Document:

may2007warrant.htm

    EXHIBIT
      10.2

     

    NEITHER
      THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE
      BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
      COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
      THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
      MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
      STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
      OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
      SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
      EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
      SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
      COMPANY.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF
      THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
      OR
      OTHER LOAN SECURED BY SUCH SECURITIES.

    

    COMMON
      STOCK PURCHASE WARRANT

    

     AEOLUS
      PHARMACEUTICALS, INC.

     

     

    Warrant
      Shares:
      _______                                                                                                               Initial
      Exercise Date: May 22, 2007

    

     

    THIS
      COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value
      received, _____________ (the “Holder”) is entitled, upon the terms and
      subject to the limitations on exercise and the conditions hereinafter set forth,
      at any time on or after the date hereof (the “Initial Exercise Date”) and
      on or prior to the close of business on the 5 year anniversary of the Initial
      Exercise Date (the “Termination Date”) but not thereafter, to subscribe
      for and purchase from Aeolus Pharmaceuticals, Inc., a Delaware corporation
      (the
“Company”), up to ______ shares (the “Warrant Shares”) of Common
      Stock.  The purchase price of one share of Common Stock under this
      Warrant shall be equal to the Exercise Price, as defined in Section
      2(b).

     

    Section
      1.   Definitions.  Capitalized terms used
      and not otherwise defined herein shall have the meanings set forth in that
      certain Securities Purchase Agreement (the “Purchase Agreement”), dated
      May 22, 2007, among the Company and the purchasers’ signatory
      thereto.

     

    Section
      2.     Exercise.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    a)  Exercise
      of Warrant.  Exercise of the purchase rights represented by this
      Warrant may be made, in whole or in part, at any time or times on or after
      the
      Initial Exercise Date and on or before the Termination Date by delivery to
      the
      Company of a duly executed facsimile copy of the Notice of Exercise Form annexed
      hereto (or such other office or agency of the Company as it may designate by
      notice in writing to the registered Holder at the address of the Holder
      appearing on the books of the Company); and, within 3 Trading Days of the date
      said Notice of Exercise is delivered to the Company, the Company shall have
      received  payment of the aggregate Exercise Price of the shares
      thereby purchased by wire transfer or cashier’s check drawn on a United States
      bank.  Notwithstanding anything herein to the contrary, the Holder
      shall not be required to physically surrender this Warrant to the Company until
      the Holder has purchased all of the Warrant Shares available hereunder and
      the
      Warrant has been exercised in full, in which case, the Holder shall surrender
      this Warrant to the Company for cancellation within 3 Trading Days of the date
      the final Notice of Exercise is delivered to the Company.  Partial
      exercises of this Warrant resulting in purchases of a portion of the total
      number of Warrant Shares available hereunder shall have the effect of lowering
      the outstanding number of Warrant Shares purchasable hereunder in an amount
      equal to the applicable number of Warrant Shares purchased.  The
      Holder and the Company shall maintain records showing the number of Warrant
      Shares purchased and the date of such purchases.  The Company shall
      deliver any objection to any Notice of Exercise Form within 1 Business Day
      of
      receipt of such notice.  The Holder and any assignee, by
      acceptance of this Warrant, acknowledge and agree that, by reason of the
      provisions of this paragraph, following the purchase of a portion of the Warrant
      Shares hereunder, the number of Warrant Shares available for purchase hereunder
      at any given time may be less than the amount stated on the face
      hereof.

     

    b)  Exercise
      Price.  The exercise price per share of the Common Stock under
      this Warrant shall be $0.75, subject to adjustment hereunder
      (the “Exercise Price”).

     

    c)  Cashless
      Exercise.  If at any time after one year from the Closing there is
      no effective Registration Statement registering, or no current prospectus
      available for, the resale of the Warrant Shares by the Holder, then this Warrant
      may also be exercised at such time by means of a “cashless exercise” in which
      the Holder shall be entitled to receive a certificate for the number of Warrant
      Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A),
      where:

     

    
      	
               

            	
               (A)
                = the VWAP on the Trading Day immediately preceding the date of such
                election;

            

    

    

    
      	
               

            	
              (B)
                =  the Exercise Price of this Warrant, as adjusted;
                and

            

    

    

    
      	
               

            	
              (X)
                = the number of Warrant Shares issuable upon exercise of this Warrant
                in
                accordance with the terms of this Warrant by means of a cash exercise
                rather than a cashless exercise.

            

    

    

    Notwithstanding
      anything herein to the contrary, on the Termination Date, this Warrant shall
      be
      automatically exercised via cashless exercise pursuant to this Section
      2(c).

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    d)  Holder’s
      Restrictions.  The Company shall not effect any exercise of this
      Warrant, and the Holder shall not have the right to exercise any portion of
      this
      Warrant, pursuant to Section 2 or otherwise, to the extent that after giving
      effect to such issuance after exercise as set forth on the applicable Notice
      of
      Exercise, the Holder (together with the Holder’s Affiliates, and any other
      person or entity acting as a group together with the Holder or any of the
      Holder’s Affiliates), would beneficially own in excess of the Beneficial
      Ownership Limitation (as defined below).  For purposes of the foregoing
      sentence, the number of shares of Common Stock beneficially owned by the Holder
      and its Affiliates shall include the number of shares of Common Stock issuable
      upon exercise of this Warrant with respect to which such determination is being
      made, but shall exclude the number of shares of Common Stock which would be
      issuable upon (A) exercise of the remaining, nonexercised portion of this
      Warrant beneficially owned by the Holder or any of its Affiliates and (B)
      exercise or conversion of the unexercised or nonconverted portion of any other
      securities of the Company (including, without limitation, any
      other  Common Stock Equivalents) subject to a limitation on conversion
      or exercise analogous to the limitation contained herein beneficially owned
      by
      the Holder or any of its affiliates.  Except as set forth in the preceding
      sentence, for purposes of this Section 2(d), beneficial ownership shall be
      calculated in accordance with Section 13(d) of the Exchange Act and the rules
      and regulations promulgated thereunder, it being acknowledged by the Holder
      that
      the Company is not representing to the Holder that such calculation is in
      compliance with Section 13(d) of the Exchange Act and the Holder is solely
      responsible for any schedules required to be filed in accordance
      therewith.   To the extent that the limitation contained in this
      Section 2(d) applies, the determination of whether this Warrant is exercisable
      (in relation to other securities owned by the Holder together with any
      Affiliates) and of which portion of this Warrant is exercisable shall be in
      the
      sole discretion of the Holder, and the submission of a Notice of Exercise shall
      be deemed to be the Holder’s determination of whether this Warrant is
      exercisable (in relation to other securities owned by the Holder together with
      any Affiliates) and of which portion of this Warrant is exercisable, in each
      case subject the Beneficial Ownership Limitation, and the Company shall have
      no
      obligation to verify or confirm the accuracy of such determination and no
      liability to the Holder in the event of any inaccuracy in such
      determination.   In addition, a determination as to any group
      status as contemplated above shall be determined in accordance with Section
      13(d) of the Exchange Act and the rules and regulations promulgated
      thereunder.  For purposes of this Section 2(d), in determining the
      number of outstanding shares of Common Stock, the Holder may rely on the number
      of outstanding shares of Common Stock as reflected in (x) the Company’s most
      recent Form 10-Q or Form 10-K, as the case may be, (y) a more recent public
      announcement by the Company or (z) any other notice by the Company or the
      Company’s Transfer Agent setting forth the number of shares of Common Stock
      outstanding.  Upon the written or oral request of the Holder, the Company
      shall within two Trading Days confirm orally and in writing to the Holder the
      number of shares of Common Stock then outstanding.  In any case, the number
      of outstanding shares of Common Stock shall be determined after giving effect
      to
      the conversion or exercise of securities of the Company, including this Warrant,
      by the Holder or its Affiliates since the date as of which such number of
      outstanding shares of Common Stock was reported.  The “Beneficial
      Ownership Limitation” shall be 4.99% of the number of shares of the Common
      Stock outstanding immediately after giving effect to the issuance of shares
      of
      Common Stock issuable upon exercise of this Warrant.  The Beneficial
      Ownership Limitation provisions of this Section 2(d) may be waived by the
      Holder, at the election of the Holder, upon not less than 61 days’ prior notice
      to the Company to change the Beneficial Ownership Limitation to 9.99% of the
      number of shares of the Common Stock outstanding immediately after giving effect
      to the issuance of shares of Common Stock upon exercise of this Warrant, and
      the
      provisions of this Section 2(d) shall continue to apply.  Upon such a
      change by the Holder of the Beneficial Ownership Limitation from such 4.99%
      limitation to such 9.99% limitation, the Beneficial Ownership Limitation may
      not
      be further waived by the Holder.  The provisions of this paragraph
      shall be construed and implemented in a manner otherwise than in strict
      conformity with the terms of this Section 2(d) to correct this paragraph (or
      any
      portion hereof) which may be defective or inconsistent with the intended
      Beneficial Ownership Limitation herein contained or to make changes or
      supplements necessary or desirable to properly give effect to such limitation.
      The limitations contained in this paragraph shall apply to a successor holder
      of
      this Warrant.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    e)  Mechanics
      of Exercise.

     

    i.  Delivery
      of Certificates Upon Exercise.  Certificates for shares purchased
      hereunder shall be transmitted by the transfer agent of the Company to the
      Holder by crediting the account of the Holder’s prime broker with the Depository
      Trust Company through its Deposit Withdrawal Agent Commission (“DWAC”)
      system if the Company is a participant in such system and there is an effective
      Registration Statement permitting the resale of the Warrant Shares by the
      Holder, and otherwise by physical delivery to the address specified by the
      Holder in the Notice of Exercise within 3 Trading Days from the delivery to
      the
      Company of the Notice of Exercise Form, surrender of this Warrant (if required)
      and payment of the aggregate Exercise Price as set forth above (“Warrant
      Share Delivery Date”).  This Warrant shall be deemed to have been
      exercised on the date the Exercise Price is received by the
      Company.  The Warrant Shares shall be deemed to have been issued, and
      Holder or any other person so designated to be named therein shall be deemed
      to
      have become the Holder of record of such shares for all purposes, as of the
      date
      the Warrant has been exercised by payment to the Company of the Exercise Price
      (or by cashless exercise, if permitted) and all taxes required to be paid by
      the
      Holder, if any, pursuant to Section 2(e)(vi) prior to the issuance of such
      shares, have been paid.

     

    ii.  Delivery
      of New Warrants Upon Exercise.  If this Warrant shall have been
      exercised in part, the Company shall, at the request of the Holder and upon
      surrender of this Warrant certificate, at the time of delivery of the
      certificate or certificates representing Warrant Shares, deliver to Holder
      a new
      Warrant evidencing the rights of Holder to purchase the unpurchased Warrant
      Shares called for by this Warrant, which new Warrant shall in all other respects
      be identical with this Warrant.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    iii.  Rescission
      Rights.  If the Company fails to cause its transfer agent to
      transmit to the Holder a certificate or certificates representing the Warrant
      Shares pursuant to this Section 2(e)(ii) by the 2nd Trading
      Day
      immediately following Warrant Share Delivery Date, then the Holder will have
      the
      right to rescind such exercise.

     

    iv.  Compensation
      for Buy-In on Failure to Timely Deliver Certificates Upon
      Exercise.  In addition to any other rights available to the
      Holder, if the Company fails to cause its transfer agent to transmit to the
      Holder a certificate or certificates representing the Warrant Shares pursuant
      to
      an exercise on or before the 2nd Trading
      Day
      immediately following the Warrant Share Delivery Date, and if after such date
      the Holder is required by its broker to purchase (in an open market transaction
      or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of
      Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant
      Shares which the Holder anticipated receiving upon such exercise (a
“Buy-In”), then the Company shall (1) pay in cash to the Holder the
      amount by which (x) the Holder’s total purchase price (including brokerage
      commissions, if any) for the shares of Common Stock so purchased exceeds (y)
      the
      amount obtained by multiplying (A) the number of Warrant Shares that the Company
      was required to deliver to the Holder in connection with the exercise at issue
      times (B) the price at which the sell order giving rise to such purchase
      obligation was executed, and (2) at the option of the Holder, either reinstate
      the portion of the Warrant and equivalent number of Warrant Shares for which
      such exercise was not honored or deliver to the Holder the number of shares
      of
      Common Stock that would have been issued had the Company timely complied with
      its exercise and delivery obligations hereunder.  For example, if the
      Holder purchases Common Stock having a total purchase price of $11,000 to cover
      a Buy-In with respect to an attempted exercise of shares of Common Stock with
      an
      aggregate sale price giving rise to such purchase obligation of $10,000, under
      clause (1) of the immediately preceding sentence the Company shall be required
      to pay the Holder $1,000. The Holder shall provide the Company written notice
      indicating the amounts payable to the Holder in respect of the Buy-In and,
      upon
      request of the Company, evidence of the amount of such loss.  Nothing
      herein shall limit the Holder’s right to pursue any other remedies available to
      it hereunder, at law or in equity including, without limitation, a decree of
      specific performance and/or injunctive relief with respect to the Company’s
      failure to timely deliver certificates representing shares of Common Stock
      upon
      exercise of the Warrant as required pursuant to the terms hereof.

     

    v.  No
      Fractional Shares or Scrip.  No fractional shares or scrip
      representing fractional shares shall be issued upon the exercise of this
      Warrant.  As to any fraction of a share which Holder would otherwise
      be entitled to purchase upon such exercise, the Company shall at its election,
      either pay a cash adjustment in respect of such final fraction in an amount
      equal to such fraction multiplied by the Exercise Price or round up to the
      next
      whole share.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    vi.  Charges,
      Taxes and Expenses.  Issuance of certificates for Warrant Shares
      shall be made without charge to the Holder for any issue or transfer tax or
      other incidental expense in respect of the issuance of such certificate, all
      of
      which taxes and expenses shall be paid by the Company, and such certificates
      shall be issued in the name of the Holder or in such name or names as may be
      directed by the Holder; provided, however, that in the event
      certificates for Warrant Shares are to be issued in a name other than the name
      of the Holder, this Warrant when surrendered for exercise shall be accompanied
      by the Assignment Form attached hereto duly executed by the Holder; and the
      Company may require, as a condition thereto, the payment of a sum sufficient
      to
      reimburse it for any transfer tax incidental thereto.

     

    vii.  Closing
      of Books.  The Company will not close its stockholder books or
      records in any manner which prevents the timely exercise of this Warrant,
      pursuant to the terms hereof.

     

    Section
      3.                                Certain
      Adjustments.

     

    a)  Stock
      Dividends and Splits. If the Company, at any time while this Warrant is
      outstanding: (A) pays a stock dividend or otherwise make a distribution or
      distributions on shares of its Common Stock or any other equity or equity
      equivalent securities payable in shares of Common Stock (which, for avoidance
      of
      doubt, shall not include any shares of Common Stock issued by the Company upon
      exercise of this Warrant), (B) subdivides outstanding shares of Common Stock
      into a larger number of shares, (C) combines (including by way of reverse stock
      split) outstanding shares of Common Stock into a smaller number of shares,
      or
      (D) issues by reclassification of shares of the Common Stock any shares of
      capital stock of the Company, then in each case the Exercise Price shall be
      multiplied by a fraction of which the numerator shall be the number of shares
      of
      Common Stock (excluding treasury shares, if any) outstanding immediately before
      such event and of which the denominator shall be the number of shares of Common
      Stock outstanding immediately after such event and the number of shares issuable
      upon exercise of this Warrant shall be proportionately adjusted such that the
      aggregate Exercise Price of this Warrant shall remain unchanged.  Any
      adjustment made pursuant to this Section 3(a) shall become effective immediately
      after the record date for the determination of stockholders entitled to receive
      such dividend or distribution and shall become effective immediately after
      the
      effective date in the case of a subdivision, combination or
      re-classification.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    b)  Subsequent
      Equity Sales. If the Company or any Subsidiary thereof, as applicable, at
      any time while this Warrant is outstanding, shall sell or grant any option
      to
      purchase, or sell or grant any right to reprice, or otherwise dispose of or
      issue (or announce any offer, sale, grant or any option to purchase or other
      disposition) any Common Stock or Common Stock Equivalents entitling any Person
      to acquire shares of Common Stock, at an effective price per share less than
      the
      then Exercise Price (such lower price, the “Base Share Price” and such
      issuances collectively, a “Dilutive Issuance”) (if the holder of the
      Common Stock or Common Stock Equivalents so issued shall at any time, whether
      by
      operation of purchase price adjustments, reset provisions, floating conversion,
      exercise or exchange prices or otherwise, or due to warrants, options or rights
      per share which are issued in connection with such issuance, be entitled to
      receive shares of Common Stock at an effective price per share which is less
      than the Exercise Price, such issuance shall be deemed to have occurred for
      less
      than the Exercise Price on such date of the Dilutive Issuance), then the
      Exercise Price shall be reduced and only reduced to equal the Base Share
      Price.  Such adjustment shall be made whenever such Common Stock or
      Common Stock Equivalents are issued.  The Company shall notify the
      Holder in writing, no later than the Trading Day following the issuance of
      any
      Common Stock or Common Stock Equivalents subject to this Section 3(b),
      indicating therein the applicable issuance price, or applicable reset price,
      exchange price, conversion price and other pricing terms (such notice the
“Dilutive Issuance Notice”).  For purposes of clarification,
      whether or not the Company provides a Dilutive Issuance Notice pursuant to
      this
      Section 3(b), upon the occurrence of any Dilutive Issuance, after the date
      of
      such Dilutive Issuance the Holder is entitled to receive a number of Warrant
      Shares based upon the Base Share Price regardless of whether the Holder
      accurately refers to the Base Share Price in the Notice of
      Exercise.  Notwithstanding the foregoing, (i) no adjustments shall be
      made, paid or issued under this Section 3(b) in respect of an Exempt Issuance
      and (ii) this Section 3(b) shall terminate in its entirety, and be of no further
      force or effect, as of the consummation of any Fundamental
      Transaction.

     

    c)  Subsequent
      Rights Offerings.  If the Company, at any time while the Warrant
      is outstanding, shall issue rights, options or warrants to all holders of Common
      Stock (and not to Holders) entitling them to subscribe for or purchase shares
      of
      Common Stock at a price per share less than the VWAP at the record date
      mentioned below, then the Exercise Price shall be multiplied by a fraction,
      of
      which the denominator shall be the number of shares of the Common Stock
      outstanding on the date of issuance of such rights or warrants plus the number
      of additional shares of Common Stock offered for subscription or purchase,
      and
      of which the numerator shall be the number of shares of the Common Stock
      outstanding on the date of issuance of such rights or warrants plus the number
      of shares which the aggregate offering price of the total number of shares
      so
      offered (assuming receipt by the Company in full of all consideration payable
      upon exercise of such rights, options or warrants) would purchase at such
      VWAP.  Such adjustment shall be made whenever such rights or warrants
      are issued, and shall become effective immediately after the record date for
      the
      determination of stockholders entitled to receive such rights, options or
      warrants.

     

    d)  Pro
      Rata Distributions.  If the Company, at any time while this
      Warrant is outstanding, shall distribute to all holders of Common Stock (and
      not
      to Holders of the Warrants) evidences of its indebtedness or assets (including
      cash and cash dividends) or rights or warrants to subscribe for or purchase
      any
      security other than the Common Stock (which shall be subject to Section 3(b)),
      then in each such case the Exercise Price shall be adjusted by multiplying
      the
      Exercise Price in effect immediately prior to the record date fixed for
      determination of stockholders entitled to receive such distribution by a
      fraction of which the denominator shall be the VWAP determined as of the record
      date mentioned above, and of which the numerator shall be such VWAP on such
      record date less the then per share fair market value at such record date of
      the
      portion of such assets or evidence of indebtedness so distributed applicable
      to
      one outstanding share of the Common Stock as determined by the Board of
      Directors in good faith.  In either case the adjustments shall be
      described in a statement provided to the Holder of the portion of assets or
      evidences of indebtedness so distributed or such subscription rights applicable
      to one share of Common Stock.  Such adjustment shall be made whenever
      any such distribution is made and shall become effective immediately after
      the
      record date mentioned above.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    e)  Fundamental
      Transaction. If, at any time while this Warrant is outstanding, (A) the
      Company effects any merger or consolidation of the Company with or into another
      Person, (B) the Company effects any sale of all or substantially all of its
      assets in one or a series of related transactions, (C) any tender offer or
      exchange offer (whether by the Company or another Person) is completed pursuant
      to which holders of Common Stock are permitted to tender or exchange their
      shares for other securities, cash or property, or (D) the Company effects any
      reclassification of the Common Stock or any compulsory share exchange pursuant
      to which the Common Stock is effectively converted into or exchanged for other
      securities, cash or property (each “Fundamental Transaction”), then, upon
      any subsequent exercise of this Warrant, the Holder shall have the right to
      receive, for each Warrant Share that would have been issuable upon such exercise
      immediately prior to the occurrence of such Fundamental Transaction, the
      securities, property and/or any other consideration (the “Alternate
      Consideration”) receivable as a result of such merger, consolidation or
      disposition of assets by a holder of the number of shares of Common Stock for
      which this Warrant is exercisable immediately prior to such event. For purposes
      of any such exercise, the determination of the Exercise Price shall be
      appropriately adjusted to apply to such Alternate Consideration based on the
      amount of Alternate Consideration issuable in respect of one share of Common
      Stock in such Fundamental Transaction, and the Company shall apportion the
      Exercise Price among the Alternate Consideration in a reasonable manner
      reflecting the relative value of any different components of the Alternate
      Consideration.  If holders of Common Stock are given any choice as to
      the securities, cash or property to be received in a Fundamental Transaction,
      then the Holder shall be given the same choice as to the Alternate Consideration
      it receives upon any exercise of this Warrant following such Fundamental
      Transaction.  To the extent necessary to effectuate the foregoing
      provisions, any successor to the Company or surviving entity in such Fundamental
      Transaction shall issue to the Holder a new warrant consistent with the
      foregoing provisions and evidencing the Holder’s right to exercise such warrant
      into Alternate Consideration. The terms of any agreement pursuant to which
      a
      Fundamental Transaction is effected shall include terms requiring any such
      successor or surviving entity to comply with the provisions of this Section
      3(e)
      and insuring that this Warrant (or any such replacement security) will be
      similarly adjusted upon any subsequent transaction analogous to a Fundamental
      Transaction. Notwithstanding anything to the contrary, in the event of a
      Fundamental Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3
      transaction” as defined in Rule 13e-3 under the Securities Exchange Act of 1934,
      as amended, or (3) a Fundamental Transaction involving a person or entity not
      traded on a national securities exchange, the Nasdaq Global Select Market,
      the
      Nasdaq Global Market, the Nasdaq Capital Market or the OTC Bulletin Board,
      the
      Company or any successor entity shall pay at the Holder’s option, exercisable at
      any time concurrently with or within 30 days after the consummation of the
      Fundamental Transaction, an amount of cash equal to the value of this Warrant
      as
      determined in accordance with the Black Scholes Option Pricing Model obtained
      from the “OV” function on Bloomberg L.P. using (i) a price per share of Common
      Stock equal to the VWAP of the Common Stock for the Trading Day immediately
      preceding the date of consummation of the applicable  Fundamental
      Transaction, (ii) a risk-free interest rate corresponding to the U.S. Treasury
      rate for a period equal to the remaining term of this Warrant as of the date
      of
      consummation of the applicable Fundamental Transaction and (iii) an expected
      volatility equal to the 100 day volatility obtained from the “HVT” function on
      Bloomberg L.P. determined as of the Trading Day immediately following the public
      announcement of the applicable Fundamental Transaction.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    f)  Calculations.
      All calculations under this Section 3 shall be made to the nearest cent or
      the
      nearest 1/100th of a share, as the case may be. For purposes of this Section
      3,
      the number of shares of Common Stock deemed to be issued and outstanding as
      of a
      given date shall be the sum of the number of shares of Common Stock (excluding
      treasury shares, if any) issued and outstanding.

     

    g)  Voluntary
      Adjustment By Company. The Company may at any time during the term of this
      Warrant reduce the then current Exercise Price to any amount and for any period
      of time deemed appropriate by the Board of Directors of the
      Company.

     

    h)  Notice
      to Holder.

     

    i.  Adjustment
      to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any
      provision of this Section 3, the Company shall promptly mail to the Holder
      a
      notice setting forth the Exercise Price after such adjustment and setting forth
      a brief statement of the facts requiring such adjustment. If the Company enters
      into a Variable Rate Transaction (as defined in the Purchase Agreement), despite
      the prohibition thereon in the Purchase Agreement, the Company shall be deemed
      to have issued Common Stock or Common Stock Equivalents at the lowest possible
      conversion or exercise price at which such securities may be converted or
      exercised.

     

    ii.  Notice
      to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or
      any other distribution in whatever form) on the Common Stock; (B) the Company
      shall declare a special nonrecurring cash dividend on or a redemption of the
      Common Stock; (C) the Company shall authorize the granting to all holders of
      the
      Common Stock rights or warrants to subscribe for or purchase any shares of
      capital stock of any class or of any rights; (D) the approval of any
      stockholders of the Company shall be required in connection with any
      reclassification of the Common Stock, any consolidation or merger to which
      the
      Company is a party, any sale or transfer of all or substantially all of the
      assets of the Company, of any compulsory share exchange whereby the Common
      Stock
      is converted into other securities, cash or property; (E) the Company shall
      authorize the voluntary or involuntary dissolution, liquidation or winding
      up of
      the affairs of the Company; then, in each case, the Company shall cause to
      be
      mailed to the Holder at its last address as it shall appear upon the Warrant
      Register of the Company, at least 20 calendar days prior to the applicable
      record or effective date hereinafter specified, a notice stating (x) the date
      on
      which a record is to be taken for the purpose of such dividend, distribution,
      redemption, rights or warrants, or if a record is not to be taken, the date
      as
      of which the holders of the Common Stock of record to be entitled to such
      dividend, distributions, redemption, rights or warrants are to be determined
      or
      (y) the date on which such reclassification, consolidation, merger, sale,
      transfer or share exchange is expected to become effective or close, and the
      date as of which it is expected that holders of the Common Stock of record
      shall
      be entitled to exchange their shares of the Common Stock for securities, cash
      or
      other property deliverable upon such reclassification, consolidation, merger,
      sale, transfer or share exchange; provided that the failure to mail such notice
      or any defect therein or in the mailing thereof shall not affect the validity
      of
      the corporate action required to be specified in such notice.  The
      Holder is entitled to exercise this Warrant during the period commencing on
      the
      date of such notice to the effective date of the event triggering such
      notice.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Section
      4.                                Transfer
      of Warrant.

     

    a)  Transferability.  Subject
      to compliance with any applicable securities laws and the conditions set forth
      in Section 4(d) hereof and to the provisions of Section 4.1 of the Purchase
      Agreement, this Warrant and all rights hereunder (including, without limitation,
      any registration rights) are transferable, in whole or in part, upon surrender
      of this Warrant at the principal office of the Company or its designated agent,
      together with a written assignment of this Warrant substantially in the form
      attached hereto duly executed by the Holder or its agent or attorney and funds
      sufficient to pay any transfer taxes payable upon the making of such
      transfer.  Upon such surrender and, if required, such payment, the
      Company shall execute and deliver a new Warrant or Warrants in the name of
      the
      assignee or assignees and in the denomination or denominations specified in
      such
      instrument of assignment, and shall issue to the assignor a new Warrant
      evidencing the portion of this Warrant not so assigned, and this Warrant shall
      promptly be cancelled.  A Warrant, if properly assigned, may be
      exercised by a new holder for the purchase of Warrant Shares without having
      a
      new Warrant issued.

     

    b)  New
      Warrants. This Warrant may be divided or combined with other Warrants upon
      presentation hereof at the aforesaid office of the Company, together with a
      written notice specifying the names and denominations in which new Warrants
      are
      to be issued, signed by the Holder or its agent or attorney.  Subject
      to compliance with Section 4(a), as to any transfer which may be involved in
      such division or combination, the Company shall execute and deliver a new
      Warrant or Warrants in exchange for the Warrant or Warrants to be divided or
      combined in accordance with such notice. All Warrants issued on transfers or
      exchanges shall be dated the original Issue Date and shall be identical with
      this Warrant except as to the number of Warrant Shares issuable pursuant
      thereto.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    c)  Warrant
      Register. The Company shall register this Warrant, upon records to be
      maintained by the Company for that purpose (the “Warrant Register”), in
      the name of the record Holder hereof from time to time.  The Company
      may deem and treat the registered Holder of this Warrant as the absolute owner
      hereof for the purpose of any exercise hereof or any distribution to the Holder,
      and for all other purposes, absent actual notice to the contrary.

     

    d)  Transfer
      Restrictions. If, at the time of the surrender of this Warrant in connection
      with any transfer of this Warrant, the transfer of this Warrant shall not be
      registered pursuant to an effective registration statement under the Securities
      Act and under applicable state securities or blue sky laws, the Company may
      require, as a condition of allowing such transfer, that the Holder or transferee
      of this Warrant, as the case may be, comply with the provisions of Section
      5.7
      of the Purchase Agreement.

     

    Section
      5.                                Miscellaneous.

     

    a)  No
      Rights as Shareholder Until Exercise.  This Warrant does not
      entitle the Holder to any voting rights or other rights as a shareholder of
      the
      Company prior to the exercise hereof as set forth in Section
      2(e)(i).

     

    b)  Loss,
      Theft, Destruction or Mutilation of Warrant. The Company covenants that upon
      receipt by the Company of evidence reasonably satisfactory to it of the loss,
      theft, destruction or mutilation of this Warrant or any stock certificate
      relating to the Warrant Shares, and in case of loss, theft or destruction,
      of
      indemnity or security reasonably satisfactory to it (which, in the case of
      the
      Warrant, shall not include the posting of any bond), and upon surrender and
      cancellation of such Warrant or stock certificate, if mutilated, the Company
      will make and deliver a new Warrant or stock certificate of like tenor and
      dated
      as of such cancellation, in lieu of such Warrant or stock
      certificate.

     

    c)  Saturdays,
      Sundays, Holidays, etc.  If the last or appointed day for the
      taking of any action or the expiration of any right required or granted herein
      shall not be a Business Day, then such action may be taken or such right may
      be
      exercised on the next succeeding Business Day.

     

    d)  Authorized
      Shares.

     

    The
      Company covenants that during the period the Warrant is outstanding, it will
      reserve from its authorized and unissued Common Stock a sufficient number of
      shares to provide for the issuance of the Warrant Shares upon the exercise
      of
      any purchase rights under this Warrant.  The Company further covenants
      that its issuance of this Warrant shall constitute full authority to its
      officers who are charged with the duty of executing stock certificates to
      execute and issue the necessary certificates for the Warrant Shares upon the
      exercise of the purchase rights under this Warrant.  The Company will
      take all such reasonable action as may be necessary to assure that such Warrant
      Shares may be issued as provided herein without violation of any applicable
      law
      or regulation, or of any requirements of the Trading Market upon which the
      Common Stock may be listed.  The Company covenants that all Warrant
      Shares which may be issued upon the exercise of the purchase rights represented
      by this Warrant will, upon exercise of the purchase rights represented by this
      Warrant, be duly authorized, validly issued, fully paid and nonassessable and
      free from all taxes, liens and charges created by the Company in respect of
      the
      issue thereof (other than taxes in respect of any transfer occurring
      contemporaneously with such issue).

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Except
      and to the extent as waived or consented to by the Holder, the Company shall
      not
      by any action, including, without limitation, amending its certificate of
      incorporation or through any reorganization, transfer of assets, consolidation,
      merger, dissolution, issue or sale of securities or any other voluntary action,
      avoid or seek to avoid the observance or performance of any of the terms of
      this
      Warrant, but will at all times in good faith assist in the carrying out of
      all
      such terms and in the taking of all such actions as may be necessary or
      appropriate to protect the rights of Holder as set forth in this Warrant against
      impairment.  Without limiting the generality of the foregoing, the
      Company will (a) not increase the par value of any Warrant Shares above the
      amount payable therefor upon such exercise immediately prior to such increase
      in
      par value, (b) take all such action as may be necessary or appropriate in order
      that the Company may validly and legally issue fully paid and nonassessable
      Warrant Shares upon the exercise of this Warrant, and (c) use commercially
      reasonable efforts to obtain all such authorizations, exemptions or consents
      from any public regulatory body having jurisdiction thereof as may be necessary
      to enable the Company to perform its obligations under this
      Warrant.

     

    Before
      taking any action which would result in an adjustment in the number of Warrant
      Shares for which this Warrant is exercisable or in the Exercise Price, the
      Company shall obtain all such authorizations or exemptions thereof, or consents
      thereto, as may be necessary from any public regulatory body or bodies having
      jurisdiction thereof.

     

    e)  Jurisdiction.
      All questions concerning the construction, validity, enforcement and
      interpretation of this Warrant shall be determined in accordance with the
      provisions of the Purchase Agreement.

     

    f)  Restrictions.  The
      Holder acknowledges that the Warrant Shares acquired upon the exercise of this
      Warrant, if not registered, will have restrictions upon resale imposed by state
      and federal securities laws.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    g)  Nonwaiver
      and Expenses.  No course of dealing or any delay or failure to
      exercise any right hereunder on the part of Holder shall operate as a waiver
      of
      such right or otherwise prejudice Holder’s rights, powers or remedies,
      notwithstanding the fact that all rights hereunder terminate on the Termination
      Date.  If the Company willfully and knowingly fails to comply with any
      provision of this Warrant, which results in any material damages to the Holder,
      the Company shall pay to Holder such amounts as shall be sufficient to cover
      any
      costs and expenses including, but not limited to, reasonable attorneys’ fees,
      including those of appellate proceedings, incurred by Holder in collecting
      any
      amounts due pursuant hereto or in otherwise enforcing any of its rights, powers
      or remedies hereunder.

     

    h)  Notices.  Any
      notice, request or other document required or permitted to be given or delivered
      to the Holder by the Company shall be delivered in accordance with the notice
      provisions of the Purchase Agreement.

     

    i)  Limitation
      of Liability.  No provision hereof, in the absence of any
      affirmative action by Holder to exercise this Warrant to purchase Warrant
      Shares, and no enumeration herein of the rights or privileges of Holder, shall
      give rise to any liability of Holder for the purchase price of any Common Stock
      or as a stockholder of the Company, whether such liability is asserted by the
      Company or by creditors of the Company.

     

    j)  Remedies.  Holder,
      in addition to being entitled to exercise all rights granted by law, including
      recovery of damages, will be entitled to specific performance of its rights
      under this Warrant.  The Company agrees that monetary damages would
      not be adequate compensation for any loss incurred by reason of a breach by
      it
      of the provisions of this Warrant and hereby agrees to waive and not to assert
      the defense in any action for specific performance that a remedy at law would
      be
      adequate.

     

    k)  Successors
      and Assigns.  Subject to applicable securities laws, this Warrant
      and the rights and obligations evidenced hereby shall inure to the benefit
      of
      and be binding upon the successors of the Company and the successors and
      permitted assigns of Holder.  The provisions of this Warrant are
      intended to be for the benefit of all Holders from time to time of this Warrant
      and shall be enforceable by any the Holder or holder of Warrant
      Shares.

     

    l)  Amendment.  This
      Warrant may be modified or amended or the provisions hereof waived with the
      written consent of the Company and the Holder.

     

    m)  Severability.  Wherever
      possible, each provision of this Warrant shall be interpreted in such manner
      as
      to be effective and valid under applicable law, but if any provision of this
      Warrant shall be prohibited by or invalid under applicable law, such provision
      shall be ineffective to the extent of such prohibition or invalidity, without
      invalidating the remainder of such provisions or the remaining provisions of
      this Warrant.

     

    n)  Headings.  The
      headings used in this Warrant are for the convenience of reference only and
      shall not, for any purpose, be deemed a part of this Warrant.

     

    

    ********************

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
      officer thereunto duly authorized as of the date first above
      indicated.

     

    

    
 

    
      	
              AEOLUS
                PHARMACEUTICALS, INC.

               

               

            
	
              By:_____/s/
                Michael P. McManus________________

                   Name:   Michael
                P. McManus

                   Title:     Chief
                Financial Officer

               

            

    

    

    

     

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    NOTICE
      OF EXERCISE

    

    TO:           AEOLUS
      PHARMACEUTICALS, INC.

    

    (1)  The
      undersigned hereby elects to purchase ________ Warrant Shares of the Company
      pursuant to the terms of the attached Warrant (only if exercised in full),
      and
      tenders herewith payment of the exercise price in full, together with all
      applicable transfer taxes, if any.

     

    (2)  Payment
      shall take the form of (check applicable box):

     

    [  ]
      in lawful money of the United States; or

     

    [
      ] [if
      permitted] the cancellation of such number of Warrant Shares as is necessary,
      in
      accordance with the formula set forth in subsection 2(c), to exercise this
      Warrant with respect to the maximum number of Warrant Shares purchasable
      pursuant to the cashless exercise procedure set forth in subsection
      2(c).

     

    (3)  Please
      issue a certificate or certificates representing said Warrant Shares in the
      name
      of the undersigned or in such other name as is specified below:

     

    _______________________________

    

    

    The
      Warrant Shares shall be delivered to the following DWAC Account Number or by
      physical delivery of a certificate to:

    

    _______________________________

    

    _______________________________

    

    _______________________________

    

    (4)  Accredited
      Investor.  The undersigned is an “accredited investor” as defined
      in Regulation D promulgated under the Securities Act of 1933, as
      amended.

    

    [SIGNATURE
      OF HOLDER]

    

    Name
      of
      Investing Entity:
      ________________________________________________________________________

    Signature
      of Authorized Signatory of Investing Entity:
      _________________________________________________

    Name
      of
      Authorized Signatory:
      ___________________________________________________________________

    Title
      of
      Authorized Signatory:
      ____________________________________________________________________

    Date:
      ________________________________________________________________________________________

    

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

     

    ASSIGNMENT
      FORM

    

    (To
      assign the foregoing warrant, execute

    this
      form
      and supply required information.

    Do
      not
      use this form to exercise the warrant.)

    

    

    

    FOR
      VALUE
      RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all
      rights evidenced thereby are hereby assigned to

     

    

    _______________________________________________
      whose address is

    

    _______________________________________________________________.

    

    

    

    _______________________________________________________________

    

    Dated:  ______________,
      _______

    

    

    Holder’s
      Signature:                                           _____________________________

    

    Holder’s
      Address:                                           _____________________________

    

    _____________________________

    

    

    

    Signature
      Guaranteed:  ___________________________________________

    

    

    NOTE:  The
      signature to this Assignment Form must correspond with the name as it appears
      on
      the face of the Warrant, without alteration or enlargement or any change
      whatsoever, and must be guaranteed by a bank or trust
      company.  Officers of corporations and those acting in a fiduciary or
      other representative capacity should file proper evidence of authority to assign
      the foregoing Warrant.rodmanagmt.htm

    
      Exhibit
        10.3

    

    

 

    April
      30, 2007

    

    STRICTLY
      CONFIDENTIAL

    

    Mr.
      John
      McManus

    President/Chief
      Executive Officer

    Aeolus
      Pharmaceuticals, Inc.

    23811
      Inverness Place

    Laguna
      Niguel, CA 92677

    

    Dear
      Mr.
      McManus:

    

    This
      letter (the “Agreement”) constitutes the agreement between Aeolus
      Pharmaceuticals, Inc. (“Company”) and Rodman & Renshaw, LLC (“Rodman”) that
      Rodman shall serve as the exclusive placement agent (the “Services”) for the
      Company, on a “best efforts” basis, in connection with the proposed offer and
      placement (the Offering”) by the Company of securities of the Company (the
“Securities”). The terms of the Offering and the Securities shall be mutually
      agreed upon by the Company and the investors and nothing herein implies that
      Rodman would have the power or authority to bind the Company or an obligation
      for the Company to issue any Securities or complete the Offering.  The
      Company expressly acknowledges and agrees that Rodman’s obligations hereunder
      are on a reasonable best efforts basis only and that the execution of this
      Agreement does not constitute a commitment by Rodman to purchase the Securities
      and does not ensure the successful placement of the Securities or any portion
      thereof or the success of Rodman with respect to securing any other financing
      on
      behalf of the Company.

    

    A.           Fees
      and Expenses.  In connection with the Services described above,
      the Company shall pay to Rodman the following compensation:

    

    1.      Placement
      Agent’s Fee.  The Company shall pay to Rodman a cash placement fee
      (the “Placement Agent’s Fee”) equal to 7% of the aggregate purchase price paid
      by each purchaser of Securities that are placed in the Offering.

    

    2.      Warrants.  As
      additional compensation for the Services, the Company shall issue to Rodman
      or
      its designees (provided that such designee is an “accredited investor” under
      Regulation D of the Securities Act of 1933) at the closing of the Offering
      (the
“Closing”), warrants (the “Rodman Warrants”) to purchase that number of shares
      of common stock of the Company (“Shares”) equal to 7% of the aggregate number of
      Shares placed in the Offering. The Rodman Warrants shall have the same terms,
      including exercise price and registration rights as the warrants issued to
      investors (“Investors”) in the Offering.  If no warrants are issued to
      Investors, the Rodman Warrants shall have an exercise price equal to 120% of
      the
      price at which Shares are issued to Investors, an exercise period of five years
      and registration rights for the Shares underlying the Rodman Warrants equivalent
      to those granted with respect to the Shares.

    

    3.      Expenses.  In
      addition to any fees payable to Rodman hereunder, but only if an Offering is
      consummated, the Company hereby agrees to reimburse Rodman for all actual,
      reasonable and documented travel and other out-of-pocket expenses incurred
      in
      connection with Rodman’s engagement, including the reasonable fees and expenses
      of Rodman’s counsel.   Such reimbursement shall be limited to
      $25,000 without prior written approval by the Company.

    
      
        
           

          1270
            Avenue of the Americas, 28th Floor

          New
            York,
            NY 10020

        

      

      
        
        

        
          

        

      

      
        
        

      

    

    B.           Term
      and Termination of Engagement.  The term (the “Term”) of Rodman’s
      engagement will begin on the date hereof and end on the earlier of the
      consummation of the Offering or 15 days after the receipt by either party hereto
      of written notice of termination; provided that no such notice may be given
      by
      the Company for a period of 30 days after the date hereof. Notwithstanding
      anything to the contrary contained herein, the provisions concerning
      confidentiality, indemnification, contribution and the Company’s obligations to
      pay fees and reimburse expenses (provided such fees and expenses are earned
      and
      incurred by Rodman during the Term) contained herein will survive any expiration
      or termination of this Agreement.

    

    C.           Fee
      Tail.  Rodman shall be entitled to a Placement Agent’s Fee and
      Rodman Warrants, calculated in the manner provided in Paragraph A, with respect
      to any subsequent public or private offering or other financing or
      capital-raising transaction of any kind, excluding any capital-raising
      transaction pursuant to the Company’s equity benefit programs for its employees,
      directors and consultants (“Subsequent Financing”), to the extent that such
      financing or capital is provided to the Company by investors whom Rodman had
      introduced to the Company during the Term, if such Subsequent Financing is
      consummated at any time within the 18-month period following the expiration
      or
      termination of this Agreement (the “Tail Period”). Notwithstanding the
      foregoing, in no event shall Rodman be entitled to a Placement Agent’s Fee,
      Rodman Warrants or any other compensation from the Company pursuant to Paragraph
      A or this Paragraph C for any investment made during the Tail Period by Efficacy
      Biotech Master Fund, Ltd. (“Efficacy”), Xmark Opportunity Partners, LLC
      (“Xmark”), or any entity or individual affiliated with or otherwise related to
      the foregoing. For further clarity, the Company shall pay Rodman the Placement
      Agent’s Fee and Rodman Warrants with respect to any investment by Efficacy or
      Xmark (or any of their affiliates) in the Offering itself.  Within 30
      days of the termination of the engagement, Rodman shall provide the Company
      with
      a list of such investors whom Rodman introduced to the Company, provided that
      such list shall not be binding on the Company with respect to any investor
      as to
      which the Company makes reasonable objection within 5 business days of its
      receipt of the list from Rodman.

    

    D.           Use
      of Information.  The Company will furnish Rodman such written
      information as Rodman reasonably requests in connection with the performance
      of
      its services hereunder.  The Company understands, acknowledges and
      agrees that, in performing its services hereunder, Rodman will use and rely
      entirely upon such information as well as publicly available information
      regarding the Company and other potential parties to an Offering and that Rodman
      does not assume responsibility for independent verification of the accuracy
      or
      completeness of any information, whether publicly available or otherwise
      furnished to it, concerning the Company or otherwise relevant to an Offering,
      including, without limitation, any financial information, forecasts or
      projections considered by Rodman in connection with the provision of its
      services.

    

    E.           Confidentiality.  In
      the event of the consummation or public announcement of any Offering, Rodman
      shall have the right to disclose its participation in such Offering, including,
      without limitation, the placement at its cost of “tombstone” advertisements in
      financial and other newspapers and journals. Rodman agrees not to use any
      confidential information concerning the Company provided to Rodman by the
      Company for any purposes other than those contemplated under this
      Agreement.

    

    
      
        
           

          2

        

      

      
        
        

        
          

        

      

      
        
        

      

    

    F.           Securities
      Matters.  The Company shall be responsible for any and all
      compliance with the securities laws applicable to it, including Regulation
      D and
      the Securities Act of 1933, and Rule 506 promulgated thereunder, and unless
      otherwise agreed in writing, all state securities (“blue sky”) laws. Rodman
      agrees to cooperate with counsel to the Company in that regard.

    

    G.           Indemnity.

    

    1.      In
      connection with the Company’s engagement of Rodman as placement agent, the
      Company hereby agrees to indemnify and hold harmless Rodman and its Affiliates,
      and the respective controlling persons, directors, officers, shareholders,
      agents and employees of any of the foregoing (collectively the “Indemnified
      Persons”), from and against any and all claims, actions, suits, proceedings
      (including those of shareholders), damages, liabilities and expenses incurred
      by
      any of them (including the reasonable fees and expenses of counsel),
      (collectively a “Claim”), which are (A) related to or arise out of (i) any
      actions taken or omitted to be taken (including any untrue statements made
      or
      any statements omitted to be made) by the Company, or (ii) any actions taken
      or
      omitted to be taken by any Indemnified Person in connection with the Company’s
      engagement of Rodman, or (B) otherwise relate to or arise out of Rodman’s
      activities on the Company’s behalf under Rodman’s engagement, and the Company
      shall reimburse any Indemnified Person for all expenses (including the
      reasonable fees and expenses of counsel) incurred by such Indemnified Person
      in
      connection with investigating, preparing or defending any such claim, action,
      suit or proceeding, whether or not in connection with pending or threatened
      litigation in which any Indemnified Person is a party.  The Company
      will not, however, be responsible for any Claim, which is finally judicially
      determined to have resulted from the gross negligence or willful misconduct
      of
      any person seeking indemnification for such Claim.  The Company
      further agrees that no Indemnified Person shall have any liability to the
      Company for or in connection with the Company’s engagement of Rodman except for
      any Claim incurred by the Company as a result of such Indemnified Person’s gross
      negligence or willful misconduct.

    

    2.      The
      Company further agrees that it will not, without the prior written consent
      of
      Rodman, settle, compromise or consent to the entry of any judgment in any
      pending or threatened Claim in respect of which indemnification may be sought
      hereunder (whether or not any Indemnified Person is an actual or potential
      party
      to such Claim), unless such settlement, compromise or consent includes an
      unconditional, irrevocable release of each Indemnified Person from any and
      all
      liability arising out of such Claim.

    

    3.      Promptly
      upon receipt by an Indemnified Person of notice of any complaint or the
      assertion or institution of any Claim with respect to which indemnification
      is
      being sought hereunder, such Indemnified Person shall notify the Company in
      writing of such complaint or of such assertion or institution but failure to
      so
      notify the Company shall not relieve the Company from any obligation it may
      have
      hereunder, except and only to the extent such failure results in the forfeiture
      by the Company of substantial rights and defenses.  If the Company so
      elects or is requested by such Indemnified Person, the Company will assume
      the
      defense of such Claim, including the employment of counsel reasonably
      satisfactory to such Indemnified Person and the payment of the fees and expenses
      of such counsel. In the event, however, that legal counsel to such Indemnified
      Person reasonably determines that having common counsel would present such
      counsel with a conflict of interest or if the defendant in, or target of, any
      such Claim, includes an Indemnified Person and the Company, and legal counsel
      to
      such Indemnified Person reasonably concludes that there may be legal defenses
      available to it or other Indemnified Persons different from or in addition
      to
      those available to the Company, then such Indemnified Person may employ its
      own
      separate counsel to represent or defend him, her or it in any such Claim and
      the
      Company shall pay the reasonable fees and expenses of such
      counsel.  Notwithstanding anything herein to the contrary, if the
      Company fails timely or diligently to defend, contest, or otherwise protect
      against any Claim, the relevant Indemnified Party shall have the right, but
      not
      the obligation, to defend, contest, compromise, settle, assert crossclaims,
      or
      counterclaims or otherwise protect against the same, and shall be fully
      indemnified by the Company therefor, including without limitation, for the
      reasonable fees and expenses of its counsel and all amounts paid as a result
      of
      such Claim or the compromise or settlement thereof.  In addition, with
      respect to any Claim in which the Company assumes the defense, the Indemnified
      Person shall have the right to participate in such Claim and to retain his,
      her
      or its own counsel therefor at his, her or its own expense.

    

    
      
        3

      

      
        
        

        
          

        

      

      
        
        

      

    

    4.      The
      Company agrees that if any indemnity sought by an Indemnified Person hereunder
      is held by a court to be unavailable for any reason then (whether or not Rodman
      is the Indemnified Person), the Company and Rodman shall contribute to the
      Claim
      for which such indemnity is held unavailable in such proportion as is
      appropriate to reflect the relative benefits to the Company, on the one hand,
      and Rodman on the other, in connection with Rodman’s engagement referred to
      above, subject to the limitation that in no event shall the amount of Rodman’s
      contribution to such Claim exceed the amount of fees actually received by Rodman
      from the Company pursuant to Rodman’s engagement.  The Company hereby
      agrees that the relative benefits to the Company, on the one hand, and Rodman
      on
      the other, with respect to Rodman’s engagement shall be deemed to be in the same
      proportion as (a) the total value paid or proposed to be paid or received by
      the
      Company or its stockholders as the case may be, pursuant to the Offering
      (whether or not consummated) for which Rodman is engaged to render services
      bears to (b) the fee paid or proposed to be paid to Rodman in connection with
      such engagement.

    

    5.      The
      Company’s indemnity, reimbursement and contribution obligations under this
      Agreement (a) shall be in addition to, and shall in no way limit or otherwise
      adversely affect any rights that any Indemnified Party may have at law or at
      equity and (b) shall be effective whether or not the Company is at fault in
      any
      way.

    

    H.           Limitation
      of Engagement to the Company.  The Company acknowledges that
      Rodman has been retained only by the Company, that Rodman is providing services
      hereunder as an independent contractor (and not in any fiduciary or agency
      capacity) and that the Company’s engagement of Rodman is not deemed to be on
      behalf of, and is not intended to confer rights upon, any shareholder, owner
      or
      partner of the Company or any other person not a party hereto as against Rodman
      or any of its affiliates, or any of its or their respective officers, directors,
      controlling persons (within the meaning of Section 15 of the Act or Section
      20
      of the Securities Exchange Act of 1934), employees or agents.  Unless
      otherwise expressly agreed in writing by Rodman, no one other than the Company
      is authorized to rely upon this Agreement or any other statements or conduct
      of
      Rodman, and no one other than the Company is intended to be a beneficiary of
      this Agreement.  The Company acknowledges that any recommendation or
      advice, written or oral, given by Rodman to the Company in connection with
      Rodman’s engagement is intended solely for the benefit and use of the Company’s
      management and directors in considering a possible Offering, and any such
      recommendation or advice is not on behalf of, and shall not confer any rights
      or
      remedies upon, any other person or be used or relied upon for any other
      purpose.  Rodman shall not have the authority to make any commitment
      binding on the Company.  The Company, in its sole discretion, shall
      have the right to reject any investor introduced to it by Rodman.  The
      Company agrees that it will perform and comply with the covenants and other
      obligations set forth in the purchase agreement and related transaction
      documents between the Company and the investors in the Offering, and that Rodman
      will be entitled to rely on the representations, warranties, agreements and
      covenants of the Company contained in such purchase agreement and related
      transaction documents as if such representations, warranties, agreements and
      covenants were made directly to Rodman by the Company.

    

    
      
        4

      

      
        
        

        
          

        

      

      
        
        

      

    

    I.           Limitation
      of Rodman’s Liability to the Company.  Rodman and the Company
      further agree that neither Rodman nor any of its affiliates or any of its their
      respective officers, directors, controlling persons (within the meaning of
      Section 15 of the Act or Section 20 of the Exchange Act of 1934), employees
      or
      agents shall have any liability to the Company, its security holders or
      creditors, or any person asserting claims on behalf of or in the right of the
      Company (whether direct or indirect, in contract, tort, for an act of negligence
      or otherwise) for any losses, fees, damages, liabilities, costs, expenses or
      equitable relief arising out of or relating to this Agreement or the Services
      rendered hereunder, except for losses, fees, damages, liabilities, costs or
      expenses that arise out of or are based on any action of or failure to act
      by
      Rodman and that are finally judicially determined to have resulted solely from
      the gross negligence or willful misconduct of Rodman.

    

    J.           Governing
      Law.  This Agreement shall be governed by and construed in
      accordance with the laws of the State of New York applicable to agreements
      made
      and to be fully performed therein.  Any disputes which arise under
      this Agreement, even after the termination of this Agreement, will be heard
      only
      in the state or federal courts located in the City of New York, State of New
      York.  The parties hereto expressly agree to submit themselves to the
      jurisdiction of the foregoing courts in the City of New York, State of New
      York.
      The parties hereto expressly waive any rights they may have to contest the
      jurisdiction, venue or authority of any court sitting in the City and State
      of
      New York.  In the event of the bringing of any action, or suit by a
      party hereto against the other party hereto, arising out of or relating to
      this
      Agreement, the party in whose favor the final judgment or award shall be entered
      shall be entitled to have and recover from the other party the costs and
      expenses incurred in connection therewith, including its reasonable attorneys’
fees.  Any rights to trial by jury with respect to any such action,
      proceeding or suit are hereby waived by Rodman and the Company.

    

    K.           Notices.  All
      notices hereunder will be in writing and sent by certified mail, hand delivery,
      overnight delivery or telefax, if sent to Rodman, to Rodman & Renshaw, LLC,
      1270 Avenue of the Americas, 16th Floor, New York, NY  10020, Telefax
      number (212) 356-0536, Attention: Thomas Pinou, and if sent to the Company,
      to
      23811 Inverness Place Laguna Niguel, California 92677, Telefax number (949)
      481-9829, Attention: Chief Executive Officer.  Notices sent by
      certified mail shall be deemed received five days thereafter, notices sent
      by
      hand delivery or overnight delivery shall be deemed received on the date of
      the
      relevant written record of receipt, and notices delivered by telefax shall
      be
      deemed received as of the date and time printed thereon by the telefax
      machine.

    

    L.           Miscellaneous.  This
      Agreement shall not be modified or amended except in writing signed by Rodman
      and the Company.  This Agreement shall be binding upon and inure to
      the benefit of both Rodman and the Company and their respective assigns,
      successors, and legal representatives.  This Agreement constitutes the
      entire agreement of Rodman and the Company with respect to the subject matter
      hereof and supersedes any prior agreements. If any provision of this Agreement
      is determined to be invalid or unenforceable in any respect, such determination
      will not affect such provision in any other respect, and the remainder of the
      Agreement shall remain in full force and effect.  This Agreement may
      be executed in counterparts (including facsimile counterparts), each of which
      shall be deemed an original but all of which together shall constitute one
      and
      the same instrument.

    

    
      
        
          5

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    In
      acknowledgment that the foregoing correctly sets forth the understanding reached
      by Rodman and the Company, please sign in the space provided below, whereupon
      this letter shall constitute a binding Agreement as of the date indicated
      above.

    

    Very
      truly yours,

    

    RODMAN
&
RENSHAW,
      LLC

    

    

    By
      __/s/ John
      Borer_______________

    Name:   John
      Borer

    Title:     CEO

    

    Accepted
      and Agreed:

    

    AEOLUS
      PHARMACEUTICALS, INC.

    

    

    By
      ___/s/ Michael P. McManus________

    Name:   Michael
      P. McManus

    Title:    Chief
      Financial Officer

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