SECURITIES PURCHASE AGREEMENT

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

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

B.   Each Buyer, severally and not jointly, wishes to purchase, and the Company wishes to sell, upon the terms and conditions stated in this Agreement, (i) that aggregate number of shares (collectively, the “ Shares ”) of the Common Stock, par value $0.01 per share, of the Company (the “ Common Stock ”) set forth opposite such Buyer’s name in column (3) on the Schedule of Buyers attached hereto (the “ Schedule of Buyers ”)  and (ii) warrants, in substantially the form attached hereto as Exhibit A (the “ Warrants ”), to acquire up to that number of additional shares of Common Stock set forth opposite such Buyer’s name in column (4) of the Schedule of Buyers attached hereto (collectively, the “ Warrant Shares ”).

C.   Contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Registration Rights Agreement, substantially in the form attached hereto as Exhibit B (as may be amended or restated from time to time, the “ Registration Rights Agreement ”), pursuant to which the Company has agreed to provide certain registration rights with respect to the Shares and the Warrant Shares under the 1933 Act and the rules and regulations promulgated thereunder, and applicable state securities laws.

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

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

1.   PURCHASE AND SALE OF SHARES AND WARRANTS .

(a)   Purchase and Sale of Shares and Warrants .

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

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

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

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

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

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

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

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

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

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

(f)   Transfer or Resale .  Such Buyer understands that except as provided in the Registration Rights Agreement: (i) the Securities have not been and are not being registered under the 1933 Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) such Buyer shall have delivered to the Company an opinion of counsel, in a form reasonably acceptable to the Company, to the effect that such Securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration, or (C) such Buyer provides the Company with reasonable assurance that such Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act, as amended (or a successor rule thereto) (collectively, “ Rule 144 ”); (ii) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of the Securities under circumstances in which the seller (or the Person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other Person is under any obligation to register the Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder.  Notwithstanding the foregoing, the Securities may be pledged in connection with a bona fide margin account or other loan or financing arrangement secured by the Securities and such pledge of Securities, by itself, shall not be deemed to be a transfer, sale or assignment of the Securities hereunder, and no Buyer

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

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

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

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

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

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

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

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

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

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

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

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

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

(a)   Organization and Qualification .  The Company and its “ Subsidiaries ” (which for purposes of this Agreement means “Significant Subsidiary” as such term is defined in Rule 1-02 of Regulation S-X of the 1933 Act; which as of the date of this Agreement, is solely comprised of Aeolus Sciences, Inc., a Delaware corporation and a wholly owned subsidiary of the Company), are entities duly organized and validly existing and, to the extent legally applicable, in good standing under the laws of the jurisdiction in which they are formed, and have the requisite power and authorization to own their properties and to carry on their business as now being conducted.  Each of the Company and its Subsidiaries is duly qualified as a foreign entity to do business and to the extent legally applicable, is in good standing in every jurisdiction

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

(c)   Issuance of Securities .  The issuance of the Shares and the Warrants are duly authorized by the Company and upon issuance in accordance with the terms of this Agreement shall be free from all taxes, liens and charges with respect to the issue thereof.  A sufficient number of shares of Common Stock shall have been duly authorized and reserved for issuance for purposes of enabling the Company to issue that number of shares of Common Stock

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

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

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

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

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

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

(j)   SEC Documents; Financial Statements .  During the two (2) years prior to the date hereof, the Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “ 1934 Act ”) (all of the foregoing filed during the two (2) years prior to the date hereof and all exhibits included therein and financial statements, notes and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “ SEC Documents ”).  The Company has made available to the Buyers or their respective representatives, through EDGAR, true, correct and complete copies of the SEC Documents.  As of their respective filing dates, and to the Company's knowledge, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.  As of their respective filing dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto.  Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude

(k)   Absence of Certain Changes .  Except as set forth on Schedule 3(k) , since September 30, 2008, there has been no material adverse change and no material adverse development in the business, properties, operations, condition (financial or otherwise), results of operations or prospects of the Company or its Subsidiaries.  Since September 30, 2008, the Company has not (i) declared or paid any dividends, (ii) sold any assets, individually or in the aggregate, in excess of $100,000 outside of the ordinary course of business or (iii) had capital expenditures, individually or in the aggregate, in excess of $500,000.  Neither the Company nor any of its Subsidiaries has taken any steps to seek protection pursuant to any bankruptcy law nor does the Company have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact that would reasonably lead a creditor to do so.

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

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

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

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

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

(q)   Equity Capitalization .  As of the date hereof, the authorized capital stock of the Company consists of 210,000,000 shares, comprised of (x) 200,000,000 shares of Common Stock, of which as of the date hereof, 32,110,712 shares are issued and outstanding, and (y) 10,000,000 shares of preferred stock, par value $0.01 per share, of which 600,000 shares are designated Series B nonredeemable convertible preferred stock, of which 475,087 shares are issued and outstanding, and no other shares of the Company’s preferred stock are issued or outstanding.  All outstanding shares of the Company’s capital stock have been, or upon issuance will be, validly issued and are, or upon issuance will be, fully paid and nonassessable.  Except as described on Schedule  3 (q) , with respect to any debt or equity instruments of the Company and its Subsidiaries, (i) none of the Company’s capital stock is subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company; (ii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or