Document:

Exhibit
      10.3

    

    NEITHER
      THIS WARRANT NOR THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER
      THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE.
      SUCH
      SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED EXCEPT
      (1) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OR
      (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
      ACT, AND, IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF
      THE
      STATES AND OTHER JURISDICTIONS, AND IN THE CASE OF A TRANSACTION EXEMPT FROM
      REGISTRATION, UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY
      SATISFACTORY TO IT THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER
      THE
      SECURITIES ACT AND SUCH OTHER APPLICABLE LAWS.

    

    AEOLUS
      PHARMACEUTICALS, INC.

    

    WARRANT
      TO PURCHASE [•]
      SHARES
      OF COMMON STOCK

     

    
      
        	June 5, 2006	
                 Warrant
                  No. [•]

              

      

    

     

    For
      value
      received, Aeolus Pharmaceuticals, Inc., a Delaware corporation (the
“Company”),
      hereby certifies that [name
      of Investor],
      or
      its registered
      transferees, successors or assigns (each person or entity holding all or part
      of
      this Warrant being referred to as a “Holder”),
      is
      the registered holder of a warrant (the “Warrant”)
      to
      subscribe for and purchase [______]
      ([______])
      shares
      (as adjusted pursuant to Section
      3
      hereof,
      the “Warrant
      Shares”)
      of the
      fully paid and nonassessable common stock, par value $0.01 per share, of the
      Company (the “Common
      Stock”),
      at a
      purchase price per share initially equal to Seventy-Five Cents
      ($0.75) (the
      “Warrant
      Price”),
      on or
      before 5:00 P.M., Eastern Time, on June 5, 2011 (the “Expiration
      Date”),
      subject to the provisions and upon the terms and conditions hereinafter set
      forth. As used in this Warrant, the term “Business
      Day”
means
      any day other than a Saturday or Sunday on which commercial banks located in
      New
      York, New York are open for the general transaction of business.

     

    This
      Warrant is one of a number of Warrants (collectively, the “Warrants”)
      being
      issued pursuant that certain Subscription Agreement dated as of June 5, 2006,
      by
      and among the Company and the Investors party thereto (the “Subscription
      Agreement”).

    

      Section
        1. Method
        of Exercise; Payment; Issuance of New Warrant.

    

    

    (a) Subject
      to the provisions hereof, the Holder may exercise this Warrant, in whole or
      in
      part and from time to time, by the surrender of this Warrant (with the Notice
      of
      Exercise attached hereto as Appendix
      A
      duly
      executed) at the principal office of the Company, or such other office or agency
      of the Company as it may reasonably designate by written notice to the Holder,
      during normal business hours on any Business Day, and the payment by the Holder
      by cash, certified check payable to the Company or wire transfer of immediately
      available funds to an account designated to the exercising Holder by the Company
      of an amount equal to the then applicable Warrant Price multiplied by the number
      of Warrant Shares then being purchased. On the date on which the Holder shall
      have satisfied in full the Holder’s obligations set forth herein regarding an
      exercise of this Warrant (provided such date is no later than the Expiration
      Date), the Holder (or such other person or persons as directed by the Holder,
      subject to compliance with applicable securities laws) shall be treated for
      all
      purposes as the holder of record of such Warrant Shares as of the close of
      business on such date.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b) In
      the
      event of any exercise of the rights represented by this Warrant, certificates
      for the whole number of shares of Common Stock so purchased shall be delivered
      to the Holder (or such other person or persons as directed by the Holder,
      subject to compliance with applicable securities laws) as promptly as is
      reasonably practicable (but not later than three
      (3) Business
      Days)
      after
      such exercise at the Company’s expense, and, unless this Warrant has been fully
      exercised, a new Warrant representing the whole number of Warrant Shares, if
      any, with respect to which this Warrant shall not then have been exercised
      shall
      also be issued to the Holder as soon as reasonably practicable thereafter (but
      not later than three
      (3) Business
      Days)
      after
      such exercise.

    

    (c) Certificates
      for Warrant Shares purchased hereunder shall be transmitted by the Company
      or
      its transfer agent to the Holder by crediting the account of the Holder’s prime
      broker with the Depository Trust Company through its Deposit Withdrawal Agent
      Commission (“DWAC”)
      system
      if the Company is a participant in such system, and otherwise by physical
      delivery to the address specified by the Holder in the Notice of Exercise within
      three (3) Business Days from the delivery to the Company of each of the Notice
      of Exercise, payment of the Warrant Price multiplied by the number of Warrant
      Shares being purchased (the “Purchase
      Price”)
      and
      surrender of this Warrant (“Warrant
      Share Delivery Date”).
      This
      Warrant shall be deemed to have been exercised on the latest date on which
      the
      Notice of Exercise, this Warrant or the applicable Purchase Price is received
      by
      the Company (the latest date being the “Receipt
      Date”).
      The
      Warrant Shares shall be deemed to have been issued, and Holder or any other
      person so designated to be named therein shall be deemed to have become a holder
      of record of such shares for all purposes, as of the later of the Receipt Date
      and the date that all taxes required to be paid by the Holder, if any, prior
      to
      the issuance of such Warrant Shares have been paid. 

    

    (d) If
      this
      Warrant shall have been exercised in part, the Company shall at the time of
      delivery of the certificate or certificates representing Warrant Shares, deliver
      to Holder a new Warrant evidencing the rights of Holder to purchase the
      unpurchased Warrant Shares called for by this Warrant, which new Warrant shall
      in all other respects be identical with this Warrant.

    

    (e) If
      the
      Company or its transfer agent fails to transmit to the Holder a certificate
      or
      certificates representing the Warrant Shares pursuant to Section
      1(c)
      hereof
      by the Warrant Share Delivery Date, then the Holder will have the right to
      rescind such exercise by delivering a written notice of rescission to the
      Company within three (3) Business Days of the Warrant Share Delivery Date.
      The
      Company shall be liable to the Holder for liquidated damages in an amount equal
      to 1.5% of the aggregate price of the Warrant Shares, as adjusted pursuant
      to
Section
      3
      hereof,
      evidenced by such certificate for each thirty (30)-day period (or portion
      thereof) beyond such three (3)-Business Day period that the certificates have
      not been so delivered.

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

     

    (f) If
      any
      portion of this Warrant remains unexercised as of the Expiration Date and the
      Fair Market Value (as
      defined in Section
      9
      hereof)
of
      one
      share of Common Stock as of the Expiration Date is greater than the applicable
      Warrant Price as of the Expiration Date, then this Warrant shall be deemed
      to
      have been automatically exercised as of immediately prior to the close of
      business on the Expiration Date (or in the event that the Expiration Date is
      not
      a Business Day, the immediately preceding Business Day) (the “Automatic
      Exercise Date”);
      provided
      that
      the
      Holder submits to the Company no later than ten (10) Business Days following
      the
      Automatic Exercise Date payment (the “Payment”)
      by
      cash, certified check payable to the Company or wire transfer of immediately
      available funds to an account designated to the exercising Holder by the Company
      of an amount equal to the Warrant Price applicable as of the Automatic Exercise
      Date multiplied by the number of Warrant Shares then being purchased pursuant
      to
      this Section
      1(f).
      The
      Holder (or such other person or persons as directed by the Holder, subject
      to
      compliance with applicable securities laws) shall be treated for all purposes
      as
      the holder of record of such Warrant Shares as of the close of business on
      the
      date the Payment is received by the Company. This Warrant shall be deemed to
      be
      surrendered to the Company on the Automatic Exercise Date by virtue of this
      Section
      1(f)
      without
      any action by the Holder; provided
      that
      the
      Holder shall be required to surrender this Warrant to the Company with the
      Payment. As soon as is reasonably practicable after the Payment and Warrant
      are
      received by the Company pursuant to this Section
      1(f),
      the
      Company, at its expense, shall issue and deliver to the Holder (or such other
      person or persons as directed by the Holder, subject to compliance with
      applicable securities laws) a certificate or certificates for the number of
      Warrant Shares issuable upon such exercise in accordance with this Section
      1(f).

    
      

      Section
        2. Reservation
        of Shares; Stock Fully Paid; Listing.
        The
        Company shall keep reserved a sufficient number of shares of the authorized
        and
        unissued shares of Common Stock to provide for the exercise of the rights
        of
        purchase represented by this Warrant in compliance with its terms. All Warrant
        Shares issued upon exercise of this Warrant shall be, at the time of delivery
        of
        the certificates for such Warrant Shares upon payment in full of the Warrant
        Price therefor in accordance with the terms of this Warrant, duly authorized,
        validly issued, fully paid and non-assessable shares of Common Stock. The
        Company shall, prior to the Expiration Date when the shares of Common Stock
        issuable upon the exercise of this Warrant are authorized for listing or
        quotation on a national securities exchange, a Nasdaq quotation system, the
        Over-the-Counter Bulletin Board or the “pink sheets”, as the case may be, use
        commercially reasonable efforts to keep the shares of Common Stock issuable
        upon
        the exercise of this Warrant authorized for listing or quotation on such
        national securities exchange, Nasdaq quotation system, the Over-the-Counter
        Bulletin Board or the “pink sheets”, as the case may be.

      

      Section
        3. Adjustments
        and Distributions.
        The
        number and kind of securities purchasable upon the exercise of this Warrant
        and
        the Warrant Price shall be subject to adjustment from time to time upon the
        occurrence of certain events, as follows:

       

    

    (a) If
      the
      Company shall at any time or from time to time while this Warrant is
      outstanding, pay a dividend or make a distribution on its Common Stock in shares
      of Common Stock, subdivide its outstanding shares of Common Stock into a greater
      number of shares or combine its outstanding shares of Common Stock into a
      smaller number of shares, then the number of Warrant Shares purchasable upon
      exercise of this Warrant and the Warrant Price in effect immediately prior
      to
      the date upon which such change shall become effective shall be proportionally
      adjusted by the Company so that the Holder thereafter exercising this Warrant
      shall be entitled to receive the number of shares of Common Stock or other
      capital stock which the Holder would have received if this Warrant had been
      exercised immediately prior to such event upon payment of a Warrant Price that
      has been proportionally adjusted to reflect such event. Such adjustments shall
      be made successively whenever any event listed above shall occur.

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

     

    (b) If
      any
      recapitalization, reclassification or reorganization of the capital stock of
      the
      Company (other than a change in par value or a subdivision or combination as
      provided for in Section
      3(a)
      above)
      shall be effected in such a manner (including, without limitation, in connection
      with a consolidation or merger in which the Company is the continuing
      corporation), that holders of Common Stock shall be entitled to receive stock,
      securities, or other assets or property (a “Reorganization”),
      then,
      as a condition of such Reorganization, lawful and adequate provisions shall
      be
      made by the Company whereby the Holder hereof shall thereafter have the right
      to
      purchase and receive (in lieu of the shares of the Common Stock of the Company
      immediately theretofore purchasable and receivable upon the exercise of the
      rights represented hereby) such shares of stock, securities or other assets
      or
      property as may be issued or payable in such Reorganization with respect to
      or
      in exchange for a number of outstanding shares of such Common Stock equal to
      the
      number of shares of such Common Stock purchasable and receivable immediately
      prior to such Reorganization upon the exercise of this Warrant. In the event
      of
      any Reorganization, appropriate provision shall be made by the Company with
      respect to the rights and interests of the Holder of this Warrant to the end
      that the provisions hereof (including, without limitation, provisions for
      adjustments of the Warrant Price and of the number of Warrant Shares) shall
      thereafter be applicable, in relation to any shares of stock, securities or
      assets thereafter deliverable upon the exercise hereof. The provisions of this
      Section
      3(b)
      shall
      similarly apply to successive Reorganizations.

    

    (c) If
      any
      consolidation or merger of the Company with another entity in which the Company
      is not the survivor, or sale, transfer or other disposition of all or
      substantially all of the Company’s assets to another entity shall be effected (a
“Change
      in Control”),
      then,
      as a condition of such consolidation, merger, sale, transfer or other
      disposition, lawful and adequate provision shall be made whereby the Holder
      shall thereafter have the right to purchase and receive upon the basis and
      upon
      the terms and conditions herein specified and in lieu of the Warrant Shares
      immediately theretofore issuable upon exercise of this Warrant, such shares
      of
      stock, securities or assets as would have been issuable or payable with respect
      to or in exchange for a number of Warrant Shares equal to the number of Warrant
      Shares immediately theretofore issuable upon exercise of this Warrant, had
      such
      consolidation, merger, sale, transfer or other disposition not taken place,
      and
      in any such case appropriate provision shall be made with respect to the rights
      and interests of the Holder to the end that the provisions hereof (including,
      without limitation, provision for adjustment of the Warrant Price and of the
      number of Warrant Shares) shall thereafter be applicable, as nearly equivalent
      as may be practicable, in relation to any shares of stock, securities or
      properties thereafter deliverable upon the exercise thereof. The Company shall
      not effect any such consolidation, merger, sale, transfer or other disposition
      unless prior to or simultaneously with the consummation thereof the successor
      entity (if other than the Company) resulting from such consolidation or merger,
      or the entity purchasing or otherwise acquiring such assets or other appropriate
      entity shall assume the obligation to deliver to the Holder such shares of
      stock, securities or assets as, in accordance with the foregoing provisions,
      such Holder may be entitled to purchase, and the other obligations under this
      Warrant. The provisions of this Section
      3(c)
      shall
      similarly apply to successive consolidations, mergers, sales, transfers or
      other
      dispositions.

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

     

    (d) In
      case
      the Company shall fix a payment date for the making of a distribution to all
      holders of Common Stock of evidences of indebtedness or assets (other than
      dividends or distributions referred to in Section
      3(a)
      hereof),
      or subscription rights or warrants, the Warrant Price to be in effect after
      such
      payment date shall be determined by multiplying the Warrant Price in effect
      immediately prior to such payment date by a fraction, the numerator of which
      shall be the total number of shares of Common Stock outstanding multiplied
      by
      the Fair Market Value (as defined in Section
      9
      hereof)
      per share of Common Stock immediately prior to such payment date, less the
      fair
      market value (as determined by the Company’s Board of Directors (the
“Board”)
      in good
      faith) of said assets or evidences of indebtedness so distributed, or of such
      subscription rights or warrants, and the denominator of which shall be the
      total
      number of shares of Common Stock outstanding multiplied by such Fair Market
      Value per share of Common Stock immediately prior to such payment date. Such
      adjustment shall be made successively whenever such a payment date is fixed.
      In
      the event that:

    

    (i) any
      dividend or distribution for which this Section
      3(d)
      would
      require an adjustment is not so paid or made, the Warrant Price shall be
      adjusted to be the Warrant Price which would then be in effect if such dividend
      or distribution had not been declared; or

    

    (ii) the
      Company implements a new shareholder rights plan, such rights plan shall provide
      that upon exercise of this Warrant the Holder will receive, in addition to
      the
      Common Stock issuable upon such exercise, the rights issued under such rights
      plan (as if the Holder had exercised this Warrant prior to implementing the
      rights plan and notwithstanding the occurrence of an event causing such rights
      to separate from the Common Stock at or prior to the time of exercise). Any
      distribution of rights or warrants pursuant to a shareholder rights plan
      complying with the requirements set forth in the immediately preceding sentence
      of this paragraph shall not constitute a distribution of rights or warrants
      for
      the purposes of this Section
      3(d).

    

    (e) An
      adjustment to the Warrant Price under the terms hereof shall become effective
      immediately after the payment date, in the case of each dividend or
      distribution, and immediately after the effective date of each other event
      which
      requires an adjustment. No adjustment to the Warrant Price shall be made in
      an
      amount less than $0.01, but any such lesser amount shall be carried forward
      and
      shall be given effect in the next Warrant Price adjustment, if any.

    

    (f) In
      the
      event that, as a result of an adjustment made pursuant to this Section
      3,
      the
      Holder shall become entitled to receive any shares of capital stock of the
      Company other than shares of Common Stock, the number of such other shares
      so
      receivable upon exercise of this Warrant shall be subject thereafter to
      adjustment from time to time in a manner and on terms as nearly equivalent
      as
      practicable to the provisions with respect to the Warrant Shares contained
      in
      this Warrant.

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

     

    (g) With
      each
      adjustment pursuant to this Section
      3,
      the
      Company shall deliver a certificate signed by its chief financial or executive
      officer setting forth, in reasonable detail, the event requiring the adjustment,
      the amount of the adjustment, the method by which such adjustment was
      calculated, and the Warrant Price and the number of Warrant Shares purchasable
      hereunder after giving effect to such adjustment, which shall be mailed by
      first
      class mail, postage prepaid to the Holder. 

    

    (h) If
      holders of Common Stock are given any choice as to the securities, cash or
      property to be received in a Reorganization or a Change in Control, then the
      Holder shall be given the same choice as to the type and form of consideration
      it receives upon any exercise of this Warrant following such Reorganization
      or
      Change in Control. 

    

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

    

    (j) If:
      (A)
      the Company shall declare a dividend (or any other distribution) on the Common
      Stock; (B) the Company shall declare a special nonrecurring cash dividend on
      or
      a redemption of the Common Stock; (C) the Company shall authorize the granting
      to all holders of the Common Stock rights or warrants to subscribe for or
      purchase any shares of capital stock of any class or of any rights; (D) the
      approval of any stockholders of the Company shall be required in connection
      with
      any Reorganization or Change in Control whereby the Common Stock is converted
      into other securities, cash or property; (E) the Company shall authorize
      the voluntary or involuntary dissolution, liquidation or winding up of the
      affairs of the Company; then, in each case, the Company shall cause to be mailed
      to the Holder at its last address as it shall appear upon the Company’s Warrant
      register, at least twenty (20) calendar days prior to the applicable record
      or
      effective date hereinafter specified, a notice stating (x) the date on which
      a
      record is to be taken for the purpose of such dividend, distribution,
      redemption, rights or warrants, or if a record is not to be taken, the date
      as
      of which the holders of the Common Stock of record to be entitled to such
      dividend, distribution, redemption, rights or warrants are to be determined,
      or
      (y) the date on which such Reorganization or Change in Control is expected
      to
      become effective or close, and the date as of which it is expected that holders
      of the Common Stock of record shall be entitled to exchange their shares of
      the
      Common Stock for securities, cash or other property deliverable upon
      consummation of such Reorganization or Change in Control; provided
      that
      the
      failure to mail such notice or any defect therein or in the mailing thereof
      shall not affect the validity of the corporate action required to be specified
      in such notice. The Holder is entitled to exercise this Warrant during the
      20-day period immediately following the date of such notice.

    
      

      Section
        4. Transfer
        Taxes.
        The
        Company will pay any documentary stamp taxes attributable to the initial
        issuance of Warrant Shares issuable upon the exercise of the Warrant;
provided
        that
        the
        Company shall not be required to pay any tax or taxes which may be payable
        in
        respect of any transfer involved in the issuance or delivery of any certificates
        for Warrant Shares in a name other than that of the registered Holder of
        this
        Warrant in respect of which such shares are issued, and in such case, the
        Company shall not be required to issue or deliver any certificate for Warrant
        Shares or any Warrant until the person requesting the same has paid to the
        Company the amount of such tax or has established to the Company’s reasonable
        satisfaction that such tax has been paid.

       

      
        
          
          

        

        
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      Section
        5. Mutilated
        or Missing Warrants.
        In case
        this Warrant shall be mutilated, lost, stolen, or destroyed, the Company
        shall
        issue in exchange and substitution of and upon cancellation of the mutilated
        Warrant, or in lieu of and substitution for the Warrant lost, stolen or
        destroyed, a new Warrant of like tenor and for the purchase of a like number
        of
        Warrant Shares, but only upon receipt of evidence reasonably satisfactory
        to the
        Company of such loss, theft or destruction of the Warrant, and with respect
        to a
        lost, stolen or destroyed Warrant, reasonable indemnity or bond with respect
        thereto, if requested by the Company.

      

      Section
        6. Fractional
        Shares.
        No
        fractional shares of Common Stock shall be issued in connection with any
        exercise hereunder, and in lieu of any such fractional shares the Company
        shall
        make a cash payment therefor to the Holder (or such other person or persons
        as
        directed by the Holder, subject to compliance with all applicable laws) based
        on
        the Fair Market Value of a share of Common Stock on the date of exercise
        of this
        Warrant.

      

      Section
        7. Compliance
        with Securities Act and Legends. The
        Holder, by acceptance hereof, agrees that it will not offer, sell or otherwise
        dispose of this Warrant, or any shares of Common Stock to be issued upon
        exercise hereof except under circumstances which will not result in a violation
        of the Securities Act of 1933, as amended, or the rules and regulations
        promulgated thereunder, as amended (the “Act”),
        or
        any state’s securities laws. All shares of Common Stock issued upon exercise of
        this Warrant (unless registered under the Act) shall be stamped or imprinted
        with a legend as follows:

    

    

    “THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE (i) NOT BEEN REGISTERED UNDER
      THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE,
      AND
      (ii) BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY. THESE SECURITIES MAY NOT BE
      SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
      THEREFROM UNDER SAID ACT OR LAWS.”

    
      

      Section
        8.  Rights
        as a Stockholder.
        Except
        as expressly provided in this Warrant, no Holder, as such, shall be entitled
        to
        vote or receive dividends or be deemed the holder of Common Stock or any
        other
        securities of the Company which may at any time be issuable on the exercise
        hereof for any purpose, nor shall anything contained herein be construed
        to
        confer upon the Holder, as such, any of the rights of a stockholder of the
        Company or any right to vote for the election of the directors or upon any
        matter submitted to stockholders at any meeting thereof, or to receive notice
        of
        meetings, or to receive dividends or subscription rights or otherwise, until
        this Warrant shall have been exercised and the Warrant Shares purchasable
        upon
        the exercise hereof shall have become deliverable, as provided
        herein.

      

      Section
        9.  The
        “Fair
        Market Value”
of
        a
        share of Common Stock as of a particular date (the “Valuation
        Date”)
        shall
        mean the following:

      

      (a) if
        the
        Common Stock is then listed on a national securities exchange, the average
        of
        the closing sale prices of one share of Common Stock on such exchange on the ten
        (10) consecutive trading days ending on the last trading day prior to the
        Valuation Date; provided
        that
        if such
        stock has not traded in the ten (10) consecutive trading days prior to the
        Valuation Date, the Fair Market Value shall be the average of the closing
        sale
        prices of one share of Common Stock in the most recent ten (10) trading days
        during which the Common Stock has traded prior to the Valuation
        Date;

       

      
        
          
          

        

        
          -7-

          
            

          

        

        
          
          

        

      

       

      (b) if
        the
        Common Stock is then included in The Nasdaq Stock Market, Inc., including
        without limitation the NASDAQ Capital
        Market
        or the NASDAQ National Market (“Nasdaq”),
        the
        average of the closing sale prices of one share of Common Stock on Nasdaq
        on the
        ten (10) consecutive trading days ending on the last trading day prior to
        the
        Valuation Date or, if no closing sale price is available for any of such
        ten
        (10) trading days, the closing sale price for such day shall be determined
        as
        the average of the high bid and the low ask price quoted on Nasdaq as of
        the end
        of such trading day; provided
        that
        if the
        Common Stock has not traded in the ten (10) consecutive trading days prior
        to
        the Valuation Date, the Fair Market Value shall be the average of the closing
        sale prices of one share of Common Stock in the most recent ten (10) trading
        days during which the Common Stock has traded prior to the Valuation
        Date;

      

      (c) If
        the
        Common Stock is then included in the Over-the-Counter Bulletin Board, the
        average of the closing sale prices of one share of Common Stock on the
        Over-the-Counter Bulletin Board over the ten (10) consecutive trading days
        ending on the last trading day prior to the Valuation Date or, if no closing
        sale price is available for any of such ten (10) trading days, the closing
        sale
        price for such day shall be determined as the average of the high bid and
        the
        low ask price quoted on the Over-the-Counter Bulletin Board as of the end
        of
        such trading day; provided
        that
        if the
        Common Stock has not traded in the ten (10) consecutive trading days prior
        to
        the Valuation Date, the Fair Market Value shall be the average of the closing
        sale prices of one share of Common Stock in the most recent ten (10) trading
        days during which the Common Stock has traded prior to the Valuation
        Date;

      

      (d) if
        the
        Common Stock is then included in the “pink sheets,” the average of the closing
        sale prices of one share of Common Stock on the “pink sheets” over the ten (10)
        consecutive trading days ending on the last trading day prior to the Valuation
        Date or, if no closing sale price is available for any of such ten (10) trading
        days, the closing sale price for such day shall be determined as the average
        of
        the high bid and the low ask price quoted on the “pink sheets” as of the end of
        such trading day; provided
        that
        if the
        Common Stock has not traded in the ten (10) consecutive trading days prior
        to
        the Valuation Date, the Fair Market Value shall be the average of the closing
        sale prices
        of one
        share of Common Stock in the most recent ten (10) trading days during which
        the
        Common Stock has traded prior to the Valuation Date; or

      

      (e) if
        the
        Common Stock is not then listed on a national securities exchange or quoted
        on
        Nasdaq or the Over-the-Counter Bulletin Board or the “pink sheets,” the Fair
        Market Value of one share of Common Stock as of the Valuation Date shall
        be
        determined in good faith by mutual agreement of the Board and the
        Holder;
        provided that
        if, in
        such case, the Board and the Holder are unable to agree as to the Fair Market
        Value of a share of Common Stock, such Fair Market Value shall be determined
        by
        an investment banker of national reputation selected by the Company and
        reasonably acceptable to the Holder, the fees and expenses of which shall
        be
        borne by the Company. The Board shall respond promptly in writing to a written
        inquiry by the Holder prior to the exercise hereunder as to the Fair Market
        Value of a share of Common Stock.

       

      
        
          
          

        

        
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      Section
        10.  Restrictions
        on Exercise Amount. Unless
        a
        Holder delivers to the Company irrevocable written notice prior to the date
        of
        issuance hereof or sixty-one (61) days prior to the effective date of such
        notice that this Section
        10
        shall
        not apply to such Holder, then, notwithstanding anything herein to the contrary,
        the Holder shall not be entitled to exercise this Warrant for a number of
        Warrant Shares to the extent that, upon such exercise, the number of shares
        of
        Common Stock then beneficially owned by such holder and its affiliates and
        any
        other persons or entities whose beneficial ownership of Common Stock would
        be
        aggregated with the Holder’s for purposes of Section 13(d) of the Securities
        Exchange Act of 1934, as amended (the “Exchange
        Act”),
        (including shares held by any “group” of which the holder is a member, but
        excluding shares beneficially owned by virtue of the ownership of securities
        or
        rights to acquire securities that have limitations on the right to convert,
        exercise or purchase similar to the limitation set forth herein) would exceed
        4.99% of the total number of shares of Common Stock of the Company then issued
        and outstanding immediately following such exercise. For purposes hereof,
        “group” has the meaning set forth in Section 13(d) of the Exchange Act and
        applicable regulations of the Securities and Exchange Commission (“SEC”),
        and
        the percentage held by the Holder shall be determined in a manner consistent
        with the provisions of Section 13(d) of the Exchange Act. Each delivery of
        a
        Notice of Exercise by a Holder will constitute a representation by such Holder
        that it has evaluated the limitation set forth in this Section
        10
        and
        determined, based on the most recent public filings by the Company with the
        SEC,
        that the issuance of the full number of Warrant Shares requested in such
        Notice
        of Exercise is permitted under this Section
        10.

      

      Section
        11.   Modification
        and Waiver.
        This
        Warrant and any provision hereof may be changed, waived, discharged or
        terminated only by an instrument in writing signed by the Company and the
        then
        current Holder, and such change, waiver, discharge or termination shall be
        binding on any future Holder.

      

      Section
        12.  Notices.
        Unless
        otherwise specifically provided herein, all communications under this Warrant
        shall be in writing and shall be deemed to have been duly given (a) on the
        date
        personally delivered to the party to whom notice is to be given, (b) on the
        day
        of transmission if sent by facsimile transmission to, in the case of the
        registered Holder, the facsimile number shown on the books of the Company
        and,
        in the case of the Company, the facsimile number set forth in Section
        9.3
        of the
        Subscription Agreement, if sent during normal business hours; if not, then
        at
        the commencement of the next Business Day, in each case provided that the
        sending party receives confirmation of the completion of such transmission,
        (c)
        on the Business Day after submitted for next day delivery to Federal Express
        or
        similar overnight courier which utilizes a written form of receipt, or (d)
        on
        the fifth (5th) day after mailing, if mailed to the party to whom notice
        is to
        be given, by first class mail, registered or certified, postage prepaid,
        and
        properly addressed, return receipt requested, to the registered Holder at
        its
        address as shown on the books of the Company or to the Company at the address
        indicated in Section
        9.3
        of the
        Subscription Agreement. Any party hereto may change its address for purposes
        of
        this Section
        12
        by
        giving the other party written notice of the new address in the manner set
        forth
        herein.

       

      Section
        13.  Descriptive
        Headings.
        The
        descriptive headings contained in this Warrant are inserted for convenience
        only
        and do not constitute a part of this Warrant.

       

      
        
          
          

        

        
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      Section
        14.  Governing
        Law.
        The
        validity, interpretation and performance of this Warrant shall be governed
        by,
        and construed in accordance with, the laws of the State of California applicable
        to contracts made and to be performed entirely within such State, regardless
        of
        the law that might be applied under principles of conflicts of law. The Company
        and, by accepting this Warrant, the Holder, each irrevocably submits to the
        exclusive jurisdiction of the state and federal courts located in California
        for
        the purpose of any suit, action, proceeding or judgment relating to or arising
        out of this Warrant and the transactions contemplated hereby. Service of
        process
        in connection with any such suit, action or proceeding may be served on each
        party hereto anywhere in the world by the same methods as are specified for
        the
        giving of notices under this Warrant. The Company and, by accepting this
        Warrant, the Holder, each irrevocably consents to the jurisdiction of any
        such
        court in any such suit, action or proceeding and to the laying of venue in
        such
        court. The Company and, by accepting this Warrant, the Holder, each irrevocably
        waives any objection to the laying of venue of any such suit, action or
        proceeding brought in such courts and irrevocably waives any claim that any
        such
        suit, action or proceeding brought in any such court has been brought in
        an
        inconvenient forum.

      

      Section
        15.  Acceptance.
        Receipt
        and execution of this Warrant by the Holder hereof shall constitute acceptance
        of and agreement to the foregoing terms and conditions.

      

      Section
        16.  Identity
        of Transfer Agent.
        The
        transfer agent for the Common Stock is American Stock Transfer and Trust
        Company. Upon the appointment of any subsequent transfer agent for the Common
        Stock or other shares of the Company’s capital stock issuable upon the exercise
        of the rights of purchase represented by this Warrant, the Company will mail
        to
        the Holder a statement setting forth the name and address of such transfer
        agent.

      

      Section
        17.  No
        Impairment of Rights.
        The
        Company will not, by amendment of its Certificate of Incorporation or through
        any other voluntary action, avoid or seek to avoid the observance or performance
        of any of the terms of this Warrant, but will at all times in good faith
        assist
        in the carrying out of all such terms and in the taking of all such action
        as
        may be necessary or appropriate in order to protect the rights of the holder
        of
        this Warrant against material impairment.

      

      Section
        18.  Transferability.
        Subject
        to compliance with applicable federal and state securities laws, this Warrant
        may be transferred by the Holder with respect to any or all of the Warrant
        Shares then purchasable hereunder. Upon surrender of this Warrant to the
        Company, together with a properly endorsed notice of transfer, for transfer
        of
        this Warrant in its entirety by the Holder, the Company shall issue a new
        warrant of the same denomination to the designated transferee. Upon surrender
        of
        this Warrant to the Company, together with a properly endorsed notice of
        transfer, by the Holder for transfer with respect to a portion of the Warrant
        Shares then purchasable hereunder, the Company shall issue a new warrant
        to the
        designated transferee, in such denomination as shall be requested by the
        Holder
        hereof, and shall issue to such Holder a new warrant covering the number
        of
        Warrant Shares in respect of which this Warrant shall not have been
        transferred.

      

      [REMAINDER
        OF PAGE INTENTIONALLY LEFT BLANK]

       

      
        
          
          

        

        
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      IN
        WITNESS WHEREOF,
        the
        Company has caused this Warrant to be executed on its behalf by one of its
        officers thereunto duly authorized.

       

      
        	 	 	 
	 	AEOLUS
                PHARMACEUTICALS, INC.
	 
 	 
 	 
 
	 	By:  	/s/
                Richard P. Burgoon, Jr.
	 	
                 

                Name:  

              	
                
                  

                

                 

                Richard P. Burgoon, Jr.

              
	 	Title:	
                
                  

                

                 

                Chief Executive Officer

              
	 	 	
                
 

      
        
          
          

        

        
          -11-

          
            

          

        

         

      

      APPENDIX
        A

      

      NOTICE
        OF EXERCISE

      

      To: AEOLUS
        PHARMACEUTICALS, INC.

      

      1. The
        undersigned hereby irrevocably elects to purchase ________ shares of Common
        Stock of Aeolus Pharmaceuticals, Inc. pursuant to the terms of the attached
        Warrant, and tenders herewith payment of the purchase price of such shares
        in
        full, by [cash,
        certified check or wire transfer]
        [select the applicable method of payment].

      

      2. Please
        issue a certificate or certificates representing said shares in the name
        of the
        undersigned or in such other name or names as are specified below:

      

      ______________________________

      ______________________________

      (Name)

      

      ______________________________

      (Address)

      

      _________________________
        (Signature)

      __________________(Date)

      

      3. Please
        issue a new Warrant of equivalent form and tenor for the unexercised portion
        of
        the attached Warrant in the name of the undersigned or in such other name
        as is
        specified below:

      

       
        ____________________________________

      

      Date: 
        ________________________________

       

      (Warrantholder)
         ________________________

      

      Name:
        (Print)  __________________________

      

      By:
        __________________________________Exhibit
        10.4

      

      NEITHER
        THIS WARRANT NOR THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER
        THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE.
        SUCH SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED EXCEPT
        (1) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OR
        (2) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
        ACT, AND, IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS
        OF THE
        STATES AND OTHER JURISDICTIONS, AND IN THE CASE OF A TRANSACTION EXEMPT FROM
        REGISTRATION, UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY
        SATISFACTORY TO IT THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER
        THE
        SECURITIES ACT AND SUCH OTHER APPLICABLE LAWS.

      

      AEOLUS
        PHARMACEUTICALS, INC.

      

      WARRANT
        TO PURCHASE FOUR MILLION SHARES OF COMMON STOCK

       

      
        	June 5, 2006	
                 Warrant
                  No.
                  CO-91

              

      

       

      For
        value
        received, Aeolus Pharmaceuticals, Inc., a Delaware corporation (the
“Company”),
        hereby certifies that EFFICACY
        BIOTECH MASTER FUND LTD.,
        or
        its registered
        transferees, successors or assigns (each person or entity holding all or
        part of
        this Warrant being referred to as a “Holder”),
        is
        the registered holder of a warrant (the “Warrant”)
        to
        subscribe for and purchase Four
        Million
        (4,000,000)
        shares
        (as adjusted pursuant to Section
        3
        hereof,
        the “Warrant
        Shares”)
        of the
        fully paid and nonassessable common stock, par value $0.01 per share, of
        the
        Company (the “Common
        Stock”),
        at a
        purchase price per share initially equal to Fifty Cents ($0.50) (the
        “Warrant
        Price”),
        on or
        before 5:00 P.M., Eastern Time, on June 5, 2007 (the “Expiration
        Date”),
        subject to the provisions and upon the terms and conditions hereinafter set
        forth. As used in this Warrant, the term “Business
        Day”
means
        any day other than a Saturday or Sunday on which commercial banks located
        in New
        York, New York are open for the general transaction of business.

       

      This
        Warrant is one of a number of Warrants (collectively, the “Warrants”)
        being
        issued pursuant that certain Subscription Agreement dated as of June 5, 2006,
        by
        and among the Company and the Investors party thereto (the “Subscription
        Agreement”).

       

      Section
        1.  Method
        of Exercise; Payment; Issuance of New Warrant.

      

      (a) Subject
        to the provisions hereof, the Holder may exercise this Warrant, in whole
        or in
        part and from time to time, by the surrender of this Warrant (with the Notice
        of
        Exercise attached hereto as Appendix
        A
        duly
        executed) at the principal office of the Company, or such other office or
        agency
        of the Company as it may reasonably designate by written notice to the Holder,
        during normal business hours on any Business Day, and the payment by the
        Holder
        by cash, certified check payable to the Company or wire transfer of immediately
        available funds to an account designated to the exercising Holder by the
        Company
        of an amount equal to the then applicable Warrant Price multiplied by the
        number
        of Warrant Shares then being purchased. On the date on which the Holder shall
        have satisfied in full the Holder’s obligations set forth herein regarding an
        exercise of this Warrant (provided such date is no later than the Expiration
        Date), the Holder (or such other person or persons as directed by the Holder,
        subject to compliance with applicable securities laws) shall be treated for
        all
        purposes as the holder of record of such Warrant Shares as of the close of
        business on such date.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (b) In
        the
        event of any exercise of the rights represented by this Warrant, certificates
        for the whole number of shares of Common Stock so purchased shall be delivered
        to the Holder (or such other person or persons as directed by the Holder,
        subject to compliance with applicable securities laws) as promptly as is
        reasonably practicable (but not later than three
        (3) Business
        Days)
        after
        such exercise at the Company’s expense, and, unless this Warrant has been fully
        exercised, a new Warrant representing the whole number of Warrant Shares,
        if
        any, with respect to which this Warrant shall not then have been exercised
        shall
        also be issued to the Holder as soon as reasonably practicable thereafter
        (but
        not later than three
        (3) Business
        Days)
        after
        such exercise.

      

      (c) Certificates
        for Warrant Shares purchased hereunder shall be transmitted by the Company
        or
        its transfer agent to the Holder by crediting the account of the Holder’s prime
        broker with the Depository Trust Company through its Deposit Withdrawal Agent
        Commission (“DWAC”)
        system
        if the Company is a participant in such system, and otherwise by physical
        delivery to the address specified by the Holder in the Notice of Exercise
        within
        three (3) Business Days from the delivery to the Company of each of the Notice
        of Exercise, payment of the Warrant Price multiplied by the number of Warrant
        Shares being purchased (the “Purchase
        Price”)
        and
        surrender of this Warrant (“Warrant
        Share Delivery Date”).
        This
        Warrant shall be deemed to have been exercised on the latest date on which
        the
        Notice of Exercise, this Warrant or the applicable Purchase Price is received
        by
        the Company (the latest date being the “Receipt
        Date”).
        The
        Warrant Shares shall be deemed to have been issued, and Holder or any other
        person so designated to be named therein shall be deemed to have become a
        holder
        of record of such shares for all purposes, as of the later of the Receipt
        Date
        and the date that all taxes required to be paid by the Holder, if any, prior
        to
        the issuance of such Warrant Shares have been paid. 

      

      (d) If
        this
        Warrant shall have been exercised in part, the Company shall at the time
        of
        delivery of the certificate or certificates representing Warrant Shares,
        deliver
        to Holder a new Warrant evidencing the rights of Holder to purchase the
        unpurchased Warrant Shares called for by this Warrant, which new Warrant
        shall
        in all other respects be identical with this Warrant.

      

      (e) If
        the
        Company or its transfer agent fails to transmit to the Holder a certificate
        or
        certificates representing the Warrant Shares pursuant to Section
        1(c)
        hereof
        by the Warrant Share Delivery Date, then the Holder will have the right to
        rescind such exercise by delivering a written notice of rescission to the
        Company within three (3) Business Days of the Warrant Share Delivery Date.
        The
        Company shall be liable to the Holder for liquidated damages in an amount
        equal
        to 1.5% of the aggregate price of the Warrant Shares, as adjusted pursuant
        to
Section
        3
        hereof,
        evidenced by such certificate for each thirty (30)-day period (or portion
        thereof) beyond such three (3)-Business Day period that the certificates
        have
        not been so delivered.

      

      
        
          
          

        

        
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      (f) If
        any
        portion of this Warrant remains unexercised as of the Expiration Date and
        the
        Fair Market Value (as
        defined in Section
        9
        hereof)
of
        one
        share of Common Stock as of the Expiration Date is greater than the applicable
        Warrant Price as of the Expiration Date, then this Warrant shall be deemed
        to
        have been automatically exercised as of immediately prior to the close of
        business on the Expiration Date (or in the event that the Expiration Date
        is not
        a Business Day, the immediately preceding Business Day) (the “Automatic
        Exercise Date”);
        provided
        that
        the
        Holder submits to the Company no later than ten (10) Business Days following
        the
        Automatic Exercise Date payment (the “Payment”)
        by
        cash, certified check payable to the Company or wire transfer of immediately
        available funds to an account designated to the exercising Holder by the
        Company
        of an amount equal to the Warrant Price applicable as of the Automatic Exercise
        Date multiplied by the number of Warrant Shares then being purchased pursuant
        to
        this Section
        1(f).
        The
        Holder (or such other person or persons as directed by the Holder, subject
        to
        compliance with applicable securities laws) shall be treated for all purposes
        as
        the holder of record of such Warrant Shares as of the close of business on
        the
        date the Payment is received by the Company. This Warrant shall be deemed
        to be
        surrendered to the Company on the Automatic Exercise Date by virtue of this
        Section
        1(f)
        without
        any action by the Holder; provided
        that
        the
        Holder shall be required to surrender this Warrant to the Company with the
        Payment. As soon as is reasonably practicable after the Payment and Warrant
        are
        received by the Company pursuant to this Section
        1(f),
        the
        Company, at its expense, shall issue and deliver to the Holder (or such other
        person or persons as directed by the Holder, subject to compliance with
        applicable securities laws) a certificate or certificates for the number
        of
        Warrant Shares issuable upon such exercise in accordance with this Section
        1(f).

      

      Section
        2.  Reservation
        of Shares; Stock Fully Paid; Listing.
        The
        Company shall keep reserved a sufficient number of shares of the authorized
        and
        unissued shares of Common Stock to provide for the exercise of the rights
        of
        purchase represented by this Warrant in compliance with its terms. All Warrant
        Shares issued upon exercise of this Warrant shall be, at the time of delivery
        of
        the certificates for such Warrant Shares upon payment in full of the Warrant
        Price therefor in accordance with the terms of this Warrant, duly authorized,
        validly issued, fully paid and non-assessable shares of Common Stock. The
        Company shall, prior to the Expiration Date when the shares of Common Stock
        issuable upon the exercise of this Warrant are authorized for listing or
        quotation on a national securities exchange, a Nasdaq quotation system, the
        Over-the-Counter Bulletin Board or the “pink sheets”, as the case may be, use
        commercially reasonable efforts to keep the shares of Common Stock issuable
        upon
        the exercise of this Warrant authorized for listing or quotation on such
        national securities exchange, Nasdaq quotation system, the Over-the-Counter
        Bulletin Board or the “pink sheets”, as the case may be.

      

      Section
        3.  Adjustments
        and Distributions.
        The
        number and kind of securities purchasable upon the exercise of this Warrant
        and
        the Warrant Price shall be subject to adjustment from time to time upon the
        occurrence of certain events, as follows:

      

      (a) If
        the
        Company shall at any time or from time to time while this Warrant is
        outstanding, pay a dividend or make a distribution on its Common Stock in
        shares
        of Common Stock, subdivide its outstanding shares of Common Stock into a
        greater
        number of shares or combine its outstanding shares of Common Stock into a
        smaller number of shares, then the number of Warrant Shares purchasable upon
        exercise of this Warrant and the Warrant Price in effect immediately prior
        to
        the date upon which such change shall become effective shall be proportionally
        adjusted by the Company so that the Holder thereafter exercising this Warrant
        shall be entitled to receive the number of shares of Common Stock or other
        capital stock which the Holder would have received if this Warrant had been
        exercised immediately prior to such event upon payment of a Warrant Price
        that
        has been proportionally adjusted to reflect such event. Such adjustments
        shall
        be made successively whenever any event listed above shall occur.

      

      
        
          
          

        

        
          -3-

          
            

          

        

        
          
          

        

      

       

      (b) If
        any
        recapitalization, reclassification or reorganization of the capital stock
        of the
        Company (other than a change in par value or a subdivision or combination
        as
        provided for in Section
        3(a)
        above)
        shall be effected in such a manner (including, without limitation, in connection
        with a consolidation or merger in which the Company is the continuing
        corporation), that holders of Common Stock shall be entitled to receive stock,
        securities, or other assets or property (a “Reorganization”),
        then,
        as a condition of such Reorganization, lawful and adequate provisions shall
        be
        made by the Company whereby the Holder hereof shall thereafter have the right
        to
        purchase and receive (in lieu of the shares of the Common Stock of the Company
        immediately theretofore purchasable and receivable upon the exercise of the
        rights represented hereby) such shares of stock, securities or other assets
        or
        property as may be issued or payable in such Reorganization with respect
        to or
        in exchange for a number of outstanding shares of such Common Stock equal
        to the
        number of shares of such Common Stock purchasable and receivable immediately
        prior to such Reorganization upon the exercise of this Warrant. In the event
        of
        any Reorganization, appropriate provision shall be made by the Company with
        respect to the rights and interests of the Holder of this Warrant to the
        end
        that the provisions hereof (including, without limitation, provisions for
        adjustments of the Warrant Price and of the number of Warrant Shares) shall
        thereafter be applicable, in relation to any shares of stock, securities
        or
        assets thereafter deliverable upon the exercise hereof. The provisions of
        this
Section
        3(b)
        shall
        similarly apply to successive Reorganizations.

      

      (c) If
        any
        consolidation or merger of the Company with another entity in which the Company
        is not the survivor, or sale, transfer or other disposition of all or
        substantially all of the Company’s assets to another entity shall be effected (a
“Change
        in Control”),
        then,
        as a condition of such consolidation, merger, sale, transfer or other
        disposition, lawful and adequate provision shall be made whereby the Holder
        shall thereafter have the right to purchase and receive upon the basis and
        upon
        the terms and conditions herein specified and in lieu of the Warrant Shares
        immediately theretofore issuable upon exercise of this Warrant, such shares
        of
        stock, securities or assets as would have been issuable or payable with respect
        to or in exchange for a number of Warrant Shares equal to the number of Warrant
        Shares immediately theretofore issuable upon exercise of this Warrant, had
        such
        consolidation, merger, sale, transfer or other disposition not taken place,
        and
        in any such case appropriate provision shall be made with respect to the
        rights
        and interests of the Holder to the end that the provisions hereof (including,
        without limitation, provision for adjustment of the Warrant Price and of
        the
        number of Warrant Shares) shall thereafter be applicable, as nearly equivalent
        as may be practicable, in relation to any shares of stock, securities or
        properties thereafter deliverable upon the exercise thereof. The Company
        shall
        not effect any such consolidation, merger, sale, transfer or other disposition
        unless prior to or simultaneously with the consummation thereof the successor
        entity (if other than the Company) resulting from such consolidation or merger,
        or the entity purchasing or otherwise acquiring such assets or other appropriate
        entity shall assume the obligation to deliver to the Holder such shares of
        stock, securities or assets as, in accordance with the foregoing provisions,
        such Holder may be entitled to purchase, and the other obligations under
        this
        Warrant. The provisions of this Section
        3(c)
        shall
        similarly apply to successive consolidations, mergers, sales, transfers or
        other
        dispositions.

      

      
        
          
          

        

        
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      (d) In
        case
        the Company shall fix a payment date for the making of a distribution to
        all
        holders of Common Stock of evidences of indebtedness or assets (other than
        dividends or distributions referred to in Section
        3(a)
        hereof),
        or subscription rights or warrants, the Warrant Price to be in effect after
        such
        payment date shall be determined by multiplying the Warrant Price in effect
        immediately prior to such payment date by a fraction, the numerator of which
        shall be the total number of shares of Common Stock outstanding multiplied
        by
        the Fair Market Value (as defined in Section
        9
        hereof)
        per share of Common Stock immediately prior to such payment date, less the
        fair
        market value (as determined by the Company’s Board of Directors (the
“Board”)
        in good
        faith) of said assets or evidences of indebtedness so distributed, or of
        such
        subscription rights or warrants, and the denominator of which shall be the
        total
        number of shares of Common Stock outstanding multiplied by such Fair Market
        Value per share of Common Stock immediately prior to such payment date. Such
        adjustment shall be made successively whenever such a payment date is fixed.
        In
        the event that:

      

      (i) any
        dividend or distribution for which this Section
        3(d)
        would
        require an adjustment is not so paid or made, the Warrant Price shall be
        adjusted to be the Warrant Price which would then be in effect if such dividend
        or distribution had not been declared; or

      

      (ii) the
        Company implements a new shareholder rights plan, such rights plan shall
        provide
        that upon exercise of this Warrant the Holder will receive, in addition to
        the
        Common Stock issuable upon such exercise, the rights issued under such rights
        plan (as if the Holder had exercised this Warrant prior to implementing the
        rights plan and notwithstanding the occurrence of an event causing such rights
        to separate from the Common Stock at or prior to the time of exercise). Any
        distribution of rights or warrants pursuant to a shareholder rights plan
        complying with the requirements set forth in the immediately preceding sentence
        of this paragraph shall not constitute a distribution of rights or warrants
        for
        the purposes of this Section
        3(d).

      

      (e) An
        adjustment to the Warrant Price under the terms hereof shall become effective
        immediately after the payment date, in the case of each dividend or
        distribution, and immediately after the effective date of each other event
        which
        requires an adjustment. No adjustment to the Warrant Price shall be made
        in an
        amount less than $0.01, but any such lesser amount shall be carried forward
        and
        shall be given effect in the next Warrant Price adjustment, if any.

      

      (f) In
        the
        event that, as a result of an adjustment made pursuant to this Section
        3,
        the
        Holder shall become entitled to receive any shares of capital stock of the
        Company other than shares of Common Stock, the number of such other shares
        so
        receivable upon exercise of this Warrant shall be subject thereafter to
        adjustment from time to time in a manner and on terms as nearly equivalent
        as
        practicable to the provisions with respect to the Warrant Shares contained
        in
        this Warrant.

       

      
        
          
          

        

        
          -5-

          
            

          

        

        
          
          

        

      

       

      (g) With
        each
        adjustment pursuant to this Section
        3,
        the
        Company shall deliver a certificate signed by its chief financial or executive
        officer setting forth, in reasonable detail, the event requiring the adjustment,
        the amount of the adjustment, the method by which such adjustment was
        calculated, and the Warrant Price and the number of Warrant Shares purchasable
        hereunder after giving effect to such adjustment, which shall be mailed by
        first
        class mail, postage prepaid to the Holder. 

      

      (h) If
        holders of Common Stock are given any choice as to the securities, cash or
        property to be received in a Reorganization or a Change in Control, then
        the
        Holder shall be given the same choice as to the type and form of consideration
        it receives upon any exercise of this Warrant following such Reorganization
        or
        Change in Control. 

      

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

      

      (j) If:
        (A)
        the Company shall declare a dividend (or any other distribution) on the Common
        Stock; (B) the Company shall declare a special nonrecurring cash dividend
        on or
        a redemption of the Common Stock; (C) the Company shall authorize the granting
        to all holders of the Common Stock rights or warrants to subscribe for or
        purchase any shares of capital stock of any class or of any rights; (D) the
        approval of any stockholders of the Company shall be required in connection
        with
        any Reorganization or Change in Control whereby the Common Stock is converted
        into other securities, cash or property; (E) the Company shall authorize
        the voluntary or involuntary dissolution, liquidation or winding up of the
        affairs of the Company; then, in each case, the Company shall cause to be
        mailed
        to the Holder at its last address as it shall appear upon the Company’s Warrant
        register, at least twenty (20) calendar days prior to the applicable record
        or
        effective date hereinafter specified, a notice stating (x) the date on which
        a
        record is to be taken for the purpose of such dividend, distribution,
        redemption, rights or warrants, or if a record is not to be taken, the date
        as
        of which the holders of the Common Stock of record to be entitled to such
        dividend, distribution, redemption, rights or warrants are to be determined,
        or
        (y) the date on which such Reorganization or Change in Control is expected
        to
        become effective or close, and the date as of which it is expected that holders
        of the Common Stock of record shall be entitled to exchange their shares
        of the
        Common Stock for securities, cash or other property deliverable upon
        consummation of such Reorganization or Change in Control; provided
        that
        the
        failure to mail such notice or any defect therein or in the mailing thereof
        shall not affect the validity of the corporate action required to be specified
        in such notice. The Holder is entitled to exercise this Warrant during the
        20-day period immediately following the date of such notice.

      

      Section
        4.  Transfer
        Taxes.
        The
        Company will pay any documentary stamp taxes attributable to the initial
        issuance of Warrant Shares issuable upon the exercise of the Warrant;
provided
        that
        the
        Company shall not be required to pay any tax or taxes which may be payable
        in
        respect of any transfer involved in the issuance or delivery of any certificates
        for Warrant Shares in a name other than that of the registered Holder of
        this
        Warrant in respect of which such shares are issued, and in such case, the
        Company shall not be required to issue or deliver any certificate for Warrant
        Shares or any Warrant until the person requesting the same has paid to the
        Company the amount of such tax or has established to the Company’s reasonable
        satisfaction that such tax has been paid.

      

      
        
          
          

        

        
          -6-

          
            

          

        

        
          
          

        

      

       

      Section
        5. Mutilated
        or Missing Warrants.
        In case
        this Warrant shall be mutilated, lost, stolen, or destroyed, the Company
        shall
        issue in exchange and substitution of and upon cancellation of the mutilated
        Warrant, or in lieu of and substitution for the Warrant lost, stolen or
        destroyed, a new Warrant of like tenor and for the purchase of a like number
        of
        Warrant Shares, but only upon receipt of evidence reasonably satisfactory
        to the
        Company of such loss, theft or destruction of the Warrant, and with respect
        to a
        lost, stolen or destroyed Warrant, reasonable indemnity or bond with respect
        thereto, if requested by the Company.

      

      Section
        6. Fractional
        Shares.
        No
        fractional shares of Common Stock shall be issued in connection with any
        exercise hereunder, and in lieu of any such fractional shares the Company
        shall
        make a cash payment therefor to the Holder (or such other person or persons
        as
        directed by the Holder, subject to compliance with all applicable laws) based
        on
        the Fair Market Value of a share of Common Stock on the date of exercise
        of this
        Warrant.

      

      Section
        7.  Compliance
        with Securities Act and Legends. The
        Holder, by acceptance hereof, agrees that it will not offer, sell or otherwise
        dispose of this Warrant, or any shares of Common Stock to be issued upon
        exercise hereof except under circumstances which will not result in a violation
        of the Securities Act of 1933, as amended, or the rules and regulations
        promulgated thereunder, as amended (the “Act”),
        or
        any state’s securities laws. All shares of Common Stock issued upon exercise of
        this Warrant (unless registered under the Act) shall be stamped or imprinted
        with a legend as follows:

      

      “THE
        SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE (i) NOT BEEN REGISTERED UNDER
        THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE,
        AND
        (ii) BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY. THESE SECURITIES MAY NOT
        BE
        SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
        THEREFROM UNDER SAID ACT OR LAWS.”

       

      Section
        8. Rights
        as a Stockholder.
        Except
        as expressly provided in this Warrant, no Holder, as such, shall be entitled
        to
        vote or receive dividends or be deemed the holder of Common Stock or any
        other
        securities of the Company which may at any time be issuable on the exercise
        hereof for any purpose, nor shall anything contained herein be construed
        to
        confer upon the Holder, as such, any of the rights of a stockholder of the
        Company or any right to vote for the election of the directors or upon any
        matter submitted to stockholders at any meeting thereof, or to receive notice
        of
        meetings, or to receive dividends or subscription rights or otherwise, until
        this Warrant shall have been exercised and the Warrant Shares purchasable
        upon
        the exercise hereof shall have become deliverable, as provided
        herein.

      

      Section
        9. The
        “Fair
        Market Value”
of
        a
        share of Common Stock as of a particular date (the “Valuation
        Date”)
        shall
        mean the following:

      

      (a) if
        the
        Common Stock is then listed on a national securities exchange, the average
        of
        the closing sale prices of one share of Common Stock on such exchange on
        the ten
        (10) consecutive trading days ending on the last trading day prior to the
        Valuation Date; provided
        that
        if such
        stock has not traded in the ten (10) consecutive trading days prior to the
        Valuation Date, the Fair Market Value shall be the average of the closing
        sale
        prices of one share of Common Stock in the most recent ten (10) trading days
        during which the Common Stock has traded prior to the Valuation
        Date;

      

      
        
          
          

        

        
          -7-

          
            

          

        

        
          
          

        

      

       

      (b) if
        the
        Common Stock is then included in The Nasdaq Stock Market, Inc., including
        without limitation the NASDAQ Capital
        Market
        or the NASDAQ National Market (“Nasdaq”),
        the
        average of the closing sale prices of one share of Common Stock on Nasdaq
        on the
        ten (10) consecutive trading days ending on the last trading day prior to
        the
        Valuation Date or, if no closing sale price is available for any of such
        ten
        (10) trading days, the closing sale price for such day shall be determined
        as
        the average of the high bid and the low ask price quoted on Nasdaq as of
        the end
        of such trading day; provided
        that
        if the
        Common Stock has not traded in the ten (10) consecutive trading days prior
        to
        the Valuation Date, the Fair Market Value shall be the average of the closing
        sale prices of one share of Common Stock in the most recent ten (10) trading
        days during which the Common Stock has traded prior to the Valuation
        Date;

      

      (c) If
        the
        Common Stock is then included in the Over-the-Counter Bulletin Board, the
        average of the closing sale prices of one share of Common Stock on the
        Over-the-Counter Bulletin Board over the ten (10) consecutive trading days
        ending on the last trading day prior to the Valuation Date or, if no closing
        sale price is available for any of such ten (10) trading days, the closing
        sale
        price for such day shall be determined as the average of the high bid and
        the
        low ask price quoted on the Over-the-Counter Bulletin Board as of the end
        of
        such trading day; provided
        that
        if the
        Common Stock has not traded in the ten (10) consecutive trading days prior
        to
        the Valuation Date, the Fair Market Value shall be the average of the closing
        sale prices of one share of Common Stock in the most recent ten (10) trading
        days during which the Common Stock has traded prior to the Valuation
        Date;

      

      (d) if
        the
        Common Stock is then included in the “pink sheets,” the average of the closing
        sale prices of one share of Common Stock on the “pink sheets” over the ten (10)
        consecutive trading days ending on the last trading day prior to the Valuation
        Date or, if no closing sale price is available for any of such ten (10) trading
        days, the closing sale price for such day shall be determined as the average
        of
        the high bid and the low ask price quoted on the “pink sheets” as of the end of
        such trading day; provided
        that
        if the
        Common Stock has not traded in the ten (10) consecutive trading days prior
        to
        the Valuation Date, the Fair Market Value shall be the average of the closing
        sale prices
        of one
        share of Common Stock in the most recent ten (10) trading days during which
        the
        Common Stock has traded prior to the Valuation Date; or

      

      (e) if
        the
        Common Stock is not then listed on a national securities exchange or quoted
        on
        Nasdaq or the Over-the-Counter Bulletin Board or the “pink sheets,” the Fair
        Market Value of one share of Common Stock as of the Valuation Date shall
        be
        determined in good faith by mutual agreement of the Board and the
        Holder;
        provided that
        if, in
        such case, the Board and the Holder are unable to agree as to the Fair Market
        Value of a share of Common Stock, such Fair Market Value shall be determined
        by
        an investment banker of national reputation selected by the Company and
        reasonably acceptable to the Holder, the fees and expenses of which shall
        be
        borne by the Company. The Board shall respond promptly in writing to a written
        inquiry by the Holder prior to the exercise hereunder as to the Fair Market
        Value of a share of Common Stock.

      

      
        
          
          

        

        
          -8-

          
            

          

        

        
          
          

        

      

       

      Section
        10. Restrictions
        on Exercise Amount. Unless
        a
        Holder delivers to the Company irrevocable written notice prior to the date
        of
        issuance hereof or sixty-one (61) days prior to the effective date of such
        notice that this Section
        10
        shall
        not apply to such Holder, then, notwithstanding anything herein to the contrary,
        the Holder shall not be entitled to exercise this Warrant for a number of
        Warrant Shares to the extent that, upon such exercise, the number of shares
        of
        Common Stock then beneficially owned by such holder and its affiliates and
        any
        other persons or entities whose beneficial ownership of Common Stock would
        be
        aggregated with the Holder’s for purposes of Section 13(d) of the Securities
        Exchange Act of 1934, as amended (the “Exchange
        Act”),
        (including shares held by any “group” of which the holder is a member, but
        excluding shares beneficially owned by virtue of the ownership of securities
        or
        rights to acquire securities that have limitations on the right to convert,
        exercise or purchase similar to the limitation set forth herein) would exceed
        4.99% of the total number of shares of Common Stock of the Company then issued
        and outstanding immediately following such exercise. For purposes hereof,
        “group” has the meaning set forth in Section 13(d) of the Exchange Act and
        applicable regulations of the Securities and Exchange Commission (“SEC”),
        and
        the percentage held by the Holder shall be determined in a manner consistent
        with the provisions of Section 13(d) of the Exchange Act. Each delivery of
        a
        Notice of Exercise by a Holder will constitute a representation by such Holder
        that it has evaluated the limitation set forth in this Section
        10
        and
        determined, based on the most recent public filings by the Company with the
        SEC,
        that the issuance of the full number of Warrant Shares requested in such
        Notice
        of Exercise is permitted under this Section
        10.

      

      Section
        11. Modification
        and Waiver.
        This
        Warrant and any provision hereof may be changed, waived, discharged or
        terminated only by an instrument in writing signed by the Company and the
        then
        current Holder, and such change, waiver, discharge or termination shall be
        binding on any future Holder.

      

      Section
        12.  Notices.
        Unless
        otherwise specifically provided herein, all communications under this Warrant
        shall be in writing and shall be deemed to have been duly given (a) on the
        date
        personally delivered to the party to whom notice is to be given, (b) on the
        day
        of transmission if sent by facsimile transmission to, in the case of the
        registered Holder, the facsimile number shown on the books of the Company
        and,
        in the case of the Company, the facsimile number set forth in Section
        9.3
        of the
        Subscription Agreement, if sent during normal business hours; if not, then
        at
        the commencement of the next Business Day, in each case provided that the
        sending party receives confirmation of the completion of such transmission,
        (c)
        on the Business Day after submitted for next day delivery to Federal Express
        or
        similar overnight courier which utilizes a written form of receipt, or (d)
        on
        the fifth (5th) day after mailing, if mailed to the party to whom notice
        is to
        be given, by first class mail, registered or certified, postage prepaid,
        and
        properly addressed, return receipt requested, to the registered Holder at
        its
        address as shown on the books of the Company or to the Company at the address
        indicated in Section
        9.3
        of the
        Subscription Agreement. Any party hereto may change its address for purposes
        of
        this Section
        12
        by
        giving the other party written notice of the new address in the manner set
        forth
        herein.

       

      Section
        13.  Descriptive
        Headings.
        The
        descriptive headings contained in this Warrant are inserted for convenience
        only
        and do not constitute a part of this Warrant.

      

      
        
          
          

        

        
          -9-

          
            

          

        

        
          
          

        

      

       

      Section
        14.  Governing
        Law.
        The
        validity, interpretation and performance of this Warrant shall be governed
        by,
        and construed in accordance with, the laws of the State of California applicable
        to contracts made and to be performed entirely within such State, regardless
        of
        the law that might be applied under principles of conflicts of law. The Company
        and, by accepting this Warrant, the Holder, each irrevocably submits to the
        exclusive jurisdiction of the state and federal courts located in California
        for
        the purpose of any suit, action, proceeding or judgment relating to or arising
        out of this Warrant and the transactions contemplated hereby. Service of
        process
        in connection with any such suit, action or proceeding may be served on each
        party hereto anywhere in the world by the same methods as are specified for
        the
        giving of notices under this Warrant. The Company and, by accepting this
        Warrant, the Holder, each irrevocably consents to the jurisdiction of any
        such
        court in any such suit, action or proceeding and to the laying of venue in
        such
        court. The Company and, by accepting this Warrant, the Holder, each irrevocably
        waives any objection to the laying of venue of any such suit, action or
        proceeding brought in such courts and irrevocably waives any claim that any
        such
        suit, action or proceeding brought in any such court has been brought in
        an
        inconvenient forum.

      

      Section
        15.  Acceptance.
        Receipt
        and execution of this Warrant by the Holder hereof shall constitute acceptance
        of and agreement to the foregoing terms and conditions.

      

      Section
        16.  Identity
        of Transfer Agent.
        The
        transfer agent for the Common Stock is American Stock Transfer and Trust
        Company. Upon the appointment of any subsequent transfer agent for the Common
        Stock or other shares of the Company’s capital stock issuable upon the exercise
        of the rights of purchase represented by this Warrant, the Company will mail
        to
        the Holder a statement setting forth the name and address of such transfer
        agent.

      

      Section
        17.  No
        Impairment of Rights.
        The
        Company will not, by amendment of its Certificate of Incorporation or through
        any other voluntary action, avoid or seek to avoid the observance or performance
        of any of the terms of this Warrant, but will at all times in good faith
        assist
        in the carrying out of all such terms and in the taking of all such action
        as
        may be necessary or appropriate in order to protect the rights of the holder
        of
        this Warrant against material impairment.

      

      Section
        18.  Transferability.
        Subject
        to compliance with applicable federal and state securities laws, this Warrant
        may be transferred by the Holder with respect to any or all of the Warrant
        Shares then purchasable hereunder. Upon surrender of this Warrant to the
        Company, together with a properly endorsed notice of transfer, for transfer
        of
        this Warrant in its entirety by the Holder, the Company shall issue a new
        warrant of the same denomination to the designated transferee. Upon surrender
        of
        this Warrant to the Company, together with a properly endorsed notice of
        transfer, by the Holder for transfer with respect to a portion of the Warrant
        Shares then purchasable hereunder, the Company shall issue a new warrant
        to the
        designated transferee, in such denomination as shall be requested by the
        Holder
        hereof, and shall issue to such Holder a new warrant covering the number
        of
        Warrant Shares in respect of which this Warrant shall not have been
        transferred.

      

      [REMAINDER
        OF PAGE INTENTIONALLY LEFT BLANK]

      
        
          
          

        

        
          -10-

          
            

          

        

        
          
          

        

      

      

      IN
        WITNESS WHEREOF,
        the
        Company has caused this Warrant to be executed on its behalf by one of its
        officers thereunto duly authorized.

       

      
        	 	AEOLUS
                PHARMACEUTICALS, INC.
	 	 	 
	 	 	 
	 	By: 	/s/ Richard
                P. Burgoon, Jr.
	 	 	 
	 	Name:	 Richard
                P. Burggon, Jr.
	 	 	 
	 	Title: 	Chief
                Executive Officer

      
        
          
          

        

        
          -11-

          
            

          

        

        
          
          

          
            

          

        

      

      

        APPENDIX
          A

        

        NOTICE
          OF EXERCISE

        

        

        

        To: AEOLUS
          PHARMACEUTICALS, INC.

        

        1. The
          undersigned hereby irrevocably elects to purchase ________ shares of Common
          Stock of Aeolus Pharmaceuticals, Inc. pursuant to the terms of the attached
          Warrant, and tenders herewith payment of the purchase price of such shares
          in
          full, by [cash,
          certified check or wire transfer]
          [select the applicable method of payment].

        

        2. Please
          issue a certificate or certificates representing said shares in the name
          of the
          undersigned or in such other name or names as are specified below:

        

        ______________________________

        ______________________________

                (Name)

        

        ______________________________

                (Address)

        

        _________________________
          (Signature)

        __________________(Date)

        

        3. Please
          issue a new Warrant of equivalent form and tenor for the unexercised portion
          of
          the attached Warrant in the name of the undersigned or in such other name
          as is
          specified below:

        

        _______________________________________

        

        Date:
          __________________________________

        

        (Warrantholder)
          __________________________

        

        Name:
          (Print) ____________________________

        

        By:____________________________________

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