Exhibit 4.1


 


THIS
WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD OR OFFERED
FOR SALE UNLESS REGISTERED UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.


 


Dated: October 23,
2008


 


WARRANT


 


To Purchase 65,000 Shares of 
Common Stock


of ADVANCED LIFE SCIENCES HOLDINGS, INC.


 


Expiring October 23,
2013


 


THIS
TO CERTIFY THAT, for value received, THE LEADERS GROUP, INC., an Illinois corporation or
any registered assigns (“Holder”)
is entitled to purchase from ADVANCED LIFE
SCIENCES HOLDINGS, INC., a Delaware corporation (the “Company”), at any time or from time to time
after 9:00 a.m., Chicago time, on the date hereof and prior to 5:00 p.m.,
Chicago time, on October 23, 2013, at the place where the Warrant Agency
is located, at the Exercise Price, the number of shares of Common Stock, par
value $.01 per share, of the Company (the “Common
Stock”) shown above, subject to adjustment as provided in
Articles IV and V hereof, and upon the terms and conditions
hereinafter provided, and is entitled also to exercise the other appurtenant
rights, powers and privileges hereinafter described.


 


This Warrant
entitles the holder initially to purchase up to an aggregate of 65,000 shares
of Common Stock.  This Warrant has been
issued by the Company pursuant to the Amended and Restated Business Loan
Agreement dated as of October 23, 2008 (as amended from time to time, the “Loan Agreement”) between the Company and
Holder, in consideration of a loan to the Company by the Holder.  The Holder is entitled to certain benefits as
set forth therein.  The Company shall keep
a copy of the Loan Agreement, and any amendments thereto, at the Warrant
Agency, and shall furnish, without charge, copies thereof to the Holder upon
request.


 


Certain terms used
in this Warrant are defined in Article VI.


 


ARTICLE
I


 


EXERCISE
OF WARRANTS


 


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


 

















 


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


 


The Company shall,
as promptly as practicable and in any event within seven days after receipt of
such notice and payment, execute and deliver or cause to be executed and
delivered, in accordance with such notice, a certificate or certificates
representing the aggregate number of shares of Common Stock specified in said
notice together with cash in lieu of any fractions of a share as provided in Section 1.3.  The share certificate or certificates so
delivered shall be in such denominations as may be specified in such notice,
and shall be issued in the name of the Holder or such other name or names as
shall be designated in such notice.  This
Warrant shall be deemed to have been exercised and such certificate or
certificates shall be deemed to have been issued, and such Holder or any other
Person so designated to be named therein shall be deemed for all purposes to
have become a holder of record of shares, as of the date the aforementioned
notice and payment is received by the Company. 
If this Warrant shall have been exercised only in part, the Company
shall, at the time of delivery of such certificate or certificates, deliver to
the Holder a new Warrant evidencing the right to purchase the remaining shares
of Common Stock called for by this Warrant, which new Warrant shall in all
other respects be identical with this Warrant, or, at the request of the
Holder, appropriate notation may be made on this Warrant which shall then be
returned to the Holder.  The Company
shall pay all expenses, taxes and other charges payable in connection with the
preparation, issuance and delivery of share certificates and new Warrants,
except that, if share certificates or new Warrants shall be registered in a
name or names other than the name of the Holder, funds sufficient to pay all
transfer taxes payable as a result of such transfer shall be paid by the Holder
at the time of delivery of the aforementioned notice of exercise or promptly
upon receipt of a written request of the Company for payment.


 


I.2.          Shares to be Fully
Paid and Nonassessable.  All
shares of Common Stock issued upon the exercise of this Warrant shall be
validly issued, fully paid and nonassessable.


 


I.3.          No Fractional Shares
Required to be Issued.  The
Company shall not be required to issue fractions of shares of Common Stock upon
exercise of this Warrant.  If any
fraction of a share would, but for this Section, be issuable upon final
exercise of this Warrant, in lieu of such fractional share, the Company shall
pay to the Holder in cash an amount equal to the same fraction of the Fair
Market Value of the Company per share of outstanding Common Stock on the
Business Day immediately prior to the date of such exercise.


 


I.4.          Legend.  Each certificate for shares of Common Stock
issued upon exercise of this Warrant, unless at the time of exercise such
shares are registered under the Securities Act, shall bear the following
legend:


 


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


 


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


 


I.5.          Reservation.  The Company has duly reserved, and will keep
available for issuance upon exercise of the Warrants, the total number of
Warrant Shares deliverable from time to time upon exercise of all Warrants from
time to time outstanding.  The Company
will not take any actions during the term of this Warrant that would result in
any adjustment of the number of shares of Common Stock issuable upon the
exercise of the Warrant if (i) the total number of shares of Common Stock
issuable after such action upon exercise of this Warrant, (ii) all shares
of Common Stock issued and outstanding and (iii) all shares then issuable (y) upon
the exercise of all Options and (z) upon the conversion or exchange of all
Convertible Securities, would exceed the total number of shares of Common Stock
then authorized for issuance by the Company. 
The Company will not change the Common Stock from par value $.01 per
share to any higher par value which exceeds the Exercise Price then in effect,
and will reduce the par value of the Common Stock upon any event described in Article IV
that provides for an increase in the number of shares of Common Stock subject
to purchase upon exercise of this Warrant, in inverse proportion to and
effective at the same time as such number of shares is increased.  As of the date hereof, the Company had
outstanding (i) 40,805,932 shares of Common Stock, (ii) [11,347,648]
Options to purchase Common Stock, and no other shares of capital stock or any
securities convertible into or exchangeable for shares of capital stock or any
rights, options or warrants to purchase any shares of capital stock or any
securities convertible into or exchangeable for shares of capital stock.  Neither the issuance of this Warrant nor the
issuance of Warrant Shares upon exercise of this Warrant violates or conflicts
with the Company’s certificate of incorporation or bylaws or any agreement to
which the Company is a party.


 


ARTICLE
II


 


WARRANT
AGENCY;


TRANSFER,
EXCHANGE AND REPLACEMENT OF WARRANTS


 


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


 


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


 


II.3.         Transfer of Warrant.  The Company agrees to maintain at the Warrant
Agency books for the registration of transfers of the Warrants, and transfer of
this Warrant and all rights 


 


3

















 


hereunder shall be registered, in whole or in part, on
such books, upon surrender of this Warrant at the Warrant Agency, together with
a written assignment of this Warrant duly executed by the Holder or its duly
authorized agent or attorney, with (if the Holder is a natural person)
signatures guaranteed by a bank or trust company or a registered broker or
dealer, and funds sufficient to pay any transfer taxes payable upon such
transfer.  Upon surrender and, if
required, such payment, the Company shall execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees and in the denominations
specified in the instrument of assignment (which shall be whole numbers of
shares only) and shall issue to the assignor a new Warrant evidencing the
portion of this Warrant not so assigned, and this Warrant shall promptly be
canceled.


 


II.4.         Division or
Combination of Warrants.  This
Warrant may be divided or combined with other Warrants upon presentment hereof
and of any Warrant or Warrants with which this Warrant is to be combined at the
Warrant Agency, together with a written notice specifying the names and
denominations (which shall be whole numbers of shares only) in which the new
Warrant or Warrants are to be issued, signed by the holders hereof and thereof
or their respective duly authorized agents or attorneys.  Subject to compliance with Section 2.3
as to any transfer or assignment which may be involved in the division or
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.


 


II.5.         Loss, Theft,
Destruction of Warrant Certificates. 
Upon receipt of evidence satisfactory to the Company of the ownership of
and the loss, theft, destruction or mutilation of any Warrant and, in the case
of any such loss, theft or destruction, upon receipt of indemnity or security
satisfactory to the Company (it being understood and agreed that if the holder
of such Warrant is Leaders Bank, then a written agreement of indemnity given by
Leaders Bank alone shall be satisfactory to the Company and no further security
shall be required) or, in the case of any such mutilation, upon surrender and
cancellation of such Warrant, the Company will make and deliver, in lieu of
such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor
and representing the right to purchase the same aggregate number of shares of
Common Stock.


 


II.6.         Expenses of Delivery
of Warrants.  The Company shall
pay all expenses, taxes (other than transfer taxes) and other charges payable
in connection with the preparation, issuance and delivery of Warrants
hereunder.


 


ARTICLE
III


 


CERTAIN
RIGHTS


 


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


 


III.2.        Financial Statements
and Other Information.  Promptly
upon transmission thereof, to the extent required under the Loan Agreement, the
Company will deliver to the 


 


4

















 


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


 


ARTICLE
IV


 


ANTIDILUTION
PROVISIONS


 


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


 


IV.2.       Common Stock
Reorganization.  If the Company
shall subdivide its outstanding shares of Common Stock (or any class thereof)
into a greater number of shares or consolidate its outstanding shares of Common
Stock (or any class thereof) into a smaller number of shares (any such event
being called a “Common Stock Reorganization”),
then (a) the Exercise Price shall be adjusted, effective immediately after
the effective date of such Common Stock Reorganization, to a price determined
by multiplying the Exercise Price in effect immediately prior to such effective
date by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding on such effective date before giving effect to such
Common Stock Reorganization and the denominator of which shall be the number of
shares of Common Stock outstanding after giving effect to such Common Stock
Reorganization, and (b) the number of shares of Common Stock subject to
purchase upon exercise of this Warrant shall be adjusted, effective at such
time, to a number determined by multiplying the number of shares of Common
Stock subject to purchase immediately before such Common Stock Reorganization
by a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding after giving effect to such Common Stock Reorganization and
the denominator of which shall be the number of shares of Common Stock
outstanding immediately before such Common Stock Reorganization.


 


IV.3.       Common Stock
Distribution.  (a) If the Company
shall issue, sell or otherwise distribute any shares of Common Stock, other
than pursuant to this Agreement or a Common Stock Reorganization (which is
governed by Section 4.2 hereof) (any such event, including any event
described in paragraphs (b) and (c) below, being herein
called a “Common Stock Distribution”),
for a consideration per share less than the Fair Market Value of the Company
per share of outstanding Common Stock on a Fully Diluted Basis on the date of
such Common Stock Distribution (before giving effect to such Common Stock
Distribution), then, effective upon such Common Stock Distribution, the
Exercise Price shall be reduced, if such consideration per share shall be less
than such Fair Market Value per share, to the lowest of the prices (calculated
to the nearest one thousandth of one cent) determined as provided in
clauses (i), (ii) and (iii) below:


 


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(i)            if
the Company shall receive any consideration for the Common Stock issued, sold
or distributed, in such Common Stock Distribution, the consideration per share
of Common Stock received by the Company upon such issue, sale or distribution;


 


(ii)           by
dividing (A) an amount equal to the sum of (1) the number of shares
of Common Stock outstanding immediately prior to such Common Stock Distribution
multiplied by the then existing Exercise Price, plus (2) the consideration, if any, received by the
Company upon such Common Stock Distribution by (B) the total number of
shares of Common Stock outstanding immediately after such Common Stock
Distribution; and


 


(iii)          by multiplying the Exercise Price in effect
immediately prior to such Common Stock Distribution by a fraction, the
numerator of which shall be the sum of (A) the number of shares of Common
Stock outstanding immediately prior to such Common Stock Distribution
multiplied by such Fair Market Value per share on the date of such Common Stock
Distribution, plus (B) the
consideration, if any, received by the Company upon such Common Stock Distribution,
and the denominator of which shall be the product of (1) the total number
of shares of Common Stock outstanding immediately after such Common Stock
Distribution multiplied by (2) such Fair Market Value per share on the
date of such Common Stock Distribution.


 


If any Common
Stock Distribution shall require an adjustment to the Exercise Price pursuant
to the foregoing provisions of this paragraph (a), including by operation
of paragraph (b) or (c) below, then, effective at the time
such adjustment is made, the number of shares of Common Stock subject to
purchase upon exercise of this Warrant shall be increased to a number
determined by multiplying the number of shares of Common Stock subject to
purchase immediately before such Common Stock Distribution by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately after giving effect to such Common Stock Distribution and the
denominator of which shall be the sum of the number of shares outstanding
immediately before giving effect to such Common Stock Distribution (both
calculated on a Fully Diluted Basis) plus the
number of shares of Common Stock which the aggregate consideration received by
the Company with respect to such Common Stock Distribution would purchase at
the Fair Market Value of the Company per share of outstanding Common Stock on a
Fully Diluted Basis on the date of such Common Stock Distribution (before
giving effect to such Common Stock Distribution).  In computing adjustments under this paragraph,
fractional interests in Common Stock shall be taken into account to the nearest
one-thousandth of a share.


 


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


 


(b)           If
the Company shall issue, sell, distribute or otherwise grant in any manner
(including by assumption) any rights to subscribe for or to purchase, or any
warrants or options for the purchase of Common Stock or any stock or securities
convertible into or exchangeable for Common Stock (such rights, warrants or
options being herein called “Options”
and such convertible or exchangeable stock or securities being herein called “Convertible Securities’’), whether or not
such Options or the rights to convert or exchange any such 


 


6

















 


Convertible Securities in respect of such Options are
immediately exercisable, and the price per share for which Common Stock is
issuable upon the exercise of such Options or upon conversion or exchange of
such Convertible Securities in respect of such Options (determined by dividing (i) the
aggregate amount, if any, received or receivable by the Company as
consideration for the granting of such Options, plus the minimum aggregate amount of additional
consideration payable to the Company upon the exercise of all such Options, plus, in the case of Options to acquire
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issuance or sale of such Convertible
Securities and upon the conversion or exchange thereof, by (ii) the total
maximum number of shares of Common Stock issuable upon the exercise of such
Options or upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options) shall be less than the Fair Market
Value of the Company per share of outstanding Common Stock on a Fully Diluted
Basis on the date of granting such Options (before giving effect to such
grant), then, for purposes of paragraph (a) above, the total maximum
number of shares of Common Stock issuable upon the exercise of such Options or
upon conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such Options shall be deemed to have
been issued as of the date of granting of such Options and thereafter shall be
deemed to be outstanding and the Company shall be deemed to have received as
consideration such price per share, determined as provided above,
therefor.  Except as otherwise provided
in paragraph (d) below, no additional adjustment of the Exercise
Price shall be made upon the actual exercise of such Options or upon conversion
or exchange of such Convertible Securities.


 


(c)           If
the Company shall issue, sell or otherwise distribute (including by assumption)
any Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which
Common Stock is issuable upon such conversion or exchange (determined by
dividing (i) the aggregate amount received or receivable by the Company as
consideration for the issuance, sale or distribution of such Convertible Securities,
plus the minimum aggregate amount
of additional consideration, if any, payable to the Company upon the conversion
or exchange thereof, by (ii) the total maximum number of shares of Common
Stock issuable upon the conversion or exchange of all such Convertible
Securities) shall be less than the Fair Market Value of the Company per share
of outstanding Common Stock on a Fully Diluted Basis on the date of such
issuance, sale or distribution (before giving effect to such issuance, sale or
distribution) of such Convertible Securities, then, for purposes of
paragraph (a) above, the total maximum number of shares of Common
Stock issuable upon conversion or exchange of all such Convertible Securities
shall be deemed to have been issued as of the date of the issuance, sale or
distribution of such Convertible Securities and thereafter shall be deemed to
be outstanding and the Company shall be deemed to have received as
consideration such price per share, determined as provided above, therefor.  Except as otherwise provided in
paragraph (d) below, no additional adjustment of the Exercise Price
shall be made upon the actual conversion or exchange of such Convertible
Securities.


 


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


 


7

















 


provisions designed to protect against dilution upon
an event which results in a related adjustment pursuant to this Article IV),
or (ii) any of such Options or Convertible Securities shall have
terminated, lapsed or expired, then the Exercise Price then in effect shall
forthwith be readjusted (effective only with respect to any exercise of this
Warrant after such readjustment) to the Exercise Price which would then be in
effect had the adjustment made upon the issuance, sale, distribution or grant
of such Options or Convertible Securities been made based upon such changed
purchase price, additional consideration or conversion rate, as the case may be
(in the case of any event referred to in clause (i) of this
paragraph (d)) or had such adjustment not been made (in the case of any
event referred to in clause (ii) of this paragraph (d)).


 


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


 


IV.4.       Special Dividends.  If the Company shall issue or distribute to
any holder or holders of shares of Common Stock evidences of indebtedness, any
other securities of the Company or any cash, property or other assets
(excluding a Common Stock Reorganization or a Common Stock Distribution),
whether or not accompanied by a purchase, redemption or other acquisition of
shares of Common Stock (any such nonexcluded event being herein called a “Special Dividend”), (a) the Exercise
Price shall be decreased, effective immediately after the effective date of
such Special Dividend, to a price determined by multiplying the Exercise Price
then in effect by a fraction, the numerator of which shall be the Fair Market
Value of the Company per share of outstanding Common Stock as of such effective
date less any cash and the then Fair Market Value of any evidences of
indebtedness, securities or property or other assets issued or distributed in
such Special Dividend with respect to one share of Common Stock, and the
denominator of which shall be such Fair Market Value per share and (b) the
number of shares of Common Stock subject to purchase upon exercise of this
Warrant shall be increased to a number determined by multiplying the number of
shares of Common Stock subject to purchase immediately before such Special
Dividend by a fraction, the numerator of which shall be the Exercise Price in
effect immediately before such Special Dividend and the denominator of which shall
be the Exercise Price in effect immediately after such Special Dividend.  A reclassification of Common Stock (other
than a change in par value, or from par value to no par value or from no par
value to par value) into shares of Common Stock and shares of any other class
of stock shall be deemed a distribution by the Company to the holders of such
Common Stock of such shares of such other class of stock and, if the
outstanding shares of Common Stock shall be changed into a larger or smaller
number of shares of Common Stock as part of such reclassification, a Common
Stock Reorganization.


 


IV.5.       Capital Reorganizations.  If there shall be any consolidation or merger
to which the Company is a party, other than a consolidation or a merger of
which the Company is the continuing corporation and which does not result in
any reclassification of, or change (other than a Common Stock Reorganization)
in, outstanding shares of Common Stock, or any sale or conveyance of the
property of the Company as an entirety or substantially as an entirety, or any
recapitalization of the Company (any such event being called a “Capital Reorganization”), then, effective
upon the effective date of such Capital Reorganization, the Holder shall no
longer have the right to purchase Common Stock, but shall have instead the
right to purchase, upon 


 


8

















 


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


 


IV.6.       Adjustment Rules.  Any adjustments pursuant to this Article IV
shall be made successively whenever an event referred to herein occurs, except
that, notwithstanding any other provision of this Article IV, no
adjustment shall be made to the number of shares of Common Stock to be
delivered to the Holder (or to the Exercise Price) if such adjustment
represents less than 1% of the number of shares previously required to be so
delivered, but any lesser adjustment shall be carried forward and shall be made
at the time and together with the next subsequent adjustment which together
with any adjustments so carried forward shall amount to 1% or more of the
number of shares to be so delivered.  No
adjustment shall be made pursuant to this Article IV:  (a) in respect of the issuance from time
to time of shares of Common Stock upon the exercise of any Warrants (b) with
respect to issuance of shares of Common Stock pursuant to any Public Offering, (c) upon
exercise of any of the Options outstanding on the Date of Issuance or with
respect to issuance of any additional options to purchase Common Stock to
officers, employees and independent directors of the Company (“Additional Options”) (or issuance of Common
Stock upon exercise of any such Additional Options), (d) with respect to
other rights granted to a Person which is not an Affiliate (as defined in the
Loan Agreement) as consideration for the issuance of loans or extensions of
credit to the Company as long as the board of directors of the Company has
determined in good faith that the total consideration received from such Person
is fair value for the loans or extensions of credit received by the Company,
provided that the Loan Agreement shall have been terminated and all obligations
thereunder paid in full, or (e) with respect to any issuance of shares of
Common Stock or Options of the Company in a Third Party Transaction (or issuance
of Common Stock upon exercise of such Options). 
If the Company takes a record of the holders of its Common Stock for any
purpose referred to in this Article IV, then (i) such record date
shall be deemed to be the date of the issuance, sale, distribution or grant in
question and (ii) if the Company shall legally abandon such action prior
to effecting such action, no adjustment shall be made pursuant to this Article IV
in respect of such action.


 


IV.7.       Proceedings Prior to Any
Action Requiring Adjustment.  As
a condition precedent to the taking of any action which would require an
adjustment pursuant to this Article IV, the Company shall take any action
which may be necessary, including obtaining regulatory approvals or exemptions,
in order that (a) the Company may thereafter validly and legally issue as
fully paid and nonassessable all shares of Common Stock which the Holder is 


 


9

















 


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


 


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


 


ARTICLE
V


 


PURCHASE,
REDEMPTION AND


CANCELLATION
OF WARRANTS


 


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


 


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


 


V.3.         Cancellation of
Warrants.  All Warrants
purchased, redeemed or otherwise acquired by the Company shall thereupon be
canceled and retired.  The Warrant Agency
shall cancel any Warrant surrendered for exercise or registration of transfer
or exchange and deliver such canceled Warrants to the Company.


 


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


 


10

















 


ARTICLE
VI


 


DEFINITIONS


 


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


 


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


 


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


 


“Capital Reorganization” has the meaning set
forth in Section 4.5.


 


“Common Stock” means the Common Stock, par
value $.01 per share, of the Company.


 


“Closing Price” on any day means (a) if
Common Stock is listed or admitted for trading on a national securities
exchange, the reported last sales price regular way or, if no such reported
sale occurs on such day, the average of the closing bid and asked prices
regular way on such day, in each case on the principal national securities
exchange on which Common Stock is listed or admitted to trading, or (b) if
Common Stock is not listed or admitted to trading on any national securities
exchange, the average of the closing bid and asked prices in the
over-the-counter market on such day as reported by NASDAQ or any comparable
system or, if not so reported, as reported by any New York Stock Exchange
member firm selected by the Company for such purpose.


 


“Common Stock Distribution” has the meaning
set forth in Section 4.3(a).


 


“Common Stock Reorganization” has the
meaning set forth in Section 4.2.


 


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


 


“Company Determination” has the meaning set
forth in Section 3.1.


 


“Convertible Securities” has the meaning set
forth in Section 4.3(b).


 


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


 


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


 


11

















 


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


 


“Fully Diluted Basis” means, with respect to
any determination or calculation, that such determination or calculation is
performed on a fully diluted basis determined in accordance with generally
accepted accounting principles as in effect from time to time.


 


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


 


“Loan Agreement” has the meaning set forth
in the second paragraph of this Warrant.


 


“Market Price” as at any date of
determination means the average of the daily Closing Prices of a share of
Common Stock for the shorter of (i) the 20 consecutive Business Days
ending on the most recent Business Day prior to the Time of Determination and (ii) the
period commencing on the date next succeeding the first public announcement of
the issuance, sale, distribution, grant or exercise in question through such
most recent Business Day prior to the Time of Determination.  “Time of Determination” means the time and
date of the earliest of (x) the determination of the stockholders entitled
to receive such issuance, sale, distribution or grant, (y) the
determination of the Holders or the Company to exercise their respective rights
set forth in Section 5.2 or 5.3 hereof, and (z) the commencement
of “ex-dividend” trading in respect thereof.


 


“NASDAQ” means The National Association of
Securities Dealers, Inc. Automated Quotation System.


 


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


 


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


 


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


 


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


 


“Refinancing Notice” has the meaning set
forth in Section 5.4 hereof.


 


12

















 


“Regulation Y Holder” means the Holder or a
holder of Warrant Shares, if such Holder or holder of Warrant Shares is a bank
holding company within the meaning of the BHC Act or a subsidiary thereof
subject to Regulation Y under the BHC Act.


 


“Securities Act” means the Securities Act of
1933, as amended, and any successor Federal statute and the rules and
regulations of the Securities and Exchange Commission (or its successors)
thereunder, all as the same shall be in effect from time to time.


 


“Special Dividend” has the meaning set forth
in Section 4.4.


 


“Subsidiary” of any Person means any
corporation, partnership, joint venture, association or other business entity
of which more than 50% of the total voting power of shares of stock or other
interests therein entitled to vote in the election of members of the board of
directors, partnership committee, board of managers or trustees or other
managerial body thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of such
Person or a combination thereof.


 


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


 


“Warrant Agency” has the meaning set forth
in Section 2.1.


 


“Warrant Shares” means the shares of Common
Stock issuable upon the exercise of the Warrants.


 


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


 


All references
herein to “days” shall mean
calendar days unless otherwise specified.


 


ARTICLE
VII


 


MISCELLANEOUS


 


VII.1.      Notices.  Notices and other communications provided for
herein must be in writing and may be given by mail, courier, confirmed telex or
facsimile transmission and shall, unless otherwise expressly required, be
deemed given when received or, if mailed, four Business Days after being
deposited in the United States mail with postage prepaid and properly
addressed.  In the case of the Holder,
such notices and communications shall be addressed to its address as shown on
the books maintained by the Warrant Agency, unless the Holder shall notify the
Warrant Agency that notices and communications should be sent to a different
address (or telex or facsimile number), in which case such notices and
communications shall be sent to the address (or telex or facsimile number)
specified by the Holder.


 


13

















 


VII.2.      Waivers; Amendments.  No failure or delay of the Holder in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power.  No notice or demand on
the Company in any case shall entitle the Company to any other or future notice
or demand in similar or other circumstances. 
The rights and remedies of the Holder are cumulative and not exclusive
of any rights or remedies which it would otherwise have.  The provisions of this Warrant may be
amended, modified or waived with (and only with) the written consent of the
Company and the holders of Warrants entitling such holders to purchase a
majority of the Common Stock subject to purchase upon exercise of such Warrants
at the time outstanding (exclusive of Warrants then owned by the Company or any
Subsidiary (as defined in the Loan Agreement) or Affiliate (as defined in the
Loan Agreement) thereof); provided, however, that no such amendment,
modification or waiver shall, without the written consent of the holders of all
Warrants at the time outstanding, (a) change the number of shares of
Common Stock subject to purchase upon exercise of this Warrant, the Exercise
Price or provisions for payment thereof or (b) amend, modify or waive the
provisions of this Section or Article III or IV or Section 1.5,
5.2 or 5.4.  The provisions of the Loan
Agreement may be amended, modified or waived only in accordance with the
respective provisions thereof.


 


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


 


VII.3.      GOVERNING LAW.  THIS WARRANT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS (WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW).


 


VII.4.      Transfer; Covenants to
Bind Successor and Assigns.  All
covenants, stipulations, promises and agreements in this Warrant contained by
or on behalf of the Company or the Holder shall bind its successors and
assigns, whether so expressed or not. 
This Warrant shall be transferable and assignable by the Holder hereof
in whole or from time to time in part to any other Person and the provisions of
this Warrant shall be binding upon and inure to the benefit of the Holder
hereof and its successors and assigns.


 


VII.5.      Severability.  In case any one or more of the provisions
contained in this Warrant shall 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.  The parties shall endeavor in good faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.


 


14

















 


VII.6.      Section Headings.  The section headings used herein are for
convenience of reference only, are not part of this Warrant and are not to
affect the construction of or be taken into consideration in interpreting this
Warrant.


 


VII.7.      Right to Specific
Performance.  The Company
acknowledges and agrees that in the event of any breach of the foregoing
covenants and agreements, the Holder would be irreparably harmed and could not
be made whole only by the award of monetary damages. Accordingly, the Company
agrees that the Holder, in addition to any other remedy to which the Holder may
be entitled at law or equity, will be entitled to seek and obtain an award of
specific performance of any of the foregoing covenants and agreements.


 


[signature page follows]


 


15

















 


IN
WITNESS WHEREOF, the Company has caused this Warrant to be
executed in its corporate name by one of its officers thereunto duly authorized
as of the day and year first above written.


 


	
   

  	
  ADVANCED
  LIFE SCIENCES

  HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael T. Flavin

  
	
   

  	
   

  	
  Michael T.
  Flavin

  
	
   

  	
   

  	
  Chairman and
  Chief Executive Officer