**Exhibit 4.1**

 

**THISWARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER HAVE NOT BEENREGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR OFFEREDFOR SALE UNLESS REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIESLAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.**

 

Dated: October 23,2008

 

**WARRANT**

 

To Purchase 65,000 Shares of Common Stock

of ADVANCED LIFE SCIENCES HOLDINGS, INC.

 

Expiring October 23,2013

 

**THISTO CERTIFY THAT**, for value received, **THE LEADERS GROUP, INC., an Illinois corporation**orany registered assigns (“**Holder**”)is entitled to purchase from **ADVANCED LIFESCIENCES HOLDINGS, INC.**, a Delaware corporation (the “**Company**”), at any time or from time to timeafter 9:00 a.m., Chicago time, on the date hereof and prior to 5:00 p.m.,Chicago time, on October 23, 2013, at the place where the Warrant Agencyis located, at the Exercise Price, the number of shares of Common Stock, parvalue $.01 per share, of the Company (the “**CommonStock**”) shown above, subject to adjustment as provided inArticles IV and V hereof, and upon the terms and conditionshereinafter provided, and is entitled also to exercise the other appurtenantrights, powers and privileges hereinafter described.

 

This Warrantentitles the holder initially to purchase up to an aggregate of 65,000 sharesof Common Stock.  This Warrant has beenissued by the Company pursuant to the Amended and Restated Business LoanAgreement dated as of October 23, 2008 (as amended from time to time, the “**Loan Agreement**”) between the Company andHolder, in consideration of a loan to the Company by the Holder.  The Holder is entitled to certain benefits asset forth therein.  The Company shall keepa copy of the Loan Agreement, and any amendments thereto, at the WarrantAgency, and shall furnish, without charge, copies thereof to the Holder uponrequest.

 

Certain terms usedin this Warrant are defined in Article VI.

 

# **ARTICLEI**

# ** **

# **EXERCISEOF WARRANTS**

# ** **

## **I.1.****          Method of Exercise.**  To exercise this Warrant in whole or in part,the Holder shall deliver on any Business Day to the Company at the WarrantAgency (a) this Warrant, (b) a written notice of the Holder’selection to exercise this Warrant, which notice shall specify the number ofshares of Common Stock to be purchased (which shall be a whole number of sharesif for less than all the shares then issuable hereunder), the denominations ofthe share certificate or 

 

----

 

## certificates desired and the name or names in whichsuch certificates are to be registered, and (c) payment of the ExercisePrice with respect to such shares.  Suchpayment may be made by cash, certified or bank cashier’s check or wire transferin an amount equal to the product of (i) the Exercise Price times (ii) thenumber of Warrant Shares as to which this Warrant is being exercised.

##  

The Company shall,as promptly as practicable and in any event within seven days after receipt ofsuch notice and payment, execute and deliver or cause to be executed anddelivered, in accordance with such notice, a certificate or certificatesrepresenting the aggregate number of shares of Common Stock specified in saidnotice together with cash in lieu of any fractions of a share as provided in Section 1.3.  The share certificate or certificates sodelivered shall be in such denominations as may be specified in such notice,and shall be issued in the name of the Holder or such other name or names asshall be designated in such notice.  ThisWarrant shall be deemed to have been exercised and such certificate orcertificates shall be deemed to have been issued, and such Holder or any otherPerson so designated to be named therein shall be deemed for all purposes tohave become a holder of record of shares, as of the date the aforementionednotice and payment is received by the Company. If this Warrant shall have been exercised only in part, the Companyshall, at the time of delivery of such certificate or certificates, deliver tothe Holder a new Warrant evidencing the right to purchase the remaining sharesof Common Stock called for by this Warrant, which new Warrant shall in allother respects be identical with this Warrant, or, at the request of theHolder, appropriate notation may be made on this Warrant which shall then bereturned to the Holder.  The Companyshall pay all expenses, taxes and other charges payable in connection with thepreparation, issuance and delivery of share certificates and new Warrants,except that, if share certificates or new Warrants shall be registered in aname or names other than the name of the Holder, funds sufficient to pay alltransfer taxes payable as a result of such transfer shall be paid by the Holderat the time of delivery of the aforementioned notice of exercise or promptlyupon receipt of a written request of the Company for payment.

 

## **I.2.****          Shares to be FullyPaid and Nonassessable.**  Allshares of Common Stock issued upon the exercise of this Warrant shall bevalidly issued, fully paid and nonassessable.

##  

## **I.3.****          No Fractional SharesRequired to be Issued.**  TheCompany shall not be required to issue fractions of shares of Common Stock uponexercise of this Warrant.  If anyfraction of a share would, but for this Section, be issuable upon finalexercise of this Warrant, in lieu of such fractional share, the Company shallpay to the Holder in cash an amount equal to the same fraction of the FairMarket Value of the Company per share of outstanding Common Stock on theBusiness Day immediately prior to the date of such exercise.

##  

## **I.4.****          Legend.**  Each certificate for shares of Common Stockissued upon exercise of this Warrant, unless at the time of exercise suchshares are registered under the Securities Act, shall bear the followinglegend:

##  

“This security has notbeen registered under the Securities Act of 1933 and may not be sold or offeredfor sale unless registered under said Act and any applicable state securitieslaws or unless an exemption from such registration is available.”

 

2

----

 

Any certificateissued at any time in exchange or substitution for any certificate bearing suchlegend (except a new certificate issued upon completion of a public offeringpursuant to a registration statement under the Securities Act) shall also bearsuch legend unless, in the opinion of counsel selected by the Holder of suchcertificate (who may be an employee of such holder) and reasonably acceptableto the Company, the securities represented thereby need no longer be subject torestrictions on resale under the Securities Act.

 

## **I.5.****          Reservation.**  The Company has duly reserved, and will keepavailable for issuance upon exercise of the Warrants, the total number ofWarrant Shares deliverable from time to time upon exercise of all Warrants fromtime to time outstanding.  The Companywill not take any actions during the term of this Warrant that would result inany adjustment of the number of shares of Common Stock issuable upon theexercise of the Warrant if (i) the total number of shares of Common Stockissuable after such action upon exercise of this Warrant, (ii) all sharesof Common Stock issued and outstanding and (iii) all shares then issuable (y) uponthe exercise of all Options and (z) upon the conversion or exchange of allConvertible Securities, would exceed the total number of shares of Common Stockthen authorized for issuance by the Company. The Company will not change the Common Stock from par value $.01 pershare to any higher par value which exceeds the Exercise Price then in effect,and will reduce the par value of the Common Stock upon any event described in Article IVthat provides for an increase in the number of shares of Common Stock subjectto purchase upon exercise of this Warrant, in inverse proportion to andeffective at the same time as such number of shares is increased.  As of the date hereof, the Company hadoutstanding (i) 40,805,932 shares of Common Stock, (ii) [11,347,648]Options to purchase Common Stock, and no other shares of capital stock or anysecurities convertible into or exchangeable for shares of capital stock or anyrights, options or warrants to purchase any shares of capital stock or anysecurities convertible into or exchangeable for shares of capital stock.  Neither the issuance of this Warrant nor theissuance of Warrant Shares upon exercise of this Warrant violates or conflictswith the Company’s certificate of incorporation or bylaws or any agreement towhich the Company is a party.

##  

# **ARTICLEII**

# ** **

# **WARRANTAGENCY;**

# **TRANSFER,EXCHANGE AND REPLACEMENT OF WARRANTS**

# ** **

## **II.1.****         Warrant Agency.**  As long as any Warrant remains outstanding,the Company shall perform the obligations of and be the warrant agency withrespect to the Warrants (the “**Warrant Agency**”)at its address set forth in the Loan Agreement or at such other address as theCompany shall specify by notice to the Holder.

##  

## **II.2.****         Ownership of Warrant.**  The Company may deem and treat the person inwhose name this Warrant is registered as the holder and owner hereof(notwithstanding any notations of ownership or writing hereon made by anyperson other than the Company) for all purposes and shall not be affected byany notice to the contrary, until due presentment of this Warrant forregistration of transfer as provided in this Article II.

##  

## **II.3.****         Transfer of Warrant.**  The Company agrees to maintain at the WarrantAgency books for the registration of transfers of the Warrants, and transfer ofthis Warrant and all rights 

 

3

----

 

## hereunder shall be registered, in whole or in part, onsuch books, upon surrender of this Warrant at the Warrant Agency, together witha written assignment of this Warrant duly executed by the Holder or its dulyauthorized agent or attorney, with (if the Holder is a natural person)signatures guaranteed by a bank or trust company or a registered broker ordealer, and funds sufficient to pay any transfer taxes payable upon suchtransfer.  Upon surrender and, ifrequired, such payment, the Company shall execute and deliver a new Warrant orWarrants in the name of the assignee or assignees and in the denominationsspecified in the instrument of assignment (which shall be whole numbers ofshares only) and shall issue to the assignor a new Warrant evidencing theportion of this Warrant not so assigned, and this Warrant shall promptly becanceled.

##  

## **II.4.****         Division orCombination of Warrants.**  ThisWarrant may be divided or combined with other Warrants upon presentment hereofand of any Warrant or Warrants with which this Warrant is to be combined at theWarrant Agency, together with a written notice specifying the names anddenominations (which shall be whole numbers of shares only) in which the newWarrant or Warrants are to be issued, signed by the holders hereof and thereofor their respective duly authorized agents or attorneys.  Subject to compliance with Section 2.3as to any transfer or assignment which may be involved in the division orcombination, the Company shall execute and deliver a new Warrant or Warrants inexchange for the Warrant or Warrants to be divided or combined in accordancewith such notice.

##  

## **II.5.****         Loss, Theft,Destruction of Warrant Certificates.** Upon receipt of evidence satisfactory to the Company of the ownership ofand the loss, theft, destruction or mutilation of any Warrant and, in the caseof any such loss, theft or destruction, upon receipt of indemnity or securitysatisfactory to the Company (it being understood and agreed that if the holderof such Warrant is Leaders Bank, then a written agreement of indemnity given byLeaders Bank alone shall be satisfactory to the Company and no further securityshall be required) or, in the case of any such mutilation, upon surrender andcancellation of such Warrant, the Company will make and deliver, in lieu ofsuch lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenorand representing the right to purchase the same aggregate number of shares ofCommon Stock.

##  

## **II.6.****         Expenses of Deliveryof Warrants.**  The Company shallpay all expenses, taxes (other than transfer taxes) and other charges payablein connection with the preparation, issuance and delivery of Warrantshereunder.

##  

# **ARTICLEIII**

 

# **CERTAINRIGHTS**

# ** **

## **III.1.****        Determination of FairMarket Value.**  Each determinationof Fair Market Value hereunder shall be made in good faith by the Company.  Upon each determination of Fair Market Valueby the Company hereunder, the Company shall promptly give notice thereof to theHolder, setting forth in reasonable detail the calculation of such Fair MarketValue and the method and basis of determination thereof (the “**Company Determination**”).

##  

## **III.2.****        Financial Statementsand Other Information.**  Promptlyupon transmission thereof, to the extent required under the Loan Agreement, theCompany will deliver to the 

 

4

----

 

## Holder copies of any and all financial statements,proxy statements, notices and other reports as it may send to its publicstockholders and copies of all registration statements and all reports which itfiles with the Securities and Exchange Commission (or any governmental body oragency succeeding to its functions).

##  

# **ARTICLEIV**

# ** **

# **ANTIDILUTIONPROVISIONS**

# ** **

## **IV.1.****       General.**  The Exercise Price and the number of sharesof Common Stock (or other securities or property) issuable upon exercise ofthis Warrant shall be subject to adjustment from time to time upon the occurrenceof certain events as provided in this Article IV;**provided that notwithstandinganything to the contrary herein, the Exercise Price shall not be less than thepar value of the Common Stock, as such par value is reduced from time to timein accordance with Section 1.5.

##  

## **IV.2.****       Common StockReorganization.**  If the Companyshall subdivide its outstanding shares of Common Stock (or any class thereof)into a greater number of shares or consolidate its outstanding shares of CommonStock (or any class thereof) into a smaller number of shares (any such eventbeing called a “**Common Stock Reorganization**”),then (a) the Exercise Price shall be adjusted, effective immediately afterthe effective date of such Common Stock Reorganization, to a price determinedby multiplying the Exercise Price in effect immediately prior to such effectivedate by a fraction, the numerator of which shall be the number of shares ofCommon Stock outstanding on such effective date before giving effect to suchCommon Stock Reorganization and the denominator of which shall be the number ofshares of Common Stock outstanding after giving effect to such Common StockReorganization, and (b) the number of shares of Common Stock subject topurchase upon exercise of this Warrant shall be adjusted, effective at suchtime, to a number determined by multiplying the number of shares of CommonStock subject to purchase immediately before such Common Stock Reorganizationby a fraction, the numerator of which shall be the number of shares of CommonStock outstanding after giving effect to such Common Stock Reorganization andthe denominator of which shall be the number of shares of Common Stockoutstanding immediately before such Common Stock Reorganization.

##  

## **IV.3.****       Common StockDistribution.**  (a) If the Companyshall issue, sell or otherwise distribute any shares of Common Stock, otherthan pursuant to this Agreement or a Common Stock Reorganization (which isgoverned by Section 4.2 hereof) (any such event, including any eventdescribed in paragraphs (b) and (c) below, being hereincalled a “**Common Stock Distribution**”),for a consideration per share less than the Fair Market Value of the Companyper share of outstanding Common Stock on a Fully Diluted Basis on the date ofsuch Common Stock Distribution (before giving effect to such Common StockDistribution), then, effective upon such Common Stock Distribution, theExercise Price shall be reduced, if such consideration per share shall be lessthan such Fair Market Value per share, to the lowest of the prices (calculatedto the nearest one thousandth of one cent) determined as provided inclauses (i), (ii) and (iii) below:

 

5

----

 

#### (i)            ifthe Company shall receive any consideration for the Common Stock issued, soldor distributed, in such Common Stock Distribution, the consideration per shareof Common Stock received by the Company upon such issue, sale or distribution;

####  

#### (ii)           bydividing (A) an amount equal to the sum of (1) the number of sharesof Common Stock outstanding immediately prior to such Common Stock Distributionmultiplied by the then existing Exercise Price, *plus*(2) the consideration, if any, received by theCompany upon such Common Stock Distribution by (B) the total number ofshares of Common Stock outstanding immediately after such Common StockDistribution; and

####  

#### (iii)          by multiplying the Exercise Price in effectimmediately prior to such Common Stock Distribution by a fraction, thenumerator of which shall be the sum of (A) the number of shares of CommonStock outstanding immediately prior to such Common Stock Distributionmultiplied by such Fair Market Value per share on the date of such Common StockDistribution, *plus*(B) theconsideration, if any, received by the Company upon such Common Stock Distribution,and the denominator of which shall be the product of (1) the total numberof shares of Common Stock outstanding immediately after such Common StockDistribution multiplied by (2) such Fair Market Value per share on thedate of such Common Stock Distribution.

####  

If any CommonStock Distribution shall require an adjustment to the Exercise Price pursuantto the foregoing provisions of this paragraph (a), including by operationof paragraph (b) or (c) below, then, effective at the timesuch adjustment is made, the number of shares of Common Stock subject topurchase upon exercise of this Warrant shall be increased to a numberdetermined by multiplying the number of shares of Common Stock subject topurchase immediately before such Common Stock Distribution by a fraction, thenumerator of which shall be the number of shares of Common Stock outstandingimmediately after giving effect to such Common Stock Distribution and thedenominator of which shall be the sum of the number of shares outstandingimmediately before giving effect to such Common Stock Distribution (bothcalculated on a Fully Diluted Basis) *plus*thenumber of shares of Common Stock which the aggregate consideration received bythe Company with respect to such Common Stock Distribution would purchase atthe Fair Market Value of the Company per share of outstanding Common Stock on aFully Diluted Basis on the date of such Common Stock Distribution (beforegiving effect to such Common Stock Distribution).  In computing adjustments under this paragraph,fractional interests in Common Stock shall be taken into account to the nearestone-thousandth of a share.

 

The provisions ofthis paragraph (a), including by operation of paragraph (b) or (c) below,shall not operate to increase the Exercise Price or reduce the number of sharesof Common Stock subject to purchase upon exercise of this Warrant.

 

### (b)           Ifthe Company shall issue, sell, distribute or otherwise grant in any manner(including by assumption) any rights to subscribe for or to purchase, or anywarrants or options for the purchase of Common Stock or any stock or securitiesconvertible into or exchangeable for Common Stock (such rights, warrants oroptions being herein called “**Options**”and such convertible or exchangeable stock or securities being herein called “**Convertible Securities**’’), whether or notsuch Options or the rights to convert or exchange any such 

 

6

----

 

### Convertible Securities in respect of such Options areimmediately exercisable, and the price per share for which Common Stock isissuable upon the exercise of such Options or upon conversion or exchange ofsuch Convertible Securities in respect of such Options (determined by dividing (i) theaggregate amount, if any, received or receivable by the Company asconsideration for the granting of such Options, *plus*the minimum aggregate amount of additionalconsideration payable to the Company upon the exercise of all such Options, *plus,*in the case of Options to acquireConvertible Securities, the minimum aggregate amount of additionalconsideration, if any, payable upon the issuance or sale of such ConvertibleSecurities and upon the conversion or exchange thereof, by (ii) the totalmaximum number of shares of Common Stock issuable upon the exercise of suchOptions or upon the conversion or exchange of all such Convertible Securitiesissuable upon the exercise of such Options) shall be less than the Fair MarketValue of the Company per share of outstanding Common Stock on a Fully DilutedBasis on the date of granting such Options (before giving effect to suchgrant), then, for purposes of paragraph (a) above, the total maximumnumber of shares of Common Stock issuable upon the exercise of such Options orupon conversion or exchange of the total maximum amount of such ConvertibleSecurities issuable upon the exercise of such Options shall be deemed to havebeen issued as of the date of granting of such Options and thereafter shall bedeemed to be outstanding and the Company shall be deemed to have received asconsideration such price per share, determined as provided above,therefor.  Except as otherwise providedin paragraph (d) below, no additional adjustment of the ExercisePrice shall be made upon the actual exercise of such Options or upon conversionor exchange of such Convertible Securities.

###  

### (c)           Ifthe Company shall issue, sell or otherwise distribute (including by assumption)any Convertible Securities, whether or not the rights to exchange or convertthereunder are immediately exercisable, and the price per share for whichCommon Stock is issuable upon such conversion or exchange (determined bydividing (i) the aggregate amount received or receivable by the Company asconsideration for the issuance, sale or distribution of such Convertible Securities,*plus*the minimum aggregate amountof additional consideration, if any, payable to the Company upon the conversionor exchange thereof, by (ii) the total maximum number of shares of CommonStock issuable upon the conversion or exchange of all such ConvertibleSecurities) shall be less than the Fair Market Value of the Company per shareof outstanding Common Stock on a Fully Diluted Basis on the date of suchissuance, sale or distribution (before giving effect to such issuance, sale ordistribution) of such Convertible Securities, then, for purposes ofparagraph (a) above, the total maximum number of shares of CommonStock issuable upon conversion or exchange of all such Convertible Securitiesshall be deemed to have been issued as of the date of the issuance, sale ordistribution of such Convertible Securities and thereafter shall be deemed tobe outstanding and the Company shall be deemed to have received asconsideration such price per share, determined as provided above, therefor.  Except as otherwise provided inparagraph (d) below, no additional adjustment of the Exercise Priceshall be made upon the actual conversion or exchange of such ConvertibleSecurities.

###  

### (d)           If(i) the purchase price provided for in any Option referred to inparagraph (b) above or the additional consideration, if any, payableupon the conversion or exchange of any Convertible Securities referred to inparagraph (b) or (c) above or the rate at which anyConvertible Securities referred to in paragraph (b) or (c) aboveare convertible into or exchangeable for Common Stock shall change at any time(other than under or by reason of 

 

7

----

 

### provisions designed to protect against dilution uponan event which results in a related adjustment pursuant to this Article IV),or (ii) any of such Options or Convertible Securities shall haveterminated, lapsed or expired, then the Exercise Price then in effect shallforthwith be readjusted (effective only with respect to any exercise of thisWarrant after such readjustment) to the Exercise Price which would then be ineffect had the adjustment made upon the issuance, sale, distribution or grantof such Options or Convertible Securities been made based upon such changedpurchase price, additional consideration or conversion rate, as the case may be(in the case of any event referred to in clause (i) of thisparagraph (d)) or had such adjustment not been made (in the case of anyevent referred to in clause (ii) of this paragraph (d)).

###  

### (e)           Ifthe Company shall pay a dividend or make any other distribution upon anycapital stock of the Company payable in Common Stock, Options or ConvertibleSecurities, then, for purposes of paragraph (a) above, such CommonStock, Options or Convertible Securities shall be deemed to have been issued orsold without consideration.

###  

## **IV.4.****       Special Dividends.**  If the Company shall issue or distribute toany holder or holders of shares of Common Stock evidences of indebtedness, anyother securities of the Company or any cash, property or other assets(excluding a Common Stock Reorganization or a Common Stock Distribution),whether or not accompanied by a purchase, redemption or other acquisition ofshares of Common Stock (any such nonexcluded event being herein called a “**Special Dividend**”), (a) the ExercisePrice shall be decreased, effective immediately after the effective date ofsuch Special Dividend, to a price determined by multiplying the Exercise Pricethen in effect by a fraction, the numerator of which shall be the Fair MarketValue of the Company per share of outstanding Common Stock as of such effectivedate less any cash and the then Fair Market Value of any evidences ofindebtedness, securities or property or other assets issued or distributed insuch Special Dividend with respect to one share of Common Stock, and thedenominator of which shall be such Fair Market Value per share and (b) thenumber of shares of Common Stock subject to purchase upon exercise of thisWarrant shall be increased to a number determined by multiplying the number ofshares of Common Stock subject to purchase immediately before such SpecialDividend by a fraction, the numerator of which shall be the Exercise Price ineffect immediately before such Special Dividend and the denominator of which shallbe the Exercise Price in effect immediately after such Special Dividend.  A reclassification of Common Stock (otherthan a change in par value, or from par value to no par value or from no parvalue to par value) into shares of Common Stock and shares of any other classof stock shall be deemed a distribution by the Company to the holders of suchCommon Stock of such shares of such other class of stock and, if theoutstanding shares of Common Stock shall be changed into a larger or smallernumber of shares of Common Stock as part of such reclassification, a CommonStock Reorganization.

##  

## **IV.5.****       Capital Reorganizations.**  If there shall be any consolidation or mergerto which the Company is a party, other than a consolidation or a merger ofwhich the Company is the continuing corporation and which does not result inany reclassification of, or change (other than a Common Stock Reorganization)in, outstanding shares of Common Stock, or any sale or conveyance of theproperty of the Company as an entirety or substantially as an entirety, or anyrecapitalization of the Company (any such event being called a “**Capital Reorganization**”), then, effectiveupon the effective date of such Capital Reorganization, the Holder shall nolonger have the right to purchase Common Stock, but shall have instead theright to purchase, upon 

 

8

----

 

## exercise of this Warrant, the kind and amount ofshares of stock and other securities and property (including cash) which theHolder would have owned or have been entitled to receive pursuant to suchCapital Reorganization if this Warrant had been exercised immediately prior tothe effective date of such Capital Reorganization.  As a condition to effecting any CapitalReorganization, the Company or the successor or surviving corporation, as thecase may be, shall (a) execute and deliver to the Holder and to theWarrant Agency an agreement as to the Holder’s rights in accordance with this Section 4.5,providing, to the extent of any right to purchase equity securities hereunder,for subsequent adjustments as nearly equivalent as may be practicable to theadjustments provided for in this Article IV and (b) provide eachRegulation Y Holder with an opinion of counsel reasonably satisfactory to suchRegulation Y Holder and such other assurances as any Regulation Y Holder mayreasonably request to the effect that the ownership and exercise by anyRegulation Y Holder of this Warrant after giving effect to such CapitalReorganization shall not be prohibited by the BHC Act or the regulationsthereunder.  The provisions of this Section 4.5shall similarly apply to successive Capital Reorganizations.

##  

## **IV.6.****       Adjustment Rules.**  Any adjustments pursuant to this Article IVshall be made successively whenever an event referred to herein occurs, exceptthat, notwithstanding any other provision of this Article IV, noadjustment shall be made to the number of shares of Common Stock to bedelivered to the Holder (or to the Exercise Price) if such adjustmentrepresents less than 1% of the number of shares previously required to be sodelivered, but any lesser adjustment shall be carried forward and shall be madeat the time and together with the next subsequent adjustment which togetherwith any adjustments so carried forward shall amount to 1% or more of thenumber of shares to be so delivered.  Noadjustment shall be made pursuant to this Article IV:  (a) in respect of the issuance from timeto time of shares of Common Stock upon the exercise of any Warrants (b) withrespect to issuance of shares of Common Stock pursuant to any Public Offering, (c) uponexercise of any of the Options outstanding on the Date of Issuance or withrespect to issuance of any additional options to purchase Common Stock toofficers, employees and independent directors of the Company (“**Additional Options**”) (or issuance of CommonStock upon exercise of any such Additional Options), (d) with respect toother rights granted to a Person which is not an Affiliate (as defined in theLoan Agreement) as consideration for the issuance of loans or extensions ofcredit to the Company as long as the board of directors of the Company hasdetermined in good faith that the total consideration received from such Personis fair value for the loans or extensions of credit received by the Company,provided that the Loan Agreement shall have been terminated and all obligationsthereunder paid in full, or (e) with respect to any issuance of shares ofCommon Stock or Options of the Company in a Third Party Transaction (or issuanceof Common Stock upon exercise of such Options). If the Company takes a record of the holders of its Common Stock for anypurpose referred to in this Article IV, then (i) such record dateshall be deemed to be the date of the issuance, sale, distribution or grant inquestion and (ii) if the Company shall legally abandon such action priorto effecting such action, no adjustment shall be made pursuant to this Article IVin respect of such action.

##  

## **IV.7.****       Proceedings Prior to AnyAction Requiring Adjustment.**  Asa condition precedent to the taking of any action which would require anadjustment pursuant to this Article IV, the Company shall take any actionwhich may be necessary, including obtaining regulatory approvals or exemptions,in order that (a) the Company may thereafter validly and legally issue asfully paid and nonassessable all shares of Common Stock which the Holder is 

 

9

----

 

## entitled to receive upon exercise of a Warrant and (b) theownership and exercise of any Warrant by any Regulation Y Holder shall not beprohibited by the BHC Act or the regulations thereunder.

##  

## **IV.8.****       Notice of Adjustment.**  Not less than 10 nor more than 30 days priorto the record date or effective date, as the case may be, of any action whichrequires or might require an adjustment or readjustment pursuant to this Article IV,the Company shall give notice to the Holder of such event, describing suchevent in reasonable detail and specifying the record date or effective date, asthe case may be, and, if determinable, the required adjustment and thecomputation thereof.  If the requiredadjustment is not determinable at the time of such notice, the Company shallgive notice to the Holder of such adjustment and computation promptly aftersuch adjustment becomes determinable.

##  

# **ARTICLEV**

# ** **

# **PURCHASE,REDEMPTION AND**

# **CANCELLATIONOF WARRANTS**

# ** **

## **V.1.****         Purchase of Warrantsby the Company.**  The Companyshall have the right to purchase or otherwise acquire Warrants at such times,in such manner and for such consideration as set forth below.

##  

## **V.2.****         Optional Redemption.**  At any time and from time to time after theearliest of (a) the third anniversary of the Closing Date (as defined inthe Loan Agreement) and (b) at any time after the date on which alloutstanding amounts under the Loan Agreement have been paid in full and theCommitments thereunder shall have terminated, the Company shall have the rightto redeem all, but not less than all, of the outstanding Warrants at theOptional Redemption Price, determined as of the day preceding the notice ofredemption.  Irrevocable notice of suchright of redemption shall be given by the Company to the Holder not more than30 days nor less than 5 days prior to the date scheduled for redemption,stating the date and price, including a reasonably detailed description of themethod of calculation thereof, of redemption. The Holder may exercise Warrants until 5:00 p.m., Chicago time, onthe Business Day preceding the date of redemption set forth in a valid noticeof redemption, at which time the right to purchase shares of Common Stocktheretofore represented by this Warrant shall terminate, and this Warrant shallrepresent the right of the Holder to receive the Optional Redemption Price fromthe Company in immediately available funds upon surrender of this Warrant atthe Warrant Agency.

##  

## **V.3.****         Cancellation ofWarrants.**  All Warrantspurchased, redeemed or otherwise acquired by the Company shall thereupon becanceled and retired.  The Warrant Agencyshall cancel any Warrant surrendered for exercise or registration of transferor exchange and deliver such canceled Warrants to the Company.

##  

## **V.4.****         Notice of Refinancing.**  The Company shall give notice to the Holderof any intent by the Company to refinance in their entirety the Notes (asdefined in the Loan Agreement) not less than 5 days prior to the proposedclosing date of such refinancing, setting forth such proposed closing date(such notice, the “**Refinancing Notice**”).

 

10

----

 

# **ARTICLEVI**

# ** **

# **DEFINITIONS**

# ** **

The followingterms, as used in this Warrant, have the following meanings:

 

“**BHC Act**” means the Bank Holding Company Actof 1956, as amended.

 

“**Business Day**” means any day except aSaturday, Sunday or other day on which commercial banks in Chicago, Illinoisare authorized by law to close, unless there has been an offering of CommonStock registered under the Securities Act, in which case “Business Day” means (a) ifCommon Stock is listed or admitted to trading on a national securitiesexchange, a day on which the principal national securities exchange on whichthe Common Stock is listed or admitted to trading is open for business or (b) ifCommon Stock is not so listed or admitted to trading, a day on which the NewYork Stock Exchange is open for business.

 

“**Capital Reorganization**” has the meaning setforth in Section 4.5.

 

“**Common Stock**” means the Common Stock, parvalue $.01 per share, of the Company.

 

“**Closing Price**” on any day means (a) ifCommon Stock is listed or admitted for trading on a national securitiesexchange, the reported last sales price regular way or, if no such reportedsale occurs on such day, the average of the closing bid and asked pricesregular way on such day, in each case on the principal national securitiesexchange on which Common Stock is listed or admitted to trading, or (b) ifCommon Stock is not listed or admitted to trading on any national securitiesexchange, the average of the closing bid and asked prices in theover-the-counter market on such day as reported by NASDAQ or any comparablesystem or, if not so reported, as reported by any New York Stock Exchangemember firm selected by the Company for such purpose.

 

“**Common Stock Distribution**” has the meaningset forth in Section 4.3(a).

 

“**Common Stock Reorganization**” has themeaning set forth in Section 4.2.

 

“**Company**” has the meaning set forth in thefirst paragraph of this Warrant.

 

“**Company Determination**” has the meaning setforth in Section 3.1.

 

“**Convertible Securities**” has the meaning setforth in Section 4.3(b).

 

“**Exchange Act**” means the Securities ExchangeAct of 1934, as amended, and any successor Federal statute, and the rules andregulations of the Securities and Exchange Commission (or its successor)thereunder, all as the same shall be in effect at the time.

 

“**Exercise Price**” means $1.00 per share ofthe Common Stock, subject to adjustment pursuant to Article IV.

 

11

----

 

“**Fair Market Value**” as at any date ofdetermination means the Market Price on such date multiplied by the number ofshares of Common Stock then outstanding. Determination of the Fair Market Value of the Company per share ofCommon Stock, shall be made without giving effect to any discount for (i) minorityinterests or (ii) the voting status of the Common Stock.

 

“**Fully Diluted Basis**” means, with respect toany determination or calculation, that such determination or calculation isperformed on a fully diluted basis determined in accordance with generallyaccepted accounting principles as in effect from time to time.

 

“**Holder**” has the meaning set forth in thefirst paragraph of this Warrant.

 

“**Loan Agreement**” has the meaning set forthin the second paragraph of this Warrant.

 

“**Market Price**” as at any date ofdetermination means the average of the daily Closing Prices of a share ofCommon Stock for the shorter of (i) the 20 consecutive Business Daysending on the most recent Business Day prior to the Time of Determination and (ii) theperiod commencing on the date next succeeding the first public announcement ofthe issuance, sale, distribution, grant or exercise in question through suchmost recent Business Day prior to the Time of Determination.  “Time of Determination” means the time anddate of the earliest of (x) the determination of the stockholders entitledto receive such issuance, sale, distribution or grant, (y) thedetermination of the Holders or the Company to exercise their respective rightsset forth in Section 5.2 or 5.3 hereof, and (z) the commencementof “ex-dividend” trading in respect thereof.

 

“**NASDAQ**” means The National Association ofSecurities Dealers, Inc. Automated Quotation System.

 

“**Options**” has the meaning set forth in Section 4.3(b).

 

“**Optional Redemption Price**” means, as of anydate of determination, a price for each share of Common Stock issuable uponexercise of the Warrants equal to 105% of the Redemption Price, determined asof such date.

 

“**Person**” means any natural person,corporation, limited liability company, limited partnership, generalpartnership, joint stock company, joint venture, association, company, trust,bank, trust company, land trust, business trust or other organization, whetheror not a legal entity, and any government agency or political subdivisionthereof.

 

“**Redemption Price**” means, as of any date ofdetermination, a price for each share of Common Stock issuable upon exercise ofthe Warrants equal to the excess of (a)(i) the Fair Market Value of theCompany plus the aggregate Exercise Price of all Warrants either being redeemedor then outstanding and not being redeemed divided by (ii) the number ofshares of Common Stock outstanding on a Fully Diluted Basis over (b) theExercise Price then in effect.

 

“**Refinancing Notice**” has the meaning setforth in Section 5.4 hereof.

 

12

----

 

“**Regulation Y Holder**” means the Holder or aholder of Warrant Shares, if such Holder or holder of Warrant Shares is a bankholding company within the meaning of the BHC Act or a subsidiary thereofsubject to Regulation Y under the BHC Act.

 

“**Securities Act**” means the Securities Act of1933, as amended, and any successor Federal statute and the rules andregulations of the Securities and Exchange Commission (or its successors)thereunder, all as the same shall be in effect from time to time.

 

“**Special Dividend**” has the meaning set forthin Section 4.4.

 

“**Subsidiary**” of any Person means anycorporation, partnership, joint venture, association or other business entityof which more than 50% of the total voting power of shares of stock or otherinterests therein entitled to vote in the election of members of the board ofdirectors, partnership committee, board of managers or trustees or othermanagerial body thereof is at the time owned or controlled, directly orindirectly, by such Person or one or more of the other Subsidiaries of suchPerson or a combination thereof.

 

“**Third Party Transaction**” shall mean abona-fide negotiated transaction approved by the Board of Directors of theCompany in good faith involving the purchase or sale of assets and/or stock(whether by sale of stock, assets, merger, consolidation, or otherwise) of theCompany by another Person or an acquisition by the Company of assets or stock(whether by sale of stock, assets, merger, consolidation, or otherwise) ofanother Person if such Person is not an Affiliate of the Company.

 

“**Warrant Agency**” has the meaning set forthin Section 2.1.

 

“**Warrant Shares**” means the shares of CommonStock issuable upon the exercise of the Warrants.

 

“**Warrants**” has the meaning set forth in thesecond paragraph of this Warrant.

 

All referencesherein to “**days**” shall meancalendar days unless otherwise specified.

 

# **ARTICLEVII**

# ** **

# **MISCELLANEOUS**

# ** **

## **VII.1.****      Notices.**  Notices and other communications provided forherein must be in writing and may be given by mail, courier, confirmed telex orfacsimile transmission and shall, unless otherwise expressly required, bedeemed given when received or, if mailed, four Business Days after beingdeposited in the United States mail with postage prepaid and properlyaddressed.  In the case of the Holder,such notices and communications shall be addressed to its address as shown onthe books maintained by the Warrant Agency, unless the Holder shall notify theWarrant Agency that notices and communications should be sent to a differentaddress (or telex or facsimile number), in which case such notices andcommunications shall be sent to the address (or telex or facsimile number)specified by the Holder.

 

13

----

 

## **VII.2.****      Waivers; Amendments.**  No failure or delay of the Holder inexercising any power or right hereunder shall operate as a waiver thereof, norshall any single or partial exercise of any such right or power, or anyabandonment or discontinuance of steps to enforce such a right or power,preclude any other or further exercise thereof or the exercise of any otherright or power.  No notice or demand onthe Company in any case shall entitle the Company to any other or future noticeor demand in similar or other circumstances. The rights and remedies of the Holder are cumulative and not exclusiveof any rights or remedies which it would otherwise have.  The provisions of this Warrant may beamended, modified or waived with (and only with) the written consent of theCompany and the holders of Warrants entitling such holders to purchase amajority of the Common Stock subject to purchase upon exercise of such Warrantsat the time outstanding (exclusive of Warrants then owned by the Company or anySubsidiary (as defined in the Loan Agreement) or Affiliate (as defined in theLoan Agreement) thereof); provided, however, that no such amendment,modification or waiver shall, without the written consent of the holders of allWarrants at the time outstanding, (a) change the number of shares ofCommon Stock subject to purchase upon exercise of this Warrant, the ExercisePrice or provisions for payment thereof or (b) amend, modify or waive theprovisions of this Section or Article III or IV or Section 1.5,5.2 or 5.4.  The provisions of the LoanAgreement may be amended, modified or waived only in accordance with therespective provisions thereof.

##  

Any suchamendment, modification or waiver effected pursuant to and in accordance withthe provisions of this Section or the applicable provisions of the LoanAgreement shall be binding upon the holders of all Warrants and Warrant Shares,upon each future holder thereof and upon the Company.  In the event of any such amendment,modification or waiver, the Company shall give prompt notice thereof to allholders of Warrants and Warrant Shares and, if appropriate, notation thereofshall be made on all Warrants thereafter surrendered for registration oftransfer or exchange.

 

## **VII.3.****      GOVERNING LAW.  THIS WARRANT SHALL BE CONSTRUED IN ACCORDANCEWITH AND GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS (WITHOUT REGARD TOPRINCIPLES OF CONFLICTS OF LAW).**

##  

## **VII.4.****      Transfer; Covenants toBind Successor and Assigns.**  Allcovenants, stipulations, promises and agreements in this Warrant contained byor on behalf of the Company or the Holder shall bind its successors andassigns, whether so expressed or not. This Warrant shall be transferable and assignable by the Holder hereofin whole or from time to time in part to any other Person and the provisions ofthis Warrant shall be binding upon and inure to the benefit of the Holderhereof and its successors and assigns.

##  

## **VII.5.****      Severability.**  In case any one or more of the provisionscontained in this Warrant shall be invalid, illegal or unenforceable in anyrespect, the validity, legality and enforceability of the remaining provisionscontained herein shall not in any way be affected or impaired thereby.  The parties shall endeavor in good faithnegotiations to replace the invalid, illegal or unenforceable provisions withvalid provisions the economic effect of which comes as close as possible tothat of the invalid, illegal or unenforceable provisions.

 

14

----

 

## **VII.6.****      Section Headings.**  The section headings used herein are forconvenience of reference only, are not part of this Warrant and are not toaffect the construction of or be taken into consideration in interpreting thisWarrant.

##  

## **VII.7.****      Right to SpecificPerformance.**  The Companyacknowledges and agrees that in the event of any breach of the foregoingcovenants and agreements, the Holder would be irreparably harmed and could notbe made whole only by the award of monetary damages. Accordingly, the Companyagrees that the Holder, in addition to any other remedy to which the Holder maybe entitled at law or equity, will be entitled to seek and obtain an award ofspecific performance of any of the foregoing covenants and agreements.

##  

**[signature page follows]**

 

15

----

 

**INWITNESS WHEREOF**, the Company has caused this Warrant to beexecuted in its corporate name by one of its officers thereunto duly authorizedas of the day and year first above written.

 
|   | **ADVANCED  LIFE SCIENCES  HOLDINGS, INC.** |
|--------|---------------------------------------------|
|   |                                        |
|   |                                        |
|   | By:                                         | /s/ Michael T. Flavin |
|   |                                        | Michael T.  Flavin |
|   |                                        | Chairman and  Chief Executive Officer |

 

----