Exhibit 4.1


 


SECURITIES PURCHASE AGREEMENT


 


Advanced Life Sciences Holdings, Inc.


1440 Davey Road


Woodridge, IL 60517


 


Ladies & Gentlemen:


 


The undersigned,                              
(the “Investor”), hereby confirms its agreement with you as follows:


1.                                       This Securities Purchase Agreement (the “Agreement”)
is made as of February 24, 2006 by and among Advanced Life Sciences Holdings,
Inc., a Delaware corporation (the “Company”), and the Investor.


2.                                       The Company and the Investor agree that
the Investor will purchase from the Company and the Company will issue and sell
to the Investor                     shares
of common stock of the Company, $0.01 par value per share (the “Common Stock”),
in the aggregate and warrants, in the form of Exhibit B attached hereto, to
purchase up to                  
shares of Common Stock in the aggregate at an exercise price of $3.81 per
share, in each case, pursuant to the Terms and Conditions for Purchase of the
Shares and the Warrants attached hereto as Annex I and incorporated herein
by reference as if fully set forth herein (the “Terms and Conditions”).  Such                
shares of Common Stock to be purchased by the Investor pursuant to this
Agreement are referred to herein as the “Shares,” and such warrants to be issued
to the Investor pursuant to this Agreement to purchase up to               
shares of Common Stock are referred to herein as the “Warrants.”   Each Investor will purchase the number of
the Shares and the number of the Warrants as set forth below their respective
names on the signature pages hereto for the purchase price set forth
thereon.  This Securities Purchase
Agreement, together with the investor questionnaire, exhibits and Terms and
Conditions, which are incorporated herein by reference as if fully set forth
herein, may hereinafter be referred to as the “Agreement”.  Unless otherwise requested by the Investor,
the certificates representing the Shares and the Warrants purchased by the
Investor will be registered in the Investor’s name and address as set forth
below.


Please confirm
that the foregoing correctly sets forth the agreement between us by signing in
the space provided below for that purpose. 
By executing this Agreement, the Investors acknowledge that the Company
may use the information in paragraph 2 above and the name and address
information below in preparation of the Registration Statement (as defined in
Annex I).  This Agreement may be executed
in separate counterparts, each of which shall be deemed to be an original and
all of which taken together shall constitute one and the same instrument.


AGREED AND ACCEPTED:


	
  Advanced Life Sciences Holdings, Inc.

  	
   

  	
  Investor:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
					



 


	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Print Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Tax ID No.:

  	
   

  
	
   

  	
   

  	
  Contact name:

  	
   

  
	
   

  	
   

  	
  Telephone:

  	
   

  
	
   

  	
   

  	
  Name in which shares should be registered (if
  different):

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Number of Shares:

  	
   

  
	
   

  	
   

  	
  Number of Warrants:

  	
   

  
	
   

  	
   

  	
  Purchase Price Per Unit: $3.53

  	
   

  
											



 


 

















 


ANNEX I


 


TERMS AND
CONDITIONS FOR PURCHASE OF SHARES AND WARRANTS


 


 


1.                                       Authorization and Sale of the Shares and
the Warrants.  Subject to these Terms and Conditions, the
Company has authorized the issuance and sale to the Investor pursuant hereto of
the Shares and the Warrants.


 


2.                                       Agreement to Sell and Purchase the Shares
and the Warrants; Subscription Date.


 


2.1                                       At the Closing (as defined in
Section 3), the Company will sell to the Investor, and the Investor will
purchase from the Company, upon the terms and conditions hereinafter set forth,
the Shares and the Warrants as set forth in Paragraph 2 of the Securities
Purchase Agreement to which these Terms and Conditions are attached at the
purchase price set forth thereon, and each Investor will purchase such number
of the Shares and the Warrants as set forth below their respective names on the
signature pages to the Securities Purchase Agreement.


 


2.2                                       The Company shall have sold securities to
third party purchasers, who are not acting in concert with the Investors, for
an aggregate minimum of $20 million and a maximum of $37 million, pursuant to
the same form of Securities Purchase Agreement, including these Terms and
Conditions (the “Contemporaneous Offering”).


 


2.3                                       The obligations of the Investor under the
Agreement (as defined below) are several and not joint with the obligations of
any third party purchaser of the Company’s securities, and the Investor shall
not be responsible in any way for the performance of the obligations of any
such third party purchaser.  Each
of the Investor and the Company agree and acknowledge that (i) the decision of
the Investor to purchase the Shares and the Warrants pursuant to the Agreement
has been made by the Investor independently of any such third party purchaser and (ii) no such third party purchaser has acted as agent
for the Investor in connection with the Investor making its investment
hereunder and that no such third party
purchaser will be acting as agent of the Investor in connection with
monitoring its investment hereunder.  Nothing contained in the Agreement, and no action
taken by the Investor hereto, shall be deemed to constitute the Investor and
any such third party purchaser as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Investor and any such third party purchaser are in any way acting in concert
or as a group with respect to any matter, including the obligations or the
transactions contemplated by the Agreement; provided, that such obligations or
the transactions contemplated hereby may be modified, amended or waived in
accordance with Section 9 below. The Investor shall be entitled to
independently protect and enforce its rights, including, without limitation,
the rights arising out of the Agreement (provided, that such rights may be
modified, amended or waived in accordance with Section 9 below), and it shall
not be necessary for any such third
party purchaser to be joined as an additional party in any proceeding for such
purpose.  To the extent that any
such third party purchaser purchases
the same or similar securities as the Investor hereunder or on the same or
similar terms and conditions or pursuant to the same or similar documents, all
such matters are solely in the control of the Company, not the action or
decision of the Investor, and would be solely for the convenience of the Company
and not because it was required or requested to do so by the Investor or any
such third party purchaser. The
Securities Purchase Agreement (including these attached Terms and Conditions)
is hereinafter sometimes collectively referred to as the “Agreement.”


 


3.                                       Delivery of the Shares and the Warrants
at Closing.  It is expected that the completion of the
purchase and sale of the Shares and the Warrants (the “Closing”) shall occur on
or about March 2, 2006 (the “Closing Date”), at the Chicago offices of the
Company’s counsel.  At the Closing, the
Company shall deliver to the Investor (a) one or more stock certificates
representing the Investor’s number of the Shares and (b) one or more warrant
certificates representing the Investor’s number of the Warrants, in each case
as is set forth in Paragraph 2 of the Securities Purchase Agreement, each such
certificate to be registered in the name of the Investor or, if so indicated on
the signature page of the Securities Purchase Agreement, in the name of a
nominee designated by the Investor.


 


The Company’s
obligation to issue the number of the Shares and the number of the Warrants to
the Investor as set forth on the signature page to the Securities Purchase
Agreement shall be subject to the following conditions, any one or more of
which may be waived by the Company: (a) receipt by the Company of a certified
or official bank check or wire transfer of funds in the full amount of the
purchase price for such Shares and such Warrants being purchased by such
Investor; (b) completion of the Contemporaneous Offering; and (c) the accuracy
in all material respect of the representations and warranties made by such
Investor when made and the fulfillment in all material respects of those
undertakings of such Investor to be fulfilled prior to the Closing.


 

















 


The Investor’s obligation
to purchase the number of the Shares and the number of the Warrants being
purchased by such Investor hereunder shall be subject to the following
conditions, any one or more of which may be waived by such Investor: (a) the
representations and warranties of the Company set forth herein shall be true
and correct as of the Closing Date (except for representations and warranties
that speak as of a specific date, which representations and warranties shall be
true and correct as of such date) in all material respects and the fulfillment
in all material respects of those undertakings of the Company in the Agreement
to be fulfilled on or prior to the Closing Date, and the Investor shall have
received a certificate to that effect from the Company’s Chief Executive
Officer or Chief Financial Officer, (b) such Investor shall have received such
documents as such Investor shall reasonably have requested, including, a
standard opinion of the Company’s counsel including as to the matters set forth
in Section 4.2 and as to exemption from the registration requirements of the
Securities Act of 1933, as amended (the “Securities Act”), of the sale of the
Shares and the Warrant Shares (as defined below), (c) completion of the Contemporaneous
Offering and (d) the Company shall have filed a Notification Form: Listing of
Additional Shares with respect to the Shares and the Warrant Shares with the
Nasdaq National Market.


 


4.                                       Representations, Warranties and Covenants
of the Company.  The Company hereby represents and warrants
to, and covenants with, the Investor, as follows:


 


4.1                                       Organization. 
The Company is duly organized and validly existing in good standing
under the laws of the State of Delaware. 
The Company has full power and authority to own or lease its properties
and to conduct its business as presently conducted and as described in the
documents filed by the Company under the Securities Act (such documents, the “Securities
Act Documents”) and the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder (the “Exchange Act”), since the
end of its most recently completed fiscal year through the date hereof (the “Exchange
Act Documents,” and together with the Securities Act Documents, the “SEC
Documents”) and is registered or qualified to do business and in good standing
in each jurisdiction in which the nature of the business conducted by it or the
location of the properties owned or leased by it requires such qualification
and where the failure to be so qualified would have a material adverse effect
upon the condition (financial or otherwise), operations (including results
thereof), business or properties of the Company (a “Material Adverse Effect”),
and no proceeding has been instituted in any such jurisdiction, revoking,
limiting or curtailing, or seeking to revoke, limit or curtail, such power and
authority or qualification.  Other than
Advanced Life Sciences, Inc., the Company has no subsidiaries (as defined in
Rule 405 of the Securities Act).


 


4.2                                       Due Authorization and Valid Issuance. 
The Company has all requisite corporate power and authority to execute,
deliver and perform its obligations under the Agreement, and the Agreement has
been duly authorized and validly executed and delivered by the Company and
constitutes the legal, valid and binding agreement of the Company enforceable
against the Company in accordance with its terms, except as rights to indemnity
and contribution may be limited by state or federal securities laws or the public
policy underlying such laws, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors’ and contracting parties’ rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
law).  The Shares and the Warrants being
purchased by the Investor hereunder, and the shares of common stock of the
Company to be issued to the Investors upon an exercise of all or part of the
Warrants (the “Warrant Shares”), will, upon issuance and payment therefor
pursuant to the terms hereof, be duly authorized, validly issued, fully-paid
and nonassessable.


 


4.3                                       Non-Contravention. 
The execution and delivery of the Agreement, the issuance and sale of
the Shares and the Warrants under the Agreement, the issuance of the Warrant
Shares upon exercise of the Warrants, the fulfillment of the terms of the
Agreement and the consummation of the transactions contemplated hereby will not
(A) conflict with or constitute a violation of, or default (with the
passage of time or otherwise) under, (i) any bond, debenture, note or
other evidence of indebtedness, lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture or other agreement or instrument to which
the Company is a party or by which it or its properties are bound,
(ii) the charter, by-laws or other organizational documents of the
Company, or (iii) any law, administrative regulation, ordinance or order
of any court or governmental agency, arbitration panel or authority applicable
to the Company or its properties, except in the case of clauses (i) and
(iii) for any such conflicts, violations or defaults that are not reasonably
likely to have a Material Adverse Effect or (B) result in the creation or
imposition of any lien, encumbrance, claim, security interest or restriction
whatsoever upon any of the properties or assets of the Company or an
acceleration of indebtedness pursuant to any obligation, agreement or condition
contained in any bond, debenture, note or any other evidence of indebtedness or
any indenture, mortgage, deed of trust or any other agreement or instrument to
which the Company is a party or by which it is bound or to which any of the
material property or assets of the Company is subject, except for such liens,
encumbrances, claims, security interests or restrictions upon any of the
properties or assets of the Company or accelerations of indebtedness that are
not reasonably likely to have a Material Adverse Effect.  No consent, approval, authorization or other
order of, or registration, qualification or filing with, any regulatory body,
administrative agency, or other governmental body or any other 

















 


person is required
for the execution and delivery of the Agreement, the valid issuance and sale of
the Shares and the Warrants to be sold pursuant to the Agreement, or the valid
issuance of the Warrant Shares upon exercise of the Warrants, other than such as
have been made or obtained, and except for any post-closing securities filings
or notifications required to be made under federal or state securities laws.


 


4.4                                       Capitalization. 
The capitalization of the Company as of September 30, 2005 is as set
forth in the most recent applicable SEC Documents, increased as set forth in
the next sentence.  The Company has not
issued any capital stock since that date other than pursuant to (i) employee
benefit plans disclosed in the SEC Documents, or (ii) outstanding warrants,
options or other securities disclosed in the SEC Documents.  The outstanding shares of capital stock of
the Company have been duly and validly issued and are fully paid and
nonassessable, have been issued in compliance with all federal and state securities
laws, and were not issued in violation of any preemptive rights or similar
rights to subscribe for or purchase securities. 
Except as set forth in or contemplated by the SEC Documents, and other
than options issued to officers, directors and employees of the Company under
its employee benefit plans, the Warrants and any warrants issued pursuant to
the Contemporaneous Offering, there are no outstanding rights (including,
without limitation, preemptive rights), warrants or options to acquire, or instruments
convertible into or exchangeable for, any unissued shares of capital stock or
other equity interest in the Company, or any contract, commitment, agreement,
understanding or arrangement of any kind to which the Company is a party or of
which the Company has knowledge and relating to the issuance or sale of any
capital stock of the Company, any such convertible or exchangeable securities
or any such rights, warrants or options. 
Without limiting the foregoing, no preemptive right, co-sale right,
right of first refusal or other similar right exists with respect to the
Shares, the Warrants or the Warrant Shares or the issuance and sale
thereof.  No further approval or
authorization of any stockholder or the Board of Directors of the Company or
others is required for the issuance and sale of the Shares and the Warrants or
the issuance of the Warrant Shares upon exercise of the Warrants. Except as
disclosed in the SEC Documents, there are no stockholders agreements, voting
agreements or other similar agreements with respect to the Common Stock to
which the Company is a party or, to the knowledge of the Company, between or
among any of the Company’s stockholders. The issuance and sale of the Shares
and the Warrants, and the issuance of the Warrant Shares upon exercise of the
Warrants, will not result in a right of any current holder of Company
securities to adjust the exercise, conversion, exchange or reset price under
such securities.  Subject to the filing
of the notification with the Nasdaq National Market, the issuance and sale of
the Shares under the Agreement does not contravene the rules and regulations of
the Nasdaq National Market, and, in furtherance of the foregoing sentence, no
approval of the stockholders of the Company thereunder is required for the
Company to issue and deliver to the Investors the maximum number of the Shares
and the Warrants, or the issuance of the Warrant Shares upon exercise of the
Warrants, contemplated by the Agreement.


 


4.5                                       Legal Proceedings; Disagreements with
Advisors.  There is no material legal or governmental
investigation, action, suit or proceeding pending or, to the knowledge of the
Company, threatened to which the Company is or may be a party or of which the
business or property of the Company is subject that is not disclosed in the SEC
Documents.  There are no material
disagreements presently existing, or reasonably anticipated by the Company to
arise, between the accountants formerly or presently employed by the Company.


 


4.6                                       No Violations. 
The Company is not (i) in violation of its charter, bylaws or any other
organizational documents; (ii) in violation of any federal, state or local law,
administrative regulation, ordinance or order of any court or governmental
agency, arbitration panel or authority applicable to the Company, which
violation, individually or in the aggregate, would be reasonably likely to have
a Material Adverse Effect; or (iii) in default (and there exists no condition
which, with the passage of time or otherwise, would constitute a default) in the
performance of any bond, debenture, note or any other evidence of indebtedness
in any indenture, mortgage, deed of trust or any other agreement or instrument
to which the Company is a party or by which the Company is bound or by which
the properties of the Company are bound, which would be reasonably likely to
have a Material Adverse Effect.


 


4.7                                       Governmental Permits, Etc. 
With the exception of the matters which are dealt with separately in
Sections 4.1, 4.12, 4.13, and 4.14, the Company has all necessary
franchises, licenses, certificates and other authorizations from any foreign,
federal, state or local government or governmental agency, department, or body
that are currently necessary for the operation of the business of the Company
as currently conducted and as described in the SEC Documents, except where the
failure to currently possess would not have a Material Adverse Effect.


 


4.8                                       Intellectual Property. 
Except as specifically disclosed in the SEC Documents (i)  the
Company owns or possesses sufficient rights to use all patents, patent rights,
trademarks, copyrights, licenses, inventions, trade secrets, trade names and
know-how (including trade secrets and other unpatented and/or unpatentable
property or confidential information, systems, processes or procedures)
(collectively, “Intellectual Property”) described or referred to in the SEC
Documents as owned or possessed by it or that are necessary for the conduct of
its business as now conducted as described in the SEC Documents except 

















 


where the failure
to currently own or possess would not have a Material Adverse Effect, (ii) the
Company is not infringing, and has not received any notice of, and has no
knowledge of, any asserted infringement by the Company of any rights of a third
party with respect to any Intellectual Property that, individually or in the
aggregate, would have a Material Adverse Effect and (iii) the Company  has not received any notice of, and has no
knowledge of, infringement by a third party with respect to any Intellectual
Property rights of the Company that, individually or in the aggregate, would
have a Material Adverse Effect.  Further,
except as described in the SEC Documents or exhibits thereto, or as would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect, no third party, including any academic or governmental
organization, possesses rights to the Intellectual Property which, if
exercised, could enable such third party to develop products competitive with
the business of the Company as currently being conducted.


 


4.9                                       Financial Statements; Obligations to
Related Parties.  (a) The financial statements of the Company
and the related notes contained in the SEC Documents present fairly, in
accordance with generally accepted accounting principles, the financial
position of the Company as of the dates indicated, and the results of its
operations and cash flows for the periods therein specified consistent with the
books and records of the Company except that the unaudited interim financial statements
were or are subject to normal and recurring year-end adjustments which are not
expected to be material in amount.  Such
financial statements (including the related notes) have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods therein specified, except as may be
disclosed in the notes to such financial
statements, or in the case of unaudited statements, as may be permitted by the
Securities and Exchange Commission (the “SEC”) on Form 10-Q under the
Exchange Act and except as disclosed in the SEC Documents.  The other financial information contained in
the SEC Documents has been prepared on a basis consistent with the financial
statements of the Company.  As of their
respective 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 published rules and regulations of the SEC with
respect thereto.


 


(b)                                 Except
as set forth in any SEC Documents, there are no obligations of the Company to
officers, directors, stockholders or employees of the Company other than (i)
for payment of salary for services rendered and for bonus payments; (ii)
reimbursements for reasonable expenses incurred on behalf of the Company; (iii)
for other standard employee benefits made generally available to all employees
(including stock option agreements outstanding under any stock option plan
approved by the Board of Directors of the Company); and (iv) obligations listed
in the Company’s financial statements.


 


4.10                                 No Material Adverse Change. 
Except as disclosed in the SEC Documents, since September 30, 2005,
there has not been (i) any material adverse change in the financial
condition or earnings of the Company, (ii) any material adverse event
affecting the Company, (iii) any obligation, direct or contingent, that is
material to the Company, incurred by the Company, except obligations incurred
in the ordinary course of business, (iv) any dividend or distribution of
any kind declared, paid or made on the capital stock of the Company or
(v) any loss or damage (whether or not insured) to the physical property
of the Company which has been sustained, in each case, which has a Material
Adverse Effect.


 


4.11                                 Disclosure. The representations and warranties of the Company
contained in this Section 4 as of the date hereof and as of the Closing
Date, do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.  Except with respect to the material terms and conditions of the
transaction contemplated by the Agreement, the anticipated use of the proceeds
therefrom, each of which shall be publicly disclosed by the Company pursuant to
Section 16 hereof, the Company confirms that neither it nor any person acting
on its behalf has provided the Investors with any information that the Company
believes constitutes material, non-public information.  The Company understands and confirms that the
Investors will rely on the foregoing representations in effecting transactions
in the securities of the Company.


 


4.12                                 Nasdaq Compliance. 
The Company’s Common Stock is registered pursuant to Section 12(g)
of the Exchange Act and is listed on the Nasdaq National Market (“Nasdaq”), and
the Company has taken no action designed to, or likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act or
de-listing the Common Stock from Nasdaq, nor has the Company received any
notification that the SEC or Nasdaq is contemplating terminating such
registration or listing.


 


4.13                                 Reporting Status. 
The Company has filed in a timely manner all documents that the Company
was required to file under the Exchange Act since August 5, 2005.  The following documents complied in all
material respects with the SEC’s requirements as of their respective filing
dates, and the information contained therein as of the date thereof did not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein in
light of the circumstances under which they were made not misleading:

















 


(a)                                        the Quarterly Report on Form 10-Q for the
quarter ended September 30, 2005, filed by the Company with the SEC on November
10, 2005;


 


(c)                                        the Prospectus filed by the Company with
the SEC pursuant to Rule 424(b)(4) on August 5, 2005; and


 


(d)                                       all other documents, if any, filed by the
Company with the SEC during the
period from the date of filing the Prospectus filed by the Company with the SEC
pursuant to Rule 424(b)(4) on August 5, 2005 to the date of the Agreement
pursuant to the reporting requirements of the Exchange Act.


 


4.14                                 Listing.  The Company
shall use reasonable commercial efforts to comply with all requirements of
Nasdaq with respect to the listing of the Shares and the Warrant Shares on
Nasdaq.  The Company shall comply with
all requirements of the SEC with respect to the issuance of the Shares, the
Warrants and the Warrant Shares.


 


4.15                                 No Manipulation of Stock. 
The Company has not taken and will not, in violation of applicable law,
take, any action designed to or that might reasonably be expected to cause or
result in stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of any of the Shares, the Warrants or the Warrant
Shares.


 


4.16                                 Company not an “Investment Company”. 
The Company has been advised of the rules and requirements under the
Investment Company Act of 1940, as amended (the “Investment Company Act”).  The Company is not, and immediately after
receipt of payment for the Shares and the Warrants will not be, an “investment
company” or, to the knowledge of the Company, an entity “controlled” by an “investment
company” within the meaning of the Investment Company Act and shall conduct its
business in a manner so that it will not become subject to the Investment
Company Act.


 


4.17                                 Foreign Corrupt Practices. 
Neither the Company, nor to the knowledge of the Company, any agent or
other person acting on behalf of the Company, has (i) directly or indirectly,
used any corrupt funds for unlawful contributions, gifts, entertainment or
other unlawful expenses related to foreign or domestic political activity, (ii)
made any unlawful payment to foreign or domestic government officials or
employees or to any foreign or domestic political parties or campaigns from
corporate funds, (iii) failed to disclose fully any contribution made by the
Company (or made by any person acting on its behalf of which the Company is
aware) which is in violation of law or (iv) violated in any material respect
any provision of the Foreign Corrupt Practices Act of 1977, as amended.


 


4.18                           Accountants. 
To the Company’s knowledge, Deloitte & Touche LLP, who the Company
expects will consent to the inclusion (or incorporation by reference, as the
case may be) of its report to be issued with respect to the financial
statements to be filed with the Company’s annual report on Form 10-K for the
year ended December 31, 2005 into the Registration Statement (as defined below)
and the prospectus which forms a part thereof, are and, during the periods that
will be covered by their reports, were independent accountants as required by
the Securities Act.


4.19                                 Contracts.  The contracts
described in the SEC Documents that are material to the Company are in full
force and effect on the date hereof, and neither the Company nor, to the
Company’s knowledge, any other party to such contracts is in breach of or
default, or received a notice of termination under any of such contracts which
would have a Material Adverse Effect. 
The Company has filed with the SEC all contracts and agreements required
to be filed by the Exchange Act.


4.20                                 Taxes.  The Company
has filed (or has obtained an extension of time within which to file) all
necessary federal, state and foreign income and franchise tax returns and has
paid all taxes shown as due on such tax returns, except where the failure to so
file or the failure to so pay would not have a Material Adverse Effect.  The Company is not aware of any tax
deficiency that has been or might be asserted or threatened against it that would
have a Material Adverse Effect.


 


4.21                                 Private Offering. 
Assuming the correctness of the representations and warranties of the
Investor set forth in Section 5 hereof and assuming that Lazard Capital
Markets LLC has not offered or sold any of the Shares or Warrants by any form
of general solicitation or advertising, the offer and sale of the Shares and
the Warrants and the issuance of the Warrant Shares upon exercise of the
Warrants is exempt from registration under the Securities Act.  The Company has not distributed and will not
distribute prior to the Closing Date any offering material in connection with
the transaction contemplated by the Agreement and sale of the Shares and the
Warrants other than the documents of which the Agreement is a part or the SEC
Documents.  The Company has not in the
past nor will it hereafter take any action independent of the placement agent
to sell, offer for sale or solicit offers to buy any securities of the Company
which would bring the offer, issuance or sale of the Shares and the Warrants as
contemplated by the Agreement within the provisions of Section 5 of the
Securities Act, unless such offer, issuance or sale was or shall be within the
exemptions of Section 4 of the Securities Act.  Neither the Company nor any person
acting on behalf of the 

















 


Company (other
than Lazard Capital Markets LLC) has offered or sold any of the Shares or the
Warrants by any form of general solicitation or general advertising.  The Company has offered the Shares and the
Warrants for sale only to the Investors and certain other “accredited investors”
within the meaning of Rule 501 under the Securities Act.


 


4.22                                 Disclosure Controls and Procedures. 
The Company is in material compliance with all provisions of the
Sarbanes-Oxley Act of 2002 which are applicable to it as of the Closing
Date.  The Company maintains a system of
internal control over financial reporting (as such term is defined in the
Exchange Act) sufficient to provide reasonable assurance that (i) transactions
are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management’s general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.  The Company’s certifying officers are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in the Exchange Act) for the Company and they have (a) designed
such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under their supervision, to ensure that material
information relating to the Company is made known to the certifying officers by
others within those entities, particularly during the periods in which the
Company’s filings under the Exchange Act have been prepared; (b) evaluated the
effectiveness of the Company’s disclosure controls and procedures and presented
in the Company’s filings under the Exchange Act their conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
periods covered by such filings under the Exchange Act  based on such evaluation; and (c) since the
last evaluation date referred to in (b) above, there has been no change in the
Company’s internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, the Company’s internal
control over financial reporting (as such term is defined in the Exchange Act)
or, to the Company’s knowledge, in other factors that could significantly
affect the Company’s internal control over financial reporting.


 


4.23                                 Transactions With
Affiliates.  There are no
business relationships or related-party transactions involving the Company or
any other person required to be described in the SEC Documents that have not
been described as required.


 


4.24                           No Registration Rights. 
Upon the filing of the Registration Statement (as defined below), no
person will have the right, which right has not been waived, to require the
Company to register any securities for sale under the Securities Act by reason
of the filing of the Registration Statement with the SEC or the issuance and
sale of the Shares or the Warrant Shares.


 


4.25                           Company Acknowledgement of Investor
Representation.  The Company acknowledges and agrees that
Investor does not make or has not made any representations or warranties with
respect to the transactions contemplated hereby other than those specifically
set forth in Sections 5 and 16(a) of the Agreement, or in the Investor
Questionnaire.


 


5.                                       Representations, Warranties and Covenants
of the Investor.


 


5.1                                       The Investor represents and warrants to,
and covenants with, the Company that: (i) the Investor is an “accredited
investor” as defined in Regulation D under the Securities Act and the Investor
is also knowledgeable, sophisticated and experienced in making, and is
qualified to make decisions with respect to investments in shares presenting an
investment decision like that involved in the purchase of the number of the
Shares and the number of the Warrants, in each case, set forth on the Investor’s
signature page to this Agreement, including investments in securities issued by
the Company and investments in comparable companies, and has requested,
received, reviewed and considered all information it deemed relevant in making
an informed decision to purchase the Shares and the Warrants; (ii) the
Investor is acquiring the Shares and the Warrants in the ordinary course of its
business and for its own account for investment only and with no present
intention of distributing any of the Shares or the Warrant Shares (other than
pursuant to the Registration Statement) or any arrangement or understanding
with any other persons regarding the distribution of the Shares or the Warrant
Shares; (iii) the Investor will not, directly or indirectly, offer, sell,
pledge, transfer or otherwise dispose of (or solicit any offers to buy,
purchase or otherwise acquire or take a pledge of) any of the Shares or the
Warrant Shares except in compliance with the Securities Act, applicable state
securities laws and the respective rules and regulations promulgated
thereunder; (iv) the Investor has answered all questions on the Investor
Questionnaire attached hereto for use in preparation of the Registration
Statement and the answers thereto are true, correct and complete as of the date
hereof and will be true, correct and complete as of the Closing Date and the
Filing Date; (v) the Investor will notify the Company immediately of any
change in any of such information until such time as such Investor has sold all
of the Shares and the Warrant Shares owned by it or until the Company is no
longer required to keep the Registration Statement effective (other than
changes in the number of Shares or Warrant Shares); and (vi) the Investor has,
in connection with its decision to purchase the number of the Shares and the
Warrants relied only upon the SEC Documents and the representations and
warranties of the Company contained herein. 
The Investor understands that its acquisition of the Shares and the
Warrants has not been registered under the Securities 

















 


Act or registered
or qualified under any state securities law in reliance on specific exemptions
therefrom, which exemptions may depend upon, among other things, the bona fide
nature of the Investor’s investment intent as expressed herein.  Subject
to compliance with the Securities Act, applicable securities laws and the
respective rules and regulations promulgated thereunder, nothing contained
herein shall be deemed a representation or warranty by the Investor to hold the
Shares, the Warrants or the Warrant Shares for any period of time.


 


5.2                                       The Investor acknowledges, represents and
agrees that no action has been or will be taken in any jurisdiction outside the
United States by the Company that would permit an offering of the Shares, the
Warrants or the Warrant Shares or possession or distribution of offering
materials in connection with the issue of the Shares, the Warrants or the
Warrant Shares in any jurisdiction outside the United States where legal action
by the Company for that purpose is required. 
Any Investor outside the United States will comply with all applicable
laws and regulations in each foreign jurisdiction in which it purchases,
offers, sells or delivers the Shares, the Warrants or the Warrant Shares or has
in its possession or distributes any offering material, in all cases at its own
expense.


 


5.3                                       The Investor hereby covenants with the
Company not to make any sale of the Shares, the Warrants and the Warrant Shares
without complying with the provisions of the Agreement and without causing the
prospectus delivery requirement under the Securities Act to be satisfied
(whether by delivery (including deemed delivery) of the Prospectus or pursuant
to and in compliance with an exemption from such requirement), and each Investor
acknowledges that the certificates evidencing the Shares, the Warrants and the
Warrant Shares will be imprinted with a legend that prohibits their transfer
except in accordance therewith.  The
Investor acknowledges that there may occasionally be times when the Company
determines that it must suspend the use of the Prospectus forming a part of the
Registration Statement, as set forth in Section 7.2(c).


 


5.4                                       The Investor further represents and
warrants to, and covenants with, the Company that (i) the Investor has
full right, power, authority and capacity to enter into the Agreement and to
consummate the transactions contemplated hereby and has taken all necessary
action to authorize the execution, delivery and performance of the Agreement,
and (ii) the Agreement constitutes a valid and binding obligation of the
Investor enforceable against such Investor in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ and contracting
parties’ rights generally, except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law) and except as the indemnification
agreements of the Investors herein may be legally unenforceable.


 


5.5                                       During the last thirty (30) days prior to
the date hereof, neither such Investor nor any Affiliate of such Investor which
(x) had knowledge of the transactions contemplated hereby, (y) has or shares
discretion relating to such Investor’s investments or trading or information
concerning such Investor’s investments, including in respect of the Shares and
Warrants, or (z) is subject to such Investor’s review or input concerning such
Affiliate’s investments or trading (collectively, “Trading Affiliates”) has,
directly or indirectly, effected or agreed to effect any short sale, whether or
not against the box, established any “put equivalent position” (as defined in
Rule 16a-1(h) under the 1934 Act) with respect to the Common Stock, borrowed or
pre borrowed any shares of Common Stock, granted any other right (including,
without limitation, any put or call option) with respect to the Common Stock or
with respect to any security that includes, relates to or derived any
significant part of its value from the Common Stock or otherwise sought to
hedge its position in the Company’s securities (each, a “Prohibited Transaction”).  Prior to the earliest to occur of (i) the
termination of this Agreement, (ii) the effective date of the Registration
Statement or (iii) the Required Effective Date, such Investor shall not, and
shall cause its Trading Affiliates not to, (A) engage, directly or indirectly,
in a Prohibited Transaction, or (B) effect any sale, assignment, pledge,
hypothecation, put, call, transfer or other disposition of any Shares and
Warrants.


 


5.6                                       The Investor understands that nothing in
the SEC Documents, the Agreement or any other materials presented to the
Investor in connection with the purchase and sale of the Shares and the
Warrants or the issuance of the Warrant Shares constitutes legal, tax or
investment advice.  The Investor has
consulted such legal, tax and investment advisors as it, in its sole
discretion, has deemed necessary or appropriate in connection with its purchase
of the Shares and the Warrants.


 


6.                                       Survival of Representations, Warranties
and Agreements.  Notwithstanding any investigation made by any
party to the Agreement, all covenants, agreements, representations and warranties
made by the Company and the Investor herein shall survive the execution of the
Agreement, the delivery to the Investor of the Shares and the Warrants being
purchased and the payment therefore; provided, that the representations
and warranties contained herein shall expire on the one-year anniversary of the
Closing Date.


 

















 


7.                                       Registration of the Shares and the
Warrant Shares; Compliance with the Securities Act.


 


7.1                                       Registration Procedures and Other Matters. 
The Company shall:


 


(a)                            subject to receipt of necessary
information from the Investors after prompt request from the Company to the
Investors to provide such information, prepare and file with the SEC, within 30
days after the Closing Date (the “Filing Date”), a registration statement on
Form S-1 (the “Registration Statement”) to enable the resale of the Shares and
the Warrant Shares by the Investors from time to time in compliance with the
Securities Act;


 


(b)                           subject to receipt of necessary
information from the Investor after prompt request from the Company to the
Investors to provide such information, use its best efforts to cause the
Registration Statement to become effective on or prior to the sixtieth (60th) day after
the Closing Date (the “Required Effective Date”).  However, so long as the Company filed the
Registration Statement by the Filing Date, if the Registration Statement
receives SEC review, then the Required Effective Date will be the one hundred
twentieth (120th) calendar day after the Closing Date;


 


(c)                            use its best efforts to prepare and file
with the SEC such amendments and supplements to the Registration Statement in
compliance with applicable laws, and the prospectus used in connection
therewith (the “Prospectus”) as may be necessary to keep the Registration
Statement current, effective and free from any material misstatement or
omission to state a material fact for a period not exceeding, with respect to
the Shares purchased by the Investor and the Warrant Shares issued pursuant to
the Warrants, the earlier of (i) the second anniversary of the Closing
Date, (ii) the date on which the Investor may sell all of the Shares and
the Warrant Shares then held by the Investor without restriction by the volume
limitations of Rule 144(e) of the Securities Act, or (iii) such time
as all of the Shares purchased by the Investor in the transaction contemplated
by the Agreement and the Warrant Shares issued to the Investor pursuant to the
Warrants have been sold pursuant to a registration statement;


 


(d)                           furnish to the Investor with respect to the
Shares and the Warrant Shares registered under the Registration Statement such
number of copies of the Registration Statement, Prospectuses and preliminary
Prospectuses in conformity with
the requirements of the Securities Act and such other documents as the Investor
may reasonably request, in order to facilitate the public sale or other
disposition of all or any of the Shares and the Warrant Shares by the Investor;


 


(e)                            file documents required of the Company
for blue sky clearance in states specified in writing by the Investors and use
its commercially reasonable efforts to maintain such blue sky qualifications
during the period the Company is required to maintain the effectiveness of the
Registration Statement pursuant to Section 7.1(c); provided, however,
that the Company shall not be required to qualify to do business or consent to
service of process in any jurisdiction in which it is not now so qualified or
has not so consented;


 


(f)                              bear all expenses in connection with the
procedures in paragraph (a) through (e), (h) and the last paragraph of this
Section 7.1 and the registration of the Shares and the Warrant Shares
pursuant to the Registration Statement (other than underwriting discounts or
commissions, brokers’ fees and similar selling expenses and any other fees or
expenses incurred by the Investors, including attorneys’ fees);


 


(g)                           advise the Investor, promptly after it
shall receive notice or obtain knowledge of the issuance of any stop order by
the SEC delaying or suspending the effectiveness of the Registration Statement
or of the initiation or threat of any proceeding for that purpose; and it will
promptly use its commercially reasonable efforts to prevent the issuance of any
stop order or to obtain its withdrawal as promptly as possible moment if such
stop order should be issued;


 


(h)                           include in the Registration Statement a “Plan
of Distribution” section substantially in the form attached hereto as Exhibit
A; and


 


(i)                               upon becoming eligible to use Form S-3,
convert the Registration Statement from a Form S-1 to a Form S-3 as promptly as
practicable.


 


Notwithstanding
anything to the contrary herein, the Registration Statement shall cover only
the Shares and the Warrant Shares, but the parties acknowledge that the Company
may choose to include, at its option and solely for its convenience, the Shares
and the Warrant Shares on a registration statement with other similar
securities, but only if to do so would not adversely affect the Investor.  In no event at any time before the
Registration Statement becomes effective with respect to the Shares and the
Warrant Shares shall the Company publicly announce or file any other
registration statement, other than registrations on Form S-8,

















 


without the prior
written consent of a majority in interest of the Investor and the third-party
purchasers in the Contemporaneous Offering.


 


The Company
understands that the Investor disclaims being an underwriter, but any Investor
being deemed an underwriter by the SEC shall not relieve the Company of any
obligations it has hereunder; provided, however that if the
Company receives notification from the SEC that an Investor is deemed an
underwriter, then the period by which the Company is obligated to submit an
acceleration request to the SEC shall be extended to the earlier of
(i) the 90th day after such SEC notification or (ii) 150 days after
the initial filing of the Registration Statement with the SEC.


 


Within three business
days of the effectiveness date of the Registration Statement, the Company shall
give notice to the Investor of such effectiveness and use its commercially
reasonable efforts to cause its counsel to issue an appropriate opinion or
opinions to the transfer agent substantially to the effect that the shares are
subject to an effective registration statement and can be reissued free of
restrictive legend in accordance with provisions of Section 7.6.


 


7.2                                       Transfer of the Shares and the Warrant
Shares After Registration; Suspension.


 


(a)                            The Investor agrees that it will not
effect any disposition of the Shares or the Warrant Shares or its right to
purchase the Shares or the Warrant Shares that would constitute a sale within
the meaning of the Securities Act except as contemplated in the Registration
Statement referred to in Section 7.1 and as described below or as
otherwise permitted by law, and that it will promptly notify the Company of any
changes in the information set forth in the Registration Statement regarding
such Investor or its plan of distribution (other than changes in the number of
Shares or Warrant Shares). In connection with any transfer of the Shares or the
Warrant Shares other than pursuant to an effective registration statement, to
the Company or to an affiliate of the Investor (who is an accredited investor
and executes a customary representation letter), the Company may require the
transferor thereof to provide to the Company an opinion of counsel which
opinion shall be reasonably satisfactory to the Company, to the effect that
such transfer does not require registration of such transferred Shares or
Warrant Shares under the Securities Act.


 


(b)                           Except in the event that paragraph (c)
below applies, the Company shall (i) if deemed necessary by the Company,
prepare and file from time to time with the SEC a post-effective amendment to
the Registration Statement or a supplement to the related Prospectus or a
supplement or amendment to any document incorporated therein by reference or
file any other required document so that such Registration Statement will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and so that, as thereafter delivered to purchasers of the Shares or
the Warrant Shares being sold thereunder, such Prospectus will not contain an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; (ii) provide
the Investor copies of any documents filed pursuant to Section 7.2(b)(i)
as they reasonably request; and (iii) inform the Investor that the Company
has complied with its obligations in Section 7.2(b)(i) (or that, if the
Company has filed a post-effective amendment to the Registration Statement
which has not yet been declared effective, the Company will notify the Investor
to that effect, will use its best efforts to secure the effectiveness of such
post-effective amendment as promptly as possible and will promptly notify each
Investor pursuant to Section 7.2(b)(i) hereof when the amendment has
become effective).


 


(c)                            Subject to paragraph (d) below, in the
event (i) of any request by the SEC or any other federal or state
governmental authority during the period of effectiveness of the Registration
Statement for amendments or supplements to a Registration Statement or related
Prospectus or for additional information; (ii) of the issuance by the SEC
or any other federal or state governmental authority of any stop order
suspending the effectiveness of a Registration Statement or the initiation of
any proceedings for that purpose; (iii) of the receipt by the Company of
any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Shares for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose; or (iv) of
any event or circumstance which, upon the good faith judgment of the Company’s
Board of Directors based on the advice of its counsel, necessitates the making
of any changes in the Registration Statement or Prospectus, or any document
incorporated or deemed to be incorporated therein by reference, so that, in the
case of the Registration Statement, it will not contain any untrue statement of
a material fact or any omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and that in
the case of the Prospectus, it will not contain any untrue statement of a
material fact or any omission to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; then the Company
shall deliver a certificate in writing to the Investor (the “Suspension Notice”)
to the effect of the foregoing and, upon receipt of such Suspension Notice,
such Investor will refrain from selling any of the Shares or the Warrant Shares
pursuant to the Registration Statement (a “Suspension”) until the Investor’s
receipt of copies of a supplemented or amended Prospectus prepared and filed by
the Company, or until it is advised in writing by the Company that the current
Prospectus may be used, and has received copies of any additional or 

















 


supplemental
filings that are incorporated or deemed incorporated by reference in any such
Prospectus.  In the event of any
Suspension, the Company will use its best efforts to cause the use of the
Prospectus so suspended to be resumed as soon as reasonably practicable within
20 business days after the delivery of a Suspension Notice to the Investor.


 


(d)                           Notwithstanding the foregoing paragraphs
of this Section 7.2, the Investor shall not be prohibited from selling any
of the Shares or the Warrant Shares under the Registration Statement as a
result of Suspensions on more than two occasions of not more than 30 days each
in any twelve month period, unless, in the good faith judgment of the Company’s
Board of Directors based on the advice of its counsel, the sale of the Shares
or the Warrant Shares under the Registration Statement in reliance on this
paragraph 7.2(d) would be reasonably likely to cause a violation of the
Securities Act or the Exchange Act and result in liability to the Company.


 


(e)                            Provided that a Suspension is not then in
effect, the Investor may sell any of the Shares and the Warrant Shares under
the Registration Statement; provided, that it complies with the
prospectus delivery requirements under the Securities Act.  Upon receipt of a request therefor, the
Company has agreed to provide an adequate number of current Prospectuses to the
Investors and to supply copies to any other parties requiring such Prospectuses
pursuant to the Securities Act.


 


7.3                                       Indemnification. 
For the purpose of this Section 7.3:


 


(i)                                           the term “Selling Stockholder” means the
Investor and any affiliate of such Investor;


 


(ii)                                        the term “Registration Statement” shall
include the Prospectus in the form first filed with the SEC pursuant to
Rule 424(b) of the Securities Act or filed as part of the Registration
Statement at the time of effectiveness if no Rule 424(b) filing is
required, and any exhibit, supplement or amendment included in or relating to
the Registration Statement referred to in Section 7.1; and


 


(iii)                                     the term “untrue statement” for purposes
of Section 7.3(d) hereof shall include any untrue statement or alleged untrue
statement, or any omission or alleged omission to state in the Registration
Statement a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.


 


(a)                            The Company agrees to indemnify and hold
harmless each Selling Stockholder from and against any losses, claims, damages
or liabilities to which such Selling Stockholder may become subject (under the
Securities Act or otherwise) insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon (i) any breach of any of the representations or warranties of
the Company contained herein or failure to comply with any of the covenants and
agreements of the Company contained herein, (ii) any untrue statement of a
material fact contained in the Registration Statement as amended at the time of
effectiveness or any omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading, or (iii) any
failure by the Company to fulfill any undertaking included in the Registration
Statement as amended at the time of effectiveness, and the Company will
reimburse such Selling Stockholder for any reasonable legal or other expenses
reasonably incurred in investigating, defending or preparing to defend any such
action, proceeding or claim, or preparing to defend any such action, proceeding
or claim; provided, however, that the Company shall not be liable
to a Selling Stockholder to the extent that such loss, claim, damage or
liability arises out of, or is based upon, an untrue statement made in such
Registration Statement or any omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of such Selling Stockholder specifically for use in preparation of
the Registration Statement, or the failure of such Selling Stockholder to
comply with its covenants and agreements contained in Section 7.2 hereof
respecting sale of the Shares or the Warrant Shares or any statement or
omission in any Prospectus that is corrected in any subsequent Prospectus that
was delivered to the Selling Stockholder prior to the pertinent sale or sales
by the Selling Stockholder.  The Company
shall reimburse each Selling Stockholder for the amounts provided for herein on
demand as such expenses are incurred as reasonably documented by the Selling
Stockholder.


 


(b)                           The Investor agrees to indemnify and hold
harmless the Company (and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act, each officer of the
Company who signs the Registration Statement and each director of the Company)
from and against any losses, claims, damages or liabilities to which the
Company (or any such officer, director or controlling person) may become
subject (under the Securities Act or otherwise), insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of, or are based upon, (i) any failure to comply with the covenants
and agreements contained in Section 7.2 hereof respecting sale of the
Shares, (ii) any untrue statement of a material fact contained in the
Registration Statement or any omission of a material fact required to be stated
therein 

















 


or necessary to
make the statements therein not misleading if such untrue statement or omission
was made in reliance upon and in conformity with written information furnished
by or on behalf of such Investor specifically for use in preparation of the
Registration Statement or (iii) any breach of the representations and
warranties of the Investor contained in Section 5 hereof, and the Investor will
reimburse the Company (or such officer, director or controlling person), as the
case may be, for any legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action, proceeding or
claim; provided, that an
Investor’s obligation to indemnify the Company shall be limited to the net
amount received by the Investor from the sale of the Shares or Warrant Shares
by the Investor.


 


(c)                            Promptly after receipt by any indemnified
person of a notice of a claim or the beginning of any action in respect of
which indemnity is to be sought against an indemnifying person pursuant to this
Section 7.3, such indemnified person shall notify the indemnifying person
in writing of such claim or of the commencement of such action, but the
omission to so notify the indemnifying person will not relieve it from any
liability which it may have to any indemnified person under this
Section 7.3 (except to the extent that such omission materially and
adversely affects the indemnifying person’s ability to defend such action) or
from any liability otherwise than under this Section 7.3.  Subject to the provisions hereinafter stated,
in case any such action shall be brought against an indemnified person, the
indemnifying person shall be entitled to participate therein, and, to the
extent that it shall elect by written notice delivered to the indemnified
person promptly after receiving the aforesaid notice from such indemnified
person, shall be entitled to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified person.  After notice from the indemnifying person to
such indemnified person of its election to assume the defense thereof, such
indemnifying person shall not be liable to such indemnified person for any
legal expenses subsequently incurred by such indemnified person in connection
with the defense thereof; provided, however, that if there exists
or shall exist a conflict of interest that would make it inappropriate, in the
opinion of counsel to the indemnified person, for the same counsel to represent
both the indemnified person and such indemnifying person or any affiliate or
associate thereof, the indemnified person shall be entitled to retain its own
counsel at the expense of such indemnifying person; provided, however,
that no indemnifying person shall be responsible for the fees and expenses of
more than one separate counsel (together with appropriate local counsel) for
all indemnified parties hereunder and similarly situated indemnified parties
under the Securities Purchase Agreements with the third-party purchasers in
connection with the Contemporaneous Offering. 
In no event shall any indemnifying person be liable in respect of any
amounts paid in settlement of any action unless the indemnifying person shall
have approved the terms of such settlement; provided, that such consent
shall not be unreasonably withheld.  No
indemnifying person shall, without the prior written consent of the indemnified
person, effect any settlement of any pending or threatened proceeding in
respect of which any indemnified person is or could have been a party and
indemnification could have been sought hereunder by such indemnified person,
unless such settlement includes an unconditional release of such indemnified
person from all liability on claims that are the subject matter of such
proceeding.


 


(d)                           If the indemnification provided for in
this Section 7.3 is unavailable to or insufficient to hold harmless an
indemnified person under subsection (a) or (b) above in respect of any losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
referred to therein, then each indemnifying person shall contribute to the
amount paid or payable by such indemnified person as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative fault of the Company on
the one hand and an Investor, as well as any other Selling Stockholders under
such registration statement on the other in connection with the statements or
omissions or other matters which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations.  The relative
fault shall be determined by reference to, among other things, in the case of
an untrue statement, whether the untrue statement relates to information
supplied by the Company on the one hand or an Investor or other Selling
Stockholder on the other and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement.  The Company and the Investors agree that it
would not be just and equitable if contribution pursuant to this subsection (d)
were determined by pro rata allocation (even if the Investor and other Selling
Stockholders were treated as one entity for such purpose) or by any other
method of allocation which does not take into account the equitable
considerations referred to above in this subsection (d).  The amount paid or payable by an indemnified
person as a result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above in this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
person in connection with investigating or defending any such action or
claim.  Notwithstanding the provisions of
this subsection (d), no Investor shall be required to contribute any amount in
excess of the amount by which the net amount received by such Investor from the
sale of the Shares or the Warrant Shares to which such loss relates exceeds the
amount of any damages which such Investor has otherwise been required to pay by
reason of such untrue statement.  No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.  The Investor’s obligations in this subsection
to contribute shall be in proportion to its sale of the Shares or the Warrant
Shares to which such loss relates and shall not be joint with any other Selling
Stockholders.

















 


 


(e)                            The parties to the Agreement hereby
acknowledge that they are sophisticated business persons who were represented
by counsel during the negotiations regarding the provisions hereof including,
without limitation, the provisions of this Section 7.3, and are fully
informed regarding said provisions.  They
further acknowledge that the provisions of this Section 7.3 fairly
allocate the risks in light of the ability of the parties to investigate the
Company and its business in order to assure that adequate disclosure is made in
the Registration Statement as required by the Securities Act and the Exchange
Act.  The parties are advised that
federal or state public policy as interpreted by the courts in certain
jurisdictions may be contrary to certain of the provisions of this
Section 7.3, and the parties hereto hereby expressly waive and relinquish
any right or ability to assert such public policy as a defense to a claim under
this Section 7.3 and further agree not to attempt to assert any such
defense.


 


7.4                                       Termination of Conditions and Obligations. 
The conditions precedent imposed by Section 5 or this
Section 7 upon the transferability of the Shares and the Warrant Shares
shall cease and terminate as to any particular number of the Shares or the Warrant
Shares when such shares shall have been effectively registered under the
Securities Act and sold or otherwise disposed of in accordance with the
intended method of disposition set forth in the Registration Statement covering
such shares or at such time as an opinion of counsel reasonably satisfactory to
the Company shall have been rendered to the effect that such conditions are not
necessary in order to comply with the Securities Act.


 


7.5                                       Information Available. 
So long as the Registration Statement is effective covering the resale
of any of the Shares or the Warrant Shares owned by the Investor, the Company
will furnish to the Investor:


 


(a)                            as soon as practicable after it is
available, one copy of (i) its Annual Report to Stockholders (which Annual
Report shall contain financial statements audited in accordance with generally
accepted accounting principles by a national firm of certified public
accountants), (ii) its Annual Report on Form 10-K and (iii) its
Quarterly Reports on Form 10-Q (the foregoing, in each case, excluding
exhibits);


 


(b)                           upon the reasonable request of the
Investor, all exhibits excluded by the parenthetical to subparagraph
(a) of this Section 7.5 as filed with the SEC and all other
information that is made available to shareholders; and


 


(c)                            upon the reasonable request of the
Investor, an adequate number of copies of the Prospectuses to supply to any
other party requiring such Prospectuses.


 


7.6                                 Legend; Restrictions on Transfer. 
(a) The certificates for the Shares and the Warrants (and any securities
issued in respect of or exchange for the Shares or the Warrants, including,
without limitation, the Warrant Shares) shall be subject to a legend or legends
restricting transfer under the Securities Act and referring to restrictions on
transfer herein, such legend to be substantially as follows:


THE SECURITIES
REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE BEEN ISSUED AND SOLD IN
RELIANCE UPON EXEMPTIONS FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933
(THE “1933 ACT”) AND APPROPRIATE EXEMPTIONS FROM REGISTRATION UNDER THE
SECURITIES LAWS OF OTHER APPLICABLE JURISDICTIONS. THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD OR TRANSFERRED OTHER THAN PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER
THE 1933 ACT AND THE APPLICABLE SECURITIES LAWS OF ANY OTHER JURISDICTION.  THE ISSUER SHALL BE ENTITLED TO REQUIRE AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT WITH RESPECT TO COMPLIANCE OF
THE PROPOSED SALE OR TRANSFER WITH THE REGISTRATION REQUIREMENTS OF THE 1933
ACT OR EXEMPTION THEREFROM.


 


                                                The Investor expressly agrees that any
sale by such Investor of the Shares or the Warrant Shares pursuant to the
Registration Statement shall be sold in a manner described under the caption “Plan
of Distribution” in such Registration Statement and the Investor will deliver a
copy of the Prospectus contained in the Registration Statement to the purchaser
or purchasers (including through deemed delivery) in connection with such sale,
in each case in compliance with the requirements of the Securities Act and
Exchange Act applicable to such sale. 
The Investor further agrees that the Shares or the Warrant Shares shall
only be sold while the Registration Statement is effective, unless another
exemption from registration is available. 
On the basis of compliance by the Investor with the foregoing covenants,
upon effectiveness of the Registration Statement, the Company shall as soon as
practicable (but not later than three business days after surrender of the
legended certificates to the Company and notice of such surrender has been
provided pursuant to Section 8 below) cause certificates evidencing the Shares,
the Warrants and the 


 

















 


Warrant Shares previously issued to be replaced with certificates which
do not bear the restrictive legends specified above in this Section 7.6, and
all of the Shares, the Warrants and the Warrant Shares subsequently issued
shall not bear the restrictive legend specified above in this Section 7.6; provided,
that such Investor shall notify the Company promptly upon completion of the
sale of all of the Shares and the Warrant Shares owned by it.  The Investor acknowledges that the removal of
the restrictive legends from certificates representing the Shares, the Warrants
and the Warrant Shares as provided in this Section 7.6 is predicated upon the
Company’s reliance on the Investor’s compliance with its covenants in this
Section 7.6.


 


                                                                                                7.7                                 Damages. The Company and the Investor agree that
the Investor will suffer damages if the Company fails to fulfill its
obligations pursuant to Section 7.1 and 7.2 hereof and that it would not be
possible to ascertain the extent of such damages with precision.  Accordingly, the Company hereby agrees to pay
partial damages (“Liquidated Damages”) to the Investors under the following
circumstances:  (a) if the Registration
Statement is not filed by the Company on or prior to 30 days after the Closing
Date (such an event, a “Filing Default”); (b) if the Registration Statement is
not declared effective by the SEC on or prior to 60 days or, 120 days in the
event that the Registration Statement receives SEC review, after the Closing
Date (such an event, an “Effectiveness Default”); or (c) if the Registration
Statement (after its effectiveness date) ceases to be effective and available
to the Investors for any continuous period that exceeds 30 days or for one or
more periods that exceed in the aggregate 60 days in any 12-month period (such
an event, a “Suspension Default” and together with a Filing Default and an Effectiveness
Default, a “Registration Default”).  In
the event of a Registration Default, the Company shall as Liquidated Damages
pay, as set forth below, to each Investor, for each 30-day period of a
Registration Default, an amount in cash equal to 1% of the aggregate purchase
price paid by such Investor for the Shares purchased pursuant to this Agreement
and held at the time of the Registration Default; provided, that in no
event shall the aggregate amount of cash to be paid as Liquidated Damages
pursuant to this Section 7.7 exceed 10% of the aggregate purchase price paid by
the Investor.  The Company shall pay the
Liquidated Damages as follows:  (i) in
connection with a Filing Default, on the 31st day after the Closing Date, and each 30th day
thereafter until the Registration Statement is filed with the SEC; (ii) in
connection with an Effectiveness Default, on the 61st day after the Closing Date (or, in the event
that the Registration Statement receives SEC review, the 121st day after the Closing Date), and each 30th day
thereafter until the Registration Statement is declared effective by the SEC;
or (iii) in connection with a Suspension Default, on either (x) the 31st consecutive day of any Suspension or (y) the
61st day (in the
aggregate) of any Suspensions in any 12-month period, and each 30th day thereafter until the Suspension is
terminated in accordance with Section 7.2. 
Notwithstanding the foregoing, all periods shall be tolled during delays
directly caused by the action or inaction of any Investor, and the Company
shall have no liability to any Investor in respect of any such delay.  The Liquidated Damages payable herein shall
apply on a pro rata basis for any portion of a 30-day period of a Registration
Default.


 


8.                                       Notices.  All notices,
requests, consents and other communications hereunder shall be in writing,
shall be mailed (A) if within the United States by first-class registered
or certified airmail, or nationally recognized overnight express courier,
postage prepaid, or by facsimile or electronic mail, or (B) if delivered
from outside the United States, by International Federal Express (or other
recognized international express courier) or facsimile, and shall be deemed
given (i) if delivered by first-class registered or certified mail, three
business days after so mailed, (ii) if delivered by nationally recognized
overnight carrier (and next day delivery was specified), one business day after
so mailed, (iii) if delivered by International Federal Express (or other
recognized international express courier), two business days after so mailed,
or (iv) if delivered by facsimile or electronic mail, upon electronic
confirmation of receipt and shall be delivered as addressed as follows:


 


	
   

  	
  (a)

  	
  if to the Company, to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Advanced Life Sciences Holdings, Inc.

  
	
   

  	
   

  	
  1440 Davey Road

  
	
   

  	
   

  	
  Woodridge, IL 60517

  
	
   

  	
   

  	
  Attn: Patrick Flavin, Chief Legal Counsel

  
	
   

  	
   

  	
  Phone: (630) 739-6744, ext. 214

  
	
   

  	
   

  	
  Fax: (630) 739-6754

  
					



 


 


	
   

  	
  (b)

  	
  with a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Winston
  & Strawn LLP

  
	
   

  	
   

  	
  35
  West Wacker Drive

  
	
   

  	
   

  	
  Chicago,
  IL 60601

  
	
   

  	
   

  	
  Attention:
  R. Cabell Morris, Esq.

  
	
   

  	
   

  	
  Phone:
  (312) 558-5609

  
	
   

  	
   

  	
  Fax:
  (312) 558-5700

  
					



 

















 


 


	
   

  	
  (c)

  	
  if to the Investor, at its address on the signature
  page hereto, or at such other address or addresses as may have been furnished
  to the Company in writing.

  



 


 


Notwithstanding anything in the Agreement to the contrary, (a) the
Company may deliver any documents, information or notices required to be
delivered to an Investor under the Agreement by email, in any recognized
electronic format, including Portable Document Format (PDF) or Microsoft Word
document format, and (b) with respect to any documents, exhibits, filings,
furnishings or other submissions (other than any Registration Statement,
Prospectus, or Preliminary Prospectus pursuant to Section 7 hereof) publicly
available on the SEC’s EDGAR system (each, an “EDGAR Filing”), such EDGAR
Filing shall be deemed furnished by the Company to such Investor, in each case
as of the date first publicly available on the EDGAR system.


 


9.                                       Changes.  The Agreement
may be modified, amended or waived only pursuant to a written instrument signed
by the Company and (a) a majority in interest of the Investor and the third
party purchasers in the Contemporaneous Offering; provided, that such
modification, amendment or waiver is made with respect to all Securities
Purchase Agreements relating thereto and does not adversely affect the Investor
without adversely affecting the Investor and such third party Investors in a
similar manner or (b) the Investor.


 


10.                                 Headings.  The headings
of the various sections of the Agreement have been inserted for convenience of
reference only and shall not be deemed to be part of the Agreement.


 


11.                                 Severability. 
In case any provision contained in the Agreement should be invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any
way be affected or impaired thereby.


 


12.                                 Governing Law. 
The Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York, without giving effect to the principles of
conflicts of law.


 


13.                                 Counterparts. 
The Agreement may be executed in two or more counterparts, each of which
shall constitute an original, but all of which, when taken together, shall
constitute but one instrument, and shall become effective when one or more
counterparts have been signed by each party hereto and delivered to the other
parties.


 


14.                                 Entire Agreement. 
The Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior understandings or agreements concerning the
purchase and sale of the Shares and the Warrants and the resale registration of
the Shares and the Warrant Shares.


 


15.                                 Rule 144.  For three
years from the Closing Date, the Company covenants that it will timely file the
reports required to be filed by it under the Securities Act and the Exchange
Act and the rules and regulations adopted by the SEC thereunder (or, if the
Company is not required to file such reports, it will, upon the request of any
Investor holding any of the Shares purchased hereunder or the Warrant Shares
issued pursuant to the Warrants that is made after the first anniversary of the
Closing Date, make publicly available such information as necessary to permit
sales pursuant to Rule 144 under the Securities Act), and it will take such
further action as any such Investor may reasonably request, all to the extent
required from time to time to enable such Investor to sell such Shares or
Warrant Shares without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144 under the Securities Act,
as such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the SEC. 
Upon the request of an Investor, the Company will deliver to such holder
a written statement as to whether it has complied with such information and
requirements.


 


16.                                 Confidential Information.


 


                                                (a)                                        The Investor represents to the Company
that, at all times during the Company’s offering of the Shares and the
Warrants, such Investor has maintained in confidence all non-public information
regarding the Company received by such Investor from the Company or its agents,
including without limitation, the existence of the transaction contemplated
herein, and covenants that it will continue to maintain in confidence such
information until such information (a) becomes generally publicly available
other than through a violation of this provision by such Investor or its agents
or (b) is required to be disclosed in legal proceedings (such as by
deposition, interrogatory, request for documents, subpoena, civil investigation
demand, filing with any governmental authority or similar process); provided,
however, that before making any use or disclosure in reliance on this
subparagraph (b) the Investor shall give the Company at least fifteen (15) days
prior written notice (or such shorter period as required by law) specifying the
circumstances giving rise thereto and will furnish only that portion of the non-public
information 


 

















 


which is legally
required and will exercise its best efforts to obtain reliable assurance that
confidential treatment will be accorded any non-public information so
furnished.


 


                                                (b)                                       The Company shall
on the Closing Date, or on the following business day of the Closing Date,
issue a press release disclosing the material terms of the transactions
contemplated hereby (including at least the number of the Shares and the
Warrants sold and proceeds therefrom). 
The Company shall not publicly disclose the name of the Investor, or
include the name of the Investor in such press release or any filing with the
SEC or any regulatory agency or Nasdaq (other than the filing of the Agreement
with the SEC pursuant to the Exchange Act or the filing of the Registration
Statement in accordance with the provisions of Section 7 of the Agreement),
without the prior written consent of such Investor, except to the extent such
disclosure is required by law or Nasdaq regulations.


 


17.                                 No Third-Party
Beneficiaries.  Except as may
otherwise be expressly set forth herein, the Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.


 


18.                               Expenses.  The parties
shall pay their own legal and other expenses in connection with the
preparation, negotiation and execution of the Agreement and the consummation of
the transactions contemplated herein. 
For clarification purposes and without implication that the contrary
would otherwise be true, the transactions contemplated by the Agreement only
include the transaction between the Company and the Investor and do not include
any other transaction between the Company and any other third party purchaser
of the Company’s securities.


 


19.                                 Termination. 
The Investors may terminate the Agreement without any obligation or
liability thereunder or otherwise if the Closing does not occur within seven
(7) business days after the execution of the Agreement.


 

















 


ADVANCED LIFE SCIENCES HOLDINGS,
INC.


 


INVESTOR
QUESTIONNAIRE


 


(ALL
INFORMATION WILL BE TREATED CONFIDENTIALLY)


 


	
  To:

  	
   

  	
  Advanced Life Sciences Holdings, Inc.

  
	
   

  	
   

  	
  1440 Davey Road

  
	
   

  	
   

  	
  Woodridge, IL 60517

  



 


 


This Investor
Questionnaire (“Questionnaire”) must be completed by each potential investor in
connection with the offer and sale of the Shares and the Warrants.  The Warrants and the Shares are collectively
referred to herein as the “Securities”. 
The Securities are being offered and sold by Advanced Life Sciences
Holdings, Inc. (the “Corporation”) without registration under the Securities
Act of 1933, as amended (the “Act”), and the securities laws of certain states,
in reliance on the exemptions contained in Section 4(2) of the Act and on
Regulation D promulgated thereunder and in reliance on similar exemptions under
applicable state laws.  The Corporation
must determine that a potential investor meets certain suitability requirements
before offering or selling Securities to such investor.  The purpose of this Questionnaire is to
assure the Corporation that each investor will meet the applicable suitability
requirements.  The information supplied
by you will be used in determining whether you meet such criteria, and reliance
upon the private offering exemption from registration is based in part on the
information herein supplied.  The
information provided herein may be used by the Corporation in connection with
the filing of a Registration Statement for the resale of the Shares and the Warrant
Shares.


 


This Questionnaire
does not constitute an offer to sell or a solicitation of an offer to buy any
security.  Your answers will be kept
strictly confidential.  However, by
signing this Questionnaire you will be authorizing the Corporation to provide a
completed copy of this Questionnaire to such parties as the Corporation deems
appropriate in order to ensure that the offer and sale of the Securities will
not result in a violation of the Act or the securities laws of any state and
that you otherwise satisfy the suitability standards applicable to purchasers
of the Securities.  All potential
investors must answer all applicable questions and complete, date and sign this
Questionnaire.  Please print or type your
responses and attach additional sheets of paper if necessary to complete your
answers to any item.  Capitalized terms
used but not defined herein have the meaning given thereto in the Securities
Purchase Agreement to which this Questionnaire is attached (the “Securities
Purchase Agreement”).


 


A.                                   BACKGROUND INFORMATION


 


	
  Name:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Business Address:

  
	
   

  	
   

  	
  (Number and Street)

  	
   

  	
   

  
	
   

  
	
  (City)

  	
   

  	
  (State)

  	
   

  	
  (Zip Code)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Telephone
  Number: (     )

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Residence Address:

  
	
   

  	
   

  	
  (Number and Street)

  	
   

  	
   

  
	
   

  
	
  (City)

  	
   

  	
  (State)

  	
   

  	
  (Zip Code)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Telephone Number: (     )

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  If an individual:

  	
   

  	
   

  	
   

  	
   

  
	
  Age:

  	
   

  	
   

  	
  Citizenship:

  	
   

  	
   

  	
  Where registered to vote:

  	
   

  
													



 


 


	
  If a corporation, partnership, limited liability
  company, trust or other entity:

  	
   

  	
   

  
	
  Type of entity:

  	
   

  
	
  State of
  formation:

  	
   

  	
   

  	
  Date of formation:

  	
   

  
	
   

  	
   

  	
   

  
	
  Social Security or Taxpayer Identification No.

  	
   

  
									



 

















 


 


	
  Send all correspondence to (check one): 

  	
   

  	
  Residence Address

  	
   

  	
   

  	
  Business Address

  
	
   

  	
   

  	
   

  
	
  Email address of contact person: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Current ownership of securities of the Corporation:

  
	
                      shares
  of common stock, par value $0.001 per share (the “Common Stock”)

  	
   

  	
   

  
	
  options or warrants to
  purchase                         shares
  of Common Stock

  	
   

  	
   

  
												



 


Please identify
the number of shares of Common Stock or warrants to purchase Common Stock that
you or your organization will beneficially own immediately after Closing,
identifying the Securities purchased by you or your organization pursuant to
the Securities Purchase Agreement and those shares of Common Stock or warrants
to purchase Common Stock purchased by you or your organization through other
transactions:


 


	
  Securities purchased pursuant to the Securities
  Purchase Agreement:

  	
   

  	
  Shares

  
	
  and

  	
   

  	
  Warrants

  	
   

  	
   

  
					



 


	
  Shares purchased by your or your organization
  through other transactions:

  	
   

  



 


	
  Warrants purchased by your or your organization
  through other transactions:

  	
   

  



 


	
  Total: 

  	
   

  	
  shares and 

  	
   

  	
  warrants

  



 


BENEFICIAL
OWNERSHIP INFORMATION: Please describe the beneficial ownership of the shares
and/or warrants owned by you or your organization.  If the Investor is a partnership, limited liability
company or similar entity, please identify the individual or individuals
with ultimate voting and dispositive power over such shares and/or warrants,
typically the investment manager or investment advisor with primary
responsibility for this investment.  This
information is available from your compliance officer or general counsel. THE
CORPORATION WILL NOT BE ABLE TO REGISTER YOUR SECURITIES WITHOUT THIS IMPORTANT
INFORMATION.


 


Exception:  This information need not be provided if the
Investor is a publicly traded company.


	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  



 


 


Have you or your
organization had any position, office or other material relationship within the
past three years with the Corporation or its affiliates? 


	
   

  
	
  o
  Yes                                    o No

  
	
   

  
	
  If yes, please indicate the nature of any such
  relationships below:

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  



 


If you, any of
your associates, or any member of your immediate family had or will have any
direct or indirect material interest in any transaction or series of
transactions to which the Corporation or any of its subsidiaries was a party at
any time since January 1, 2001, or in any currently proposed transactions or
series of transactions in which the company or any of its subsidiaries will be
a party, in which the amount involved exceeds $60,000, please specify (a) the
names of the parties to the transaction(s) and their relationship to you, (b)
the nature of the interest in the transaction, (c) the amount involved in the
transaction, and (d) the amount of the interest in the transaction.  If the answer is “none”, please so
state.  


 


	
   

  



 

















 


	
   

  
	
   

  
	
   

  
	
   

  



 


Are you (i) an
NASD Member (see definition), (ii) a Controlling (see definition) shareholder
of an NASD Member, (iii) a Person Associated with a Member of the NASD (see
definition), or (iv) an Underwriter or a Related Person (see definition) with
respect to the proposed offering; or (b) do you own any shares or other
securities of any NASD Member not purchased in the open market; or (c) have you
made any outstanding subordinated loans to any NASD Member?  IN RESPONDING TO THIS
QUESTION, INDICATE WHETHER OR NOT YOU ARE A BROKER DEALER OR IF YOU ARE
AFFILIATED WITH A BROKER DEALER, AND IF SO, STATE THE NATURE OF YOUR
AFFILIATION.   


	
   

  
	
  o
  Yes                                    o No

  
	
   

  
	
  If “yes,” please describe below

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  



 


NASD Member. The term “NASD member” means either any broker or dealer admitted to
membership in the National Association of Securities Dealers, Inc. (“NASD”). (NASD Manual, By-laws Article I,
Definitions)


 


Control. The term “control” (including the terms “controlling,” “controlled by”
and “under common control with”)
means the possession, direct or indirect, of the power, either individually or
with others, to direct or cause the direction of the management and policies of
a person, whether through the ownership of voting securities, by contract, or
otherwise. (Rule 405 under the Securities Act of 1933, as amended)


 


Person Associated
with a Member of the NASD. The term “person associated with a
member of the NASD” means every sole proprietor, partner, officer,
director, branch manager or executive representative of any NASD Member, or any
natural person occupying a similar status or performing similar functions, or
any natural person engaged in the investment banking or securities business who
is directly or indirectly controlling or controlled by a NASD Member, whether
or not such person is registered or exempt from registration with the NASD
pursuant to its bylaws. (NASD Manual, By-laws Article I, Definitions)


 


Underwriter or a Related
Person. The term “underwriter or a related person” means,
with respect to a proposed offering, underwriters, underwriters’ counsel,
financial consultants and advisors, finders, members of the selling or
distribution group and any and all other persons associated with or related to
any of such persons. (NASD Interpretation)


 


B.                                     STATUS AS ACCREDITED INVESTOR


 


The
undersigned is an “accredited investor” as such term is defined in Regulation D
under the Act, as at the time of the sale of the Securities the undersigned
falls within one or more of the following categories (Please initial one or
more, as applicable):1


 


           (1)                                                       a bank as defined in Section 3(a)(2)
of the Act, or a savings and loan association or other institution as defined
in Section 3(a)(5)(A) of the Act whether acting in its individual or
fiduciary capacity; a broker or dealer registered pursuant to Section 15
of the Securities Exchange Act of 1934; an insurance company as defined in
Section 2(13) of the Act; an investment company registered under the
Investment Corporation Act of 1940 or a business development company as defined
in


 






1               As
used in this Questionnaire, the term “net worth” means the excess of total
assets over total liabilities.  In
computing net worth for the purpose of subsection (4), the principal residence
of the investor must be valued at cost, including cost of improvements, or at
recently appraised value by an institutional lender making a secured loan, net
of encumbrances.  In determining income,
the investor should add to the investor’s adjusted gross income any amounts
attributable to tax exempt income received, losses claimed as a limited partner
in any limited partnership, deductions claimed for depiction, contributions to
an IRA or KEOGH retirement plan, alimony payments, and any amount by which
income from long-term capital gains has been reduced in arriving at adjusted
gross income.


 

















 


Section 2(a)(48)
of that Act; a Small Business Investment Corporation licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958; a plan established and maintained by a state, its
political subdivisions, or any agency or instrumentality of a state or its
political subdivisions for the benefit of its employees, if such plan has total
assets in excess of $5,000,000; an employee benefit plan within the meaning of
the Employee Retirement Income Security Act of 1974 if the investment decision
is made by a plan fiduciary, as defined in Section 3(21) of such Act,
which is either a bank, savings and loan association, insurance company, or
registered investment adviser, or if the employee benefit plan has total assets
in excess of $5,000,000 or, if a self-directed plan, with the investment
decisions made solely by persons that are accredited investors;


 


           (2)                                                       a private business development company as
defined in Section 202(a)(22) of the Investment Adviser Act of 1940;


 


           (3)                                                       an organization described in
Section 501(c)(3) of the Internal Revenue Code of 1986, as amended,
corporation, Massachusetts or similar business trust, or partnership, not
formed for the specific purpose of acquiring the Securities offered, with total
assets in excess of $5,000,000;


 


           (4)                                                       a natural person whose individual net worth,
or joint net worth with that person’s spouse, at the time of such person’s
purchase of the Securities exceeds $1,000,000;


 


           (5)                                                       a natural person who had an individual
income in excess of $200,000 in each of the two most recent years or joint
income with that person’s spouse in excess of $300,000 in each of those years
and has a reasonable expectation of reaching the same income level in the
current year;


 


           (6)                                                       a trust, with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring the Securities
offered, whose purchase is directed by a sophisticated person as described in
Rule 506(b)(2)(ii) of Regulation D; and


 


           (7)                                                       an entity in which all of the equity
owners are accredited investors (as defined above) (If the answer is yes, all
shareholders, partners or other equity owners must complete an Individual
Questionnaire).


 


C.                                     REPRESENTATIONS


 


The undersigned
hereby represents and warrants to the Corporation as follows:


 


1.                                       Any purchase of the Securities would be
solely for the account of the undersigned and not for the account of any other
person or with a view to any resale, fractionalization, division, or
distribution thereof.


 


2.                                       The information contained herein is
complete and accurate and may be relied upon by the Corporation, and the
undersigned will notify the Corporation immediately of any material change in
any of such information occurring prior to the closing, if any, with respect to
the purchase of Securities by the undersigned or any co-purchaser.


 


3.                                       There are no suits, pending litigation,
or claims against the undersigned that could materially affect the net worth of
the undersigned as reported in this Questionnaire.


 


4.                                       The undersigned acknowledges that there
may occasionally be times when the Corporation determines that it must suspend
the use of the Prospectus forming a part of the Registration Statement (as such
terms are defined in the Securities Purchase Agreement), as set forth in
Section 7.2(c) of the Securities Purchase Agreement.  The undersigned is aware that, in such event,
the Securities will not be subject to ready liquidation, and that any
Securities purchased by the undersigned would have to be held during such
suspension.  The overall commitment of
the undersigned to investments which are not readily marketable is not
excessive in view of the undersigned’s net worth and financial circumstances,
and any purchase of the Securities will not cause such commitment to become
excessive.  The undersigned is able to
bear the economic risk of an investment in the Securities.


 


5.                                       The undersigned is aware of its
obligations under applicable federal and state securities laws with respect to
use and disclosure of non-public information regarding the Corporation.


 


6.                                       The
undersigned has carefully considered the potential risks relating to the
Corporation and a purchase of the Securities, and fully understands that the
Securities are speculative investments which involve a high degree of risk of
loss of the 


 

















 


undersigned’s entire
investment.  Among others, the
undersigned has carefully considered each of the risks identified in the SEC
Documents.


 


7.                                       The
undersigned understands that the Securities that it is acquiring are
characterized as “restricted securities” under the federal securities laws
inasmuch as they are being acquired in a transaction not involving a public
offering, and that under such laws and applicable regulations such securities
may be resold without registration under the Act, only in certain limited
circumstances. In this connection, the undersigned represents that it is
familiar with SEC Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Act.


8.                                     It
us understood that the certificates evidencing the Securities shall bear a
legend, reading substantially as follows:


                                                THE
SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE BEEN ISSUED
AND SOLD IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933 (THE “1933 ACT”) AND APPROPRIATE EXEMPTIONS FROM REGISTRATION UNDER THE
SECURITIES LAWS OF OTHER APPLICABLE JURISDICTIONS. THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD OR TRANSFERRED OTHER THAN PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER
THE 1933 ACT AND THE APPLICABLE SECURITIES LAWS OF ANY OTHER JURISDICTION. THE
ISSUER SHALL BE ENTITLED TO REQUIRE AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO IT WITH RESPECT TO COMPLIANCE OF THE PROPOSED SALE OR TRANSFER
WITH THE REGISTRATION REQUIREMENTS OF THE 1933 ACT OR EXEMPTION THEREFROM.


 


9.                                       It
is understood that the Corporation anticipates filing the Registration
Statement within 30 days of the Closing Date. 
If at any time any of the information set forth in the undersigned’s
responses to this Questionnaire has changed due to passage of time, or any
development occurs which requires a change in any of the answers, or has for
any other reason become incorrect, the undersigned agrees to immediately
furnish to the individual to whom a copy of this Questionnaire is to be sent,
as indicated and at the address shown on the first page hereof, any necessary
or appropriate correcting information. 
Otherwise, the Corporation is to understand that the above information
continues to be, to the best of the undersigned’s knowledge, information and
belief, complete and correct.


10.                               It
is understood that the information furnished herein will be used by the
Corporation in the preparation of its Registration Statement on Form S-1.


IN WITNESS
WHEREOF, the undersigned has executed this Questionnaire this _____ day of
February, 2006, and declares under oath that it is truthful and correct.


 


	
   

  	
   

  
	
   

  	
  Print Name

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
  Title

  	
   

  
	
   

  	
   

  	
  (required for any
  purchaser that is a corporation, partnership, trust or other entity)

  
						



 


 


 

















 


[Company
Letterhead]


 


 


           ,
2006


 


 


 


 


 


 


 


 


Re:                               Advanced Life Sciences Holdings, Inc.;
Registration Statement on Form S-1


 


Dear Selling
Shareholder:


 


Enclosed please
find five (5) copies of a prospectus dated                      ,
2006 (the “Prospectus”) for your use in reselling your shares of common
stock, $0.01 par value (the “Shares”), of Advanced Life Sciences
Holdings, Inc.  (the “Company”),
under the Company’s Registration Statement on Form S-1 (Registration No. 333-                     )
(the “Registration Statement”), which has been declared effective by the
Securities and Exchange Commission.  As a selling shareholder under the Registration Statement, you have an
obligation to deliver (including through deemed delivery) a copy of the
Prospectus to each purchaser of your Shares.


 


The Company is
obligated to notify you in the event that it suspends trading under the
Registration Statement in accordance with the terms of the Securities Purchase
Agreement between the Company and you. 
During the period that the Registration Statement remains effective and
trading thereunder has not been suspended, you will be permitted to sell your
Shares that are included in the Prospectus under the Registration Statement.


 


Please note that
you are under no obligation to sell your Shares during the registration
period.  However, if you do decide to
sell, you must comply with the requirements described in this letter or
otherwise applicable to such sale.  Your
failure to do so may result in liability under the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended.  Please remember that all sales of your Shares
must be carried out in the manner set forth under the caption “Plan of
Distribution” in the Prospectus if you sell under the Registration
Statement.  The Company may require an
opinion of counsel reasonably satisfactory to the Company if you choose another
method of sale.  You should
consult with your own legal advisor(s) on an ongoing basis to ensure your
compliance with the relevant securities laws and regulations.


 


In order
to maintain the accuracy of the Prospectus, you must notify the undersigned in
accordance with the provisions of your Securities Purchase Agreement upon the
sale, gift or other transfer of any Shares by you, including the number of
Shares being transferred, and in the event of any other change in the
information regarding you which is contained in the Prospectus.  For example, you must notify the undersigned
if you enter into any arrangement with a broker-dealer for the sale of shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker-dealer. 
Depending on the circumstances, such transactions may require the filing
of a supplement to the prospectus in order to update the information set forth
under the caption “Plan of Distribution” in the Prospectus.


 


Should you need any additional copies of the
Prospectus, or if you have any questions concerning the foregoing, please write
to me at Advanced Life Sciences Holdings, Inc., 1440 Davey Road, Woodridge,
Illinois 60517.


 


Sincerely,


 


 


 


Chief Legal
Counsel


 

















 


Exhibit A


 


PLAN OF
DISTRIBUTION


 


The
selling stockholders, which as used herein include donees, pledgees,
transferees or other successors-in-interest selling shares of our common stock
received after the date of this prospectus from a selling stockholder as a
gift, pledge, partnership distribution or other transfer, may, from time to
time, sell, transfer or otherwise dispose of any or all of their shares of
common stock or interests in shares of common stock on any stock exchange,
market or trading facility on which the shares are traded or in private
transactions. These dispositions may be at fixed prices, at prevailing market
prices at the time of sale, at prices related to the prevailing market price,
at varying prices determined at the time of sale, or at negotiated prices.


The
selling stockholders may use any one or more of the following methods when
disposing of shares or interests therein: 


	
   

  	
   

  	
   

  
	
  •

  	
   

  	
  on the Nasdaq National Market (or any other exchange
  on which the shares may be listed);

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  •

  	
   

  	
  on the over-the-counter market;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  •

  	
   

  	
  ordinary brokerage transactions and transactions in
  which the broker-dealer solicits purchasers;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  •

  	
   

  	
  block trades in which the broker-dealer will attempt
  to sell the shares as agent, but may position and resell a portion of the
  block as principal to facilitate the transaction;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  •

  	
   

  	
  purchases by a broker-dealer as principal and resale
  by the broker-dealer for its account;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  •

  	
   

  	
  an exchange distribution in accordance with the
  rules of the applicable exchange;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  •

  	
   

  	
  privately negotiated transactions;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  •

  	
   

  	
  short sales;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  •

  	
   

  	
  through the writing or settlement of options or
  other hedging transactions, whether through an options exchange or otherwise;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  •

  	
   

  	
  broker-dealers may agree with the selling
  stockholders to sell a specified number of such shares at a stipulated price
  per share;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  •

  	
   

  	
  a combination of any such methods of sale; and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  •

  	
   

  	
  any other method permitted pursuant to applicable
  law.

  



The
selling stockholders may, from time to time, pledge or grant a security
interest in some or all of the shares of common stock owned by them and, if
they default in the performance of their secured obligations, the pledgees or
secured parties may offer and sell the shares of common stock, from time to
time, under this prospectus, or under an amendment to this prospectus under
Rule 424(b) or under any applicable provision of the Securities Act
amending the list of selling stockholders to include the pledgee, transferee or
other successors in interest as selling stockholders under this prospectus. The
selling stockholders also may transfer the shares of common stock in other
circumstances, in which case the transferees, pledgees or other successors in
interest will be the selling beneficial owners for purposes of this prospectus.
To the extent required, this prospectus may be amended or supplemented from
time to time to describe a specific plan of distribution.


In connection with the sale of our common stock or interests therein,
the selling stockholders may enter into hedging transactions with
broker-dealers or other financial institutions, which may, in turn, engage in
short sales of the common stock in the course of hedging the positions they
assume. The selling stockholders may also sell shares of our common stock short
and deliver these securities to close out their short positions, or loan or pledge
the common stock to broker-dealers that in turn may sell these securities. The
selling stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker- dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).


 

















 


The
aggregate proceeds to the selling stockholders from the sale of the common
stock offered by them will be the purchase price of the common stock less
discounts or commissions, if any. Each of the selling stockholders reserves the
right to accept and, together with their agents from time to time, to reject,
in whole or in part, any proposed purchase of common stock to be made directly
or through agents. We will not receive any of the proceeds from this offering.


The
selling stockholders also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act,
provided that they meet the criteria and conform to the requirements of that
rule.


The
selling stockholders and any underwriters, broker-dealers or agents that
participate in the sale of the common stock or interests therein may be “underwriters”
within the meaning of Section 2(11) of the Securities Act. Any discounts,
commissions, concessions or profit they earn on any resale of the shares may be
underwriting discounts and commissions under the Securities Act. Selling
stockholders who are “underwriters” within the meaning of Section 2(11) of
the Securities Act will be subject to the prospectus delivery requirements of the
Securities Act. The selling stockholders may indemnify any broker-dealer that
participates in transactions involving the sale of the shares against certain
liabilities, including liabilities arising under the Securities Act.


We have
borne and will bear substantially all of the costs, expenses and fees in
connection with the registration of the shares, other than any commissions,
discounts or other fees payable to broker-dealers in connection with any sale
of shares, which will be borne by the selling stockholder selling such shares
of common stock. We have agreed to indemnify the selling stockholders against
certain liabilities, including liabilities under the Securities Act and state
securities laws, relating to the registration of the shares offered by this
prospectus.


In order
to comply with the securities laws of some states, if applicable, the common
stock may be sold in these jurisdictions only through registered or licensed
brokers or dealers. In addition, in some states the common stock may not be sold
unless it has been registered or qualified for sale or an exemption from
registration or qualification requirements is available and is complied with.


The
selling stockholders may, to the extent applicable, be subject to the
anti-manipulation rules of Regulation M, which may limit the timing of
purchases and sales of shares of our common stock by such selling stockholders.


We will
make copies of this prospectus (as it may be supplemented or amended from time
to time) available to the selling stockholders for the purpose of satisfying
the prospectus delivery requirements of the Securities Act.


We have
agreed with each selling stockholder to keep the registration statement, of
which this prospectus constitutes a part, effective with respect to its shares until
the earlier of (1) the second anniversary of our issuance of shares and
warrants to such selling stockholder, (2) the date on which all shares
purchased from us by such selling stockholder may be sold pursuant to
Rule 144 of the Securities Act without volume limitations and
(3) such time as all of such selling stockholder’s shares covered by this
prospectus have been disposed of pursuant to and in accordance with the
registration statement.