Document:

REGISTRATION
RIGHTS AGREEMENT

       

      REGISTRATION RIGHTS AGREEMENT
(this “Agreement”),
dated as of August 11, 2010, 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.           The
parties hereto have entered into a Securities Purchase Agreement dated as of
even date herewith (the “Securities Purchase
Agreement”).

       

      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.

       

      (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 New Warrant Shares, (iii) the Conversion Shares, (iv)
the March Shares, (v) the Exchange Warrant Shares, (vi) the Option Exchange
Warrant Shares, and (vii) any capital stock of the Company issued or
issuable, with respect to the foregoing 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: (a) the date on which the
securities are disposed of pursuant to an effective registration statement under
the 1933 Act; (b) the date on which the securities are distributed to the public
pursuant to Rule 144; (c) 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 (d) 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.

       

      (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.

      
        
           

        

        
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      (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
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.

      
        
           

        

        
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      (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 publicly
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 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.

      
        
           

        

        
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      (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(c), 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 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.

      
        
           

        

        
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      (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 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.

      
        
           

        

        
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      (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 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.

      
        
           

        

        
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      (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.

      
        
           

        

        
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      (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 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.

      
        
           

        

        
          -10-

          
            

          

        

        
           

        

      

      (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 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.

      
        
           

        

        
          -11-

          
            

          

        

        
           

        

      

      (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 Registrable Securities
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 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.

      
        
           

        

        
          -12-

          
            

          

        

        
           

        

      

      (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 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.

      
        
           

        

        
          -13-

          
            

          

        

        
           

        

      

      (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 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.

      
        
           

        

        
          -14-

          
            

          

        

        
           

        

      

      (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 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.

      
        
           

        

        
          -15-

          
            

          

        

        
           

        

      

      (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

       

      (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.

      
        
           

        

        
          -16-

          
            

          

        

        
           

        

      

      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.

       

      (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:

      
        
           

        

        
          -17-

          
            

          

        

        
           

        

      

      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 and Chief Executive Officer

       

      with a
copy (for information purposes only) to:

       

      Paul,
Hastings, Janofsky & Walker LLP

      55 Second
Street, 24th Floor

      San
Francisco, CA 94105

      Telephone:     (415)
856-7024

      Facsimile:       (415)
856-7124

      Attention:       Jeffrey
T. Hartlin

      

      If to the
Transfer Agent:

       

      American
Stock Transfer and Trust Company

      6201 15th
Avenue

      Brooklyn,
New York 11219

      Telephone:     (718)
921-8380

      Facsimile:       (718)
765-8718

      Attention:       Angelia
Francis-Brown

      

      If to
Legal Counsel:

       

      Lowenstein
Sandler PC

      1251
Avenue of the Americas, 18th Floor

      New York,
New York 10020

      Telephone:     (973)
597-2500

      Facsimile:       (973)
597-2400

      Attention:       John
D. Hogoboom

      

      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.

      
        
           

        

        
          -18-

          
            

          

        

        
           

        

      

      (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 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.

      
        
           

        

        
          -19-

          
            

          

        

        
           

        

      

      (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, 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]

      
        
           

        

        
          -20-

          
            

          

        

        
           

        

      

      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/
      John L. McManus	  
      
	 
      	 
      	
                    Name:
      John L. McManus

                  
	 
      	 
      	
                    Title:  President
      & Chief Executive
Officer

                  

          

        

      

       

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      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

                

        

      

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      

      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:
Angela Francis-Brown

      

      
        	
                 
      

              	
                Re:

              	
                Aeolus
      Pharmaceuticals, Inc.

              

      

       

      Ladies
and Gentlemen:

       

      Reference
is made to that certain Securities Purchase Agreement, dated as of [·], 2010 (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 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 [_______ __], 2010, provided that at the time of such reissuance, the
Company has not otherwise notified you that the Registration Statement is
unavailable for the resale of the Registrable Securities.

      
        
           

        

        
          A-1

          
            

          

        

        
           

        

      

       

      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.

      
        
           

        

        
          B-2

          
            

          

        

        
           

        

      

      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 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 [·], 2010 (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
[·], 2010 (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 person who
      directly or indirectly alone or with others has power to vote or dispose
      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 Purchase
      Agreement:

              

      

       

      
        	
                 
      

              	
                (a)

              	
                Type
      and Number of Registrable Securities beneficially owned and issued
      pursuant to the Agreement:

              

      

      
        
          
            	
                     
      

                  

          

        

      

      
        
          
            	
                     
      

                  

          

        

      

      
        
          
            	
                     
      

                  

          

        

      

       

      
        	
                 
      

              	
                (b)

              	
                Number
      of shares of Common Stock to be registered pursuant to this Notice 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 as
      compensation for investment banking services to the
    Company?

              

      

       

      Yes   ̈            No   ̈

       

      Note:     If
no, the SEC’s staff has indicated that you should be identified as an
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
      the Registrable Securities in the ordinary course of business, and at the
      time of the purchase 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 as an
underwriter in the Resale Registration Statement.

       

      
        	
                5.

              	
                Beneficial
      Ownership of Other Securities of the Company Owned by the Selling
      Shareholder.

              

      

       

      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-5EXECUTION
VERSION

    

    SECURITIES
PURCHASE AGREEMENT

     

    SECURITIES PURCHASE AGREEMENT
(this “Agreement”),
dated as of August 11, 2010, by and among Aeolus Pharmaceuticals, Inc., a
Delaware corporation with its 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 (individually, a “Buyer” and collectively, the
“Buyers”).

     

    WHEREAS:

     

    A.          The
Company and each Buyer is executing and delivering this Agreement in reliance
upon the exemption from securities registration afforded by Section 4(2) of the
Securities Act of 1933, as amended (the “1933 Act”), and Rule 506 of
Regulation D (“Regulation D”) as
promulgated by the United States Securities and Exchange Commission (the “SEC”) under the 1933
Act.

     

    B.        
  Each Buyer, severally and not jointly, wishes to purchase, and the
Company wishes to sell, upon the terms and conditions stated in this Agreement,
(i) that aggregate number of shares (collectively, the “Shares”) of Common Stock set
forth opposite such Buyer’s name in column (3) on the Schedule of Buyers
attached hereto (the “Schedule
of Buyers”), (ii) warrants, in substantially the form attached hereto as
Exhibit A
(the “Warrants”), to
acquire up to that number of additional shares of Common Stock set forth
opposite such Buyer’s name in column (4) of the Schedule of Buyers attached
hereto (collectively, the “Warrant Shares”) at an
exercise price of $0.50 per share (subject to adjustment) (the “Exercise
Price”).  The transactions contemplated by this paragraph B are
hereinafter referred to as the “Financing.”  The
Shares and Warrants shall be issued in units (the “Units”), each Unit consisting
of one (1) Share and Warrants to acquire seventy-five one hundredth (0.75)
Warrant Shares.  The Units shall be immediately separable into Shares
and Warrants upon issuance and the Shares and Warrants shall be separately
transferable. The Purchase Price (as defined below) payable at the Initial
Closing (as defined below) divided by the number of Units to be acquired at the
Initial Closing is hereinafter referred to as the “Per Unit Purchase
Price”.

     

    C.           The
Company wishes to grant to Buyers the option to acquire, collectively, up to
2,500,000 additional Units at the Per Unit Purchase Price in accordance with the
provisions of Section 1(b) below (the “Call Option”).

     

    D.          The
Buyers, severally and not jointly, wish to grant to the Company the option to
require the Buyers, severally and not jointly, to acquire up to 2,500,000
additional Units at the Per Unit Purchase Price in accordance with the
provisions of Section 1(b) below (the “Put Option”).

     

    E.           Simultaneous
with the Financing, the parties wish to enter into a new Registration Rights
Agreement, substantially in the form attached hereto as Exhibit B (the
“Registration Rights
Agreement”), pursuant to which the Company will provide certain
registration rights with respect to the Shares and the Warrant Shares under the
1933 Act and the rules and regulations promulgated thereunder, and applicable
state securities laws.

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    F.           The
Shares, the Warrants and the Warrant Shares are collectively are referred to
herein as the “Securities.”

     

    NOW, THEREFORE, the Company
and each Buyer hereby agree as follows:

     

    1.           PURCHASE AND SALE OF SHARES
AND WARRANTS; OPTION EXERCISE.

     

    (a)          Purchase and Sale of Shares
and Warrants.

     

    (i)           Purchase and
Sale. Subject to the
satisfaction (or waiver) of the conditions set forth in Sections 6 and 7(i) below, the
Company shall issue and sell to each Buyer, and each Buyer severally, but not
jointly, shall purchase from the Company, (x) the number of Shares set forth
opposite such Buyer’s name in column (3) on the Schedule of Buyers and
(y) Warrants to acquire up to that number of Warrant Shares set forth
opposite such Buyer’s name in column (4) on the Schedule of Buyers (the “Initial
Closing”);

     

    (ii)          Initial
Closing.  The closing of the Financing (the “Initial Closing”) shall occur
at 10:00 a.m., New York City time, on the date hereof (or such later date as is
mutually agreed to by the Company and each Buyer) after notification of
satisfaction (or waiver) of the conditions to the Closing set forth in Sections 6 and 7(i) below at the
offices of Lowenstein Sandler PC, 1251 Avenue of the Americas, 18th Floor, New
York, New York 10020.  The date on which the Initial Closing occurs is
referred to herein as the “Initial Closing
Date.”

     

    (iii)         Financing Purchase
Price.  The purchase price to be paid by each Buyer for the
Shares and the Warrants to be purchased by such Buyer at the Initial Closing
shall be the amount set forth opposite such Buyer’s name in column (5) of the
Schedule of Buyers to be paid on the Initial Closing Date (the “Purchase Price”).

     

    (b)         Exercise of Call and Put
Options.

     

    (i)           Exercise of Call
Option.  Unless the Company shall have previously exercised the
Put Option in full, at any time, commencing on October 1, 2010 and ending on and
including December 31, 2010 (the “Call Option Termination
Date”), the Buyers shall have the right, upon written notice to the
Company (each a “Call Option
Exercise Notice”), to acquire, severally and not jointly, from the
Company their Pro Rata Share (as defined below) of up to 2,500,000 additional
Units at the Per Unit Purchase Price, less any Units acquired by Buyers pursuant
to the exercise of the Put Option.  Each Call Option Exercise Notice
shall indicate (x) the maximum amount of Units the Buyer providing the Call
Option Exercise Notice wishes to purchase from the Company at the Per Unit
Purchase Price, and (y) the Business Day on which the closing of the purchase
and sale of the Units subject to the Call Option Exercise Notice shall occur (a
“Call Option Closing”);
provided, however, that any Call Option Closing shall be not less than five (5)
Business Days nor greater than twenty (20) Business Days after the receipt of
such Call Option Exercise Notice by the Company.   No Call Option
Exercise Notice may be delivered less than five (5) Business Days before the
Call Option Termination Date.  As used herein, a Buyer’s “Pro Rata Share” means the
quotient of the Units purchased by such Buyer at the Initial Closing divided by
the aggregate Units purchased by all of the Buyers at the Initial
Closing.

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

    (ii)          Exercise of Put
Option.  Unless the Buyers shall have previously exercised the
Call Option in full, at any time, commencing on October 1, 2010 and ending on
and including December 31, 2010 (the “Put Option Termination
Date”),the Company shall have the right, upon written notice to the
Buyers (the “Put Option
Exercise Notice”), to require the Buyers to acquire, severally and not
jointly, from the Company up to their Pro Rata Share of up to 2,500,000
additional Units at the Per Unit Purchase Price, less any Units acquired by
Buyers pursuant to the exercise of the Call Option.  Only one Put
Option Exercise Notice may be given pursuant to this Section
1(b)(ii).  The Put Option Exercise Notice shall indicate (x) the total
number of Units to be acquired from the Company at the Per Unit Purchase Price,
(y) each Buyer’s Pro Rata Share of such Units and (z) the Business Day on which
the closing of the purchase and sale of the Units subject to the Put Option
Exercise Notice shall occur (the “Put Option Closing”);
provided, however, that the Put Option Closing shall be not less than five (5)
Business Days nor greater than twenty (20) Business Days after the receipt of
such Put Option Exercise Notice by the Buyers.  No Put Option Exercise
Notice may be delivered less than five (5) Business Days before the Put Option
Termination Date.  The Buyers shall have the right to rescind the Put
Option Exercise Notice and shall not be required to acquire any additional Units
pursuant to the Put Option upon written notice to the Company given prior to the
closing date specified in the Put Option Exercise Notice if the Buyers
reasonably determine that a material adverse event, condition or circumstance
has occurred with respect to the prospects of the Company’s AEOL 10150 drug
candidate for acute radiation syndrome; provided, that the Company’s failure to
obtain a grant or financing shall not, by itself, constitute a material adverse
event, condition or circumstance with respect thereto.

     

    (iii)         Option
Closings.  Subject to the satisfaction (or waiver) of the
conditions set forth in Sections 6 and 7(c) below, the Company shall issue and
sell to each Buyer delivering a Call Option Exercise Notice (in the event of an
exercise of the Call Option) or to each Buyer receiving a Put Option Exercise
Notice (in the event of the exercise of the Put Option), and each such Buyer
severally, but not jointly, shall purchase from the Company at the applicable
Call Option Closing or Put Option Closing, the number of Units to be issued to
such Buyer in accordance with clauses (i) and (ii) above of this Section 1(b)
(each of the Initial Closing, a Call Option Closing and the Put Option Closing,
a “Closing”).  Each
Closing shall occur at 10:00 a.m., New York City time, on the date specified in
this Section 1(b) (or such later date as is mutually agreed to by the Company
and each Buyer) after notification of satisfaction (or waiver) of the conditions
to such Closing set forth in Sections 6 and 7(i) below at the offices of
Lowenstein Sandler PC, 1251 Avenue of the Americas, 18th Floor, New York, New
York 10020.  The date on which any such Closing occurs is hereinafter
referred to herein as the “Closing Date.”

     

    (c)         Closing
Mechanics.

     

    (i)           Initial
Closing.  On the Initial Closing Date, (i) each Buyer
shall pay its respective Purchase Price to the Company by wire transfer of
immediately available funds in accordance with the Company’s written wire
instructions, and (ii) the Company shall deliver to each Buyer (A) one
or more stock certificates, evidencing the number of Shares being purchased by
such Buyer as set forth opposite such Buyer’s name in column (3) of the Schedule
of Buyers, and (B) one or more Warrants exercisable for the number of
Warrant Shares set forth opposite such Buyer’s name in column (4) of the
Schedule of Buyers, in all cases duly executed on behalf of the Company and
registered in the name of such Buyer, or such Buyer’s nominee.

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    

    (ii)          Additional
Closings.  On any Closing Date other than the Initial Closing
Date, (i) each Buyer shall pay its respective Purchase Price for the Units
to be acquired on such Closing Date to the Company by wire transfer of
immediately available funds in accordance with the Company’s written wire
instructions and (ii) the Company shall deliver to each Buyer (A) one
or more stock certificates, evidencing the number of Shares being purchased by
such Buyer on such Closing Date as set forth in the applicable Call Option
Exercise Notice or Put Option Exercise Notice, and (B) one or more Warrants
exercisable for the number of Warrant Shares being purchased by such Buyer on
such Closing Date as set forth in the applicable Call Option Exercise Notice or
Put Option Exercise Notice, in all cases duly executed on behalf of the Company
and registered in the name of such Buyer, or such Buyer’s nominee.

     

    2.           BUYER’S REPRESENTATIONS AND
WARRANTIES.  Each Buyer, severally and not jointly, represents
and warrants to the Company that:

     

    (a)           No Sale or
Distribution.  Such Buyer is acquiring the Shares and the
Warrants, and upon exercise of the Warrants will acquire the Warrant Shares
issuable upon exercise of the Warrants, for its own account, not as nominee or
agent, and not with a view towards distribution thereof, and such Buyer has no
present intention of selling, granting any participation in, or otherwise distributing
the same in violation of the 1933 Act or any state securities laws; provided,
however, that by making the representations herein, such Buyer does not agree to
hold any of the Securities for any minimum or other specific term and reserves
the right to dispose of the Securities at any time in accordance with or
pursuant to a registration statement or an exemption under the 1933 Act and
pursuant to the applicable terms of the Transaction Documents (as defined in
Section 3(b)).  Such
Buyer is acquiring the Securities hereunder in the ordinary course of its
business.  Such Buyer does not presently have any agreement or
understanding, directly or indirectly, with any Person (as defined in Section 3(r) below) to
distribute any of the Securities.

     

    (b)           Accredited Investor
Status.  Such Buyer is an “accredited investor” as that term is
defined in Rule 501(a) of Regulation D.

     

    (c)           Reliance on
Exemptions.  Such Buyer understands that the Securities are
being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and such
Buyer’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire the Securities.

    
      
         

      

      
        -4-

        
          

        

      

      
         

      

    

    (d)           Information.  Such
Buyer has been furnished with all materials relating to the business, finances
and operations of the Company and materials relating to the offer and sale of
the Securities that have been requested by such Buyer.  Such Buyer and
its advisors, if any, have been afforded the opportunity to ask questions of and
receive answers from the Company regarding the Company, its business and the
terms and conditions of the offering of the Securities.  Such Buyer
acknowledges that it has had access to the SEC Documents (as defined in Section 3(j) below) via the
SEC’s Electronic Data Gathering and Retrieval System or any successor database
(“EDGAR”).  Neither
such inquiries nor any other due diligence investigations conducted by such
Buyer or its advisors, if any, or its representatives shall modify, amend or
affect such Buyer’s right to rely on the Company’s representations and
warranties contained herein.  Such Buyer understands and acknowledges
that (i) its investment in the Securities involves a high degree of risk, (ii)
it is able to afford a complete loss of such investment in the Securities, and
(iii) it has such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of the investment
contemplated hereby.  Such Buyer has sought such accounting, legal and
tax advice as it has considered necessary to make an informed investment
decision with respect to its acquisition of the Securities.

     

    (e)           No Governmental
Review.  Such Buyer understands that no United States federal
or state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities or the fairness or
suitability of the investment in the Securities nor have such authorities passed
upon or endorsed the merits of the offering of the Securities.

     

    (f)           Transfer or
Resale.  Such Buyer understands that except as provided in the
Registration Rights Agreement: (i) the Securities have not been and are not
being registered under the 1933 Act or any state securities laws, and may not be
offered for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder, (B) such Buyer shall have delivered to the Company
an opinion of counsel, in a form reasonably acceptable to the Company, to the
effect that such Securities to be sold, assigned or transferred may be sold,
assigned or transferred pursuant to an exemption from such registration, or
(C) such Buyer provides the Company with reasonable assurance that such
Securities can be sold, assigned or transferred pursuant to Rule 144 or
Rule 144A promulgated under the 1933 Act, as amended (or a successor rule
thereto) (collectively, “Rule
144”); (ii) any sale of the Securities made in reliance on Rule 144
may be made only in accordance with the terms of Rule 144 and further, if Rule
144 is not applicable, any resale of the Securities under circumstances in which
the seller (or the Person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 1933 Act) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (iii) neither the Company nor any other Person is under
any obligation to register the Securities under the 1933 Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder.  Notwithstanding the foregoing, the Securities may be
pledged in connection with a bona fide margin account or other loan or financing
arrangement secured by the Securities and such pledge of Securities, by itself,
shall not be deemed to be a transfer, sale or assignment of the Securities
hereunder, and no Buyer effecting a pledge of Securities shall be required to
provide the Company with any notice thereof or otherwise make any delivery to
the Company pursuant to this Agreement or any other Transaction Document (as
defined in Section 3(b)), including,
without limitation, this Section 2(f).

    
      
         

      

      
        -5-

        
          

        

      

      
         

      

    

    (g)           Legends.  Such
Buyer understands that the certificates or other instruments representing the
Shares and the Warrants and, until such time as the resale of the Warrant Shares
have been registered under the 1933 Act as contemplated by the Registration
Rights Agreement or eligible to be sold under Rule 144 of the 1933 Act
without regard to the availability of current financial information, the stock
certificates representing the Warrant Shares, except as set forth below, shall
bear any legend as required by the “blue sky” laws of any state and a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):

     

    NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A FORM
REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.

     

    The
legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for resale under the 1933 Act, (ii) in connection
with a sale, assignment or other transfer, such holder provides the Company with
an opinion of a law firm reasonably acceptable to the Company, in a form
reasonably acceptable to the Company, to the effect that such sale, assignment
or transfer of the Securities may be made without registration under the
applicable requirements of the 1933 Act, or (iii) such holder provides the
Company with reasonable assurance that the Securities can be sold, assigned or
transferred pursuant to Rule 144 or Rule 144A.  If an opinion is
required, the Company shall be obligated to retain counsel in order to cause
such counsel to deliver the legal opinion referred to in clause (I)(B) of the
legend set forth above and to pay any related fees and expenses of said
counsel.

     

    (h)           Validity;
Enforcement.  The execution, delivery and performance by such
Buyer of each of the Transaction Documents (as defined below) to which such
Buyer is a party have been duly and validly authorized, executed and delivered
on behalf of such Buyer and shall constitute the legal, valid and binding
obligations of such Buyer enforceable against such Buyer in accordance with
their respective terms, except (i) as may be limited by general principles
of equity or to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors’ rights generally, (ii) as limited by
laws relating to specific performance, injunctive relief of other equitable
remedies, and (iii) to the extent the indemnification provisions contained
in this Agreement may be limited by applicable laws.

    
      
         

      

      
        -6-

        
          

        

      

      
         

      

    

    (i)       
    No
Conflicts.  The execution, delivery and performance by such
Buyer of each of the Transaction Documents to which such Buyer is a party and
the consummation by such Buyer of the transactions contemplated hereby and
thereby will not (i) result in a violation of the organizational documents
of such Buyer or (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which such Buyer is a
party, or (iii) result in a violation of any law, rule, regulation, order,
judgment  or decree (including federal and state securities laws)
applicable to such Buyer, except in the case of clauses (ii) and (iii) above,
for such conflicts, defaults, rights or violations which would not, individually
or in the aggregate, reasonably be expected to have a material adverse effect on
the ability of such Buyer to perform its obligations hereunder or under any
other Transaction Document to which such Buyer is a party.

     

    (j)         
  Residency.  Such
Buyer is a resident of that jurisdiction specified below its address on the
Schedule of Buyers.

     

    (k)           Certain Trading
Activities.  Other than with respect to the transactions
contemplated herein, since the time that such Buyer was first contacted by the
Company or any other Person regarding this investment in the Company neither the
Buyer nor any “affiliate” of such Buyer (as defined in Rule 144 of the 1933 Act)
which (x) had knowledge of the transactions contemplated hereby,
(y) has or shares discretion relating to such Buyer’s investments or
trading or information concerning such Buyer’s investments and (z) is subject to
such Buyer’s review or input concerning such affiliate’s investments or trading
(collectively, “Trading
Affiliates”) has directly or indirectly, nor has any Person acting on
behalf of or pursuant to any understanding with such Buyer or Trading Affiliate,
effected or agreed to effect any transactions in the securities of the
Company.  Such Buyer hereby covenants and agrees not to, and shall
cause its Trading Affiliates not to, engage, directly or indirectly, in any
transactions in the securities of the Company or involving the Company’s
securities during the period from the date hereof until such time as
(i) the transactions contemplated by this Agreement are first publicly
announced as described in Section 4(h) hereof or
(ii) this Agreement is terminated in full pursuant to Section 8
hereof.  Notwithstanding the foregoing, for avoidance of doubt,
nothing contained herein shall constitute a representation or warranty, or
preclude any actions, with respect to the identification of the availability of,
or securing of, available shares to borrow in order to effect short sales or
similar transactions in the future.

     

    (l)         
  Legal
Investment.  Such Buyer acknowledges that the Company has not
provided any advice as to whether the Securities are a suitable investment or
whether the Securities constitute a legal investment for such
Buyer.

     

    (m)          Compliance with SEC
Telephone Interpretation.  Such Buyer acknowledges the SEC’s
position set forth in Compliance & Disclosure Interpretation 239.10 issued
by the SEC’s Division of Corporation Finance on November 26, 2008, and such
Buyer will adhere to such position.

    
      
         

      

      
        -7-

        
          

        

      

      
         

      

    

    (n)           General
Solicitation.  Such Buyer is not purchasing the Shares and the
Warrants as a result of any advertisement, article, notice or other
communication regarding any of the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar.

     

    (o)           Organization.  Such
Buyer is an entity duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization with the requisite corporate,
limited liability company or partnership power and authority to enter into and
to consummate the transactions contemplated by this Agreement and the other
applicable Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder.

     

    (p)           Acknowledgement Regarding
Insolvency.  Notwithstanding anything in this Agreement to the
contrary, such Buyer understands and acknowledges that the Company and its
Subsidiaries, individually and on a consolidated basis, as of the date hereof,
and after giving effect to the transactions contemplated hereby to occur at the
Closing may be, or may become, Insolvent (as defined below).  For
purposes of this Section 2(p), “Insolvent” means, with respect
to any Person (as defined in Section 3(r)), (i) the
present fair saleable value of such Person’s assets is less than the amount
required to pay such Person’s total Indebtedness (as defined in Section 3(q)), (ii) such
Person is unable to pay its debts and liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and matured,
(iii) such Person intends to incur or believes that it will incur debts
that would be beyond its ability to pay as such debts mature or (iv) such Person
has unreasonably small capital with which to conduct the business in which it is
engaged as such business is now conducted and is proposed to be
conducted.

     

    3.           REPRESENTATIONS AND
WARRANTIES OF THE COMPANY.  The Company represents and warrants
to each of the Buyers that, as of the date hereof and at all times to and
including the Closing Date, except as otherwise described in the SEC Documents
filed with the SEC prior to the date hereof:

     

    (a)           Organization and
Qualification.  The Company and its “Subsidiaries” (which for
purposes of this Agreement means “Significant Subsidiary” as such term is
defined in Rule 1-02 of Regulation S-X of the 1933 Act; which as of the date of
this Agreement, is solely comprised of Aeolus Sciences, Inc., a Delaware
corporation and a wholly owned subsidiary of the Company), are entities duly
organized and validly existing and, to the extent legally applicable, in good
standing under the laws of the jurisdiction in which they are formed, and have
the requisite power and authorization to own their properties and to carry on
their business as now being conducted.  Each of the Company and its
Subsidiaries is duly qualified as a foreign entity to do business and to the
extent legally applicable, is in good standing in every jurisdiction in which
its ownership of property or the nature of the business conducted by it makes
such qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not reasonably be expected to have a
Material Adverse Effect.  As used in this Agreement, “Material Adverse Effect” means
any material adverse effect on the business, properties, assets, operations,
results of operations, condition (financial or otherwise) or prospects of the
Company and its Subsidiaries, taken as a whole, or on the transactions
contemplated hereby and the other Transaction Documents or by the agreements and
instruments to be entered into in connection herewith or therewith, or on the
authority or ability of the Company to perform its obligations under the
Transaction Documents (as defined below).  Notwithstanding the
foregoing, the entities in which the Company,
directly or indirectly, owns any of the capital stock or holds an equity or
similar interest which are not
Subsidiaries, taken as whole, do not have income, revenues or assets which are
material to the Company and its Subsidiaries, individually, or taken as a whole.
Except for the capital stock of Aeolus Sciences, Inc. or as set forth on Schedule 3(a), the Company does
not, directly or indirectly, own any joint venture or similar entity or hold
capital stock, equity or similar interests.

    
      
         

      

      
        -8-

        
          

        

      

      
         

      

    

    (b)           Authorization; Enforcement;
Validity.  The Company has the requisite corporate power and
authority to enter into, deliver and perform its obligations under this
Agreement, the Warrants, the Registration Rights Agreement, the Irrevocable
Transfer Agent Instructions (as defined in Section 5(b)) and each of the
other agreements entered into by the Company and any Buyer in connection with
the transactions contemplated by this Agreement (collectively, the “Transaction Documents”), and
to issue the Securities in accordance with the terms hereof and
thereof.  Except as set forth on Schedule 3(b),
the execution and delivery of this Agreement and the other Transaction Documents
by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby, including, without limitation, the issuance of
the Shares the Warrants, and the reservation for issuance and issuance of
Warrant Shares issuable upon exercise of the Warrants, have been duly authorized
by the Company’s board of directors, and no further filing, consent, or
authorization is required by the Company, its board of directors or its
stockholders.  This Agreement and the other Transaction Documents of
even date herewith have been (and, to the extent the Closing Date is after the
date hereof, each Transaction Document to be entered into as of the Closing Date
will have been) duly executed and delivered by the Company as of the Closing
Date, and constitute (or in the case of Transaction Documents entered on the
Closing Date if such date is after the date hereof, will constitute as of the
Closing Date) the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except (i) as may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of applicable creditors’
rights generally, (ii) as limited by laws relating to specific performance,
injunctive relief of other equitable remedies, and (iii) to the extent the
indemnification provisions contained in this Agreement and the Registration
Rights Agreement may be limited by applicable laws.

     

    (c)           Issuance of
Securities.  The issuance of the Shares the Warrants are duly
authorized by the Company and upon issuance in accordance with the terms of this
Agreement shall be free from all taxes, liens and charges with respect to the
issue thereof.  A sufficient number of shares of Common Stock shall
have been duly authorized and reserved for issuance for purposes of enabling the
Company to issue that number of shares of Common Stock issuable upon exercise of
the Warrants.  Upon exercise in accordance with the Warrants, the
Warrant Shares will be validly issued, fully paid and nonassessable and free
from all preemptive or similar rights, taxes, liens and charges with respect to
the issue thereof, with the holders being entitled to all rights accorded to a
holder of Common Stock.  Assuming the accuracy of each of the
representations and warranties set forth in Section 2 of this Agreement,
the offer and issuance by the Company of the Securities is exempt from
registration under the 1933 Act.

    
      
         

      

      
        -9-

        
          

        

      

      
         

      

    

    (d)           No
Conflicts.  Except as set forth on Schedule 3(d),
the execution, delivery and performance of this Agreement and the other
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance of the Shares and Warrants and reservation for issuance and issuance of
the Warrant Shares) will not (i) result in a violation of any certificate
of incorporation, certificate of formation, any certificate of designations or
other constituent documents of the Company or any of its Subsidiaries, any
capital stock of the Company or any of its Subsidiaries or bylaws of the Company
or any of its Subsidiaries or (ii) conflict with, or constitute a default
(or an event which with notice or lapse of time or both would become a default)
in any respect under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its Subsidiaries is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree (including
foreign, federal and state securities laws and regulations and the rules and
regulations of the OTC Bulletin Board (the “Principal Market”)) applicable
to the Company or any of its Subsidiaries or by which any property or asset of
the Company or any of its Subsidiaries is bound or affected, except in the case
of clauses (ii) and (iii) above, to the extent that such violation conflict,
default or right would not reasonably be expected to have a Material Adverse
Effect.

     

    (e)           Consents and
Filings.  Except as set forth on Schedule 3(e),
neither the Company nor any of its Subsidiaries is required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court, governmental agency or any regulatory or self-regulatory agency or any
other Person in order to execute, deliver or perform any of its obligations
under or contemplated by the Transaction Documents to which they are a party, in
each case in accordance with the terms hereof or thereof, other than
(i) the filing with the SEC of one or more Registration Statements in
accordance with the requirements of the Registration Rights Agreement,
(ii) the filing of Form D with the SEC and such filings as are required to
be made under applicable state securities laws, (iii) application(s) to the
Principal Market for the listing of the Securities for trading thereon in the
time and manner required thereby, and (iv)  filings required pursuant to
Section 4(h) of this
Agreement.  The Company and its Subsidiaries are unaware of any facts
or circumstances that might prevent the Company from obtaining or effecting any
of the registration, application or filings pursuant to the preceding
sentence.  The Company is not in violation of the listing requirements
of the Principal Market and has no knowledge of any facts that would reasonably
lead to delisting or suspension of the Common Stock in the foreseeable
future.

     

    (f)           Acknowledgment Regarding
Buyer’s Purchase of Securities.  The Company acknowledges and
agrees that each Buyer is acting solely in the capacity of an arm’s length
purchaser with respect to the Transaction Documents and the transactions
contemplated hereby and thereby.

     

    (g)           No General
Solicitation.  Neither the Company, nor any of its Subsidiaries
or affiliates, nor any Person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D) in connection with the offer or sale of the
Securities.

    
      
         

      

      
        -10-

        
          

        

      

      
         

      

    

    (h)           No Integrated
Offering.  None of the Company, its Subsidiaries, any of their
affiliates, and any Person acting on their behalf has, directly or indirectly,
made any offers or sales of any security or solicited any offers to buy any
security, under circumstances that would require registration of the issuance of
any of the Securities under the 1933 Act, whether through integration with prior
offerings or otherwise, or cause this offering of the Securities to require
approval of stockholders of the Company for purposes of any applicable
stockholder approval provisions, including, without limitation, under the rules
and regulations of any exchange or automated quotation system on which any of
the securities of the Company are listed or designated.

     

    (i)      
     Application of Takeover
Protections; Rights Agreement.  The Company and its board of
directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Certificate of Incorporation (as defined in
Section 3(q)) or the laws of
the state of its incorporation which is or could become applicable to any Buyer
as a result of the transactions contemplated by this Agreement, including,
without limitation, the Company’s issuance of the Securities and any Buyer’s
ownership of the Securities.  The Company and its board of directors
have taken all necessary action, if any, in order to render inapplicable any
stockholder rights plan or similar arrangement relating to accumulations of
beneficial ownership of Common Stock or a change in control of the
Company.

     

    (j)      
     SEC Documents; Financial
Statements.  During the two (2) years prior to the date hereof,
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the “1934 Act”) (all of the
foregoing filed during the two (2) years prior to the date hereof and all
exhibits included therein and financial statements, notes and schedules thereto
and documents incorporated by reference therein being hereinafter referred to as
the “SEC
Documents”).  The Company has made available to the Buyers or
their respective representatives, through EDGAR, true, correct and complete
copies of the SEC Documents.  As of their respective filing dates, and
to the Company's knowledge, the SEC Documents complied in all material respects
with the requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading.  As of their respective filing dates, the financial
statements of the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto.  Such financial
statements have been prepared in accordance with generally accepted accounting
principles, consistently applied, during the periods involved (except (i) as may
be otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).  No other information provided by or on behalf of any
officer or director of the Company to the Buyers, solely in their capacity as
Buyers, which is not included in the SEC Documents, including, without
limitation, information referred to in Section 2(d) of this
Agreement or in any disclosure schedules, contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make the
statements therein, in the light of the circumstance under which they are or
were made not misleading.

    
      
         

      

      
        -11-

        
          

        

      

      
         

      

    

    (k)           Absence of Certain
Changes.  Except as set forth on Schedule 3(k),
since March 31, 2010, there has been no material adverse change and no material
adverse development in the business, properties, operations, condition
(financial or otherwise), results of operations or prospects of the Company or
its Subsidiaries. Since March 31, 2010, the Company has not (i) declared or paid
any dividends, (ii) sold any assets, individually or in the aggregate, in excess
of $100,000 outside of the ordinary course of business or (iii) had capital
expenditures, individually or in the aggregate, in excess of
$500,000.  Neither the Company nor any of its Subsidiaries has taken
any steps to seek protection pursuant to any bankruptcy law nor does the Company
have any knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy proceedings or any actual knowledge of any fact that
would reasonably lead a creditor to do so.

     

    (l)      
     No Undisclosed Events,
Liabilities, Developments or Circumstances.  No event,
liability, development or circumstance has occurred or exists, or is
contemplated to occur with respect to the Company, its Subsidiaries or their
respective business, properties, prospects, operations or financial condition,
that would be required to be disclosed by the Company under applicable
securities laws on a registration statement on Form S-1 filed with the SEC
relating to an issuance and sale by the Company of its Common Stock and which
has not been publicly announced.

     

    (m)          Conduct of Business;
Regulatory Permits.  Neither the Company nor any of its
Subsidiaries is in violation of any term of or in default under its Certificate
of Incorporation, any certificate of designations of any outstanding series of
preferred stock of the Company or the Bylaws or their organizational charter or
bylaws, respectively.  Neither the Company nor any of its Subsidiaries
is in violation of any judgment, decree or order or any statute, ordinance, rule
or regulation applicable to the Company or its Subsidiaries, and neither the
Company nor any of its Subsidiaries will conduct its business in violation of
any of the foregoing, except for possible violations which could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.  Without limiting the generality of the foregoing, the
Company is not in violation of any of the rules, regulations or requirements of
the Principal Market and has no knowledge of any facts or circumstances that
would reasonably lead to delisting or suspension of the Common Stock by the
Principal Market in the foreseeable future.  During the two (2) years
prior to the date hereof, (i) the Common Stock has been designated for quotation
on the Principal Market, (ii) trading in the Common Stock has not been suspended
by the SEC or the Principal Market and (iii) the Company has received no
communication, written or oral, from the SEC or the Principal Market regarding
the suspension or delisting of the Common Stock from the Principal
Market.  The Company and its Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate regulatory authorities
necessary to conduct their respective businesses, except where the failure to
possess such certificates, authorizations or permits would not have,
individually or in the aggregate, a Material Adverse Effect, and neither the
Company nor any such Subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit.

    
      
         

      

      
        -12-

        
          

        

      

      
         

      

    

    (n)           Foreign Corrupt
Practices.  Neither the Company nor any of its Subsidiaries
nor, to the Company's knowledge, any of their respective current or former
directors, officers, agents, employees or other Persons acting on behalf of the
Company or any of its Subsidiaries has, in the course of its actions for, or on
behalf of, the Company or any of its Subsidiaries (i) used any corporate funds
for any unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.

     

    (o)           Sarbanes-Oxley
Act.  Except as set forth on Schedule 3(o), the Company is
in material compliance with any and all requirements of the Sarbanes-Oxley Act
of 2002 that are effective and applicable to the Company as of the date hereof,
and any and all rules and regulations promulgated by the SEC thereunder that are
effective and applicable to the Company as of the date hereof.

     

    (p)           Transactions with
Affiliates.  Except as discussed on Schedule 3(p), none of the
officers, directors or employees of the Company or any of its Subsidiaries is
presently a party to any transaction with the Company or any of its Subsidiaries
(other than for ordinary course services as employees, officers or directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any such
officer, director or employee or, to the knowledge of the Company or any of its
Subsidiaries, any corporation, partnership, trust or other entity in which any
such officer, director, or employee has a substantial interest or is an officer,
director, trustee or partner.

     

    (q)           Equity
Capitalization.  As of the date hereof, the authorized capital
stock of the Company consists of 210,000,000 shares, comprised of
(x) 200,000,000 shares of Common Stock, of which as of the date hereof,
56,617,177 shares are issued and outstanding, and (y) 10,000,000 shares of
preferred stock, par value $0.01 per share, of which 600,000 shares are
designated Series B nonredeemable convertible preferred stock, of which 475,087
shares are issued and outstanding, and no other shares of the Company’s
preferred stock are issued or outstanding.  All outstanding shares of
the Company’s capital stock have been, or upon issuance will be, validly issued
and are, or upon issuance will be, fully paid and
nonassessable.  Except as described on Schedule 3(q), with respect to
any debt or equity instruments of the Company and its Subsidiaries,
(i) none of the Company’s capital stock is subject to preemptive rights or
any other similar rights or any liens or encumbrances suffered or permitted by
the Company; (ii) there are no outstanding options, warrants, scrip, rights
to subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into, or exercisable or exchangeable for,
any capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional capital stock of the
Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, or exercisable or exchangeable for, any
capital stock of the Company or any of its Subsidiaries; (iii)  there are
no financing statements securing obligations in any material amounts, either
singly or in the aggregate, filed in connection with the Company or any of its
Subsidiaries; (iv) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of
their securities under the 1933 Act (except the Registration Rights Agreement);
(v) there are no outstanding securities or instruments of the Company or
any of its Subsidiaries which contain any redemption or similar provisions, and
there are no contracts, commitments, understandings or arrangements by which the
Company or any of its Subsidiaries is or may become bound to redeem a security
of the Company or any of its Subsidiaries; (vi) there are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Securities; (vii) the Company does not
have any stock appreciation rights or “phantom stock” plans or agreements or any
similar plan or agreement; and (vii) the Company and its Subsidiaries have
no liabilities or obligations required to be disclosed in the SEC Documents but
not so disclosed in the SEC Documents, other than those incurred in the ordinary
course of the Company’s or its Subsidiaries’ respective businesses and which,
individually or in the aggregate, do not or would not have a Material Adverse
Effect.  The Company has made available to the Buyers, through EDGAR,
true, correct and complete copies of the Company’s certificate of incorporation,
as amended and as in effect on the date hereof (the “Certificate of
Incorporation”), and the Company’s bylaws, as amended and as in effect on
the date hereof (the “Bylaws”).

    
      
         

      

      
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    (r)           Indebtedness and Other
Contracts.  Except as set forth under the agreements or other
arrangements listed on Schedule 3(r), neither the
Company nor any of its Subsidiaries (i) has any outstanding Indebtedness
(as defined below), (ii) is a party to any contract, agreement or
instrument, the violation of which, or default under which, by the other
party(ies) to such contract, agreement or instrument could reasonably be
expected to result in a Material Adverse Effect, (iii) is in violation of
any term of or in default under any contract, agreement or instrument relating
to any Indebtedness, except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect, or (iv) is a
party to any contract, agreement or instrument relating to any Indebtedness, the
performance of which, in the judgment of the Company’s officers, has or is
expected to have a Material Adverse Effect.  For purposes of this
Agreement:  (x) “Indebtedness” of any Person
means, without duplication (A) all indebtedness for borrowed money, (B) all
obligations issued, undertaken or assumed as the deferred purchase price of
property or services, including (without limitation) “capital leases” in
accordance with generally accepted accounting principles (other than trade
payables entered into in the ordinary course of business), (C) all reimbursement
or payment obligations with respect to letters of credit, surety bonds and other
similar instruments, (D) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to
any property or assets acquired with the proceeds of such indebtedness (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property), (F) all
monetary obligations in excess of $100,000 under any leasing or similar
arrangement which, in connection with generally accepted accounting principles,
consistently applied for the periods covered thereby, is classified as a capital
lease, (G) all indebtedness referred to in clauses (A) through (F) above secured
by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge,
security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the
Person which owns such assets or property has not assumed or become liable for
the payment of such indebtedness, and (H) all Contingent Obligations in respect
of indebtedness or obligations of others of the kinds referred to in clauses (A)
through (G) above; (y) “Contingent Obligation” means,
as to any Person, any direct or indirect liability, contingent or otherwise, of
that Person with respect to any indebtedness, lease, dividend or other
obligation of another Person if the primary purpose or intent of the Person
incurring such liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any agreements relating thereto will be complied with, or that the
holders of such liability will be protected (in whole or in part) against loss
with respect thereto; and (z) “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.

    
      
         

      

      
        -14-

        
          

        

      

      
         

      

    

    (s)          Absence of
Litigation.  There is no action, suit, proceeding, inquiry or
investigation before or by the Principal Market, any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries, the Common Stock or any of the Company’s Subsidiaries or any
of the Company’s or its Subsidiaries’ officers or directors.

     

    (t)           Insurance.  The
Company and each of its Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its Subsidiaries are engaged.  Except as set
forth on Schedule
3(t), neither the
Company nor any such Subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not have a Material Adverse
Effect.

     

    (u)          Employee
Relations.

     

    (i)           Neither
the Company nor any of its Subsidiaries is a party to any collective bargaining
agreement or employs any member of a union.  The Company and its
Subsidiaries believe that their relations with their employees are
good.  No executive officer of the Company or any of its Subsidiaries
has notified the Company or any such Subsidiary that such officer intends to
leave the Company or any such Subsidiary or otherwise terminate such officer’s
employment with the Company or any such Subsidiary.  No executive
officer of the Company or any of its Subsidiaries, is, or is now expected to be,
in violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition agreement, or
any other contract or agreement or any restrictive covenant, and the continued
employment of each such executive officer does not subject the Company or any of
its Subsidiaries to any liability with respect to any of the foregoing
matters.

     

    (ii)           Except
as set forth on Schedule 3(o), the Company and
its Subsidiaries, to their knowledge, are in compliance with all federal, state,
local and foreign laws and regulations respecting labor, employment and
employment practices and benefits, terms and conditions of employment and wages
and hours, except where failure to be in compliance would not, either
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.

    
      
         

      

      
        -15-

        
          

        

      

      
         

      

    

    (v)           Title.  Except
as set forth on Schedule 3(v), the Company and
its Subsidiaries have good and marketable title in fee simple to all real
property and good and marketable title to all personal property owned by them
which is material to the business of the Company and its Subsidiaries, in each
case free and clear of all liens, encumbrances and defects  or such as
do not materially affect the value of such property and do not materially
interfere with the use made and proposed to be made of such property by the
Company and any of its Subsidiaries.  Any real property and facilities
held under lease by the Company and any of its Subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company and its Subsidiaries, except (i) as
limited by applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability, relating
to or affecting creditors’ rights generally, (ii) as limited by laws
relating to specific performance, injunctive relief or other equitable remedies,
and (iii) to the extent any indemnification provisions contained in such
leases may be limited by applicable laws.

     

    (w)          Intellectual Property
Rights.  The Company and its Subsidiaries own or possess
adequate rights or licenses to use all trademarks, service marks and all
applications and registrations therefor, trade names, patents, patent rights,
copyrights, original works of authorship, inventions, trade secrets and other
intellectual property rights (“Intellectual Property Rights”)
necessary to conduct their respective businesses as conducted on the date of
this Agreement.  Except as set forth on Schedule 3(w), none of the
Company’s registered, or applied for, Intellectual Property Rights have expired
or terminated or have been abandoned, or are expected to expire or terminate or
expected to be abandoned, within three years from the date of this Agreement, in
each case except as have not had and could not reasonably be expected to have a
Material Adverse Effect.  To the knowledge of the Company, no product
or service of the Company or its Subsidiaries infringes the Intellectual
Property Rights of others.  There is no claim, action or proceeding
being made or brought, or to the knowledge of the Company or its Subsidiaries,
being threatened, against the Company or its Subsidiaries regarding (i) its
Intellectual Property Rights, or (ii) that the products or services of the
Company or its Subsidiaries infringe the Intellectual Property Rights of
others.  Neither the Company nor any of its Subsidiaries is aware of
any facts or circumstances which might give rise to any of the foregoing
infringements or claims, actions or proceedings.  The Company and its
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their Intellectual Property Rights, except
where failure to do so could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.

     

    (x)           Environmental
Laws.  The Company and its Subsidiaries, to their knowledge,
(i) are in compliance with any and all Environmental Laws (as hereinafter
defined), (ii) have received all permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance with all terms and conditions of any
such permit, license or approval where, in each of the foregoing clauses (i),
(ii) and (iii), the failure to so comply could be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect.  The term
“Environmental Laws”
means all federal, state, local or foreign laws relating to pollution or
protection of human health or the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata),
including, without limitation, laws relating to emissions, discharges, releases
or threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved
thereunder.

    
      
         

      

      
        -16-

        
          

        

      

      
         

      

    

    (y)           Tax
Status.  The Company and each of its Subsidiaries (i) has made
or filed all foreign, federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject,
(ii) has paid all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and (iii) has set aside
on its books provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply.  There are no unpaid taxes in any material amount claimed to be
due by the taxing authority of any jurisdiction, and the officers of the Company
know of no basis for any such claim.

     

    (z)           Internal Accounting and
Disclosure Controls.  The Company and each of its Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
and liability accountability, (iii) access to assets or incurrence of
liabilities is permitted only in accordance with management’s general or
specific authorization and (iv) the recorded accountability for assets and
liabilities is compared with the existing assets and liabilities at reasonable
intervals and appropriate action is taken with respect to any
difference.  Except as set forth on Schedule 3(z), the Company
maintains disclosure controls and procedures (as such term is defined in Rule
13a-14 under the 1934 Act) that are effective in ensuring that information
required to be disclosed by the Company in the reports that it files or submits
under the 1934 Act is recorded, processed, summarized and reported, within the
time periods specified in the rules and forms of the SEC, including, without
limitation, controls and procedures designed in to ensure that information
required to be disclosed by the Company in the reports that it files or submits
under the 1934 Act is accumulated and communicated to the Company’s management,
including its principal executive officer or officers and its principal
financial officer or officers, as appropriate, to allow timely decisions
regarding required disclosure.  Except as set forth on Schedule 3(z), during the
twelve months prior to the date hereof neither the Company nor any of its
Subsidiaries have received any notice or correspondence from any accountant
relating to any material weakness in any part of the system of internal
accounting controls of the Company or any of its Subsidiaries.

     

    (aa)         Off Balance Sheet
Arrangements.  There is no transaction, arrangement, or other
relationship between the Company or any of its Subsidiaries and an
unconsolidated or other off balance sheet entity that is required to be
disclosed by the Company in its 1934 Act filings and is not so disclosed or that
otherwise would be reasonably likely to have a Material Adverse
Effect.

    
      
         

      

      
        -17-

        
          

        

      

      
         

      

    

    (bb)         Investment Company
Status.  Neither the Company nor any of its Subsidiaries is,
and upon consummation of the sale of the Securities neither the Company nor any
of its Subsidiaries will be, an “investment company,” a company controlled by an
“investment company” or an “affiliated person” of, or “promoter” or “principal
underwriter” for, an “investment company” as such terms are defined in the
Investment Company Act of 1940, as amended.

     

    (cc)         Transfer
Taxes.  On the Closing Date, all stock transfer, documentary
stamp taxes or other taxes (other than income or similar taxes) which are
required to be paid in connection with the sale and transfer of the Securities
to be sold to each Buyer hereunder on the Closing Date will be, or will have
been, fully paid or provided for by the Company, and all laws imposing such
taxes will be or will have been complied with.

     

    (dd)         Manipulation of
Price.  The Company has not, and to its knowledge no one acting
on its behalf has, (i) taken, directly or indirectly, any action designed
to cause or to result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of any of the
Securities, (ii) sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or agreed to
pay to any person any compensation for soliciting another to purchase any other
securities of the Company.

     

    (ee)         Disclosure.  The
Company confirms that neither it nor any other Person acting on its behalf has
provided any of the Buyers or their agents or counsel, solely in their capacity
as prospective Buyers, with any information that constitutes or could reasonably
be expected to constitute material, nonpublic information.  The
Company understands and confirms that each of the Buyers will rely on the
foregoing representations in effecting transactions in securities of the
Company.  All disclosure provided to the Buyers regarding the Company
or any of its Subsidiaries, their business and the transactions contemplated
hereby, including the Schedules to this Agreement, furnished by or on behalf of
the Company is true and correct and does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.  Each press release issued by the Company or any
of its Subsidiaries during the twelve (12) months preceding the date of this
Agreement did not at the time of release contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.  No event or
circumstance has occurred or information exists with respect to the Company or
any of its Subsidiaries or its or their business, properties, prospects,
operations or financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Company but which
has not been so publicly announced or disclosed in accordance with such
requirements.  The Company acknowledges and agrees that no Buyer makes
or has made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section 2.
Notwithstanding the foregoing, the Company and each Buyer acknowledge that Buyer
has or may have one or more agents serving as a director on the Board of
Directors of the Company and that the receipt or awareness of any information
related to the Company gained by any such director in his or her capacity as a
director of the Company shall not be deemed a violation of this paragraph by the
Company.

    
      
         

      

      
        -18-

        
          

        

      

      
         

      

    

    (ff)          Acknowledgement Regarding
Buyers’ Trading Activity.  Anything in this Agreement or
elsewhere herein to the contrary notwithstanding, but subject to compliance by
the Buyers with applicable law and the terms of this Agreement, it is understood
and acknowledged by the Company (i) that none of the Buyers have been asked
by the Company or its Subsidiaries to agree, nor has any Buyer agreed with the
Company or its Subsidiaries, to desist from purchasing or selling, long and/or
short, securities of the Company, or “derivative” securities based on securities
issued by the Company or to hold the Securities for any specified term;
(ii) that past or future open market or other transactions by any Buyer,
including, without limitation, short sales or “derivative” transactions, before
or after the closing of this or future private placement transactions, may
negatively impact the market price of the Company’s publicly-traded securities;
(iii) that any Buyer, and counter parties in “derivative” transactions to
which any such Buyer is a party, directly or indirectly, presently may have a
“short” position in the Common Stock; and (iv) that each Buyer shall not be
deemed to have any affiliation with or control over any arm’s length
counter-party in any “derivative” transaction.  The Company further
understands and acknowledges that (a) one or more Buyers may engage in hedging
and/or trading activities at various times during the period that the Securities
are outstanding, including, without limitation, during the periods that the
value of the Warrant Shares deliverable with respect to Securities are being
determined and (b) such hedging and/or trading activities (if any) could reduce
the value of the existing stockholders’ equity interests in the Company at and
after the time that the hedging and/or trading activities are being
conducted.

     

    (gg)         Placement
Agents.  Except as set forth on Schedule 3(gg), neither the
Company nor any of its subsidiaries has engaged any placement agent or other
agent in connection with the Financing or the Conversion.

     

    4.           COVENANTS.

     

    (a)           Best
Efforts.  Each party shall use its best efforts to timely
satisfy each of the conditions to be satisfied by it as provided in Sections 6 and 7 of this
Agreement.

     

    (b)           Form D and Blue
Sky.  The Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof to each
Buyer promptly after such filing.  The Company shall, on or before the
Closing Date, take such action as the Company shall reasonably determine is
necessary in order to obtain an exemption for or to qualify the Securities for
sale to the Buyers at the Closing pursuant to this Agreement under applicable
securities or “Blue Sky” laws of the states of the United States (or to obtain
an exemption from such qualification), and shall provide evidence of any such
action so taken to the Buyers on or prior to the Closing Date.  The
Company shall make all filings and reports relating to the offer and sale of the
Securities required under applicable securities or “Blue Sky” laws of the states
of the United States following the Closing Date.

    
      
         

      

      
        -19-

        
          

        

      

      
         

      

    

    (c)           Reporting
Status.  Until the date on which the Buyers shall have sold all
the Warrant Shares and none of the Warrants
is outstanding (the “Reporting
Period”), the Company shall timely file (or obtain extensions in respect
thereof and file within the applicable grace period) all reports required to be
filed with the SEC pursuant to the 1934 Act.   As long as any
Buyer owns Securities, if the Company is not required to file reports pursuant
to the 1934 Act, it will prepare and furnish to the Buyers and make publicly
available in accordance with Rule 144(c) such information as is required for the
Buyers to sell the Securities under Rule 144. The Company further covenants that
it will take such further action as any holder of Securities may reasonably
request, to the extent required from time to time to enable such Person to sell
such Securities without registration under the Securities Act within the
requirements of the exemption provided by Rule 144, including, without
limitation, causing the transfer agent for the Common Stock to remove legends
and stop transfer instructions with respect to any Warrant Shares which may be
sold under Rule 144 without regard to the availability of current financial
information.

     

    (d)           Use of
Proceeds.  The Company will use the proceeds from the sale of
the Securities for general corporate purposes, and not for (x) the
repayment of any outstanding Indebtedness of the Company or any of its
Subsidiaries at any time prior to the scheduled maturity date thereof or
(y) the redemption or repurchase of any of its or its Subsidiaries’ equity
securities other than the repurchase of equity issued to or held by employees,
officers, directors and consultants of the Company or a Subsidiary upon
termination of their employment or services with the Company or a
Subsidiary.

     

    (e)           Financial
Information.  The Company agrees to send the following to each
Buyer (or each transferee thereof as permitted by Section 2(f)) during the
Reporting Period (i) unless the following are filed with the SEC through
EDGAR and are available to the public through the EDGAR system, within one (1)
Business Day after the filing thereof with the SEC, a copy of its Annual Reports
and Quarterly Reports on Form 10-K, 10-Q, any interim reports or any
consolidated balance sheets, income statements, stockholders’ equity statements
and/or cash flow statements for any period other than annual, any Current
Reports on Form 8-K and any registration statements (other than on Form S-8) or
amendments filed pursuant to the 1933 Act, (ii) unless the following are
available to the public through a national news wire, including, without
limitation, Business Wire, on the same day as the release thereof, facsimile or
e-mailed copies of all press releases issued by the Company or any of its
Subsidiaries, and (iii) copies of any notices and other information made
available or given to all stockholders of the Company generally,
contemporaneously with the making available or giving thereof to the
stockholders.  As used herein, “Business Day” means any day
other than Saturday, Sunday or other day on which commercial banks in The City
of New York are authorized or required by law to remain closed.

     

    (f)           Listing.  The
Company shall promptly secure the listing of the Shares the Warrant Shares upon
each national securities exchange and automated quotation system, if any, upon
which the Common Stock is then listed (subject to official notice of issuance)
and shall maintain such listing of all Shares and Warrant Shares from time to
time issuable under the terms of the Transaction Documents.  The
Company shall maintain the Common Stock’s authorization for quotation on the
Principal Market.  Neither the Company nor any of its Subsidiaries
shall take any action which would be reasonably expected to result in the
delisting or suspension of the Common Stock on the Principal
Market.  The Company shall pay all fees and expenses in connection
with satisfying its obligations under this Section 4(f).

    

      
        
           

        

        
          -20-

          
            

          

        

        
           

        

      

      (g)           Expenses.  Subject
to Section 8 below,
the parties hereto shall pay their own costs and expenses in connection
herewith, except that, the Company shall pay the documented, reasonable and
customary third party expenses incurred by the Buyers in connection with the
negotiation, preparation and execution of the Transaction Documents, including
the reasonable fees and expenses of one counsel to the Buyers, which shall be
Lowenstein Sandler PC. Such expenses shall be paid not later than, in the case
of fees and expenses associated with the Closing, five (5) Business Days
following the Closing.

       

      (h)           Disclosure of Transactions
and Other Material Information.  On or before 11:30 a.m., New
York City time, on the first Business Day following the date of this Agreement,
the Company shall issue a press release and file a Current Report on Form 8-K
describing the terms of the transactions contemplated by the Transaction
Documents in the form required by the 1934 Act and attaching the material
Transaction Documents (including, without limitation, this Agreement, the form
of Warrant and the Registration Rights Agreement) as exhibits to such filing
(such filing, including all such attachments, the “8-K Filing”).  From
and after the filing of the 8-K Filing with the SEC, no Buyer shall be in
possession of any material, nonpublic information received from the Company or
any of its Subsidiaries or any of their respective officers, directors,
employees or agents, that is not disclosed in the 8-K Filing; provided, however,
that the mere possession of such information by a director of the Company who is
affiliated with a Buyer shall not be required to be disclosed in the 8-K Filing;
and provided further that Buyer may have, or may be deemed to have, material,
non-public information received from the Company or its officers, directors,
employees or agents as a result of Buyer having one or more agents serving as a
director on the Board of Directors of the Company.  The Company shall
not, and shall cause each of its Subsidiaries and its and each of their
respective officers, directors, employees and agents, not to, provide any Buyer,
solely in Buyer’s capacity as a purchaser of Securities hereunder, with any
material, nonpublic information regarding the Company or any of its Subsidiaries
from and after the filing of the 8-K Filing with the SEC without the express
written consent of such Buyer.  Subject to the foregoing, neither the
Company, its Subsidiaries nor any Buyer shall issue any press releases or any
other public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
approval of any Buyer, to make any press release or other public disclosure with
respect to such transactions (i) in substantial conformity with the 8-K Filing
and contemporaneously therewith and (ii) as is required by applicable law and
regulations (provided that in the case of clause (i) each Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release).

       

      (i)         
  Reservation of
Shares.  The Company shall take all action necessary to at all
times have authorized, and reserved for the purpose of issuance, a sufficient
number of shares of Common Stock for the purpose of enabling the Company to
issue that number of shares of Common Stock issuable upon exercise of the
Warrants (without taking into account any limitations on the exercise of the
Warrants set forth in the Warrants).

       

      (j)    
       Fundamental
Transactions.  So long as any Buyer beneficially owns any
Securities, the Company shall not be party to any Fundamental Transaction (as
defined in the Warrants) unless the Company is in compliance with the applicable
provisions governing Fundamental Transactions set forth in the
Warrants.

      
        
           

        

        
          -21-

          
            

          

        

        
           

        

      

      (k)           Conduct of
Business.  The business of the Company and its Subsidiaries
shall not be conducted in violation of any law, ordinance or regulation of any
governmental entity, except where such violations would not result, either
individually or in the aggregate, in a Material Adverse Effect.

       

      5.           REGISTER; TRANSFER AGENT
INSTRUCTIONS.

       

      (a)           Register.  The
Company shall maintain at its principal executive offices (or such other office
or agency of the Company as it may designate by notice to each holder of
Securities), a register for the Shares and the Warrants in which the Company
shall record the name and address of the Person in whose name the Shares
and the Warrants
have been issued (including the name and address of each transferee), the number
of Shares held by such Person, and the number of Warrant Shares issuable upon
exercise of the Warrants held by such Person.  The Company shall keep
the register open and available at all times during business hours for
inspection of any Buyer or its legal representatives, upon reasonable advance
written notice to the Company.

       

      (b)           Transfer Agent
Instructions.  The Company shall issue irrevocable instructions
to its transfer agent, American Stock Transfer and Trust Company, and any subsequent
transfer agent, to issue certificates or credit shares to the applicable balance
accounts at The Depository Trust Company (“DTC”), registered in the name
of each Buyer or its respective nominee(s), for the Shares and the Warrant
Shares issued at the Closing or upon exercise of the Warrants in such amounts as
specified from time to time by each Buyer to the Company upon exercise of the
Warrants in the form of Exhibit C
attached hereto (the “Irrevocable Transfer Agent
Instructions”).  The Company warrants that no instruction other
than the Irrevocable Transfer Agent Instructions referred to in this Section 5(b),
and stop transfer instructions to give effect to Section 2(g)
hereof, will be given by the Company to its transfer agent, and that the
Securities shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement and the other
Transaction Documents.  If a Buyer effects a sale, assignment or
transfer of the Securities in accordance with Section 2(f),
the Company shall permit the transfer and shall promptly instruct its transfer
agent to issue one or more certificates or credit shares to the applicable
balance accounts at DTC in such name and in such denominations as specified by
such Buyer to effect such sale, transfer or assignment.  In the event
that such sale, assignment or transfer involves Shares or Warrant Shares sold,
assigned or transferred pursuant to an effective registration statement or
pursuant to Rule 144, the transfer agent shall issue such Securities to the
Buyer, assignee or transferee, as the case may be, without any restrictive
legend.  The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to a
Buyer.  Accordingly, the Company acknowledges that the remedy at law
for a breach of its obligations under this Section 5(b)
will be inadequate and agrees, in the event of a breach or threatened breach by
the Company of the provisions of this Section 5(b),
that a Buyer shall be entitled, in addition to all other available remedies, to
an order and/or injunction restraining any breach and requiring immediate
issuance and transfer, without the necessity of showing economic loss and
without any bond or other security being required.

      
        
           

        

        
          -22-

          
            

          

        

        
           

        

      

      6.           CONDITIONS
TO THE COMPANY’S OBLIGATION TO SELL.

       

      The
obligation of the Company hereunder to consummate the Financing at the Closing
and to issue and sell additional Units as provided herein is subject to the
satisfaction, at or before the applicable Closing Date, of each of the following
conditions, provided that these conditions are for the Company’s sole benefit
and may be waived by the Company at any time in its sole discretion by providing
each Buyer participating in such Closing with prior written notice
thereof:

       

      (i)           Such
Buyer shall have executed each of the Transaction Documents to which it is a
party and delivered the same to the Company.

       

      (ii)          Such
Buyer and each other Buyer shall have delivered to the Company the deliveries
required to be made by them pursuant to Section 1(d) hereof.

       

      (iii)         The
representations and warranties of such Buyer shall be true and correct in all
material respects (except for those representations and warranties that are
qualified by materiality or Material Adverse Effect, which shall be true and
correct in all respects) as of the date when made and as of the applicable
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date, which shall be true and correct as
of such specified date), and such Buyer shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by such
Buyer at or prior to the applicable Closing Date.

       

      7.           CONDITIONS TO EACH BUYER’S
OBLIGATION TO PURCHASE.

       

      (a)         Conditions to the Initial
Closing.  The obligation of each Buyer hereunder to consummate
the Financing at the Initial Closing is subject to the satisfaction, at or
before the Initial Closing Date, of each of the following conditions, provided
that these conditions are for each Buyer’s sole benefit and may be waived by
such Buyer at any time in its sole discretion by providing the Company with
prior written notice thereof.

       

      (i)           The
Company shall have duly executed and delivered to such Buyer (I) the Securities
that are being acquired by the Buyers at the Closing pursuant to Section 1(b),
(II) each of the other Transaction Documents to which the Company is a
party and (III) such other certificates or instruments required to be delivered
by it pursuant to the Transaction Documents in connection with the Initial
Closing.

       

      (ii)          The
Company shall have delivered to such Buyer a copy of the Irrevocable Transfer
Agent Instructions, in the form of Exhibit C
attached hereto, which instructions shall have been executed by the Company and
delivered to and acknowledged in writing by the Company’s transfer
agent.

       

      (iii)         Such
Buyer shall have received the opinion of Paul, Hastings, Janofsky & Walker
LLP, counsel to the Company, dated as of the Initial Closing Date, in
substantially the form of Exhibit D attached
hereto.

      
        
           

        

        
          -23-

          
            

          

        

        
           

        

      

      (iv)         The
Company shall have delivered to such Buyer copies of (a) the Certificate of
Incorporation of the Company and (b) the certificate of incorporation of
Aeolus Sciences, Inc., each as certified by the Secretary of State of the State
of Delaware within ten (10) Business Days of the Initial Closing
Date.

       

      (v)          The
Company shall have delivered to such Buyer copies of certificates of good
standing for each of the Company and Aeolus Sciences, Inc., each as certified by
the Secretary of State of the State of Delaware within five (5) Business Days of
the Initial Closing Date.

       

      (vi)         The
Company shall have delivered to such Buyer a certificate, executed by the
Secretary of the Company and dated as of the Initial Closing Date, as to
(i) the resolutions consistent with Section 3(b) as
adopted by the Company’s board of directors in a form reasonably acceptable to
such Buyer, (ii) the Certificate of Incorporation of the Company, (iii) the
certificate of incorporation of Aeolus Sciences, Inc., (iii) the Bylaws of
the Company and (iv) the bylaws of Aeolus Sciences, Inc., each as in effect
at the Initial Closing, which certificate shall be in form and substance
acceptable to the Buyers and shall provide specimen signatures for each of the
officers or directors of the Company who execute and deliver this Agreement or
any other Transaction Document to be delivered at the Initial Closing by or on
behalf of the Company (in each case, pursuant to the authorization of the
Company’s board of directors).

       

      (vii)        The
representations and warranties of the Company shall be true and correct in all
material respects (except for those representations and warranties that are
qualified by materiality or Material Adverse Effect, which shall be true and
correct in all respects) as of the date when made and at all times through and
including as of the Initial Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date, which shall be
true and correct as of such specified date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company at or prior to the Initial Closing
Date.  Such Buyer shall have received a certificate, executed by the
Chief Executive Officer, President, Chief Financial Officer or Vice President of
the Company, dated as of the Initial Closing Date, to the foregoing effect and
as to such other matters as may be reasonably requested by such Buyer, in form
and substance acceptable to the Buyers.

       

      (viii)       The
Common Stock (I) shall be designated for quotation or listed on the Principal
Market and (II) shall not have been suspended, as of the Closing Date, by the
SEC or the Principal Market from trading on the Principal Market nor shall
suspension by the SEC or the Principal Market have been threatened, as of the
Initial Closing Date, either (A) in writing by the SEC or the Principal Market
or (B) by falling below the minimum listing maintenance requirements of the
Principal Market.

       

      (ix) 
        The Company shall have obtained
all governmental, regulatory or third party consents and approvals, if any,
necessary for the sale of the Securities.

      
        
           

        

        
          -24-

          
            

          

        

        
           

        

      

      (x)           The
Company shall have delivered to such Buyer such other documents relating to the
transactions contemplated by this Agreement as such Buyer or its counsel may
reasonably request.

       

      (b)         Conditions to each
additional Closing.  The obligation of each Buyer hereunder to
purchase Units at each additional Closing Date is subject to the satisfaction,
at or before the applicable Closing Date, of each of the following conditions,
provided that these conditions are for each Buyer’s sole benefit and may be
waived by such Buyer at any time in its sole discretion by providing the Company
with prior written notice thereof.

       

      (i)           The
Company shall have complied with all of the conditions set forth in Section
7.1(a) on or prior to the Initial Closing Date.

       

      (ii)          The
Company shall have duly executed and delivered to such Buyer (a) the Securities
being purchased by such Buyer at the applicable Closing, and (b) each of the
other Transaction Documents to which the Company is a party and such other
certificates or instruments required to be delivered by it pursuant to the
Transaction Documents in connection with such Closing.

       

      (iii)         Each
Transaction Document to be entered into as of the applicable Closing Date has
been duly executed and delivered by the Company and constitutes, as of such
Closing Date, the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except (i) as may
be limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of applicable creditors’ rights generally,
(ii) as limited by laws relating to specific performance, injunctive relief of
other equitable remedies, and (iii) to the  extent the indemnification
provisions contained in this Agreement may be limited by applicable
laws.

       

      (iv)         The
Company shall have delivered to such Buyer copies of certificates of good
standing for each of the Company and Aeolus Sciences, Inc., each as certified by
the Secretary of State of the State of Delaware within five (5) Business Days of
such Closing Date.

       

      (v)          On
the applicable Closing Date, all stock transfer, documentary stamp taxes or
other taxes (other than income or similar taxes) which are required to be paid
in connection with the sale and transfer of the Securities to be sold to each
Buyer hereunder on such Closing Date will be, or will have been, fully paid or
provided for by the Company, and all laws imposing such taxes will be or will
have been complied with.

       

      (vi)         The
Company shall have timely filed (or obtained extensions in respect thereof and
filed within the applicable grace period) all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC pursuant
to the 1934 Act from the date of this Agreement through the applicable Closing
Date.

      
        
           

        

        
          -25-

          
            

          

        

        
           

        

      

      (vii)        The
representations and warranties of the Company shall be true and correct in all
material respects (except for those representations and warranties that are
qualified by materiality or Material Adverse Effect, which shall be true and
correct in all respects) as of the date when made and as of such Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date, which shall be true and correct as of such specified
date, and with respect to all other representations and warranties, after giving
effect to any updated disclosure schedules delivered by the Company to the Buyer
on such Closing Date or as otherwise described in any reports, schedules, forms,
statements and other documents filed by the Company with the SEC pursuant to the
reporting requirements of the 1934 Act from the period commencing on the Initial
Closing Date and ending on such Closing Date, including the exhibits included
therein and financial statements, notes and schedules thereto and documents
incorporated by reference therein; provided that such representations and
warranties as so qualified by such updated disclosure schedules or other
disclosures are reasonably acceptable to such Buyer in its sole discretion) and
the Company shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the Company
at or prior to such Closing Date.  Such Buyer shall have received a
certificate, executed by the Chief Executive Officer, President, Chief Financial
Officer or Vice President of the Company, dated as of such Closing Date, to the
foregoing effect, the conditions set forth in this Section 7(b) have been
satisfied, and as to such other matters as may be reasonably requested by such
Buyer, in form and substance acceptable to such Buyer.

       

      (viii)       The
Company shall have delivered to such Buyer such other documents relating to the
transactions contemplated by this Agreement as such Buyer or its counsel may
reasonably request; provided that neither Xmark Opportunity Partners, LLC nor
any “affiliate” of Xmark Opportunity Partners, LLC (as defined in Rule 144 of
the 1933 Act) shall have the right under this Section 7(b)(viii) to request that
the Company deliver an opinion of counsel in connection with any additional
Closing.

       

      8.           TERMINATION.  In
the event that the Initial Closing shall not have occurred with respect to a
Buyer on or before five (5) Business Days from the date hereof due to the
Company’s or such Buyer’s failure to satisfy the conditions set forth in Sections 6 and
7 above (and
the non-breaching party’s failure to waive such unsatisfied condition(s)), the
non-breaching party shall have the option to terminate this Agreement with
respect to such breaching party at the close of business on such date without
liability of any party to any other party; provided, however, that if this
Agreement is terminated in its entirety pursuant to this Section 8 solely
as a result of the Company’s failure to satisfy the conditions in Section 7 above,
the Company shall remain obligated to reimburse the non-breaching Buyers for the
expenses described in Section 4(g)
above.

       

      9.           MISCELLANEOUS.

       

      (a)           Governing Law; Jurisdiction;
Jury Trial.  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, the borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper.  Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof to
such party at the address for such notices to it under 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 WITH
OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.

      
        
           

        

        
          -26-

          
            

          

        

        
           

        

      

      (b)           Counterparts.  This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party;
provided that a facsimile signature shall be considered due execution and shall
be binding upon the signatory thereto with the same force and effect as if the
signature were an original, not a facsimile signature.

       

      (c)           Headings.  The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.

       

      (d)           Severability.  If
any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.

       

      (e)           Entire Agreement;
Amendments.  This Agreement and the other Transaction Documents
supersede all other prior oral or written agreements between the Buyers, the
Company, their affiliates and Persons acting on their behalf with respect to the
matters discussed herein, and this Agreement, the other Transaction Documents
and the instruments referenced herein and therein contain the entire
understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the
Company nor any Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters.  No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the holders of at least two-thirds of the aggregate number of Shares
and Warrant Shares issued and issuable under the Warrants, and any amendment to
this Agreement made in conformity with the provisions of this Section 9(e)
shall be binding on all Buyers and holders of Securities as
applicable.  No provision hereof may be waived other than by an
instrument in writing signed by the party against whom enforcement is
sought.  No such amendment shall be effective to the extent that it
applies to less than all of the holders of the applicable Securities then
outstanding.  No consideration shall be offered or paid to any Person
to amend or consent to a waiver or modification of any provision of any of the
Transaction Documents unless the same consideration also is offered to all of
the parties to the Transaction Documents, holders of Shares or holders of the
Warrants, as the case may be.

      
        
           

        

        
          -27-

          
            

          

        

        
           

        

      

      (f)       
    Notices.  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 an overnight courier
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 and Chief Executive

                    
	 	 
      	
                      Officer

                    

            

          

        

      

       

      with a
copy to:

       

      
        
          
            	 	
                    Paul,
      Hastings, Janofsky & Walker LLP

                  
	 	
                    55
      Second Street, 24th Floor

                  
	 	
                    San
      Francisco, CA 94105

                  
	 	
                    Telephone:

                  	
                    (415)
      856-7024

                  
	 	
                    Facsimile:

                  	
                    (415)
      856-7124

                  
	 	
                    Attention:

                  	
                    Jeffrey
      T. Hartlin

                  

          

        

      

      

      If to the
Transfer Agent:

       

      
        
          
            	 	
                    American
      Stock Transfer and Trust Company

                  
	 	
                    6201
      15th Avenue

                  
	 	
                    Brooklyn,
      New York  11219

                  
	 	
                    Telephone:

                  	
                    (718)
      921-8380

                  
	 	
                    Facsimile:

                  	
                    (718)
      765-8718

                  
	 	
                    Attention:

                  	
                    Angelia
      Francis-Brown

                  

          

        

      

      

      If to a
Buyer, to its address and facsimile number set forth on the Schedule of Buyers,
with copies to such Buyer’s representatives as set forth on the Schedule of
Buyers,

       

      with a
copy (for informational purposes only) to:

       

      
        
          
            	 	
                    Xmark
      Opportunity Partners, LLC

                  
	 	
                    90
      Grove Street, Suite 201

                  
	 	
                    Ridgefield,
      Connecticut  06877

                  
	 	
                    Telephone:

                  	
                    (203)
      244-9503

                  
	 	
                    Facsimile:

                  	
                    (203)
      438-9949

                  
	 	
                    Attention:

                  	
                    Mitchell
      D. Kaye

                  

          

        

      

      
        
           

        

        
          -28-

          
            

          

        

        
           

        

      

       

      
        
          
            
              
                
                  
                    	 	and
	 	 
	 	
                            Lowenstein
      Sandler PC

                          
	 	
                            1251
      Avenue of the Americas, 18th Floor

                          
	 	
                            New  York,
      New York  10020

                          
	 	
                            Telephone:

                          	
                            (973)
      597-2500

                          
	 	
                            Facsimile:

                          	
                            (973)
      597-2400

                          
	 	
                            Attention:

                          	
                            John
      D.
Hogoboom

                          

                  

                

              

            

          

        

      

      

      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 an overnight courier service shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from an overnight
courier service in accordance with clause (i), (ii) or (iii) above,
respectively.

       

      (g)           Successors and
Assigns.  This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns, including
any purchasers of the Shares or the Warrants.  The Company shall not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the holders of at least two-thirds of the Shares and the
Warrant Shares issued and issuable under the Warrants, including by way of a
Fundamental Transaction (unless the Company is in compliance with the applicable
provisions governing Fundamental Transactions set forth in the
Warrants).  Except as set forth in Section 2(f)
above with respect to the Warrant Shares, a Buyer may assign some or all of its
rights hereunder without the consent of the Company, in which event such
assignee shall be deemed to be a Buyer hereunder with respect to such assigned
rights and shall enter into a joinder to this Agreement and shall become subject
to the terms and conditions of this Agreement applicable to a Buyer with respect
to such rights assigned to it.

       

      (h)           No Third Party
Beneficiaries.  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.

       

      (i)       
    Survival.  Unless
this Agreement is terminated under Section 8, the
representations and warranties of the Company and the Buyers contained in Sections 2 and
3, and the
agreements and covenants set forth in Sections 4,
5 and 9 shall survive the
Closing.  Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.

       

      (j)     
      Further
Assurances.  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.

      
        
           

        

        
          -29-

          
            

          

        

        
           

        

      

      (k)         Indemnification.

       

      (i)           In
consideration of each Buyer’s execution and delivery of the Transaction
Documents and acquiring the Securities thereunder and in addition to all of the
Company’s other obligations under the Transaction Documents, the Company shall
defend, protect, indemnify and hold harmless each Buyer and each other holder of
the Securities and all of their stockholders, partners, members, officers,
directors, employees and direct or indirect investors and any of the foregoing
Persons’ agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the “Indemnitees”) from and against
any and all actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys’ fees
and disbursements (the “Indemnified Liabilities”),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document delivered hereby or thereby or (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents or
any other certificate, instrument or document delivered hereby or thereby. The
amount paid or payable by an Indemnitee as a result any Indemnified Liability
(or action in respect thereof) shall be deemed to include, for purposes of this
Section 9(k),
any reasonable legal or other expenses reasonably and actually incurred by such
Indemnitee in connection with investigating or defending or preparing to defend
any such action or claim.

       

      (ii)          Promptly
after receipt by an Indemnitee under this Section 9(k) of
notice of any claim or the commencement of any action, such Indemnitee shall, if
a claim in respect thereof is to be made against the indemnifying party under
this Section 9(k),
notify the Company in writing of the claim or the commencement of that action;
provided, however, that the failure to notify the Company shall not relieve the
Company from any liability which it may have under this Section 9(k)
except to the extent the Company, in its capacity as the indemnifying party, has
been prejudiced by such failure.  If any such claim or action shall be
brought against an Indemnitee, and it shall notify the Company thereof, the
Company shall be entitled to participate therein and, to the extent that it
wishes, to assume the defense thereof with counsel satisfactory to such
Indemnitee.  After notice from the Company to the applicable
Indemnitee of its election to assume the defense of such claim or action, the
Company shall not be liable to such Indemnitee under this Section 9(k) for
any legal or other expenses subsequently incurred by such Indemnitee in
connection with the defense thereof other than reasonable costs of
investigation.  The Company, in its capacity as indemnifying party,
shall not:

       

      (x)           without
the prior written consent of each applicable Indemnitee (which consent shall not
be unreasonably withheld, conditioned or delayed), settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not such Indemnitees are actual
or potential parties to such claim or action) unless such settlement, compromise
or consent includes an unconditional release of each such Indemnitee from all
liability arising out of such claim, action, suit or proceeding,
or

      
        
           

        

        
          -30-

          
            

          

        

        
           

        

      

      (y)          be
liable for any settlement of any such action effected without its written
consent (which consent shall not be unreasonably withheld, conditioned or
delayed), but if settled with its written consent or if there be a final
judgment for the plaintiff in any such action, the Company, in its capacity as
the indemnifying party, agrees to indemnify and hold harmless each applicable
Indemnitee from and against any loss or liability by reason of such settlement
or judgment.

       

      (iii)        If
the indemnification provided for in this Section 9(k)
shall for any reason be unavailable or insufficient to hold harmless an
Indemnitee in respect of any Indemnified Liability (or action in respect
thereof), the Company, in its capacity as the indemnifying party, shall, in lieu
of indemnifying such Indemnitee, contribute to the amount paid or payable by
such Indemnitee as a result of such Indemnified Liability (or action in respect
thereof), in such proportion as is appropriate to reflect the relative fault of
the Company on the one hand and each applicable Indemnitee on the
other.

       

      (l)        
   No
Strict Construction.  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)          Remedies.  Each
Buyer and each holder of the Securities shall have all rights and remedies set
forth in the Transaction Documents and all rights and remedies which such
holders have been granted at any time under any other agreement or contract and
all of the rights which such holders have under any law.  Any Person
having any rights under any provision of this Agreement shall be entitled to
enforce such rights specifically (without posting a bond or other security), to
recover damages by reason of any breach of any provision of this Agreement and
to exercise all other rights granted by law.  Furthermore, the Company
recognizes that in the event that it fails to perform, observe, or discharge any
or all of its obligations under the Transaction Documents, any remedy at law may
prove to be inadequate relief to the Buyers.  The Company therefore
agrees that the Buyers shall be entitled to seek temporary and permanent
injunctive relief in any such case without the necessity of proving actual
damages and without posting a bond or other security.

       

      (n)           Rescission and Withdrawal
Right.  Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) the Transaction Documents,
whenever any Buyer exercises a right, election, demand or option under a
Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then such Buyer may rescind or
withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.

      
        
           

        

        
          -31-

          
            

          

        

        
           

        

      

      (o)           Payment Set
Aside.  To the extent that the Company makes a payment or
payments to the Buyers hereunder or pursuant to any of the other Transaction
Documents or the Buyers enforce or exercise their rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other Person under any law (including, without limitation, any
bankruptcy law, foreign, state or federal law, common law or equitable cause of
action), then to the extent of any such restoration the obligation or part
thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred.

       

      (p)           Independent Nature of
Buyers’ Obligations and Rights.  The obligations of each Buyer
under any Transaction Document are several and not joint with the obligations of
any other Buyer, and no Buyer shall be responsible in any way for the
performance of the obligations of any other Buyer under any Transaction
Document.  Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall be
deemed to constitute the Buyers as, and the Company acknowledges that the Buyers
do not so constitute, a partnership, an association, a joint venture or any
other kind of entity, or create a presumption that the Buyers are in any way
acting in concert or as a group, and the Company will not assert any such claim
with respect to such obligations or the transactions contemplated by the
Transaction Documents and the Company acknowledges that the Buyers are not
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents.  The Company
acknowledges and each Buyer confirms that it has independently participated in
the negotiation of the transaction contemplated hereby with the advice of its
own counsel and advisors.  Each Buyer shall be entitled to
independently protect and enforce its rights, including, without limitation, the
rights arising out of this Agreement or out of any other Transaction Documents,
and it shall not be necessary for any other Buyer to be joined as an additional
party in any proceeding for such purpose.

       

      [Signature Pages
Follow.]

      
        
           

        

        
          -32-

          
            

          

        

        
           

        

      

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

       

      
        
          
            
              	 
      	
                      COMPANY:

                    
	 	 
	 
      	
                      AEOLUS
      PHARMACEUTICALS, INC.

                    
	 
      	 
      	 
      
	 
      	
                      By: 

                    	
                      /s/ John L. McManus

                    
	 
      	 
      	
                      Name:

                    	
                      John
      L. McManus

                    
	 
      	 
      	
                      Title:

                    	
                      President
      and Chief Executive
Officer

                    

            

          

        

      

       

      Signature
Page to Securities Purchase Agreement

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      IN WITNESS WHEREOF, each Buyer
and the Company have caused their respective signature page to this Securities
Purchase 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 Securities Purchase Agreement

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      SCHEDULE
OF BUYERS

      

      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            
                                                              
                                                                
                                                                  
                                                                    
                                                                      
                                                                        
                                                                          	
                                                                                  (1)

                                                                                	 
      	
                                                                                  (2)

                                                                                	 
      	
                                                                                  (3)

                                                                                	 
      	
                                                                                  (4)

                                                                                	 
      	
                                                                                  (5)

                                                                                	 
      	
                                                                                  (6)

                                                                                
	
                                                                                  
                                                                                    Purchaser

                                                                                  

                                                                                	 
      	
                                                                                  
                                                                                    Address and

                                                                                    Facsimile Number

                                                                                    (Jurisdiction)

                                                                                  

                                                                                	 
      	
                                                                                  
                                                                                    Number of

                                                                                    Shares

                                                                                  

                                                                                	 
      	
                                                                                  
                                                                                    Number of

                                                                                    Warrant Shares

                                                                                  

                                                                                	 
      	
                                                                                  
                                                                                     

                                                                                    Purchase Price

                                                                                  

                                                                                	 
      	
                                                                                  
                                                                                    Legal 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

                                                                                  (Delaware)

                                                                                	 
      	
                                                                                  750,000

                                                                                	 
      	
                                                                                  562,500

                                                                                	 
      	$	
                                                                                  300,000

                                                                                	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                                                                                  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

                                                                                  (Cayman
      Islands)

                                                                                	 
      	
                                                                                  1,750,000

                                                                                	 
      	
                                                                                  1,312,500

                                                                                	 
      	$	
                                                                                  700,000

                                                                                	 
      	 
      
	 	 	 	 	 	 	 	 	 	 	 	 
	
                                                                                  Total

                                                                                	 
      	 
      	 
      	
                                                                                  2,500,000

                                                                                	 
      	
                                                                                  1,875,000

                                                                                	 
      	$	
                                                                                  1,000,000

                                                                                	 
      	 
      
	
                                                                                  (1)

                                                                                	
                                                                                    

                                                                                	
                                                                                  (2)

                                                                                	
                                                                                    

                                                                                	
                                                                                  (3)

                                                                                	
                                                                                    

                                                                                	
                                                                                  (4)

                                                                                	
                                                                                    

                                                                                	
                                                                                  (5)

                                                                                	
                                                                                    

                                                                                	
                                                                                  (6)

                                                                                

                                                                        

                                                                      

                                                                    

                                                                  

                                                                

                                                              

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

       

      
        
           

        

        
          
          

          
            

          

        

        
           

        

      

      

      EXHIBITS

       

      
        
          	
                  Exhibit
      A

                	
                  Form
      of Warrant

                
	
                  Exhibit
      B

                	
                  Form
      of Registration Rights Agreement

                
	
                  Exhibit
      C

                	
                  Form
      of Irrevocable Transfer Agent Instructions

                
	
                  Exhibit
      D

                	
                  Form
      of Opinion of Company’s
Counsel

                

        

      

      

      SCHEDULES

       

      
        
          
            	
                    Schedule
      3(a)

                  	
                    Organization
      and Qualification

                  
	
                    Schedule
      3(b)

                  	
                    Authorization;
      Enforcement; Validity

                  
	
                    Schedule
      3(d)

                  	
                    No
      Conflicts

                  
	
                    Schedule
      3(e)

                  	
                    Consents
      and Filings

                  
	
                    Schedule
      3(k)

                  	
                    Absence
      of Certain Changes

                  
	
                    Schedule
      3(o)

                  	
                    Sarbanes-Oxley
      Act

                  
	
                    Schedule
      3(p)

                  	
                    Transactions
      with Affiliates

                  
	
                    Schedule
      3(q)

                  	
                    Equity
      Capitalization

                  
	
                    Schedule
      3(r)

                  	
                    Indebtedness
      and Other Contracts

                  
	
                    Schedule
      3(t)

                  	
                    Insurance

                  
	
                    Schedule
      3(u)

                  	
                    Employee
      Relations

                  
	
                    Schedule
      3(v)

                  	
                    Title

                  
	
                    Schedule
      3(w)

                  	
                    Intellectual
      Property Rights

                  
	
                    Schedule
      3(z)

                  	
                    Internal
      Accounting and Disclosure Controls

                  
	
                    Schedule
      3(gg)

                  	
                    Placement
      Agents

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00177-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00177-of-00352.parquet"}]]