such Investor’s Registrable
Securities if:  (i) the Investor agrees in writing with the transferee
or assignee to assign such rights, and a copy of such agreement is furnished to
the Company within a reasonable time after such assignment; (ii) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of (a) the name and address of such transferee or assignee, and
(b) the securities with respect to which such registration rights are being
transferred or assigned; (iii) immediately following such transfer or assignment
the further disposition of such securities by the transferee or assignee is
restricted under the 1933 Act or applicable state securities laws; (iv) at or
before the time the Company receives the written notice contemplated by clause
(ii) of this sentence the transferee or assignee agrees in writing with the
Company to be bound by all of the provisions contained herein; and (v) such
transfer shall have been made in accordance with the applicable requirements of
the Securities Purchase Agreement and applicable federal and state securities
laws.

     

    10. Amendment of Registration
Rights.

     

    Provisions
of this Agreement may be amended and the observance thereof may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Required
Holders. Any amendment or waiver effected in accordance with this Section 10 shall
be binding upon each Investor (including any Person who becomes an Investor
pursuant to the terms of this Agreement after the effectiveness of such
amendment or waiver) and the Company. No such amendment shall be effective to
the extent that it applies to less than all of the holders of the Registrable
Securities as of the time thereof. No consideration shall be offered or paid to
any Person to amend or consent to a waiver or modification of any provision of
this Agreement unless the same consideration also is offered to all of the
parties to this Agreement on a pro rata basis based on the number of the
Registrable Securities then-held by such Persons.

     

    11. Miscellaneous.

     

    (a) A Person
is deemed to be a holder of Registrable Securities whenever such Person owns or
is deemed to own of record such Registrable Securities. If the Company receives
conflicting instructions, notices or elections from two or more Persons with
respect to the same Registrable Securities, the Company shall act upon the basis
of instructions, notice or election received from such record owner of such
Registrable Securities in accordance with the Company’s books and
records.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    (b) Any
notices, consents, waivers or other communications required or permitted to be
given under the terms of this Agreement must be in writing and will be deemed to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one Business Day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall
be:

     

     

    If to the
Company:

    

    Aeolus
Pharmaceuticals, Inc.

    26361
Crown Valley Parkway, Suite 150

    Mission
Viejo, California 92691

    Telephone:                                (949)
481-9825

    Facsimile:                                (949) 481-9829

    Attention:                                John
L. McManus, President

     

    with a
copy (for information purposes only) to:

     

    Paul,
Hastings, Janofsky & Walker LLP

    4747
Executive Drive, 12th Floor

    San
Diego, CA 92121

    Telephone:                                (858)
XXX-XXXX

    Facsimile:                                (858)
XXX-XXXX

    Attention:                                XXXXXX

    

    

    If to the
Transfer Agent:

     

    American
Stock Transfer and Trust Company

    6201 15th
Avenue

    Brooklyn,
New York 11219

    Telephone:                                (718)
XXX-XXXX

    Facsimile:                                (718)
XXX-XXXX

    Attention:                                XXXXXX

    

     

    If to
Legal Counsel:

     

    Lowenstein
Sandler PC

    1251
Avenue of the Americas, 18th Floor

    New York,
New York 10020

    Telephone:                                (212)
XXX-XXXX

    Facsimile:                                (973)
XXX-XXXX

    Attention:                                XXXXXX

    

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    If to a
Buyer, to its address and facsimile number set forth on the Schedule of Buyers
attached hereto, with copies to such Buyer’s representatives, if any, as set
forth on the Schedule of Buyers, or to such other address and/or facsimile
number and/or to the attention of such other Person as the recipient party has
specified by written notice given to each other party five (5) days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender’s facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a courier or overnight courier
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.

     

    (c) Failure
of any party to exercise any right or remedy under this Agreement or otherwise,
or delay by a party in exercising such right or remedy, shall not operate as a
waiver thereof.

     

    (d) All
questions concerning the construction, validity, enforcement and interpretation
of this 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 law provision or
rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions 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, 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
this 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, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

     

    (e) If any
provision of this Agreement is prohibited by law or otherwise determined to be
invalid or unenforceable by a court of competent jurisdiction, the provision
that would otherwise be prohibited, invalid or unenforceable shall be deemed
amended to apply to the broadest extent that it would be valid and enforceable,
and the invalidity or unenforceability of such provision shall not affect the
validity of the remaining provisions of this Agreement so long as this Agreement
as so modified continues to express, without material change, the original
intentions of the parties as to the subject matter hereof and the prohibited
nature, invalidity or unenforceability of the provision(s) in question does not
substantially impair the respective expectations or reciprocal obligations of
the parties or the practical realization of the benefits that would otherwise be
conferred upon the parties. The parties will endeavor in 

    
       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

      good
faith negotiations to replace the prohibited, invalid or unenforceable
provision(s) with a valid provision(s), the effect of which comes as close as
possible to that of the prohibited, invalid or unenforceable
provision(s).

    

     

    (f) This
Agreement, the other Transaction Documents and the instruments referenced herein
and therein constitute the entire agreement among the parties hereto with
respect to the subject matter hereof and thereof. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and therein. This Agreement, the other Transaction Documents and the
instruments referenced herein and therein supersede all prior agreements and
understandings, oral or written, among the parties hereto with respect to the
subject matter hereof and thereof.

     

    (g) Subject
to the requirements of Section 9, this Agreement
shall inure to the benefit of and be binding upon the permitted successors and
assigns of each of the parties hereto.

     

    (h) The
headings in this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.

     

    (i) This
Agreement may be executed in identical counterparts, each of which shall be
deemed an original but all of which shall constitute one and the same agreement.
This Agreement, once executed by a party, may be delivered to the other party
hereto by facsimile or other electronic transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.

     

    (j) Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as any other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.

     

    (k) All
consents and other determinations required to be made by the Investors pursuant
to this Agreement shall be made, unless otherwise specified in this Agreement,
by the Required Holders, determined as if all of the Warrants held by Investors
then outstanding have been exercised for Registrable Securities without regard
to any limitations on exercise of the Warrants.

     

    (l) The
language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent and no rules of strict construction will
be applied against any party.

     

    (m) This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person.

     

    (n) The
obligations of each Investor hereunder are several and not joint with the
obligations of any other Investor, and no provision of this Agreement is
intended to confer any obligations on any Investor vis-à-vis any other Investor.
Nothing contained herein, 

    
       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

      and no
action taken by any Investor pursuant hereto, shall be deemed to constitute the
Investors as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Investors are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated herein.

    

     

    (o) Unless
otherwise provided, references to “Sections” herein shall refer to sections of
this Agreement.

     

     

    * * * * *
*

     

    [Signature
Page Follows]

    
      
        
           

        

         

      

      
        21

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, each Buyer
and the Company have caused their respective signature page to this Registration
Rights Agreement to be duly executed as of the date first written
above.

     

    

    
      
        
          
            	
                    COMPANY:

                     

                  
	
                    AEOLUS
      PHARMACEUTICALS, INC

                    By:       /s/
      Michael
      P. McManus

                    Name:
      Michael P. McManus

                    Title:  Chief
      Financial Officer

                  
	 
      

          

        

      

    

    

     

    
      
        
          [Signature
Page to Registration Rights Agreement] 

        

         

      

      
        
        

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, each Buyer
and the Company have caused their respective signature page to this Registration
Rights Agreement to be duly executed as of the date first written
above.

     

    
      	
               
      

            	
              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

            

    

     

    
      
        
          [Signature
Page to Registration Rights Agreement] 

        

         

      

      
        
        

        
          

        

      

      
         

      

    

    

    SCHEDULE
OF BUYERS

    

    

    
      	
              
                Buyer

                 

              

            	
              
                Buyer
      Address and

                Facsimile
      Number

                 

              

            	
              
                Buyer
      Representative’s Address and Facsimile Number

                (if
      different than in column (2))

                 

              

            
	
              Xmark
      Opportunity Fund, L.P.

            	
              c/o
      Xmark Opportunity Partners, LLC

              90
      Grove Street

              Suite
      201

              Ridgefield,
      CT 06877

              Telephone:
      (203) 244-9503

              Facsimile:
      (203) 438-9949

              Attention: Mitchell
      D. Kaye

               

            	 
      
	
              Xmark
      Opportunity Fund, Ltd.

            	
              c/o
      Xmark Opportunity Partners, LLC

              90
      Grove Street

              Suite
      201

              Ridgefield,
      CT 06877

              Telephone:
      (203) 244-9503

              Facsimile:
      (203) 438-9949

              Attention: Mitchell
      D. Kaye

               

            	 
      
	 
      	 
      	 
      

    

    

    

    
      
        
           

        

         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
A

     

    FORM
OF NOTICE OF EFFECTIVENESS

     

    OF
REGISTRATION STATEMENT

     

    

    American
Stock Transfer and Trust Company

    6201 15th
Avenue

    Brooklyn,
New York 11219

    Attention:
Wilbert Myles

    

    Re:           Aeolus
Pharmaceuticals, Inc.

     

    Ladies
and Gentlemen:

     

    Reference
is made to that certain Securities Purchase Agreement, dated as of March 30,
2009 (the “Securities Purchase Agreement”), entered
into by and among Aeolus Pharmaceuticals, Inc., a Delaware corporation (the
“Company”), and the
buyers named therein (collectively, the “Holders”) pursuant to which
the Company issued to the Holders shares (the “Shares”) of the Company’s
common stock, par value $0.01 per share (the “Common Stock”) and warrants
exercisable for shares of Common Stock (the “Warrants”). Pursuant to the
Securities Purchase Agreement, the Company also has entered into a Registration
Rights Agreement with the Holders (the “Registration Rights
Agreement”) pursuant to which the Company agreed, among other things, to
register the resale of the Registrable Securities (as defined in the
Registration Rights Agreement), including the Shares and the shares of Common
Stock issuable upon exercise of the Warrants under the Securities Act of 1933,
as amended (the “1933
Act”). In connection with the Company’s obligations under the
Registration Rights Agreement, on ____________ ___, _____, the Company filed a
Registration Statement on Form S-1 (File No. 333-_____________) (the “Registration Statement”) with
the Securities and Exchange Commission (the “SEC”) relating to the
Registrable Securities which names each of the Holders as a selling stockholder
thereunder.

     

    In
connection with the foregoing, I advise you that a member of the SEC’s staff has
advised a member of management of the Company by telephone that the SEC has
entered an order declaring the Registration Statement effective under the 1933
Act at [ENTER TIME OF
EFFECTIVENESS] on [ENTER DATE OF
EFFECTIVENESS] and we
have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that
any stop order suspending its effectiveness has been issued or that any
proceedings for that purpose are pending before, or threatened by, the SEC and
the Registrable Securities are available for resale under the 1933 Act pursuant
to the Registration Statement.

     

    This
letter shall serve as our standing instruction to you that the shares of Common
Stock are freely transferable by the Holders pursuant to the Registration
Statement. You need not require further letters from us to effect any
future legend-free issuance or reissuance of shares of Common Stock to the
Holders as contemplated by the Company’s Irrevocable Transfer Agent Instructions
dated March 30, 2009, provided that at the time of such 

    
       

      
        
          A-1

        

        
          
          

          
            

          

        

        
          
          

        

      

      reissuance, the Company has not otherwise notified you that the
Registration Statement is unavailable for the resale of the Registrable
Securities.

    

     

     

    Very
truly yours,

     

    Aeolus
Pharmaceuticals, Inc.

     

    By:_____________________

     

    CC:           [LIST NAMES OF HOLDERS]

    
      
        
          
            	
                     

                  	
                    A-
      2

                  	 
      

          

          

        

         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
B

    

     

    PLAN
OF DISTRIBUTION

     

    We are
registering the shares of common stock previously issued and the shares of
common stock issued or issuable upon exercise of the warrants to permit the
resale of these shares of common stock by the holders of the common stock and
warrants from time to time after the date of this prospectus. We will not
receive any of the proceeds from the sale by the selling stockholders of the
shares of common stock. We will bear all fees and expenses incident to our
obligation to register the shares of common stock.

     

    The
selling stockholders may sell all or a portion of the shares of common stock
beneficially owned by them and offered hereby from time to time directly or
through one or more underwriters, broker-dealers or agents. If the shares of
common stock are sold through underwriters or broker-dealers, the selling
stockholders will be responsible for underwriting discounts or commissions or
agent's commissions. The shares of common stock may be sold in one or more
transactions at fixed prices, at prevailing market prices at the time of the
sale, at varying prices determined at the time of sale, or at negotiated prices.
These sales may be effected in transactions, which may involve crosses or block
transactions,

     

    
      	
              ·  

            	
              on
      any national securities exchange or quotation service on which the
      securities may be listed or quoted at the time of
  sale;

            

    

     

    
      	
              ·  

            	
              in
      the over-the-counter market;

            

    

     

    
      	
              ·  

            	
              in
      transactions otherwise than on these exchanges or systems or in the
      over-the-counter market;

            

    

     

    
      	
              ·  

            	
              through
      the writing of options, whether such options are listed on an options
      exchange or otherwise;

            

    

     

    
      	
              ·  

            	
              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;

            

    

     

    
      	
              ·  

            	
              sales
      pursuant to Rule 144;

            

    

     

    
      
        B-1

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	
              ·  

            	
              broker-dealers
      may agree with the selling securityholders 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.

            

    

     

    If the
selling stockholders effect such transactions by selling shares of common stock
to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts,
concessions or commissions from the selling stockholders or commissions from
purchasers of the shares of common stock for whom they may act as agent or to
whom they may sell as principal (which discounts, concessions or commissions as
to particular underwriters, broker-dealers or agents may be in excess of those
customary in the types of transactions involved). In connection with sales of
the shares of common stock or otherwise, the selling stockholders may enter into
hedging transactions with broker-dealers, which may in turn engage in short
sales of the shares of common stock in the course of hedging in positions they
assume. The selling stockholders may also sell shares of common stock short and
deliver shares of common stock covered by this prospectus to close out short
positions and to return borrowed shares in connection with such short
sales.  The selling stockholders may also loan or pledge shares of
common stock to broker-dealers that in turn may sell such shares.

     

    The
selling stockholders may pledge or grant a security interest in some or all of
the warrants or 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 pursuant to this
prospectus or any amendment to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act of 1933, as amended, amending, if
necessary, 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 and donate the shares of common stock
in other circumstances in which case the transferees, donees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus, subject to any requirement of the Securities and Exchange
Commission that we amend or supplement this prospectus to include the name of
such transferee, donee, pledge or other successor-in-interest in this
prospectus.

     

    The
selling stockholders and any broker-dealer participating in the distribution of
the shares of common stock may be deemed to be "underwriters" within the meaning
of the Securities Act, and any commission paid, or any discounts or concessions
allowed to, any such broker-dealer may be deemed to be underwriting commissions
or discounts under the Securities Act. At the time a particular offering of the
shares of common stock is made, a prospectus supplement, if required, will be
distributed which will set forth the aggregate amount of shares of common stock
being offered and the terms of the offering, including the name or names of any
broker-dealers or agents, any discounts, commissions and other terms
constituting compensation from the selling stockholders and any discounts,
commissions or concessions allowed or reallowed or paid to
broker-dealers.

     

    Under the
securities laws of some states, the shares of common stock may be sold in such
states only through registered or licensed brokers or dealers. In addition, in
some states the 

    
       

      
        
          B-2

        

        
          
          

          
            

          

        

        
          
          

        

      

      shares of common stock may not be sold unless such shares have
been registered or qualified for sale in such state or an exemption from
registration or qualification is available and is complied with.

    

     

    There can
be no assurance that any selling stockholder will sell any or all of the shares
of common stock registered pursuant to the shelf registration statement, of
which this prospectus forms a part.

     

    The
selling stockholders and any other person participating in such distribution
will be subject to applicable provisions of the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder, including, without
limitation, Regulation M of the Exchange Act, which may limit the timing of
purchases and sales of any of the shares of common stock by the selling
stockholders and any other participating person. Regulation M may also restrict
the ability of any person engaged in the distribution of the shares of common
stock to engage in market-making activities with respect to the shares of common
stock. All of the foregoing may affect the marketability of the shares of common
stock and the ability of any person or entity to engage in market-making
activities with respect to the shares of common stock.

     

    We will
pay all expenses of the registration of the shares of common stock pursuant to
the registration rights agreement, estimated to be $[   ] in
total, including, without limitation, Securities and Exchange Commission filing
fees and expenses of compliance with state securities or "blue sky" laws;
provided, however, that a selling stockholder will pay all underwriting
discounts and selling commissions, if any. We will indemnify the selling
stockholders against liabilities, including some liabilities under the
Securities Act, in accordance with the registration rights agreement, or the
selling stockholders may be entitled to contribution. We may be indemnified by
the selling stockholders against civil liabilities, including liabilities under
the Securities Act, that may arise from any written information furnished to us
by the selling stockholder specifically for use in this prospectus, in
accordance with the related registration rights agreement, or we may be entitled
to contribution.

     

    Once sold
under the shelf registration statement, of which this prospectus forms a part,
the shares of common stock will be freely tradable in the hands of persons other
than our affiliates.

     

    

     

    
      
        
          B-3

        

         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
C

     

    AEOLUS
PHARMACEUTICALS, INC.

     

    SELLING
SHAREHOLDER NOTICE AND QUESTIONNAIRE

     

    The
undersigned holder of shares of common stock, par value $[INSERT AMOUNT] per
share (“Common Stock”),
of Aeolus Pharmaceuticals, Inc., a Delaware corporation (the “Company”) issued or issuable
pursuant to that certain Securities Purchase Agreement by and among the Company
and the Buyers named therein, dated as of March [___], 2009 (as may be amended
or restated, the “Purchase Agreement”) and/or Warrants to
purchase Common Stock issued in connection therewith, understands that the
Company intends to file with the Securities and Exchange Commission a
registration statement on Form S-3 (the “Resale Registration
Statement”) for the registration and the resale under Rule 415 of the
Securities Act of 1933, as amended (the “Securities Act”), of the
Registrable Securities in accordance with the terms of the Rights Agreement (as
defined below). All capitalized terms used but not otherwise defined herein
shall have the meanings ascribed thereto in that certain Registration Rights
Agreement by and among the Company and the parties named therein, dated as of
March [___], 2009 (as may be amended or restated, the “Rights Agreement”).

     

    In order
to sell or otherwise dispose of any Registrable Securities pursuant to the
Resale Registration Statement, a holder of Registrable Securities generally will
be required to be named as a selling stockholder in the related prospectus or a
supplement thereto (as so supplemented, the “Prospectus”), deliver the
Prospectus to purchasers of Registrable Securities and be bound by the
provisions of the Agreement (including certain indemnification provisions,
described in the Plan of Distribution attached to the Rights Agreement). Holders
must complete and deliver this Notice and Questionnaire in order to be named as
selling stockholders in the Prospectus. Holders of Registrable Securities who do
not complete, execute and return this Notice and Questionnaire at least five (5)
Business Days prior to the first anticipated filing date of a Resale
Registration Statement (1) will not be named as selling stockholders in the
Resale Registration Statement or the Prospectus and (2) may not use the
Prospectus for resales of Registrable Securities.

     

    Certain
legal consequences arise from being named as a selling stockholder in the Resale
Registration Statement and the Prospectus. Holders of Registrable Securities are
advised to consult their own securities law counsel regarding the consequences
of being named or not named as a selling stockholder in the Resale Registration
Statement and the Prospectus.

     

    NOTICE

     

    The
undersigned holder (the “Selling Stockholder”) of
Registrable Securities hereby gives notice to the Company of its intention to
sell or otherwise dispose of Registrable Securities owned by it and listed below
in Item (3), unless otherwise specified in Item (3), pursuant to the Resale
Registration Statement. The undersigned, by signing and returning this Notice
and Questionnaire, understands and agrees that it will be bound by the terms and
conditions of this Notice and Questionnaire and the Rights
Agreement.

     

    The
undersigned hereby provides the following information to the Company and
represents and warrants that such information is materially accurate and
complete:

     

    
      
        
          C-1

        

         

      

      
         

        
          

        

      

      
         

      

    

    QUESTIONNAIRE

     

    1.           Name.

     

    (a)           Full
Legal Name of Selling Stockholder:

     

    
      	 
      

    

    (b)           Full
Legal Name of Registered Holder (if not the same as (a) above)through which
Registrable Securities listed in Item 3 below are held:

     

    
      	 
      

    

    (c)           Full
Legal Name of Natural Control Person (which means a natural personwho directly
or indirectly alone or with others has power to vote ordispose of the securities
covered by the questionnaire):

     

    
      	 
      

    

    

     

    2.           Address
for Notices to Selling Stockholder:

     

    
      	 
      
	 
      
	 
      
	
              Telephone:

            	 
      
	
              Fax:

            	 
      
	
              Contact
      Person:

            	 
      
	
              E-mail
      address of Contact Person:

            	 
      

    

    

     

    3.           Beneficial
Ownership of Registrable Securities Issuable Pursuant to the
PurchaseAgreement:

     

    (a)           Type
and Number of Registrable Securities beneficially owned and issuedpursuant to
the Agreement:

     

    
      	 
      
	 
      
	 
      

    

    (b)           Number
of shares of Common Stock to be registered pursuant to thisNotice for
resale:

     

    
      	 
      
	 
      

    

     

    
      
        C-2

      

      
        
        

        
          

        

      

      
        
        

      

    

    4.           Broker-Dealer
Status:

     

    (a)           Are
you a broker-dealer?

     

    Yes                        No  

     

    (b)           If
“yes” to Section 4(a), did you receive your Registrable Securities
ascompensation for investment banking services to the Company?

     

    Yes                        No  

     

    Note:                      If
no, the SEC’s staff has indicated that you should be identified asan underwriter
in the Registration Statement.

     

    (c)           Are
you an affiliate of a broker-dealer?

     

    Yes                        No  

     

    Note:                      If
yes, provide a narrative explanation below:

     

    (c)           If
you are an affiliate of a broker-dealer, do you certify that you bought
theRegistrable Securities in the ordinary course of business, and at the time of
thepurchase of the Registrable Securities to be resold, you had no agreements or
understandings, directly or indirectly, with any person to distribute the
Registrable Securities?

     

    Yes                        No  

     

    Note:                      If
no, the SEC’s staff has indicated that you should be identified asan underwriter
in the Resale Registration Statement.

     

    5.           Beneficial
Ownership of Other Securities of the Company Owned by the
SellingShareholder.

     

    Except
as set forth below in this Item 5, the undersigned is not the beneficial or
registered owner of any securities of the Company other than the Registrable
Securities listed above in Item 3.

     

    (a)           Type
and Amount of other securities beneficially owned:

     

    
      	 
      
	 
      

    

    

     

    6.           Relationships
with the Company:

     

    Except
as set forth below, neither the undersigned nor any of its affiliates, officers,
directors or principal equity holders (owners of 5% of more of the equity
securities of the undersigned) has held any position or office or has had any
other material relationship with the Company (or its predecessors or affiliates)
during the past three years.

     

    State any
exceptions here:

     

    
      	 
      
	 
      

    

    

    
      
        C-3

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    7.           Plan
of Distribution:

     

    The
undersigned has reviewed the form of Plan of Distribution attached as Exhibit A
to the Rights Agreement, and hereby confirms that, except as set forth below,
the information contained therein regarding the undersigned and its plan of
distribution is correct and complete.

     

    State any
exceptions here:

     

    
      	 
      
	 
      

    

    

     

    ***********

     

    The undersigned agrees to promptly
notify the Company of any material inaccuracies or changes in the information
provided herein that may occur subsequent to the date hereof and prior to the
effective date of any applicable Resale Registration Statement. All notices
hereunder and pursuant to the Rights Agreement shall be made in writing, by hand
delivery, confirmed or facsimile transmission, first-class mail or air courier
guaranteeing overnight delivery at the address set forth below. In the absence
of any such notification, the Company shall be entitled to continue to rely on
the material accuracy of the information in this Notice and
Questionnaire.

     

    By signing below, the undersigned
consents to the disclosure of the information contained herein in its answers to
Items (1) through (7) above and the inclusion of such information in the Resale
Registration Statement and the Prospectus. The undersigned understands that such
information will be relied upon by the Company in connection with the
preparation or amendment of any such Resale Registration Statement and the
related Prospectus. The undersigned agrees that, for all purposes of the Rights
Agreement, the information contained herein constitutes information
furnished in writing to the Company by or on behalf of the undersigned expressly
for use in connection with the preparation of the Resale Registration Statement,
the related prospectus, and any amendment thereof or supplement
thereto.

     

    By returning this Notice and
Questionnaire, the undersigned will be deemed to be aware of the foregoing
interpretation.

     

    

     

    IN WITNESS WHEREOF the undersigned, by
authority duly given, has caused this Notice and Questionnaire to be executed
and delivered either in person or by its duly authorized agent.

     

    

     

    
      	
              Dated:

            	 
      	
              Beneficial
      Owner:

            	 
      
	 
      	
              By:

            	 
      
	 
      	
              Name:

            
	 
      	
              Title:

            

    

    

     

    
      
        
          
            	 
      	
                    C-
      4

                  	 
      

          

          

        

         

      

      
         

        
          

        

      

      
         

      

    

    PLEASE
FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN
THE ORIGINAL BY OVERNIGHT MAIL, TO:

     

    

    _______________________________

    _______________________________

    _______________________________

    _______________________________

    Facsimile:
______________________

    

     

     

    C-5

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